How Financial Issues How Financial Issues Affect HousingAffect HousingOpportunitiesOpportunities

Julie Kalkowski Julie Kalkowski Financial Hope CollaborativeFinancial Hope Collaborative

Creighton UniversityCreighton University

Maggie KalkowskiMaggie KalkowskiInternational Center of the Heartland & Refugee ServicesInternational Center of the Heartland & Refugee Services

Lutheran Family ServicesLutheran Family Services

Recent Headlines Recent Headlines Wrong to prey on military families Wrong to prey on military families (OWH, September 2010)(OWH, September 2010)

Record number of foreclosures for 2010 third Record number of foreclosures for 2010 third quarter. quarter. (NPR, 2010)(NPR, 2010)

Many bankruptcies linked to health costs, report Many bankruptcies linked to health costs, report says says (OWH, February 3, 2005) (OWH, February 3, 2005)

Urge for quick cash cuts into refunds for low-Urge for quick cash cuts into refunds for low-income filers income filers (OWH, March 18, 2005)(OWH, March 18, 2005)

Report details health, wealth gap for blacksReport details health, wealth gap for blacks (OWH, April 6, 2005)(OWH, April 6, 2005)

The “Unbanked”The “Unbanked”

20%20% of US Households are unbanked of US Households are unbanked (Federal Reserve Bank, 2010)(Federal Reserve Bank, 2010)

83%83% of unbanked families earn less than of unbanked families earn less than $25,000 annually $25,000 annually (Carr and Schuetz, 2004)(Carr and Schuetz, 2004)

25%25% of African American and Hispanic families of African American and Hispanic families are unbanked are unbanked (Carr and Schuetz, 2004)(Carr and Schuetz, 2004)

30-40 million30-40 million US households are either US households are either unbanked or subprime credit consumersunbanked or subprime credit consumers

(Weissbourd, 2002)(Weissbourd, 2002)

The “Unbanked”The “Unbanked” Latino population totals 13% of US population Latino population totals 13% of US population

and has an estimated purchasing power of and has an estimated purchasing power of $600 billion$600 billion dollars yet 36% (including 56% of dollars yet 36% (including 56% of immigrants) is estimated to be unbankedimmigrants) is estimated to be unbanked (Aizcorbe, Kennickell & Moore, 2003)(Aizcorbe, Kennickell & Moore, 2003)

Visa U.S.A. estimates that payroll checks worth Visa U.S.A. estimates that payroll checks worth $500 billion$500 billion are issued each year to un-banked are issued each year to un-banked employeesemployees (Seidman & Tescher, 2004) (Seidman & Tescher, 2004)

Low income families spend 5% of their annual net Low income families spend 5% of their annual net income on basic financial transactionsincome on basic financial transactions. . (Federal Reserve Bank, (Federal Reserve Bank, 2010)2010)

Credit Card problemsCredit Card problems

Approximately 50% of US households Approximately 50% of US households are living paycheck to paycheck. are living paycheck to paycheck. (Center for (Center for

Financial Services Innovation, 2010)Financial Services Innovation, 2010)

Average household credit card debt in Average household credit card debt in the U.S. in 2004 was the U.S. in 2004 was $8,400$8,400 ((Consumer Credit Consumer Credit Counseling Services)Counseling Services)

In 2004 Americans paid In 2004 Americans paid $14.8 billion$14.8 billion in in credit card penalty fees alone credit card penalty fees alone (Hightower & (Hightower &

Frazer, 2005)Frazer, 2005)

Financial Education Financial Education IssuesIssues

This year more Americans will file for bankruptcy This year more Americans will file for bankruptcy than will graduate from college than will graduate from college (Wallwork Winik, 2005)(Wallwork Winik, 2005)

Research suggest that 15-20% of employees have Research suggest that 15-20% of employees have financial problems severe enough to negatively financial problems severe enough to negatively affect productivityaffect productivity

A financially stressed employee spends an average A financially stressed employee spends an average of 20 hours/month of work time on personal of 20 hours/month of work time on personal financial problemsfinancial problems

Source: Federal Reserve Bank of KC & The Federal Source: Federal Reserve Bank of KC & The Federal Reserve Bank of AtlantaReserve Bank of Atlanta

Examples of Examples of Fringe Financial ServicesFringe Financial Services

Payroll Check CashingPayroll Check Cashing Buy Here, Pay Here loansBuy Here, Pay Here loans Payday LoansPayday Loans Rent to OwnRent to Own

Payroll Check CashingPayroll Check Cashing

Average cost to cash a check at a payroll Average cost to cash a check at a payroll casher is $12/week x 52 weeks= casher is $12/week x 52 weeks= $624.00$624.00

$624.00 can pay for….$624.00 can pay for…. Car paymentCar payment Down payment on a house Down payment on a house (NIFA)(NIFA)

At US Bank, without a banking account, it is At US Bank, without a banking account, it is only $5.00 to cash a paycheck only $5.00 to cash a paycheck $5/week x 52 weeks = $260, still leaving $5/week x 52 weeks = $260, still leaving $364$364 in in

savings annually. savings annually. Using mainstream banking services can pay off Using mainstream banking services can pay off

even without an existing account. even without an existing account.

