financial-literacy-supplement-2014

Financial Literacy Supplement 2014

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The Washington Informer Financial Literacy Supplement – Ju

NEWSPAPER READING IS A HABIT DON’T BREAK THE HABIT!

CREDIT AWARENESS In January, the NAACP Economic Department and the public policy research organization, Demos, released a report that showed 79 percent of middle class African American households carry credit card debt. Why? The report titled: ‘The Challenge of Credit Card Debt for the African American Middle Class’ attributes it to the vast number of African Americans that are using credit to help cover basic living expenses when income and savings fall short.

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In Memoriam Dr. Calvin W. Rolark, Sr. Wilhelmina J. Rolark THE WASHINGTON INFORMER NEWSPAPER (ISSN#0741-9414) is published weekly on each Thursday.

Periodicals postage paid at Washington, D.C. and additional mailing offices. News and advertising deadline is Monday prior to publication. Announcements must be received two weeks prior to event. Copyright 2013

by The Washington Informer. All rights reserved. POSTMASTER: Send change of addresses to The Washington Informer, 3117 Martin Luther King, Jr. Ave., S.E. Washington, D.C. 20032. No part of this publication may be reproduced without written permission from the publisher. The Informer Newspaper cannot guarantee the return of photographs. Subscription rates are $45 per year, two years $60. Papers will be received not more than a week after publication. Make checks payable to: THE WASHINGTON INFORMER 3117 Martin Luther King, Jr. Ave., S.E Washington, D.C. 20032 Phone: 202 561-4100 Fax: 202 574-3785 news@washingtoninformer.com www.washingtoninformer.com

PUBLISHER Denise Rolark Barnes STAFF Denise W. Barnes, Editor Ron Burke, Advertising/ Marketing Director Lafayette Barnes, IV, Assistant Photo Editor John E. De Freitas, Sports Photo Editor Dorothy Rowley, Online Editor Brian Young, Design & Layout Mable Neville, Bookkeeper Mickey Thompson, Social Sightings columnist Stacey Palmer, Social Media Specialist Angie Johnson, Circulation REPORTERS Stacy Brown, Sam P.K. Collins, Eve Ferguson, Elton Hayes, D. Kevin McNeil, Dorothy Rowley, Barrington Salmon, James Wright

PHOTOGRAPHERS John E. DeFreitas, Shevry Lassiter, Roy Lewis, Nancy Shia INTERNS Roger Perryman-Brown; Capricia Galloway

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African Americans’ use of credit, however, is no different than Whites.

Most use credit to purchase homes, automobiles and other big ticket items that support their middle class lifestyles. And, when it comes to education, the report states that 80 percent of African American students borrowed money to pay for their education, compared to 65 percent of Whites.

What distinguishes African Americans from others is the fact that what they borrow supersedes significantly what they save. According to the report, “The seeds for economic disparities seen today were sown over 50 years of redlining, blockbusting and predatory lending.” According to Demos policy analyst Catherine Ruethschlin, co-author of the report, African Americans have $1 in assets for every $20 owned by White Americans, of which half of it is tied to home ownership.

The amount of debt African Americans incur can have devastating consequences even though their rates of default are similar to Whites. However, the report shows that African Americans are much more likely to be called more often by bill collectors, and they are more likely to experience credit card cancellations, limit reductions, or credit rejections, while receiving the higher interest rates on their credit cards. And, worst, African Americans are much more likely to experience repossessions, foreclosures, and bankruptcy. Yet, none of this seems to deter them from moderating their use of credit.

This financial literacy supplement is aimed at motivating our readers to take heed when it comes to purchasing with borrowed cash. It is our desire to encourage you to become educated consumers and financial builders of the future by inviting experts to help us inform you of why it is necessary to invest more and to spend less.

Denise Rolark Barnes Publisher

The Washington Informer Financial Literacy Supplement 2014

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Mortgage Loan Approval Is Determined By More than a Credit Score

By Cerita Battles National Diverse Segments Manager, Wells Fargo Home Mortgage A recent survey by Wells Fargo Home Mortgage revealed that many Americans are fiscally responsible and believe they understand what it takes to get a mortgage loan. However, answers to survey questions show that Americans can benefit from homebuying education.

In the “How America Views Homeownership” survey, 74 percent of respondents express a high comfort level with understanding the financial process of homeownership, but answers to questions about specific elements of the home buying process revealed there are some misconceptions about what’s needed for loan approval.

For example, 64% of respondents believe they needed a “very good” credit score.

Credit scores are taken into consideration as lenders make decisions on mortgage loan approval. But a credit score only plays a partial role in that decision. A borrower’s overall financial profile helps lenders determine a potential homeowner’s ability to repay a loan. Wells Fargo looks at a variety of factors when reviewing all loan applications including income, assets, debt-to-income ratios and credit history. Our home financing options span the credit spectrum to help a broad base of customers.

