Bridges - Autumn 2009

8/9/2019 Bridges - Autumn 2009

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T h e F e d e r a l r e s e r v e B a n k o F s T . l o u i s : C e n T r a l T o a m e r i C a s e C o n o m y

PUBLISHED QUARTERLY

BY THE COMMUNITY

development

DEPARTMENT OF

THE FEDERAL RESERVE

BANK OF ST. LOUIS

L i n k i n g L e n d e r s A n d C o m m u n i t i e s ALL 2009

Bridges w w w . s t l o u i s f e d . o r g

By Eileen Wolfngton

The impact o the eco-

nomic crisis on com-munities and on the

lives o those who have losttheir jobs is one o the larg-est and astest-growing issuesacing Americans. The timeswarrant boldness, innovationand grassroots solutions, all owhich describe GO! Network.

This new program is helpinghundreds o proessionals inthe St. Louis region deal withthe dicult problems pre-sented by unemployment.

There is not one person,company or agency to blameor why we are in this situation.

We have all contributed to

where we are, and it is going totake all o us working togetherto move orward, said Chuck

Aranda, director o Celtic Cre-ative and GO! Network.

Celtic Creative, a socialenterprise o the St. PatrickCenter (the largest provider o

homeless services in Missouri),in partnership with the UnitedWay o Greater St. Louis,Anheuser-Busch, World WideTechnology, Right Management

and Paramount Planning oSt. Louis met in January o 2009to create a resource that would

provide growth and opportuni-ties or out-o-work proession-als. Aimed at helping thosewho are caught in career tran-sition, this multiaceted pro-

gram oers seminars, a speakerseries, job airs, an interactiveweb site and entrepreneurial

opportunities, to name a ew.Almost 200 people attended

GO! Networks rst event, andabout 170 people attend eachweekly event. The network hasa database o more than 1,700active members, o whom 46percent are women and 54percent are men, representing

30 industries and 20 job roles.The network is comprised ounemployed members andrepresentatives o corporations,academia, government agen-cies, the health care industryand nonprots, all workingtogether.

Like most innovative

community programs, GO!Network has volunteer oppor-tunities where individuals can

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continued on Page 2

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GO! Network participants exchange resumes and business cards with 28 local employersater a series o weekly seminars were held to prepare them or a career air.

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share their experience andexpertise while helping others

in transition. More than 80volunteer human resourcesproessionals rom 38 com-panies assist members withnetworking, personal branding,resume writing, interviewingskills and more.

Corporate and universityexecutives and proessors also

donate their time to deliverkeynote presentations on avariety o topics. Motivationalspeakers such as John Foppehave delivered messages oencouragement and hope. Ithas to do with who we are, hesaid. It has to do with wherewe want to go. Most impor-

tantly, it has to do with howwere going to get there.

Theres a genuine need tonetwork and not just to net-work about the next job, but tonetwork in terms o developingconnections, said Benjamin

Akande, dean o Webster Uni-versitys School o Business &

Technology.The relationship and trustbetween GO! Network mem-bers and sta have grown.Every week, the group provides

eedback via a survey to thepeer advisory board on issuesthat are important to them.One particular survey askedthe ollowing ve questions:

1. What keeps you up at night?2. What are the top three issues

aecting your amily?3. How are you managing your

time o work?4. What are three words that

best describe your emotionalhealth right now?

5. Would you be will ing to

attend a acilitated presenta-tion on this topic?Two issues that suraced

were increased stress and am-ily issues. To address the needto maintain a healthy mind,body and spirit during thistransition, the network collabo-rated with a community amily

health cooperative, severalemployee assistance programproviders and other healthcare proessionals. Wellnesssessions are currently beingdeveloped.

Being unemployed is notalways a bad thing. There areadvantages that can emerge

rom unemployment, such asalternative career paths andentrepreneurship opportunities.The interest generated amongnearly 100 participants in a

session addressing these twotopics resulted in the ormationo a committee on entrepreneur-ship. The committee has createda program that will acilitate

entrepreneurship, small businessdevelopment and ultimately new

job creation in the community.Future topics or the entrepre-neurship program will include:Do I Want to be My Own Boss,Setting a Sound Foundation,Legal Structure and Intellec-tual Property Protection, Fast

Trac/Business Plan Review andConnecting Idea to Experience.

The knowledge that networkmembers gain about the di-culties o being unemployedmay give them insight intowhat is happening around theUnited States.

We believe St. Louis

provides a window into thechallenges being aced in everymajor city in the country,

Aranda said.For more inormation about

GO! Network, visit www.gonetworkstl.com or send ane-mail to Aranda at [email protected].

Eileen Wolfngton is a communitydevelopment specialist at the Fed-eral Reserve Bank o St. Louis.

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Chuck Aranda, directorGO! Network

The current recession has

had dire eects on employ-

ment in the United States: A

signifcant number o job losses

have been reported or most

industries and demographic

groups. However, although the

overall picture has been bleak,

a new report rom the Federal

Reserve Bank o St. Louis says

the bad news has not been

distributed evenly across demo-

graphic groups.