“ “Buy Here, Pay Here”Buy Here, Pay Here” Car LoansCar Loans

$10,000 36 month car loan $10,000 36 month car loan

Bank Loan @6.7%Bank Loan @6.7%

Monthly Payment: Monthly Payment: $307.40$307.40

Total Interest Paid = Total Interest Paid = $1066.44$1066.44

Buy Here Pay Here Buy Here Pay Here Car Loan @28%Car Loan @28%

Monthly Payment: Monthly Payment: $413.64$413.64

Total Interest Paid = Total Interest Paid = $4890.89$4890.89

FYI: Sub prime loans FYI: Sub prime loans account for 8% of new-account for 8% of new-car financing and 14% car financing and 14% of used car loans of used car loans (Consumer Reports, 1998(Consumer Reports, 1998))

Payday Loan IndustryPayday Loan Industry

There are more Payday Loans There are more Payday Loans businesses than Burger King and businesses than Burger King and McDonalds combined. McDonalds combined. (Center for Financial Services (Center for Financial Services

Innovation, 2010)Innovation, 2010)

As of January, 2009, there were 107 As of January, 2009, there were 107 payday loan businesses operating in the payday loan businesses operating in the metro area----a 28% increase since April metro area----a 28% increase since April 2005.2005.

Cost of a Payday LoanCost of a Payday Loan

With proof of a checking account, a With proof of a checking account, a paycheck stub and a copy of your last paycheck stub and a copy of your last utility bill, many people can get an utility bill, many people can get an advance on a future paycheck.advance on a future paycheck.

The average person rolls over a payday The average person rolls over a payday loan 13 times. The average annualized loan 13 times. The average annualized interest rate for payday lenders is 470%. interest rate for payday lenders is 470%. (Source: Annie E. Casey Foundation, Woodstock Institute, sample taken (Source: Annie E. Casey Foundation, Woodstock Institute, sample taken from Illinois.)from Illinois.)

Rent to OwnRent to Own Ace Rent-to-Own (Saddle Creek)Ace Rent-to-Own (Saddle Creek)Standard Refrigerator - Standard Refrigerator - $499$499 $12.99/week$12.99/week and if you can purchase and if you can purchase

appliance within 90 days the appliance appliance within 90 days the appliance cost = cost = $499.00$499.00 $12.99 X 12 weeks = $155.88. $12.99 X 12 weeks = $155.88. Week 13 pay $343.12 to equal Week 13 pay $343.12 to equal

purchase price of $499.purchase price of $499. If unable to pay off balance, you are If unable to pay off balance, you are

required to continue paying $12.99 required to continue paying $12.99 for an additional 79 weeks (91 for an additional 79 weeks (91 weeks total)weeks total)

$12.99/week x 91 weeks=$12.99/week x 91 weeks=

$1,182.09$1,182.09

NE Furniture Mart NE Furniture Mart Standard RefrigeratorStandard Refrigerator

= = $380.00$380.00

This is over 3 times the NE This is over 3 times the NE Furniture Mart priceFurniture Mart price

Overdrawn Checks Overdrawn Checks

Average charge:Average charge: $35 to $45 is the standard overdraft charge for a $35 to $45 is the standard overdraft charge for a

bounced checkbounced checkOROR

$10.00 overdraft charge if you have overdraft $10.00 overdraft charge if you have overdraft protection on your accountprotection on your account

Over 50% of the fee based income Over 50% of the fee based income earned by financial institutions in 2009 earned by financial institutions in 2009 came from bounced checks.came from bounced checks. (Center for Financial (Center for Financial

Services Innovation, 2010) Services Innovation, 2010)

What Works…What Works…Financial Financial EducationEducation

Benefits to the employerBenefits to the employer Reduces absenteeism, increases employee Reduces absenteeism, increases employee

productivity, increases contributions to the company productivity, increases contributions to the company 401(k), increases employee’s allegiance to 401(k), increases employee’s allegiance to company, decreases employer costs related to company, decreases employer costs related to wage garnishments and bankruptcieswage garnishments and bankruptcies

Benefits to employeeBenefits to employee Changes behaviors that negatively affect job Changes behaviors that negatively affect job

performance, builds assets & reduces debt, allows performance, builds assets & reduces debt, allows for a higher level of participation in employer-for a higher level of participation in employer-provided benefitsprovided benefits

Source: Federal Reserve Bank of KC & The Federal Reserve Source: Federal Reserve Bank of KC & The Federal Reserve Bank of AtlantaBank of Atlanta

Entering the Economic Entering the Economic MainstreamMainstream

6 banks & 3 credit union have agreed to offer 6 banks & 3 credit union have agreed to offer Bank on the Heartland Accounts beginning in Bank on the Heartland Accounts beginning in March 2011.March 2011.

