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Resolution on Banking Fees, Foreclosures and Access to Capital


WHEREAS there is an ongoing need to urge federal agencies and regulators to carefully review financial services proposals that disadvantage many modest wage and Hispanic households, and urge for greater transparency in disclosures of bank fees; and

WHEREAS consumers are facing a wave of new and hidden bank fees and penalties. And, while lenders contemplate cutting savings account interest rates and other means by which to expand profits from consumer accounts, they have considerably reduced access to capital and lending to both consumers and small businesses; and

WHEREAS the increases in fees are of particular concern to the Hispanic community. According to recent studies there has been an increase in the number of low-income households that have become unbanked. Almost a third of households that closed bank accounts between 2009 and 2010 did so because of unexpected or unexplained fees; and

WHEREAS households that had never had a bank account continue to cite minimum opening balance requirements and lack of proper identification to open an account as the major reasons they remain unbanked, and households that left banking most often cited unexpected or unexplained fees as their reason for closing their bank accounts; and

WHEREAS having a bank account promotes financial stability and savings. It also means lower costs for financial transactions compared to alternative financial services. A recent Pew study found that sixty-three percent of the banked population uses banking institutions exclusively, while the rest turn to check cashers, supermarkets, liquor stores and other alternative financial service providers in addition to banks; and

WHEREAS lower income households also face challenges in making monthly minimum balances to maintain checking accounts, and often resist bank accounts because of their perceived lack of liquidity; and

WHEREAS a study by the California Public Interest Research Group found that only half of bank branches provided the legally required disclosures on interests, fees and penalties; and

WHEREAS consumers continue the trend of transferring their deposits from large financial institutions into credit unions and community banks. According to some estimates, nearly two-thirds of consumers with deposit accounts will bank at community banks and credit unions by mid-next year. Large banks have claimed to be unconcerned about these trends since most of the depositors switching to lower-cost financial institutions have lower balances and are less "profitable;" and

WHEREAS a large number of Hispanic households are located in states where the real estate markets are in deep distress, and are therefore at risk of foreclosure and are likely underwater on the value of their home; and

WHEREAS reports indicate that despite record low interest rates, larger financial institutions are making substantial financial gains from mortgages that are significantly above the market rates, and utilizing higher than conventional underwriting requirements as the justification; and

WHEREAS housing finance reform is being considered actively both in Congress and at the Department of the Treasury, where proposals will have great impact on the ability of modest and middle income families to utilize programs to avoid foreclosure or refinance their home, in addition to policy decisions on who will be able to purchase or finance a home in the future; and

WHEREAS one in three Hispanic families are underwater compared to 15 percent of African Americans and 15 percent of Caucasians; and
WHEREAS many of the states that suffered the biggest reductions in home prices have significant Latino population, such as: Nevada, Florida, Arizona, California, New Jersey, Rhode Island and New England; and

WHEREAS the resulting drop in the median net worth in the states mentioned above tumbled from $51,464 in 2005 to $6,375 in 2009, a loss of 88 percent, and two thirds of all Hispanic wealth has been lost due to the decline of the real estate market; and

WHEREAS the Dodd-Frank financial reform legislation sought to create a unified banking and lending market. Yet, there are proposals being considered both in Congress and by the Department of the Treasury that would result in a bifurcated lending market; and

WHEREAS the acting director of FHFA has stated that the federal government will not authorize programs that allow principal reductions or "cram downs" for homeowners. This decision was taken despite a range of experts, from economists to the Secretary of the Treasury, expressing wide agreement that principal reductions could help up to half a million homeowners, save Fannie Mae and Freddie Mac up to $3.6 billion, and save taxpayers $1 billion.

WHEREAS principal reduction was a key component of the multi-billion settlement between state attorneys general and mortgage servicers;

NOW, THEREFORE BE IT RESOLVED that NHCSL will advocate for expanded assistance to homeowners for foreclosure mitigation and relief, particularly through refinancing and programs that negotiate reductions in principal; and

BE IT FURTHER RESOLVED that NHCSL will advocate to policy makers that financial institutions must be fair and transparent in their fee and penalties, and that these must be easily comparable.Further, that regulators end the practice of delaying deposit availability or "largest out," and to limit the escalation of fees for simple transactions such as making deposits and use of ATMs; and

BE IT FURTHER RESOLVED that NHCSL staff collaborate with other nonprofits, government officials and individuals to determine if the merger of investment and commercial banks has created dangerously large and unstable banks that are unresponsive to average consumers, and whether NHCSL should develop a view on restoring the separation between those forms of banking; and

BE IT FURTHER RESOLVED that NHCSL will advocate to discourage the addition or escalation of fees or penalties that reduce the portability of financial accounts or access by community banks to federal funding and assistance; and

BE IT FINALLY RESOLVED a copy of this Resolution will be transmitted to the leadership of the Committees of jurisdiction in Congress, the Department of the Treasury, Consumer Financial Protection Bureau, and organizations that advocate similar views.


Sponsored by: Assemblymember Manuel Pérez (CA).