The Effects of Recessions

across Demographic Groups,

written by Fed economist

Howard J. Wall, looks at the

employment experiences oU.S. workers or this recession

and others going back to 1972

across a range o demographic

categoriessex, marital status,

race, age and education.

The report will be the ocus

o several upcoming presenta-

tions on the ollowing dates:

Oct. 29, 2009Memphis901-579-4102

Oct. 30, 2009Memphis

901-579-4102

Nov. 4, 2009St. Louis

314-444-8761

Dec. 3, 2009Little Rock

501-324-8296

Dec. 10, 2009Louisville

502-568-9202

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By Lisa Locke

In the all o 2006, whenthe Louisville Branch o theFederal Reserve Bank o

St. Louis sponsored a work-shop on the industry o micro-enterprise, no one anticipatedthe outcome would be the

ormation o a state microen-terprise association (SMA). Butthat is exactly what happened.

Today, Partners or Entre-preneurial Advancement inKentucky (PEAK), a nonprotassociation, supports economicdevelopment across the state oKentucky through the growth

o microenterprise, especially ineconomically depressed areas.

Small, but (Collectively) Mighty

Microenterprise is dened bythe U.S. Small Business Admin-istration as a business with veor ewer employees and less than$35,000 in start-up unds. Typi-

cal microenterprises are busi-nesses run by forists, jewelers,hairdressers, plumbers, bakersand carpenters.

Although microenterprisesmay be small, they comprisethe majority o businesses.There are an estimated 24million microenterprises in

the United States, represent-ing almost 87 percent o allbusinesses. Microenterprisescomprise about 20 percent oall private employment and

are responsible or creatingnearly 900,000 new jobs eachyear. There are approximately303,000 microenterprises inKentucky.

Creating an SMA

The ormation o an SMA isnot an overnight process. For

the dedicated group o volun-teers in Kentucky who took onthe task, it would be nearly twoyears ater the workshopJuneo 2008beore the asso-ciation was up and running.There were nine organizationsinvolved.

In the beginning, when they

were exploring the possibili-ties, their rst order o busi-ness was to identiy what was

occurring in the state andwhether there was an interestin orming an association. Asurvey conducted in late 2006indicated that most o thoseresponding elt a statewide

association would be benecial.The primary reasons werethat an SMA would providebetter access to unding, aunied voice or public policy,

training or microenterpriseservice providers, an extensiono microloan programs tounderserved areas o the state,and an opportunity or practi-tioners to share best practicesand network.

Learning rom Others

Ater the survey was com-pleted and tabulated, strategicplanning began. The groupheard rom representatives oSMAs in Alabama and Ohioabout the benets and chal-lenges. Catherine Marshall,ormer CEO o the Caliorniaassociation and microenter-

prise consultant, was instru-mental in helping the group setgoals, objectives, action plansand timelines.

The group was also ortunateto be invited to participatein a CFED six-month, pilotprogram or SMAs on capacitybuilding. The program oered

a comprehensive package otraining and technical assis-tance or emerging and existingassociations.

Benefts o an SMA

What is the purpose o astate microenterprise associa-tion? What are the benets o

joining an association? Whatservices can an association pro-vide? The benets o member-

PeAk PacAca P expa mcp kcy

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2008 iStockphoto, Dan Moore


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ship in PEAK include:

educational training, bestpractices and networkingamong peers,

an annual conerence ocus-ing on strategies to expandmicroenterprise,

access to an online calendarto learn about upcomingevents,

access to resources,

opportunities to provide

input into PEAKs strategicdirection, and

opportunities to advocate onbehal o and act as a uni-ed voice or microenterprisedevelopment.

PEAKs current member-ship includes microenterpriseservice providers, governmentagencies, entrepreneurs, aca-demics and business leaders.

Jerry Rickett, president andCEO o Kentucky HighlandsInvestment Corp., said his orga-nization joined PEAK because itgives them a chance to connectwith other microenterprise devel-opment agencies. Its a greatopportunity to help entrepreneu-rism thrive throughout the stateo Kentucky, Rickett said.

PEAK sponsored its rstconerence this past June. Morethan 70 attendees gathered tolearn about trends and chal-lenges in microenterprise devel-opment rom local, state andnational perspectives. Keynote

speakers included Jody Raskindo the specialty lenders divisiono USDA Rural Development,

Jason Friedman o FriedmanAssociates and Donna Salyers oFabulous Furs. Feedback romattendees on what was mostbenecial about the conerenceincluded networking, roundta-ble discussions, meeting microlenders, and discussing indus-try problems and solutions.

For additional inormation aboutPEAK, visit www.peakky.org.

The ollowing organizations

worked together to orm PEAK:Kentucky Cabinet or Eco-

nomic DevelopmentFederal Reserve Bank o

St. Louis, Louisville Branch

Kentucky District Oceo the U.S. Small Business

Administration

Kentucky Small BusinessDevelopment Center

Mountain Association orCommunity Economic Devel-opment (MACED)

Community Ventures Corp.Kentucky Highlands Invest-

ment Corp.

Commerce Lexington and

Jewish Family and VocationalService o Louisville.

Lisa Locke is a community devel-opment specialist at the Louisville

Branch o the Federal ReserveBank o St. Louis.