15 businesses now offer Workplace Financial 15 businesses now offer Workplace Financial Education. Education.

86% graduation rate for the Financial Success 86% graduation rate for the Financial Success Program in 2010—includes trainer, money Program in 2010—includes trainer, money management system & one year of financial management system & one year of financial coachingcoaching

Promising IdeasPromising Ideas

Small Dollar Loan PilotSmall Dollar Loan Pilot Easy Green Pig software: Easy Green Pig software:

http://easygreenpig.com/http://easygreenpig.com/ Employers requiring bank accounts---Employers requiring bank accounts---QLI, QLI,

Omaha & Cargill in Fort Morgan, CO.Omaha & Cargill in Fort Morgan, CO.

Leveraging EITC returnsLeveraging EITC returns Your ideas???Your ideas???

Newcomers to NebraskaNewcomers to Nebraska Spanish Speakers – Mexicans, Guatemalans, Spanish Speakers – Mexicans, Guatemalans,

Salvadorans, CubansSalvadorans, Cubans Burmese – Karen, Karenni, Kachin, ChinBurmese – Karen, Karenni, Kachin, Chin BhutaneseBhutanese IraqiIraqi SomaliSomali Sudanese Sudanese Eritreans Eritreans Chinese - professionalsChinese - professionals

Characteristics of Characteristics of NewcomersNewcomers

Education level – limited formal Education level – limited formal educationeducation

Agrarian culturesAgrarian cultures Concept of ownershipConcept of ownership Religious influence on home ownershipReligious influence on home ownership Mobility issuesMobility issues General mistrust/knowledge of banking General mistrust/knowledge of banking

institutionsinstitutions

Characteristics (cont.)Characteristics (cont.)

SS# & ITINs – sending $ back homeSS# & ITINs – sending $ back home UndocumentedUndocumented Banking issues – late fees, debit cardsBanking issues – late fees, debit cards No history of saving or asset building No history of saving or asset building

opportunitiesopportunities Inability to navigate the “system”Inability to navigate the “system” Not able to take advantage of unknown Not able to take advantage of unknown

opportunitiesopportunities

Impact on Housing Impact on Housing

Older apartments/housesOlder apartments/houses High utility billsHigh utility bills Landlord/tenant rights & responsibilitiesLandlord/tenant rights & responsibilities Multiple families living together – country Multiple families living together – country

of origin traditionsof origin traditions

Barriers to Home Barriers to Home OwnershipOwnership

Concept of credit – credit scoresConcept of credit – credit scores Refugees enter the country in debtRefugees enter the country in debt

Benefits of homeownershipBenefits of homeownership Home maintenanceHome maintenance Undocumented relying on goodness of Undocumented relying on goodness of

othersothers Rules of the gameRules of the game LanguageLanguage

Overcoming BarriersOvercoming Barriers

Education – both newcomers & housing Education – both newcomers & housing agenciesagencies

Partnerships between new communities and Partnerships between new communities and housing agencieshousing agencies

Build trust by going to the people – at their Build trust by going to the people – at their community center or place of worship community center or place of worship

Establish contact with community leadersEstablish contact with community leaders Use interpretersUse interpreters

Success StoriesSuccess Stories

Habitat for Humanity Habitat for Humanity Due to length of time in the country, Due to length of time in the country,

Sudanese have taken advantage of thisSudanese have taken advantage of this Burmese – after 5 -7 years, beginning to to Burmese – after 5 -7 years, beginning to to

access this opportunityaccess this opportunity Karen have purchased nearly 15 homes Karen have purchased nearly 15 homes

– have found inspector they trust– have found inspector they trust Individual realtors have hired Spanish Individual realtors have hired Spanish

speakers to facilitate the processspeakers to facilitate the process

Contact info: Contact info: Julie KalkowskiJulie KalkowskiFinancial Hope CollaborativeFinancial Hope CollaborativeCreighton UniversityCreighton University402.280-3792402.280-3792juliekalkowski@creighton.edujuliekalkowski@creighton.edu

Maggie KalkowskiMaggie KalkowskiInternational Center of the Heartland & International Center of the Heartland &

Refugee ServicesRefugee ServicesLutheran Family Services of NebraskaLutheran Family Services of Nebraska402.536-3527402.536-3527mkalkowski@lfsneb.orgmkalkowski@lfsneb.org