Consumers and industry participants must remember that most loan applications are fully underwritten and documented, and www.washingtoninformer.com

borrowers must demonstrate their ability to repay a mortgage loan.

For all borrowers, including those with lower credit scores, we expect that they will be able to explain any credit issues to an underwriter as well as provide additional supporting documentation to support their application.

For reference, take a look at the 5 C’s of credit below; potential homeowners can evaluate their preparedness and understand better what lenders look for when deciding to approve a loan application.

CHARACTER – Lenders look for someone who is stable and reliable. Lenders will also consider other factors, such as the borrower’s length of time at the current address or in the current city and the individual’s employment history.

CREDIT HISTORY – This is the track record a borrower has established while managing credit and making payments over time. This is provided to lenders through the borrower’s credit report. Lenders look at a borrower’s payment history to see how frequently payments were made on time and how often the borrower paid more than the minimum amount. It’s a good idea for a potential homeowner to know where their credit history stands before applying for a loan. Consumers can obtain a free annual copy of their credit report from each of the three credit bureaus by visiting www.annualcreditreport.com.

Aspiring homeowners who are interested in learning more about budgeting and improving their overall financial picture can ask a Wells Fargo Home Mortgage Consultant about the My Home RoadmapSM service. It offers participants up to two hours of free, phone-based financial coaching from an accredited credit-counseling agency.

CAPACITY – Lenders determine a borrower’s ability to repay the loan based on their current income and assets, and the amount of debt and other expenses they have.

This risk is gauged by borrower’s debt-to-income ratio. It’s important for aspiring homeowners applying for a loan to maintain manageable debt relative to their income.

COLLATERAL – Collateral is the property that secures the loan.

When borrowers apply for a mortgage, the home is considered the

We want to find a house within our budget.

But what’s our budget exactly?

A home mortgage consultant can help you understand your home financing options.

The housing market’s looking brighter. And now may be a great time to come in and talk to a Wells Fargo Home Mortgage consultant. We’re committed to helping you achieve your goal of homeownership with a range of home lending products and online tools to help you make informed home financing decisions.

Call me to start a conversation today.

Steve Palladino Branch Manager 202-895-5161 NMLSR ID 457661

Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2014 Wells Fargo Bank, N.A. All rights reserved. NMLSR ID 399801. AS1045490 Expires 12/2014

collateral and lenders try to ensure that the property will support the loan. Wells Fargo is interested in helping our customers become sustainable homeowners. If our customers are having financial difficulty we do our best to assist them so that they maintain homeownership.

CONDITIONS – These are outside circumstances, such as the economy and job market, that can influence a borrower’s ability to repay a loan or the local real estate market.

The outlook on homeownership is positive. The Wells Fargo survey

The Washington Informer Financial Literacy Supplement 2014

found that 87% of respondents still see homeownership as an achievement to be proud of. And the company views financial education and responsible use of credit as a winning combination for consumers who plan to achieve their goals.

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Getting Your Credit in Shape How to strengthen your credit for better financial health

By Rotimi Raji Wells Fargo Regional Baking District Manager Your credit is much like your physical health: the weaker it is, the harder it may be to get fit and accomplish your goals.

But with hard work and dedication, maintaining good fiscal and physical health can be accomplished. Getting the results you desire takes discipline and does not depend on one action, rather a combination of responsible actions like keeping a healthy and balanced diet, getting a good night’s sleep, exercising regularly and scheduling yearly checkups with your doctor. Maintaining good credit is no different – a little work and some good habits can take you far. This means that you should pay your bills on time, manage your debt, and keep track of your credit report and spending.

Why is it important to keep an eye on your credit? First, lenders aren’t the only people who look at an individual’s credit history to make decisions – many insurance companies, cell phone providers and landlords do, too. So even if you aren’t planning on applying for new a loan or a credit card, maintaining healthy credit can help in other areas of your life.

A recent study by the Na-

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tional Foundation of Credit Counseling revealed that 37 percent of Americans are embarrassed about their credit card debt, followed by 30 percent feeling shame about their credit score. The good news is that less than perfect credit can be fixed. Establishing or rebuilding credit takes time and the best way to get your credit in shape is to manage it responsibly over time; just as you would routinely exercise if you wanted to maintain a healthy weight.

Create a monthly routine Whether you have a credit card or just simply have the responsibility of paying your cell phone bill, making on time payments on all your bills is essential to maintaining and building healthy credit. Missing a payment can have many consequences; not only can it cost you more money with late fees and increase interest rates, but

it can lower your credit score once reported to the credit reporting agencies.