PeAk Paccontinued rom Page 3

Fannie Mae has a CRA-Targeted Mortgage Backed Secu-

rity (MBS) tailored specically for depositories and other

investors in community development.

Highlights of the CRA-Targeted MBS include: It is fully customized to a banks specications. Fan-

nie Mae does not issue the MBS until the bank places

an order to trade, specifying the assessment areas,

the size of the investment and negotiated pricing.

Up to 100 percent of the loans backing each MBS

pool can be made to borrowers with incomes below

80 percent of the area median income.

A geographic distribution of the loans can be dened to

meet the banks specic CRA assessment area needs.

The CRA-Targeted MBS carries a guarantee of timely

payment of principal and interest, like all Fannie Mae

MBS, and is not subject to resale restrictions. The

CRA-Targeted MBS will be issued under Fannie Maesstandard security prexes.

Banks around the country have found the CRA-Targeted

MBS product especially useful in meeting their CRA invest-

ments needs in assessment areas in which there are few other

investment opportunities, a Fannie Mae spokesman said.

For more information, contact Mary Beth Preuss at

1-800-752-0257.

Fannie Mae Oers CRA-Targeted Investments


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By Natalia Kolesnikova

Community colleges playa signicant role inU.S. higher education.

They enroll almost hal o allU.S. undergraduate studentsand are essential or workorce training and retraining.Earlier this year, PresidentBarack Obama announced the

American Graduation Initia-tive, a 10-year, $12 billionplan to invest in communitycolleges, which underscores theimportance o the communitycollege system or the Americaneconomy. As more people turnto community colleges or theireducational needs during the

current economic downturn,it is important to have aninormative picture o com-munity college students, theirgoals, educational choicesand outcomes.

A recent Federal ReserveBank o St. Louis CommunityDevelopment research report

compares community col-leges to traditional, our-yearcollegesthe advantages, thetypes o students, the economicreturns and the studentseducational objectives.1 Thereport also examines whethera community college educa-tion aects a persons chances

o obtaining a more advanceddegree and whether studentswho receive an associate degreebeore obtaining a bachelorsdegree have dierent educa-

tional and labor market out-

comes than their counterpartswho do not have an associatedegree.

Advantages o

Community Colleges

Compared to a traditionalour-year college, a communitycollege has several important

advantages or students: anopen admission policy, makingit easier to enroll regardless otheir prior academic record;lower tuition and ees; savingson room and board; and amore fexible curriculum andclass schedule.

Who Are Community

College Students?

The population o commu-nity college students is diverse.2They are 60 percent white, 15

percent black and 14 percent

Hispanic. Forty-one percentare males. In comparison,students attending our-yearcolleges are more likely to bewhite (70 percent) and male(45 percent).

Community colleges havemore so-called nontraditionalstudents than our-year col-

leges. Community collegestudents are more likely to beolder; and only 31 percent othem are enrolled ull time,in part because they are morelikely to also be working.Furthermore, 40.8 percent ocommunity college studentswork ull time, compared to

22.8 percent o their our-yearcollege counterparts. Morestudents in communitycolleges are rst-generationcollege students.

Economic Payos

Most studies have ound thatstudents who attended commu-nity college, but did not com-plete a degree, earn 9 percentto 13 percent more than thosewith a high school diplomaonly.3 There is also an increasein annual earnings o 5 percentto 8 percent associated witheach year o education at a

community college. This nd-ing is particularly interestingbecause it is very similar to thereturn to a year o schooling ina our-year college.

Other researchers lookedat retraining eorts by com-munity colleges or older,high-tenure displaced work-

ers.4 Researchers ound thatone year o community collegeschooling increases the long-term earnings o displacedworkers by about 9 percent ormen and about 13 percent orwomen, compared to earningsor similar workers who didnot attend community college.

While there is a high return totechnically oriented and mathand science courses (about 14percent or men and 29 percentor women), less technicallyoriented courses yield very lowand possibly zero returns.

Another way to think aboutthe value o a community col-

lege education is to ask howmuch more a person with anassociate degree earns com-

th Cha rl Cy Cll

Students relax in the plaza on the Forest Park campus o St. Louis Community College.

continued on Page 6



pared to someone who has onlya high school diploma. Previ-ous studies estimated the labormarket return to an associatedegree is about 16 percent to27 percent.5

There are dierences betweendemographic groups.6 Womeno all races have higher returnsto an associate degree thanmen, mostly because womenare more likely to major in

nursing and related elds.There is also variation amongracial groups in the return toan associate degree. Hourlywages o white men with anassociate degree are 20 percenthigher than wages o those whostopped their ormal educationat high school. The returns

are much higher or black andHispanic men28 percent and31 percent, respectively.

Also, the return to an associ-ate degree is dierent across cit-ies in the United States. Whitemen with associate degrees arepaid only 4 percent more thanwhite high school graduatesin Seattle, but as much as 35percent more in Miami. ForHispanic men, the return to anassociate degree is 17 percentin Washington, D.C., but morethan twice as much, 48 percent,in Atlanta. Cross-city dieren-tials or white women are not asbig, but they are signicant or

minority women.The table shows similar

results or our large metropoli-tan areas in the Federal ReserveBank o St. Louis district.

