May/June 1998

Shelter Shorts

Mega-Merger Mania

The increasingly rapid rate at which financial institutions are merging has prompted a challenge from a national coalition of community organizations, which is working to ensure that major lending institutions' merger activities result in increased access to credit and capital for low- and moderate-income communities.

"Too often, the benefits and costs of mergers have been shared unequally," said National Community Reinvestment Coalition (NCRC) President and CEO John Taylor, testifying before the House Committee on Banking and Financial Services in April. "[M]ergers are . . . harmful to small businesses and residents of minority and lower income neighborhoods. After mergers, bank fees increase, lending declines, branches close, and teller and other bank jobs disappear from these communities. On the other hand . . . [s]hareholders of the acquired institution realize higher dividends after the sale of their bank, while senior management receive golden parachutes worth tens of millions of dollars upon their departure."

The NCRC-led coalition is challenging Congress to consider several measures to hold financial institutions responsible to the communities in which they operate. Under the coalition's proposed guidelines, lending institutions would develop Community Reinvestment Act (CRA) commitments through a process that involves community leaders, provides specific information about loans to be given, and offers a plan for monitoring that promise. The coalition is also asking Congress to apply CRA data disclosure and reporting regulations to all affiliates of bank holding companies, operating subsidiaries of federally-insured financial institutions, mortgage companies, finance companies, and large credit unions. Further, the group is pushing for a GAO investigation and report on the effects of mergers on local communities and for higher scrutiny during the government's merger approval process.

Local groups have stepped up efforts against specific mergers as well. NationsBank and Bankof America, two banks that are planning to merge, recently announced a $350 billion, 10-year commitment to community development lending and investment, but a North Carolina watchdog group has promised to challenge the merger and calls the lending promise inadequate.

"The initiative is not specific, lacks accountability, and fails to address predatory lending practices by its subsidiaries," said Peter Skillern, chair of the Community Reinvestment Association of North Carolina. The commitment also fails to indicate where the funds will be allocated, he added, heightening fears that NationsBank's long-standing commitment to North Carolina communities will diminish as it becomes part of a huge national bank.

NCRC: 202-628-8866.

At least four elderly public housing residents in Oakland, CA are facing the loss of their homes under the federal "one-strike" drug law that allows for eviction for the wrongdoing of visitors or relatives. They're fighting back, though, and are suing city and federal housing officials on the grounds that the evictions violate their civil rights. While the policy is designed to help rid public housing communities of drugs and criminals, the rule casts a net so wide that many law-abiding residents are becoming ensnared, falling victim to guilt by association.

The Oakland tenants include a 63-year-old woman whose mentally disabled daughter was found with drugs three blocks from the building and a 75-year-old man whose caretaker was caught with drugs. "Anybody who says that throwing out an 85-year-old grandmother is going to do anything meaningful about the drug problem is fooling themselves," an attorney representing the tenants said in an Associated Press article (4/3/98).

The "one-strike" initiative allows public housing authorities (PHAs) to deny occupancy to applicants, as well as evict residents, on the basis of alcohol abuse, illegal drug-related activities, or criminal behavior. Merely an arrest, not a conviction, is necessary for eviction under the rule, and the infraction is often a result of the actions of the tenant's family or visitors. Close to 4,000 public housing tenants were evicted in the six months following the policy's implementation in 1996 – an 84 percent increase over the previous six months – according to a survey of half of the nation's housing authorities. More than 19,000 applicants for public housing were denied units during that time because of criminal records. And more than 46,000 individuals have been barred from visiting public housing complexes under "exclusionary agreements" signed by tenants whose leases were threatened by their associations.

In Atlanta, public housing tenants called for a rent strike to protest that housing authority's implementation of One Strike rules to the tune of 600 evictions in 16 months, including nearly half the residents of one complex, according to an article in the Atlanta Constitution (2/20/98). Boston residents have voiced opposition to the rules' enforcement there as well; a number of parents there have been evicted because their children committed crimes while living with them, according to the Washington Post (2/4/98).

At least one effort against the policy has proven effective. The ACLU convinced a Southern California housing management company to stop evicting tenants for crimes committed by visitors, according to a UPI report (2/10/98).

(See Shelterforce #100 for the preliminary decision in the Oakland case.)

