Five Lessons for Integrating Financial Capability Services

The Inclusive Economy Blog

In January 2014, 10 community-based organizations embarked on an eighteen-month journey to develop new ways for their low-income clients to progress toward financial security, thanks to generous support from the Bank of America Charitable Foundation. Our new publication, Meeting People Where They Are: Five Lessons for Integrating Financial Capability Services, highlights the lessons and successes from that Learning Cluster so that other organizations can benefit from their experiences.

While all Learning Cluster participants followed the same general planning process, they varied in the amount of time they spent planning, the financial capability services they selected and how much they tried to do in-house versus through partnerships and referrals. Despite their differences, all ten Learning Cluster members engaged three stakeholder groups—clients, partners and staff—to design and implement their projects. Our new publication summarizes five key lessons that the organizations learned about integrating financial capability services into existing programs, specifically tailoring services for clients, leveraging partnerships and preparing staff:

Invest the time to understand which financial capability services are right for which clients. To successfully integrate financial capability services, Learning Cluster members first sought to understand how clients were managing their finances and then used this information to identify which financial capability services would be most relevant and effective.

Find out what motivates clients and how to reduce barriers to their participation. After selecting the right financial capability service(s) to provide to clients based on their financial lives, Learning Cluster members worked to make sure clients wanted and were able to access the services by meeting their basic needs first by connecting financial capability services to clients’ primary goals, and then removing barriers to participation.

Think creatively about partnerships and make sure partners have what they need to serve clients well. Throughout the project period, Learning Cluster members found that attaining sustainable funding is difficult, but inroads towards this goal can be made by engaging funders as thought partners; financial institutions continue to make excellent partners, but organizations may need to invest time exploring how best to utilize them; and partnerships need clear processes and continual refinement to be successful.

Secure buy-in from staff at all levels of the organization. Participating organizations learned that their integration projects were more likely to be successful if senior leaders, frontline staff and administrative personnel throughout the organization understood what they were trying to accomplish by integrating financial capability services, agreed that this work is important for their clients and organization, and felt comfortable talking to their clients about financial topics.

Build staff capacity to deliver or refer to financial capability services. Regardless of the integration approach they selected—refer, partner or DIY—Learning Cluster members worked to make sure staff who delivered services, both at their organization and at partner organizations, had the capacity, confidence, knowledge, expertise and cultural competency to do what they were asked to do.

 

We recommend that organizations interested in starting or expanding their own financial capability integration projects also check out our other resources. Learning Cluster members used early drafts of the tools in Building Financial Capability: A Planning Guide for Integrated Services, an interactive resource that CFED developed in partnership with the U.S. Department of Health & Human Services.

They also used the Tracking Financial Capability series to evaluate their integration projects, notably tools that helped them Identify and Prioritize Expected Outcomes, Build a Logic Model and Select and Collect Indicator Data.

These and other resources are available at CFED’s Integrating Financial Capability website.

From Rooflines: Better Loans, Better Laws: Showing Communities What “Home” Looks Like

Posted by Doug Ryan on August 25, 2015

For generations, Americans from across the nation, the demographic spectrum and the income strata have strived for homeownership, working from the premise that it is the key to long-term financial security for them and their children.
For many families, having a home with a safe and sensible mortgage is the primary means to wealth accumulation, stability and access to other asset-building opportunities, such as higher education or entrepreneurship. But now, years after the financial crisis technically ended, we still feel its after-effects, leaving many questioning the value of homeownership as public policy. That perspective is simply wrong.

For low- and moderate-income homeowners, the value of high-quality loans is especially important. Although these families own their homes, they typically do not own significant amounts of other assets. Studies after the financial crisis have demonstrated that such homeowners who remained in their homes often had lower overall housing costs and greater assets as compared to renters. But we also know that homeownership rates vary wildly by race, with white Americans being considerably more likely to own their homes than other Americans. There have been efforts to improve the road ahead, but these efforts have stalled.