White men with an associ-ate degree earn on average 25percent more in Little Rock, 20percent more in Louisville, 17

percent more in Memphis and12 percent more in St. Louisthan similar men with only a

high school diploma. For blackmen, returns to an associatedegree are 19 percent inLouisville, 25 percent inMemphis and 14 percent inSt. Louis. Consistent with therest o the country, womensreturns are higher than mens.For example, black women inSt. Louis with an associatedegree earn 54 percent morethan those with only a highschool education.

Along Dierent Paths

Community college studentshave various educational goals.

Although many plan to obtainan associate degree, some stu-dents just want to obtain certi-cation in a certain eld. Someintend to transer to a our-yearinstitution without any ormalcommunity college credentials.

Critics o community collegespoint out that a signicantproportion o students completerelatively ew college credits.One study calculated that themajority o community collegestudents complete one year orless and 35 percent completeone semester o study or less.7

The study also showed thatless than one-hal o commu-nity college students completeany degrees.

One view is that easy accessto community college sidetracksstudents rom a our-year col-lege. On the other hand, manynontraditional students would

not have attended our-yearcolleges. For them, communitycolleges provide a chance or apost-secondary education theywould not have had otherwise.

Some studies argue that, even iattending a community collegeinstead o a our-year collegelowers educational attain-ment or some students, morestudents have access to highereducation.

A study by the U.S. Depart-ment o Education ound thatabout 90 percent o studentsentering community collegesintended to obtain a ormalcredential or to transer to aour-year college. The reportestimated that between 51 and

63 percent (depending on dataused) o these students had ul-lled their expectations withinsix to eight years ater initialenrollment. Overall, about 29percent o community collegestudents had transerred toour-year colleges.

From a Community Collegeto a Bachelors Degree

It is important to evaluatehow students who do transerare compared to their counter-parts who started at our-yearinstitutions. A recent studyound that the rates o droppingout without a degree are

much higher or those whostart at community colleges.8

For example, community col-lege students were 36 percentless likely to obtain a bachelorsdegree than similar studentswho started at our-year col-leges. Even community collegestudents who expressed an

intention to obtain a our-yearbachelors degree are sig-nicantly less likely to do sowithin nine years o startingtheir post-secondary studies.

Lab ma r Aca d(rlav Hh schl)

Men Women

White Black White Black

U.S. 0.20 0.28 0.34 0.35

Little Rock 0.25 0.45

Louisville 0.20 0.19 0.38 0.38

Memphis 0.17 0.25 0.26 0.36

St. Louis 0.12 0.14 0.27 0.54

Note: Authors calculation. Data are rom 2000 Public Use Micro Sample (PUMS) o theU.S. Census. Results are missing i data were insufcient because o small sample

size. The numbers are percentage increases in wages.

Cy Cllcontinued rom Page 5



Only 26 percent o this groupachieves their goal. To put itin perspective, 50 percent and73 percent o those who start atnonselective and selective our-year institutions, respectively,obtain a bachelors degree.

The negative eect o startingpost-secondary education at acommunity college remained,even ater the authors adjustedor selection bias by control-ling or students race, gender,age, ability (ACT scores) andamily income. The authors o

the study pointed out, however,that it is important to comparethe negative eect they ound tothe dierence in costs at two-year versus our-year institutions.

Educational Outcomes

Though many communitycollege students do not go on

to receive a bachelors degreeor higher, some do. Amongpeople who have at least abachelors degree, 17 percentreport having received anassociate degree. People withan associate degree were sig-nicantly more likely to attendless selective (and perhaps less

expensive) institutions or theirbachelors studies. Studentswith an associate degree arealso more likely to be enrolledin public colleges than thosewho do not have an associatedegree and less likely to attendprivate colleges. People withan associate degree are lesslikely to major in sciences andengineering and are more likelyto major in health, technologyand management than theircounterparts.

About 70 percent o thosewith both a bachelors degreeand an associate degree donot continue their educationbeyond their rst bachelorsdegree. This compares toless than 60 percent o theircounterparts without an associ-ate degree. Among those whoreceived a masters degree, only14.3 percent have an associ-ate degree. The proportion opeople with an associate degreeis even smaller among thosewith a doctorate or proessional

degree (5.8 and 9.5 percent,respectively).

Labor Market Outcomes

Regardless o the highestdegree, people who started theirpost-secondary education withan associate degree earn less onaverage than those who started

at a our-year college. The di-erence is particularly large orthose who have a doctorate or aproessional degree.

Careul statistical analysisshows that college graduates witha prior associate degree earn$2,426 less a year than those whodo not have an associate degree.

The earnings gap is smaller orbachelors and masters degreeholders ($2,269 and $2,117,respectively) and larger or peoplewith doctorates and proessionaldegrees ($6,884 and $7,768,respectively).

One could argue that com-munity college students aremore likely to have attendedpoor perormance schools andallen so ar behind even beoreentering the post-secondaryeducation system that this

disadvantage aects theireducational and labor marketoutcomes. Community collegesplay an important role in serv-ing disadvantaged populations.However, it is not reasonable toexpect that they alone will beable to overturn apparent long-lasting cultural and educationalnegative eects that studentsrom low-income amilies ace.

