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Cascade: No. 76, Winter 2011

Message from the Community Affairs Officer

Despite the end of the “Great Recession,” the news in many segments of the economy continues to give cause for concern. We have highlighted some of these concerns in this issue of Cascade.

This issue begins with an article about the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was passed by Congress and signed into law by President Obama last summer. The new law makes significant changes to how the American financial system will work, and many of these changes involve consumer transactions. Although we could spend days writing about the changes, Amy Lempert’s article delves into two areas of great concern to our readers: the new bureau that is being created to protect consumers in financial transactions and the new mortgage and anti-predatory lending regulations. Many more changes are expected over the coming months, so we will keep you posted.

Kendra Fretz, a summer intern from Penn, was so intrigued by a session at our 2010 Rethink. Recover. Rebuild: Reinventing Older Communities conference that she decided to conduct her own unscientific, but interesting, study on the topic that the panelists discussed — the future of community development. She interviewed 19 community development leaders about their thoughts and came away with a consistent view of where the industry must head.

Automobile loans are an important part of many families’ debt profile, but different types of lenders provide different financing. In his column, Marty Smith summarizes a study that looks at who defaults on car loans and how the underwriting might be improved.

Late in the summer of 2010, two organizations that played important roles in the history of community development closed their doors. One of these organizations, ShoreBank, was acquired by another entity and is now the Urban Partnership Bank. Bruce Gottschall, who retired as the executive director of Neighborhood Housing Services (NHS) of Chicago after 30 years, has written an interesting piece about the importance of ShoreBank to community development lending. In many respects, ShoreBank taught many of us that lending in low-wealth communities was possible.

The other organization was NHS of America. This secondary market for NeighborWorks purchased loans around the country. Back in the early 1980s when I was an NHS director in Trenton, NJ, NHS of America was the only source for replenishing my organization’s loan funds. While I always tried to arrange bank financing for neighborhood homeowners, not everyone was bankable. NHS of America was a valuable resource — its end saddens me. But it reminds me of something a banker said during another recession: “When a bank’s customers face hard times, so does the bank.” The subprime crisis taught us that if you give marginal borrowers loans they cannot afford, trouble occurs. But NHS of America’s closing is a lesson to all advocates that even when you make good loans to low- and moderate-income people, they still face bumps in the road that they may not be able to handle.