Robert Johnson Creates Lending Facility for Mortgage Servicers - Black Enterprise
Black Enterprise Magazine January-March 2019 Issue

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For African Americans, the foreclosure crisis isn’t just about losing homes–it is about losing the majority of their net worth.

“A recent study found that the wealth of African Americans is one-tenth that of whites, and when home equity is subtracted, it shrinks to less than 1%,” announced Robert L. Johnson, chairman of Urban Trust Holdings Inc., during a Dec. 8 speech. At the National Housing Forum sponsored by the Office of Thrift Supervision, he unveiled a plan to help curtail the drastic increase of foreclosures which instigated the country’s economic spiral downward.

“If this housing crisis causes African Americans to lose their homes, it will be a huge setback to personal wealth creation in the entire black community,” says Johnson, the founder and chairman of the RLJ Cos. who also created Black Entertainment Television (BET) in 1979 and sold it for $3 billion in 2000.

Through Urban Trust Bank, Johnson created a new entity, Homeowners First Bank. Homeowners First is an advanced lending facility or a bank designed specifically to provide temporary, advance funding to mortgage servicers. Mortgage servicers are the middlemen, who may or may not be the same company as the lender, but who retrieve money from borrowers on behalf of lenders.

Johnson has requested $1 billion from the U.S. Treasury Department’s Troubled Asset Relief Program–a $700 billion plan to strengthen the weakened credit markets–and hopes to raise an additional $7 billion to $8 billion from deposits and deposit interest from Urban Trust Bank. He proposes that the plan that will contribute to the stabilization of the housing market and save more than 200,000 people from losing their house in the first year.

“If you are a servicer for a securitization, you have to pay the interest and principle whether or not you’ve collected it,” says Alex J. Pollock, resident fellow at the American Enterprise Institute for Public Policy Research, a nonpartisan think tank. “In normal times when there aren’t that many delinquencies, it’s not that big of a problem, but in a time where there is a housing bust and widespread mortgage delinquencies, the more money they have to advance and the harder they have to work.”

In the past, when borrowers made payments late or missed them all together, loan servicers could borrow money from an advance lending facility and still pay the lenders. Unfortunately, as a result of the faltering economy, the banks that would traditionally make this type of loan to the mortgage loan servicers have stopped making them.

“Loan servicers are financially incentivized to push toward foreclosure because they can’t afford to work out loan modifications with the homeowners,” says Kathy Boden Holland, executive vice president of Urban Trust Bank, which has 16 branches located in Walmart supercenters throughout Maryland and Florida. Without advance lending facilities, the loan servicers are less willing to help mitigate foreclosures because they can recoup the outstanding balance once they resell the house.

“The kicker is this: If the mortgages

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.