Concluding Remarks

Attending a community col-legeeven without completing

a degreeresults in economicpayos and better job oppor-tunities. Community collegesoer an opportunity to receivea post-secondary education tomany students who would nothave attended college otherwise.

There is a need to re-examinewhat is the best measure o

community colleges peror-mance. Given their changedpurpose and higher emphasison terminal certicate pro-grams and work-orce train-ing, transer rates to our-yearcolleges are not an adequateevaluation tool anymore.

Natalia Kolesnikova is aneconomist in the ResearchDivision o the Federal ReserveBank o St. Louis.

REFERENCES

1 The complete report is available athttp://stlouised.org/community_development/assets/pd/CommunityColleges.pd.

2 Data in this section are rom theU.S. Department o Education,

National Center or EducationStatistics, 2003-04 as presented inHorne, Laura; and Nevill, James.Prole o Undergraduates in U.S.Postsecondary Education Institu-tions: 2003-04: With a Special

Analysis o Community CollegeStudents (NCES 2006-184). U.S.Department o Education. Washing-ton, D.C., 2006.

3 For a survey o these studies and amore detailed description o data,

see Kane, Thomas J.; and Rouse,Cecilia Elena. The CommunityCollege: Educating Students at theMargin Between College and Work.Journal o Economic Perspectives,Winter 1999, Vol. 13, No. 1, pp.63-84.

4 Jacobson, Louis S.; LaLonde, RobertJ.; and Sullivan, Daniel G. Esti-mating the Returns to CommunityCollege Schooling or Displaced

Workers. Journal o Econometrics,March-April 2005, Vol. 125, Issues

1-2, pp. 271-304.

5 Kane, Thomas J.; and Rouse, CeciliaElena. Labor Market Returns toTwo- and Four-Year College. TheAmerican Economic Review, June1995, Vol. 85, No. 3, pp. 600-14,and Leigh, Duane E.; and Gill,

Andrew M. Labor Market Returnsto Community Colleges: Evidenceor Returning Adults. Journal oHuman Resources, Spring 1997, Vol.32, No. 2, pp. 334-53.

6 See ull discussion at http://stlouised.org/community_development/assets/pd/CommunityColleges.pd.

7 Kane and Rouse (1999).

8 Long, Bridget Terry; and Kur-laender, Michal. Do CommunityColleges Provide a Viable Pathwayto a Baccalaureate Degree? Educa-tional Evaluation and Policy Analysis,2009, Vol. 31, No. 1, pp. 30-53.



The region served by the Federal Reserve Bank of

St. Louis encompasses all of Arkansas a nd parts of Illinois,

Indiana, Kentucky, Mississippi, Missouri and Tennessee.

spanninG the regioN

St. Louis Group Teaches

Online Job-Search Skills

The Partnership or the NewWorkorce (PNW), a communitycollaborative in St. Louis, oersree classes to job seekers who areunamiliar with using computers

as a tool in their job search.Applying or a job online,

creating a resume and navigat-ing through job-search linkscan be challenging or thosewith little to no computerskills. Ater a recent job air,PNW heard rom employersthat there was a need or job

applicants to learn computerskills necessary to completean online application. PNWalso heard rom job seekerswho said they were rustratedbecause they lacked computerskills. Many older generationapplicants, particularly those intransition ater years with the

same employer, also indicatedthat they were not equippedwith basic computer skills.

Employers and employmentand training service provid-ers within the collaborativecame together with a solution.Experienced with targetingthe employment and careerdevelopment needs o clients,the partnership put together12, three-hour, hands-on train-ing sessions. These computerclasses help participants learn

how to create anonline resume, completeonline job applications, uploadelectronic documents, save andupdate electronic les, and surthe web to locate job leads.

For more inormation, call

314-746-0716.

Program Oers Inormation,

Loans to Memphis Entrepreneurs

With its Opportunity Bank,the South Memphis Alliance isdoing its part to provide assis-tance to entrepreneurs in theMemphis area.

Opportunity Bank is a12-week program that helpsentrepreneurs start or developa business. Participants meetone evening a week or threehours during the 12-weeksession to learn businessundamentals. Topics includecreating a business plan,

managing cash fow, businessinsurance and licenses, andpricing products and services.

Participants who completethe program are eligible toapply or an Opportunity Bankloan. The loans range rom$250 to $5,000 with a three-year repayment period and a5 percent interest rate.

Opportunity Bank targetswomen o color, although it isalso available to men. A regis-tration ee o $100 is required.

The program is sponsored bythe Womens Foundation or aGreater Memphis and the Cityo Memphis, Renaissance Busi-ness Center. Three sessionsare oered each year. Thenext one will run rom Janu-

ary to March 2010. For moreinormation, contact ChristineTelord at 901-774-9582.

New Illinois Law

Protects Homeowners

Illinois homeowners who allbehind on their mortgage pay-ments now have additional protec-

tion against oreclosure throughThe Illinois Protection Act.

