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Op-Ed

As Loan Debts Rise, Foreclosures Dip

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Charlene Crowell

By Charlene Crowell
NNPA Columnist

 

 

A new economic analysis by the New York Federal Reserve Bank found fewer foreclosures, bankruptcies and credit card delinquencies. However the rates of delinquent auto and student loans are worse than before.

For most consumers, debt may seem like a constant companion – not a friend but somehow lurking near. How consumers manage their debts can also trigger financial stress. In December 2014, the nation’s consumers collectively carried $710 billion of debt. Of this amount, $570 billion was 90 days or more delinquent.

It should also be noted that from mortgages to car loans, credit cards, auto financing and more – the high costs of predatory lending unnecessarily raise the costs of a wide range of products. In two specific lending areas – student and auto loans – both the amount of debt and delinquencies are rising.

Both areas have also been under scrutiny by regulators and researcher alike as evidence mounts on predatory loan practices.

For the first time since before the recession started in 2007, the 90-day delinquency rate for auto loans (3.5 percent) is now greater than that of mortgages (3.1 percent). Auto loan balances continued to increase this quarter by $21 billion, and is larger than any time in history. That growth also comes with greater financial risk.

“Underwriting standards have steadily weakened in auto lending,” says Chris Kukla, senior vice-president with the Center for Responsible Lending (CRL). “Dealers are pushing borrowers into longer loans and routinely making loans that are more than the car is worth. When dealer interest rate markups are allowed, the interest rate for compensation and other risky practices are added on top of the loans. CRL is concerned that these losses will continue to mount.”

Student loan debts in this same period rose to a new total of $1.16 trillion. In comparing student loan balances between 2013 and 2014, the New York Fed found the yearly increase to be $77 billion.

Further, student loan delinquencies and defaults were even more than double that of auto lending at 11.3 percent and may actually understate the full delinquency rate due to deferments, grace periods, forbearance that are not included in the repayment cycle.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student loan balances and delinquencies is concerning,” said Donghoon Lee, research officer at the New York Fed. “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

Maura Dundon, a CRL senior policy counsel, said: “Student loan debt can be a great financial tool for many borrowers to obtain a valuable college degree. Sharply rising balances coupled with slow repayment and high delinquency rates may indicate that student loan debt is beginning to drain Americans economically. A disproportionate share of defaulters attended for-profit colleges, which are in urgent need of reform.”

Lee’s observation on the slowdown of new households is also shared by a number of other policy experts who also view that growing student debts have delayed home purchases for many who are just beginning their careers. New mortgage loan originations totaled $355 billion, a historically low figure according to the New York Fed.

At the same time, mortgage delinquencies continued to decline, balances on home equity lines of credit dropped by $2 billion and fewer consumers are filing for bankruptcy. In the last quarter of 2014, nearly 20 percent fewer bankruptcies were filed than at the same time last year: 268,000.

Before making a decision on a major purchase or finance, try to learn as much as you can about the range of products and finance options available. The Internet offers a wealth of information from governmental office such as the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC) and the Department of Education.

CFPB offers the opportunity to file or check the status of formal complaints or blow the whistle on businesses suspected of violating laws. Similarly, the FTC’s web accepts consumer complaints, including identity theft or adding your phone number to the nation’s Do Not Call Registry. Consumers can also request free copies of their credit reports.

Additional consumer lending information is al so available on CRL’s web.

Remember: When it comes to lending, if a deal sounds too good to be true, it probably is.

 

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.crowell@responsiblelending.org.

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Activism

Oakland Post Endorses Barbara Lee

Barbara Lee will be able to unify the city around Oakland’s critical budget and financial issues, since she will walk into the mayor’s office with the support of a super majority of seven city council members — enabling her to achieve much-needed consensus on moving Oakland into a successful future.

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Congresswoman Barbara Lee. Courtesy photo, Office of Rep. Barbara Lee.
Former Congresswoman Barbara Lee. Courtesy photo.

As we end the celebration of Women’s History Month in Oakland, we endorse Barbara Lee, a woman of demonstrated historical significance. In our opinion, she has the best chance of uniting the city and achieving our needs for affordable housing, public safety, and fiscal accountability.

As a former small business owner, Barbara Lee understands how to apply tools needed to revitalize Oakland’s downtown, uptown, and neighborhood businesses.

Barbara Lee will be able to unify the city around Oakland’s critical budget and financial issues, since she will walk into the mayor’s office with the support of a super majority of seven city council members — enabling her to achieve much-needed consensus on moving Oakland into a successful future.

It is notable that many of those who fought politically on both sides of the recent recall election battles have now laid down their weapons and become brothers and sisters in support of Barbara Lee. The Oakland Post is pleased to join them.

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Activism

Actor, Philanthropist Blair Underwood Visits Bay Area, Kicks Off Literacy Program in ‘New Oakland’ Initiative

These community activations were coordinated with the San Francisco-based non-profit program “Room to Read.” Ray said he is also donating his time to read and take pictures with students to encourage their engagement and to inspire them to read more. The inspirational book “Clifford Ray Saves the Day” highlights Clifford Ray’s true story of saving a dolphin.