At the end of the last Congress, there was some movement toward comprehensive housing finance reform, which included winding down the government-sponsored enterprises, Fannie Mae and Freddie Mac. For numerous reasons, this legislation, which had many positives as well as negatives, did not advance. The current political environment all but ensures there will be no Congressional movement on homeownership before the 2016 elections.

Part of that star-crossed legislation included improving the lending environment for manufactured homes. CFED was hopeful that the proposal could serve as a starting point for moving away from the chattel loan market that too often imposes high fees and rates and is driven by just a handful of lenders. But this is just part of the vast array of wealth-building challenges that faces owners of manufactured homes. A lending environment that encourages depreciation can only be addressed from multiple angles.

Readers here know the answers to mainstreaming manufactured housing and manufactured housing finance. It is not by usurping the Consumer Financial Protection Bureau’s rulemaking authority with a bad bill, promoted through an anecdote or two, and industry-written comment pages. The key is to make manufactured housing part of the broader housing finance market. There are three primary policy ways to do so: better loans, better local land use laws and better titling.

The first two are obvious. When talking to housing experts, advocates and local leaders, the idea of financing a home like a car makes little sense to them. They often ask: Why would Congress rubber-stamp a 14 percent home loan? Why doesn’t Fannie or Freddie develop tools to support innovative loan programs that both protect homeowners and expand competition in the lending market?
Equally vexing is the strategy employed by far too many state and local governments to limit the use of manufactured homes in their jurisdictions. High-quality, aesthetically appealing homes available at significantly lower costs than their alternatives are essentially removed from the developer’s toolkit.

Undergirding each of these challenges is how states treat manufactured housing when it comes to titling. In general, states, by default, title a manufactured home as personal property, like a boat or a car. While forty states have some sort of conversion statute on the books, only a handful of states have relatively easy rules for converting manufactured home titles to real estate once the home is affixed to private property. Most states, on the other hand, have onerous laws and rules that essentially eliminate the option for homeowners who rent the lot beneath the home from getting a real estate title. For example, California, a reasonable state on many consumer issues, requires that a manufactured homeowner have a 35-year lease and that the home be affixed to a permanent foundation. Very few community owners would permit either, which condemns the family and subsequent owners to more expensive, potentially predatory lending options.

Homes without real estate titles, local permitting officials will argue, are not truly assets to the community, and have little value or role in a residential zone. Homes without true home loans are less likely to facilitate wealth building.

So what makes a structure a home? Slapping a real estate designation on a 28’ x 48’ structure does not magically make it a home. A 4.875 percent, 30-year fixed-rate loan won’t, on its own, do it either. Communities, neighbors and local leaders need to see that a home, a solid addition to a block, is one that allows a family to be part of that community, regardless of the price, construction process, or foundation.

That’s the idea behind CFED’s new campaign to show #WhatHomeLooksLike. Through images of real homes owned by real people, the campaign will demonstrate what manufactured homes look like, why they matter and how they can grow as part of the American housing fabric.

CFED thinks titling reform is key to making a home a home, in that it mainstreams manufactured housing in the eyes of lenders, investors and policymakers. It is simply undeniable that lenders will offer real mortgages to manufactured homes in communities as long as they are titled as real estate. This has been done on a small scale, but needs to be expanded much more widely through such approaches as states adopting the Uniform Manufactured Housing Act.

Between now and CFED’s Innovations in Manufactured Homes Conference at the end of October in Minneapolis, we’ll be using the #WhatHomeLooksLike campaign to show that these houses are homes and should be titled as such. At that event, which promises to be the biggest gathering of the manufactured housing field yet, we will tackle how we can get communities to see what we’ve known for years: that manufactured homes are just like any other home: a comfortable place where families spend time together, while building equity at the same time.
(Photo credit: Thomas Runley, via flickr, CC BY 2.0)

Congress Can Improve Tax Return Accuracy—Without Hurting Low-Wage Workers

The Inclusive Economy Blog

Last month (July 2015), the Senate Appropriations Committee included a very damaging paragraph in its 191-page financial services budget bill. Under the guise of reducing Earned Income Tax Credit (EITC) error rates, the bill would quintuple the number of pages low-wage workers need to complete to file their taxes. In other words, the bill alleges to increase compliance but would ultimately only increase complexity. This strategy will harm low-wage workers without tackling the problems it purports to address.