Under the new law, whenhomeowners are 30 days latein making a payment, lend-ers and loan service providersmust advise them o their legalrights and cannot proceed witha oreclosure action or 30 days

ater advising the borrower. I,at any time during that period,the borrower receives hous-ing counseling rom a certiedcounselor, they are given anadditional 30 days to work outthe loan.

Housing counselors will takethe borrowers income and abil-ity to repay into considerationwhen developing a mortgageworkout plan. Workout plansmay include temporarily sus-pending payments, longer loan

terms, lower or rozen interestrates, ensuring that the loanwill be repaid in ull, a prin-cipal write down or renanc-ing a new loan. The law onlyprovides time and resourcesor the borrower and does not

guarantee any particular out-come or the borrower.

To help homeowners takeadvantage o the new act and toshare inormation about othergovernment programs to helphomeowners, the newly estab-lished Mortgage Relie Projectis holding events statewide.

Homeowners will have theopportunity to meet with a reehousing counselor and learnhow to recognize the signs omortgage raud.

For more inormation on theHomeowner Protection Act, theMortgage Relie Project, dateso events and a list o certied

housing counselors, visit theIllinois Department o Finan-cial and Proessional Regula-tion web site at www.idpr.comor call 1-800-532-8785.



By Jean Morisseau-Kuni

Predatory payday lend-ers who take advantageo the working poor

in Southern Illinois havesomething to worry aboutthemselves: competition roma reputable lender. Those inneed o a small loan cannow turn to the Society o

St. Vincent de Paul o SouthernIllinois or help.

The Catholic organizationdecided to get involved aterhearing numerous stories romlocal residents.

I get calls daily rom peoplewho are in trouble with paydaylenders, said Pat Hogrebe,

development director at St.Vincent de Paul. I had a am-ily that took out a payday loanor car repairs and had prob-lems repaying the loan. Wegot involved a year later and Iound that, with all o the pen-alties and ees, the amily hadpaid over $1,200 and still owed

the original $200. Can youimagine paying over $1,200in interest or a $200 loan?Hogrebe asked.

Ater doing some research,Hogrebe said she realized thesociety needed to provide analternative lending source. Shethought St. Vincents couldraise enough money to cre-ate a micro-lending pool, butthe organization needed a wayto service and administer theloans. Hogrebe approached

several nancial institutionsand ound that, even thoughbankers acknowledged theneed or a micro-lending pooland thought it was a goodidea, no one wanted to takeon the challenge. That wasuntil Hogrebe met with KenBossung, president o Catholicand Community Credit Union.

Since the loans are backed

100 percent by the Society oSt. Vincent de Paul, we arenttaking on any risk. This is aneasy way that we can use ourexpertise to help an under-served part o the community,Bossung said.

The credit union disburses theunds, collects the payments and

reports loan activity to the creditbureaus, providing anotherbenet to borrowers who maketimely payments: higher creditscores. These borrowers needto establish a better nancialoothold, and helping them raise

their credit score will do that,Bossung said.

St. Vincent de Paul and thecredit union worked togetherto set up criteria or the loans,including a 3 percent interestrate that would be reasonableor the borrowers and still helpbuild the und. They also setup payments that the borrowercan aord.

The loans are small, $200to $500, and can be used ormoving expenses, home andauto repairs or paying o apayday lender.

We ensure that all bor-rowers are employed and thatvehicles requiring repair areproperly licensed, insured and

are repair worthy prior to lend-ing the unds, Hogrebe said.There is no need to x a carthat isnt worth the cost o therepair or to lend to someonewho cant make paymentsthats what the predators do.

Hogrebe said she also real-ized that many o the peopleshe serves have nancialproblems because they do notunderstand basic nancialmanagement. For that rea-son, borrowers must take reebudgeting classes oered at theSociety o St. Vincent de Paul.

By helping people learnto budget, we empower them

to become independent andhopeully not get involved withpredators. It also helps bor-rowers build sel-dignity whilewe get repaid and empowermore people, Hogrebe said.

The partnership providesanother benet to borrowerswhen they complete the bud-

geting classes, a $25 savingsaccount at Catholic and Com-munity Credit Union undedby donations to St. Vincent dePaul. That is $25 well spent,Hogrebe said. It providesaccess to nancial services thatmany o these olks have neverhad and helps them to save. I

know that we wont have a 100percent success rate, but thosewho do succeed will have toolsor a better uture.

For more inormation on thispartnership, call Hogrebe at618-875-3886 or Bossung at618-233-8073.

Jean Morisseau-Kuni is a commu-nity development specialist at theFederal Reserve Bank o St. Louis.

Chay mc La Cp wh Payay L

2007iStock/Eric

Hood


10/120l i n k i n G l e n d e r s a n d C o m m u n i T i e s

Home Buyers Oered Advance on Tax Credit

First-time home buyers who are eligible or up to $8,000 in tax credits

under the American Economic Recovery and Reinvestment Act can apply or

a bridge loan or cash advance on the credit. The money can be used or a

down payment, closing costs or other loan expenses.

