|Volume 11, Issue 1, 2011||Federal Reserve Bank of Dallas|
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Eleventh District Nonprofits Comment on Clients' Credit Education Needs
In a recent Community Outlook Survey by the Dallas Fed's Community Development Office, several nonprofit service providers observed that credit scores were a main factor affecting low- to moderate-income (LMI) clients' access to credit. Here is a sample of those comments:
"LMI households live in neighborhoods significantly affected by high numbers of foreclosures [that are] depleting the wealth and hindering new homebuyers from buying their first home. The foreclosures are causing a reduction in values whereby new homes are unable to be developed. Thus, the market continues to decline and the tax base for the cities, school districts and county governments are facing crises in revenue. LMI households have no group insurance, financial expertise or support systems to avoid major credit issues. As a result, their credit scores are going to be lower than the normal. The credit underwriting system needs to be more sensitive to the appraisal issues and credit challenges of low- to moderate-income families."
"We need to develop an army of financial advisers for the bottom 25 to 30 percent of our population—advisers who will put together packages of benefits available to LMI households; advisers who will work like financial planners and not like social workers."
"We need to start a program to help people fix their credit. Most programs (such as down payment/closing costs assistance) require a credit check, and many people in our area do not have good credit. In the last 12 months, lack of employment has affected the renters as well as the homeowners and the potential homeowner. The fluctuation of the job market, utility rates and food and gas prices has the general population unsettled and fearful. While many of the clientele are being proactive in budgeting and maintaining the good credit they do have, it is not enough to take the risk of obtaining a mortgage.”
"Economic recession has increased the amount of traffic coming to us for help. We need more tools to assist in getting clients approved under tighter underwriting criteria.”
A report of the quarterly Community Outlook Survey results is available on the Dallas Fed website. If you represent a nonprofit organization that serves low- to moderate-income clients in Texas and would like to participate in the survey, please complete this form.
e-Perspectives, Volume 11, Issue 1, 2011