As members of the low-income free tax preparation community, we know the value of the EITC to taxpayers, and we work hard to file tax returns correctly. The Volunteer Income Tax Assistance (VITA) program, which is administered by the IRS and utilizes IRS-trained volunteers to serve low-income taxpayers, has a 94% accuracy rate. That’s better than any other large tax preparer in the country. In other words, #VITAWorks isn’t just a popular hashtag in the field—it’s actually true.

While reducing filing errors is a worthy goal, increasing the difficulty of filing federal tax returns is a highly ineffective method for accomplishing that goal. The National Taxpayer Advocate has repeatedly warned Congress and taxpayers of the negative impact the complexity of the tax code and the tax-preparation process have on taxpayer compliance rates. The booklet for filing the EITC for Tax Year 2014 was already 37 pages, substantially longer than the guidance for other credits and deductions. The Senate proposal would further increase that complexity and force self-preparers to answer many questions that are only applicable to paid preparers. The complexity of filing the EITC already contributes to the error rate; adding more burdens to the process will not help.
Furthermore, the vast majority of EITC claimants are not self-preparers, but rather file their taxes through paid commercial preparers. These paid preparers have higher error rates than self-preparers (and much higher error rates than returns filed through VITA). But the Senate proposal does nothing to address the compliance shortfalls among these preparers.

Competency testing and IRS oversight has contributed to making VITA one of the most accurate ways to file a tax return. However, the tax preparation field includes 40 million commercial preparers nationwide that are currently unregulated and many of whom lack adequate training, supervision or identification. Instead of placing additional burdens on low-wage workers, Congress should ensure that all tax filers have the information they need to file their returns accurately and that the paid preparer field is doing as good a job as VITA. That is why, earlier this year, Senator Ron Wyden (D-OR) and Senator Ben Cardin (D-MD) introduced the Taxpayer Protection and Preparer Proficiency Act, which would bring best practices to the commercial tax preparation field.

Increasing the filing burden for low-wage workers will not make their tax returns more accurate. Instead, it will create barriers for resource-strapped workers, which in turn will only decrease compliance and increase the number of tax filers who forego their earned credits due to the heightened difficulty of the process. Before piling up new burdens on low-wage workers, Congress should consider the Taxpayer Protection and Preparer Proficiency Act and related proposals to get workers the information and support they need to file their returns correctly.

CFED: Support is Growing for Strong Rules on Payday Lending

The Inclusive Economy Blog

Back in March, the Consumer Financial Protection Bureau (CFPB) released a framework for regulations that would rein in the abuses of the payday lending industry--which sometimes charges interest of up to 1,900% APR on small-dollar loans and traps low-income families in a cycle of crippling debt. But consumers are still waiting for the CFPB to take the next step and actually propose their rules. Every day the CFPB waits to put forth their proposed regulations is another day that low-income families get caught in the payday lending debt trap.

That's why CFED, the Assets & Opportunity Network and the Asset Building Policy Network launched a campaign last month to send a simple message to the CFPB that consumers can't wait any longer for strong protections against payday loans. This week we had our first big campaign victory, when more than 100 partner organizations and individuals joined onto the #ConsumersCantWait Thunderclap and spread the word on social media. By speaking together, we were able to deliver this message to nearly 260,000 social media timelines.

For more information about the campaign and ways to get involved, click here.

Fargo-Moorhead Workforce Study Part 2: BUILD: Collaboration with NonProfits serving Workers of Low-Income Around Income Stability

In the NDESPA blog post on August 31st, 2015 we examined the foundational findings in the study regarding the inability to work in the Fargo-Moorhead laborshed.  Those findings were:

1. Lack of collaboration between Fargo-Moorhead and the non-profits providing support and wraparound services to people of low income.
2. Lack of affordable housing for people in low-wage jobs that make up 45% of the employment options in Fargo-Moorhead.
3. The lack of childcare is negatively impacting peoples' ability to take work.  Only 54% of the child care needs in Fargo-Moorhead are being met by licensed childcare providers.