To be eligible or the tax credit and advance, applicants can not have

owned a primary residence within three years prior to the purchase, can not

have a modifed adjusted gross income over $95,000 (single taxpayers)

or $170,000 (joint taxpayers), must apply or FHA-insured mortgages, and

must purchase the home between Jan. 1, 2009 and Nov. 30, 2009.

Organizations eligible to provide bridge loans are ederal, state or local

government or nonproft agencies considered to be instruments o government.

CFED is promoting the credit. Visit their web site at www.ced.org and

click on the Act tab and then Advocacy.

Fed Adjusts Disclosure Trigger

The Federal Reserve Board recently published its annual adjustment o

the dollar amount o ees that trigger additional disclosure requirements

under the Truth in Lending Act. This applies to home mor tgage loans that

bear rates or ees above a certain amount.The dollar amount o the ee-based trigger has been adjusted to $579

or 2010. The adjustment is eective Jan. 1, 2010. This adjustment does

not aect the new rules or higher-priced mortgage loans adopted by the

Board in July 2008. Coverage o mortgage loans under the July 2008 rules

is determined using a dierent rate-based trigger.

Fed Distributes Inormation on Protecting Tenants Act

The Board o Governors o the Federal Reser ve System recently asked its

Consumer Aairs ofcers to distribute inormation to supervised institu-tions regarding the Protecting Tenants at Foreclosure Act o 2009, which

became eective May 20, 2009.

This new law protects tenants rom immediate eviction by individuals

or entities that become owners o residential property through the ore-

closure process. It also extends additional protections or tenants with

Section 8 vouchers.

The law, which expires Dec. 31, 2012, is sel-executing: No ederal

agency has authority to issue regulations implementing the law or to

interpret the law. Given the importance o the protections this law provides

to tenants, examiners are instructed, as part o consumer compliance

examinations, to evaluate an institutions awareness o the law, its eorts to

comply and its responsiveness to addressing implementation defciencies.

Examination procedures to be used in connection with consumer compli-

ance examinations can be ound at www.ederalreserve.gov/boarddocs/

caletters/2009/0905/09-05_attachment.pd .

The purpose o the Protecting Tenants at Foreclosure Act is to ensure

that tenants acing eviction rom a oreclosed property have adequate time

to fnd alternative housing.

Under the law, the immediate successor in interest at oreclosure must:

(a) provide bona fde tenants with 90 days notice prior to eviction; and (b)

allow bona fde tenants with leases to occupy property until the end o the

lease term. (Exception: The lease can be terminated on 90 days notice i

the unit is sold to a purchaser who will occupy the property.) The law does

not aect any state or local law that provides longer time periods or other

additional protections or tenants.

A lease or tenancy is bona fde i the tenant is not the mortgagor or theparent, spouse or child o the mortgagor, the lease or tenancy is the result

o an arms-length transaction, and the lease or tenancy requires rent that

is not substantially lower than air market rent or is reduced or subsidized

due to a ederal, state or local subsidy. The law does not cover tenants

acing eviction in a nonoreclosed property, tenants with a raudulent

lease, tenants who enter in lease agreements ater a oreclosure sale or

homeowners in oreclosure

Have you

heard

rc

5 tp dal wh a H eqy L z

rcThe new guide rom the Federal Reser ve explains

consumers rights and lenders responsibilities when home equity credit

lines are reduced or rozen. It also provides inormation or those want-

ing to have a credit line reinstated. The guide is the latest in the Feds

5 Tips series. The series also includes tips or shopping or a mortgage,

avoiding oreclosure, protecting checking accounts, improving credit scoresand getting the most rom a credit card. English and Spanish versions o

the series are available both in print and online at www.ederalreserve.gov/

consumerino/fvetips.htm.

sa ipv ecc mbly W

Based on a conerence cosponsored by the W.E. Upjohn Institute

and the Federal Reserve Bank o Chicago, this new book provides

provocative assessments rom various contributors o the eectiveness

o policies designed to help disadvantaged people overcome obstaclesin their path to upward economic mobil ity. To order, go to www.upjohn

institute.org/index.htm.


11/12#o n T h e i n T e r n e T a T W W W . s T l o u i s F e d . o r G

BridgesBridges is a publication o the Commu-nity Development Oce o the FederalReserve Bank o St. Louis. It is intendedto inorm bankers, community develop-ment organizations, representatives ostate and local government agencies andothers in the Eighth District about cur-rent issues and initiatives in communityand economic development. The EighthDistrict includes the state o Arkansasand parts o Illinois, Indiana, Kentucky,Mississippi, Missouri and Tennessee.

Glenda WilsonAssistant Vice Presidentand Managing Editor314-444-8317

Yvonne SparksSenior Manager314-444-8650

Linda FischerEditor314-444-8979

Community Development staff

St. Louis: Matthew Ashby314-444-8891Jean Morisseau-Kuni314-444-8646

Eileen Wolngton314-444-8308

Memphis: Kathy Moore Cowan901-579-4103Teresa Cheeks Wilson901-579-4101

Little Rock: Lyn Haralson501-324-8240Amy Simpkins501-324-8268

Louisville: Lisa Locke502-568-9292Faith Weekly502-568-9216

The views expressed in Bridges are notnecessarily those o the Federal ReserveBank o St. Louis or the Federal ReserveSystem. Material herein may be reprintedor abstracted as long as Bridges is credited.Please provide the editor with a copy oany reprinted articles.