Short Takes

Anti-Poverty Programs Work, But Not for Children

A study by the Center on Budget and Policy Priorities (CBPP) says the drop in welfare rolls reflects not just better economic times but also denial of benefits to needy families with children. Public benefits helped 27 million people escape poverty in 1996, according to the report, but heavily favor support for the elderly over support for children. Government programs were credited for keeping more than four out of every five elderly people out of poverty, but fewer than one in three needy youngsters. CBPP: 202-408-1080; www.cbpp.org

Massachusetts' Insurance Commissioner has ruled that an insurance company's program of giving health insurance discounts to low-income individuals and families is illegal. Kaiser Permanente offered premium discounts of up to 85 percent for three years to people whose income was less than 200 percent of federal poverty guidelines and gave away an estimated $400,000 in such subsidies to 350 residents in 1997, the Associated Press reported (4/22/98). Massachusetts law requires insurance companies to sell individual health policies to anyone, regardless of their health, but the law forbids basing premiums on income. There are 700,000 uninsured people in Massachusetts.

A study conducted by the Family Housing Fund of Minnesota concludes that foreclosures for non-payment of mortgages are up to 22 times more expensive than loan programs to prevent default. The study highlights the direct and hidden costs of foreclosure to homeowners, lenders, government, and the local community, and found that the average cost for a social service agency to provide a loan to prevent foreclosure was $3,300, and the average cost of a foreclosure ranged from $27,000 to $73,300. Family Housing Fund: 612-375-9644.

A U.S. District court judge in Chicago ordered HUD to reinstate a foreclosure protection program curtailed in 1996 that gives delinquent homeowners 36 months to catch up on payments before they can lose their homes. The program, required by court-order since 1976, allowed mortgage companies to transfer troubled FHA-insured loans to HUD. In 1996 the program was replaced with a program that left it up to the discretion of lenders whether to assist tardy mortgage holders. Legal Services' Poverty Law Project said 13,000 families lost homes after HUD stopped the program, according to the Chicago Sun Times (4/7/98).

In a pilot program designed to bring needed services directly to public housing tenants, nutrition and assistance services such as food stamps, child care, summer food aid, and education programs will be available to residents through offices located directly in public housing complexes. Eight cities have been chosen to host the pilot projects: Boston; Baltimore; Charleston, SC; Dallas; Detroit; Jefferson City, MO; Oakland, CA; and Seattle; according to Reuters (2/11/98).

Housing discrimination is alive and well and legal if you live in public housing – and have four legs. Washington DC public housing now has a no pets rule, as a result of what housing officials claim is a pattern of using dogs as part of drug operations, the Associated Press reported on April 7. New York City is also cracking down on pets in public housing, and the New Haven Housing Authority made headlines in April when it relented after a protracted battle and allowed a public housing tenant to keep a dog he claimed help pull him out of a depression. Congress is considering stripping local administrators of the right to ban pets from their projects, under heavy pressure from the pet food lobby and animal advocates who point out that the companionship offered by pets is critical to many tenants' emotional health, The New York Times reported (2/4/98).

The city of Seattle will have a new SRO, three new group homes for youth and young mothers with infants who would otherwise be homeless, and 26 homes for homeless families with children, thanks to the Navy's decision to turn over 18 acres of a former naval air station to the city. Sand Point Community Housing Association, a specially created nonprofit organization, will develop and manage the housing. The group also hopes to construct 110 new family units at the former base over the next few years. Sand Point Community Housing Association: 206-517-5604.

The state of Indiana has made grants to 22 CDCs around the state to establish Individual Development Accounts (IDAs) for 800 individuals and families per year. Under the program, the state will contribute $3 for each dollar saved by participants (up to $900), and savings must be used for education, job training, home purchase, or business start-up. The program also offers tax credits to private entities that contribute funds to IDA programs. Indiana Dept. of Commerce: 317-232-8873.

The Center for Neighborhood Technology, the Natural Resources Defense Council, and the Surface Transportation Policy Project are test marketing an innovative new mortgage product, the Location Efficient Mortgage (LEM), that will enable home buyers in three initial test markets (Chicago, Los Angeles, San Francisco) to apply money saved on transportation costs – as a result of living in high density, public transportation accessible neighborhoods – to housing costs, thus making home purchase more affordable. The expected benefits include increased homeownership opportunities for low- and moderate-income households, stimulus to purchase in urban communities, increased local services and amenities, a boost to public transit ridership, and reduced energy consumption. Center for Neighborhood Technology: 773-278-4800 x115; www.cnt.org or see Shelterforce #103.

Back to May/June 1998 index.