In today's post we are digging into some of the ideas the study puts forward in its BUILD framework.

Assuming the authors of the study put the workforce study in priority order, the most important component of the study's BUILD framework is: "To Create a more formal collaborative of nonprofits working with low-income clients around income stability" (p25).  

The study recommends establishing "a regional network for financial independence and stability" which would "strengthen the regional support network and wraparound services available to low-income residents" (ibid).

According to the study "the collaboration would provide nonprofit partners with a common set of goals and the opportunity to share information, best practices, and lessons learned" (ibid).

Sounds kind of familiar to NDESPA.  NDESPA has been building coalition-based communications, coordination and activity planning, public education and advocacy, coalition building, and technical assistance through partners such as Public Works, CFED, and the Hatcher Group on the state-level since 2008.

The F/M Workforce study also states the collaboration would "build connections between nonprofits and formalize referral networks and shared services" enhancing "the capacity of the nonprofit network to offer comprehensive and bundled services" benefiting clients with low-income (ibid).

The process the workforce study describes is impressive, but might be lacking a major component.

It is not only private nonprofits providing the existing support network for workers with low-income and their families.  Public entities, such as county social services, are also key to providing a financial support network, through programs like TANF, SNAP, LIHEAP, and others.  It is their enforcement of regulations from the state and national level that act as gatekeepers to the very support network these working families need.

These county agencies do a great job of helping people as much as they can for the, often, short time it is needed.  Their voices should be included at the decision-making table along with the other stakeholders.

A small credit union brings Hope to New Orleans

The Inclusive Economy Blog 

This article was produced by and originally published on Marketplace.
Bill Bynum, the CEO of Hope Credit Union, has a couple of striking pictures hung on the walls of his Jackson, Mississippi, office.

There are two of him with U.S. presidents: Barack Obama and Bill Clinton. He advised them (and George W. Bush) on community development. Bynum also has a photo of a small, blue, ramshackle house that he spotted while driving through the Mississippi Delta one day. The house's tin roof is rusted and the front porch is collapsing. Bynum says it looks like it should be bulldozed. But it's someone's home. He says the picture serves to remind him of the credit union's mission: to invest and lend in high-poverty, low-income communities, the types of places often neglected by big banks.

"It is frustrating to drive through the Delta and through low-income communities and see street corner after street corner, shopping strip after shopping strip littered with payday lenders, with check cashers with financial predators, but no bank to be found," Bynum says.

This was the problem Bynum wanted to address when he started Hope Credit Union in a small room at his church in Jackson 20 years ago. The first members were his fellow parishioners. Today, Hope has 31,000 members and nearly $300 million in assets. It has expanded throughout the South, focusing on communities that have few or no banks.

Bynum and Hope were invited by a church in New Orleans to open a branch in that city's Central City neighborhood. It opened in December, 2004. At the time, there hadn't been a bank in Central City for 4o years.

Saundra Reed, who says six generations of her family have lived in Central City, is one of a group of residents who pushed Hope to open in Central City. Reed has a soft voice that occasionally rises in animated imitations. She says the absence of a bank was holding Central City residents back. In wealthier New Orleans neighborhoods, Reed says, people have relationships with their banks.

"They can walk into a bank and say, 'Hey, how you doin' Cyrus?' And Cyrus says, 'I'm doing good Mr. Joe. I need to talk to you a little bit about some money.' And before it's over, it's a handshake and a cigar, and they're out the door," Reed says. "What Hope offered us was the opportunity to have that kind of personalized relationship."

After Hurricane Katrina in 2005, Reed took out a second mortgage on her home with Hope. When she walks in to pay her bill, the man at the counter knows her instantly.

"I'm Cyrus," Reed says. "And he's Joe."