Free subscriptions and additional copies

are available by calling 314-444-8761 orby e-mail to [email protected].

CaleNdar

oCtoBer

9

Kentucky Hispanic and Immigrant

Networking SummitShelbyville, Ky.

Cosponsors: Lexington Fair Housing Council,

Kentucky Department o Education

502-595-4024, ext. 47

13-17

Sustaining the Future in Harmony with

Our PastNashville, Tenn.

Sponsor: National Trust or Historic

Preservation

866-988-1188www.preservationnation.org/conerence

18-19

Missouri Community Betterment

ConerenceJeerson City, Mo.

Sponsor: Missouri Community

Betterment Society

www.mocommunitybetterment.com

19-20

Governors Housing SummitNashville, Tenn.

Sponsor: Tennessee Housing and

Development Agency

615-815-2185

22

Arkansas Community Development

Society ConerenceConway, Ark.

Sponsor: Arkansas Community

Development Society

501-324-8240

27-30

The New NormalCharlotte, N.C.

Sponsor: Opportunity Finance Network

www.opportunityfnance.net

28-29

Kentucky Aordable Housing

ConerenceLexington, Ky.

Sponsor: Kentucky Housing Corp.502-564-7630, ext. 490

www.kyhousing.org

28-30

MEDC Fall ConerenceColumbia, Mo.

Sponsor: Missouri Economic Development

Council

573-636-7383www.showme.org

29

CFED Innovation SummitWashington, D.C.

Sponsor: CFED

http://innovation.ced.org

NoVeMBer

2-3Family Economic Security Conerence andPoverty SimulationLittle Rock, Ark.

Sponsor: Federal Reserve Bank o St. Louis

501-324-8296

www.stlouised.org/community_

development

4-5

NCIF Annual Development Banking

ConerenceChicago

Sponsor: National

Community Investment Fund

312-881-5817

www.nci.org

5

Asset Building: Pathways to Family

Economic StabilityMemphis, Tenn.

Sponsors: Federal Reserve Bank o

St. Louis, Federal Reserve Bank o Atlanta,

United Way o the Mid-South and the Center

or Community Building and Neighborhood

Action at the University o Memphis

901-579-4102

www.stlouised.org/community_development

6

Rural Development ForumMoberly, Mo.


314-444-8891


12

Strategies or Serving the Unbanked:

Finding Opportunities in Untapped

MarketsMemphis, Tenn.

Sponsor: Federal Reserve Bank o St. Louis901-579-4102


development

12

Stabilizing Neighborhoods through

Alternatives to HomeownershipLittle

Rock, Ark.


501-324-8268


16-18

Brownfelds ConerenceNew Orleans

Sponsor: Environmental Protection Agency

1-877-343-5374

www.brownfeldsconerence.org

deCeMBer

7-11

NeighborWorks Training Institute

Washington, D.C.

Sponsor: NeighborWorks

www.nw.org/network/training/training.asp

8

CRA 101Little Rock, Ark.


501-324-8268


development


12/12

PRSRT STD

U.S. PoSTage

paid

ST. LoUiS, Mo

PeRMiT No. 444P.O. Box 442

St. Louis, MO 63166

The Community Devel-

opment Institute at theUniversity o Central

Arkansas (UCA) presented theLittle Rock Branch o the Fed-eral Reserve Bank o St. Louiswith its Friend o CommunityDevelopment Award, in tributeand gratitude or the Branchssupport o UCAs Community

and Economic DevelopmentPrograms. The award waspresented during the univer-sitys 22nd Annual CommunityDevelopment Institute Centralon Aug. 7, 2009.

The Federal Reserve Banko St. Louis is dedicated toimproving access to high-quality inormation, educationand resources that promote bestpractices and innovation in theeld o community develop-ment, said Robert Hopkins,

senior branch executive. Weare proud o our collaborationwith the Community Develop-ment Institute, and the LittleRock Branch is honored tobe the recipient o the 2009Friend o Community Develop-ment Award.

The Federal Reserve has anobjective o providing inorma-tion and technical assistance tocommunities that historicallyhave not unctioned well. Ona local level, the Little RockBranch o the Federal ReserveBank o St. Louis participates

in local and regional collabora-

tive initiatives with communityorganizations, government agen-cies and nancial institutionsto address issues surround-ing community developmentnance, asset building, andneighborhood stabilization andrevitalization.

Throughout the state o

Arkansas, the Little Rock Branchhas stressed the importance othe Earned Income Tax Creditand individual developmentaccounts, promoted innovativenancing tools to support smallbusiness and entrepreneurship,and co-hosted the The RippleEect meeting with the Com-munity Development Institute torespond to the oreclosure crisisand tightening credit and capitalmarkets.

uvy H Ll rc Bach

From let: Kelly Lyon, executive director o the Community Development Instituteat UCA, presents the Friend o Community Development award to the Little RockBranchs community development specialists, Amy Simpkins and Lyn Haralson, and

Senior Branch Executive Robert Hopkins.

Documents

Bridges - Autumn 2009