2006 NS Contract - Contract Conducting Analysis of Impediments Fair Housing Choice Donald B Eager & Assoc

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55 City of Cuyahoga Falls, Ohio 34 Q � Anal sis of Im ediments to Fair Housin Choice opportunities for home ownership, reduced opportunities for home improvement and the lack of affordable housing are only a few of the consequences of inadequate lending performance. Financial decay in the business sector as well as the private sector is also a result of disinvestment business relocation, closure and bankruptcy. Full service local lenders, that have traditionally served residents and businesses, are the main cog in the wheel that keep neighborhoods stable. Significant changes are occurring in the lending market, not only in Cuyahoga Falls but throughout the United States. The number and type of lenders have changed over the last ten years. It is becoming a common occurrence to read about national lenders buying local lenders. These national lending institutions are becoming increasingly more active locally. The market share of national corporations is growing yearly. The "newest" issue to emerge from the changes in the market is the substantial growth of the sub -prime market and the impact that these lenders have on communities and neighborhoods. More and more we are seeing local, commercial banks lose market share to lenders outside the City, with little or no stake in it. 7.2 Sub Prime Lending Each year, millions of consumers are targeted by sub prime lending institutions to secure high cost mortgage and /or retail loans. Sub prime lenders specialize in offering credit to consumers who may have credit blemishes or consumers with "B" or "C" credit, while conventional lenders focus their marketing efforts on consumers with few or no blemishes or those with "A" credit. With promises of easy payment plans, debt consolidation, and quick approval, predatory lenders lure many consumers who have found it difficult or impossible to access low -cost loans in the conventional market, as well as many unassuming consumers who do, in fact, qualify for traditional loans. Recent studies by Freddie Mac, the GSE (Government Sponsored Enterprise) that purchases mortgages from lenders and packages them into securities that are in turn sold to investors, show that between 25 -35% of consumers receiving high cost loans in the sub prime market qualifies for conventional loans.sa What makes a sub prime lenders different from a predatory lender? While most sub prime lenders serve a need by targeting borrowers with sub -par credit histories, some go too far. Those that go too far are known as predatory lenders. Lending can become predatory when lenders target specific populations - low income, minority, and /or elderly homeowners - with high pressure marketing techniques, charge excessive fees, frequently refinance or "flip" the loan, and often mislead the borrower. Communities within the Consortium are not immune to this practice. In low and moderate income and minority neighborhoods throughout the area one or two sub prime or predatory lenders often dominate the market, while prime lenders have very small market shares or are not to be found. 64 Information for this discussion provided by Miami Valley Fair Housing Center