Hope opened in New Orleans eight months before Hurricane Katrina hit the region. The New Orleans branch escaped damage, both from flooding and from looters. And in part, because of its luck, the credit union's performance in the months after the storm is not without critics. The branch manager at the time, Lynnette White-Colin, says Hope did a great job of granting "recovery" loans to people who needed small amounts of money for basic necessities. But she says Hope was too slow and too conservative at granting larger, but equally necessary, loans. At times, White-Colin says, she'd have 30 or 40 home loan applications piled up on her desk.

"I have to see these people every day," White-Colin says of her experience with customers after the storm. "I go in the supermarket and I see them. I go to the mall; I go to church, I see them. They entrusted me to take a loan application, and it is taken six months and they still don't have an answer. And these are people who are very creditworthy." White-Colin left the credit union in 2007.
Bynum says the response to the storm was bound to be unsatisfying to many people.

"The level of destruction, the amount of displacement, the documents that had been washed away and torn up after the storm really made it difficult to get your arms around a lot of things that traditionally a financial institution can use to understand how to make decisions and make sure that not only is it meeting the regulatory requirements, but that we're using our depositors resources in a way that's going to be prudent," Bynum says.

The chaos and the sheer level of need, Bynum says, prompted the credit union to grow, expanding from 55 employees to 150 in the year and a half after the storm. That meant there were people in place when the rest of the country was hit by a different kind disaster three years after Hurricane Katrina: the financial crisis.

"All of a sudden, you had communities that were losing banks in record numbers; people couldn't get access to basic banking services," Bynum says. "We decided we would use the infrastructure and capacity we had put in place to address the spread of bank desserts across the South."

Bynum likes to cite a Bloomberg report from 2013, that found that, since the recession, 1,800 U.S. bank branches have closed. Ninety-three percent of them were in low-income communities.

In that same time, Hope Credit Union has tripled in size, expanding from seven branches to 24.

Coalition of Human Needs Fact of the Week: More than 60 percent of American Adults Will Spend a Year in Relative Poverty

Coalition on Human Needs by Lecia Imbery

Think poverty only happens to other people? Think again. Nearly 62 percent of American adults will spend a year struggling in relative poverty, according to a recent report from Mark Rank, professor at Washington University, and Thomas Hirschl, professor at Cornell University. The report found that, between the ages of 25 and 60, 61.8 percent of Americans will experience a year below the 20^th percentile of the income distribution, a measure they use to define relative poverty. They also found that just over 42 percent will experience a year below the 10^th percentile, the measure used in the report to define extreme poverty.
Using these same definitions and data from 1968 through 2011, the study found that 25 percent of the population suffers through five or more years of relative poverty, and over 11 percent live through five or more years of extreme poverty. Those who are younger, nonwhite, female, not married, have less education, or have a disability are at greater odds of living in poverty or extreme poverty.
These findings highlight even more the importance of human needs programs that serve Americans in their time of need and help raise individuals and families out of poverty. We should all be concerned that these programs are threatened by pending cuts known as sequestration. Housing vouchers and Head Start programs, for example, will face cuts unless sequestration is stopped, and safety net programs like SNAP/food stamps and Medicaid could be cut to increase spending in other areas. We need to #StopTheCuts and invest more in these programs – not less – to ensure they are there when we need them.

The report concludes that, “Relative poverty is an economic condition that will strike the majority of Americans.” In fact, Rank was quoted in a Newsweek article, “You’re Probably Going to Be Poor,” as saying,

“Poverty is often thought of as a ‘them’ issue. What these finding indicate is that poverty is an ‘us’ issues. It’s something that many of us, not just some, should be concerned about.”

If you’re concerned about poverty in America, make sure you join us on September 9 at 2pm ET for CHN’s webinar on the Census Bureau’s new poverty data being released on September 16 and 17. You’ll hear from Jared Bernstein, former Chief Economist and Economic Adviser for Vice President Biden and the Obama White House, and now a prominent writer and commentator on economic issues, as well as CHN’s own Deborah Weinstein. You’ll learn how to get accurate information about your state and community – and how to use it to press for real solutions. We hope you’ll join us on the 9th. 

The post Fact of the Week: More than 60 Percent of American Adults Will Spend a Year in Relative Poverty appeared first on Coalition on Human Needs.