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Blair Underwood (left) and Barbara Lee (right). Courtesy photo.
Blair Underwood (left) and Barbara Lee (right). Courtesy photo.

By Paul Cobb
New Oakland Series
Opinion Part 3

The Post mentioned three weeks ago that a number of our local luminaries were coming together to support the “New Oakland” movement. As this current national administration continues to eliminate our “legacy” institutional policies and programs left and right, most communities find themselves beyond “frozen” in fear.

Well, esteemed actor, long-time Bay Area supporter, and philanthropist Blair Underwood returned to Oakland this week to speak with city leaders, community trust agents, students, the Oakland Post, and local celebrities alike to continue his “New Oakland” initiative.

This week, he kicked off his “Guess Who’s Coming to Read” literacy program in some of Oakland’s middle schools. Clifford Ray, who played the center position of the 1975 World Champion Golden State Warriors, donated close to 1,000 books. Ray’s fellow teammate Charles “The Hopper” Dudley also gave Converse sneakers to students.

These community activations were coordinated with the San Francisco-based non-profit program “Room to Read.” Ray said he is also donating his time to read and take pictures with students to encourage their engagement and to inspire them to read more. The inspirational book “Clifford Ray Saves the Day” highlights Clifford Ray’s true story of saving a dolphin.

Underwood also spent quality time with the Oakland Ballers ownership group and visited the amazing Raimondi Park West Oakland community revitalization site. In the 1996 TV film Soul of the Game, Underwood played the role of the legendary first Black Major League Baseball player Jackie Robinson and commended the Ballers owners.

“This group of sports enthusiasts/ philanthropists needs to be applauded for their human capital investment and their financial capital investment,” Underwood said. “Truly putting their money and passion to work,” Underwood said.

Underwood was also inspired by mayoral candidate Barbara Lee’s open-minded invitation to bring public-private partnership opportunities to Oakland.

Underwood said he wants to “reinforce the importance of ‘collaborative activism’ among those most marginalized by non-empathic leadership. We must ‘act out’ our discomfort with passionate intentions to create healthy change.”

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Activism

Councilmembers Ramachandran, Kaplan, Unger Identify Funds to Save Oakland Fire Stations

Our budget crisis – one of the worst in Oakland’s history – is compounded by the fact that people do not feel safe coming to Oakland due to our public safety crisis. By investing in our fundamental public safety resources today, we can send a signal to the world that Oakland is open for business. We have such a rich and vibrant culture, arts, and food scene that is worth celebrating – but we can only showcase this if we are able to keep our neighborhoods safe. Having fully functioning fire stations are absolutely essential to these efforts.

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Councilmember Janani Ramachandran. Courtesy photo.
Councilmember Janani Ramachandran. Courtesy photo.

By Janani Ramachandran

There is no greater concern to the people of Oakland today than public safety. Fire stations are the bread and butter of essential city services – and every day that we have stations shuttered, we imperil the lives of our community members. In response to widespread outcry over the current and planned closure of stations, myself, along with Councilmembers Kaplan and Unger, have painstakingly worked to identify millions of dollars of new funding to save our stations. The legislation we introduced on Thursday, February 13th, will amend our budget to prevent the closure of four fire stations that are currently on the chopping block due to our budget crisis and will re-open two closed stations that have already been closed – Station 25 and 28 – in the near future. The resolution that will provide the funding to keep our stations open will go before the full City Council for a vote at our meeting on Tuesday, March 4th at 3:30 PM – and we invite you to join us at City Hall to share your perspective on the topic.

Our budget crisis – one of the worst in Oakland’s history – is compounded by the fact that people do not feel safe coming to Oakland due to our public safety crisis. By investing in our fundamental public safety resources today, we can send a signal to the world that Oakland is open for business. We have such a rich and vibrant culture, arts, and food scene that is worth celebrating – but we can only showcase this if we are able to keep our neighborhoods safe. Having fully functioning fire stations are absolutely essential to these efforts.

With the devastating Los Angeles fire at the top of people’s minds, terrible memories of Oakland’s own wildfires are re-surfacing from the 1991 Oakland Hills Firestorm to the Keller fire just a few months ago – and how essential fire stations are to mitigating these catastrophes. But in Oakland, our fire stations don’t just fight wildfires – they also provide emergency medical services to our most vulnerable constituents, put out structural fires and encampment fires, and much more.

We recognize that there are a number of competing interests and important initiatives fighting for sparse City resources. But from my perspective, core safety services are the most pivotal functions that a City must spend its resources on – especially given the outcry we have heard around fire stations.

The fight to save our stations is not over. The resolution we introduced is a critical first step, and there are hurdles to overcome. If you support keeping our fire stations open, we invite you to be a part of the solution by making your voice heard at the March 4th City Council meeting at 3:30 pm.

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