Your payment history is one of the biggest factors in your credit score, so making loan and other payments like phone bills and even utility bills on time will help keep your credit strong. A good practice to making timely payments is to keep a list of all the bills you have due. You can contact your lender to adjust the payment due date to coincide with others and having one set due date for all your bills will make it easier to remember. Another simple way to avoid late/ missed payments is to sign up for automatic payments when possible. Always make sure you have sufficient funds by scheduling the payments to coincide with your pay schedule. Most importantly, you should develop a routine that you are comfortable with and works best for you.

Manage a healthy spending habit Maintaining a good credit score also requires you to manage a healthy spending habit.

This means that you should not spend more than you can manage or exceed your credit limit.

Your credit limit is the maximum spending amount established by your lender, which are set when you apply for a credit card or line of credit. Lenders and credit card companies determine your credit limit based on many factors, including your ability to repay and the strength of your credit. Avoid spending more than you can manage to pay back and don’t go over your credit limit because doing so suggests you have trouble managing your credit responsibly.

To avoid going over your limit and acquiring any unnecessary penalty fees, try to keep your spending below the set amount. Keep debt at no more than 35 percent of your gross monthly income. Lenders look at the amount of debt a consumer has compared to their income when making credit decisions.

Conduct an annual credit report check Part of making sure that you’re maintaining good health also involves taking preventative actions such as going to the doctor at least once a year for routine check-ups. Maintaining

The Washington Informer Financial Literacy Supplement 2014

a good credit score also requires you to check your credit report at least once a year to make sure there are no errors that can prevent you from getting credit or a better interest rate.

It’s also important to review your information regularly to protect yourself against identity theft by looking for unusual activities such as credit inquiries you don’t recognize. If you were to find an error, you can fill out a dispute form provided by the credit agency. If you find an error and are in the process of applying for a loan, you should immediately notify your lender. Even though small errors may not affect your credit score as much, significant errors can have a much bigger impact.

You can review your credit report from any of the three major U.S. credit reporting agencies: Equifax®, Experian® and TransUnion®. Consumers are entitled to one free credit report from each of the three major agencies once a year. You can order your free credit report through www.annualcreditreport.com.

From Oct. 1 through Nov. 16, 2014, Wells Fargo is providing a free credit report to its consumer customers as part of its Get Smart About Credit initiative, a national financial educational program about responsible use of credit and the important role it plays in a person’s overall financial health and wellness. If you’re a Wells Fargo customer, you can visit https://www.wellsfargo.com/ freecreditscore for more information.

Achieving financial health takes practice and dedication. Your credit is like your health in the sense that it takes commitment and practice of healthy actions to strengthen it. To learn more on how you can get your credit in shape, visit Wells Fargo’s My Financial Guide site. WI

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Prepare for a future of successful homeownership Buying a home is a big step. It’s only natural you’d want to research the home purchase process to build your confidence before you contact a real estate professional or apply for a mortgage preapproval.

Our dynamic resources can help you learn, the way you want to learn, what it takes to buy a home and prepare financially for successful homeownership: My FirstHome® education An interactive online program designed to help first-time and ready-again homebuyers prepare to purchase a home and become responsible homeowners.

Go to: wellsfargo.com/myfirsthome Wells Fargo Home Lending Learning and Planning Center On-demand tools and easy-to-follow information help site visitors feel more in charge of their home financing decisions.

Go to: wellsfargo.com/mortgage/home-loans My Home RoadmapSM service Provides up to two free hours of personalized financial coaching by phone to help homebuyers get their finances in order and prepare for the financial responsibilities of homeownership.1 Enrolled participants also receive a series of educational emails to help stay motivated and connected until ready to buy. Visit with your Wells Fargo Home Mortgage consultant to learn about enrollment details.

1. The My Home RoadmapSM service provides up to four sessions (an estimated 2 hours) of free financial coaching with a National Foundation for Credit Counseling (NFCC) certified counselor from a NFCC member organization that will be paid for by Wells Fargo Home Mortgage. At your option, you may purchase additional coaching sessions or services or decide to participate in another NFCC member agency program. Program may change or be discontinued at any time.

Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2014 Wells Fargo Bank, N.A. All rights reserved. NMLSR ID 399801. AS1045196 Expires 12/2014

How to Build Good Credit So, what builds good credit?

Officials at the Consumer Financial Protection Bureau have offered the following tips for building good credit and improving an individual’s credit score.

Pay your mortgage and bills on time, every time. An automatic payment from your bank can be a good way to do that, but make sure you keep an eye on your balance so you always have enough in your account to cover the payment. You don’t want it to bounce.

Don’t get too close to your credit limit. Credit scoring models look at how close you are to being maxed out on credit cards.

If you use too much of your total credit lines, say by carrying big balances, you can hurt your credit score. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit – some even

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say you should keep it at less than 10 percent.

Don’t apply for too much credit in a short time. Your credit score may go down if you apply for or open a lot of new accounts in a short period. Buying something and wanting the discount that comes with opening a new store card? Transferring balances from an old card to a new one? Do that too often and it will show up on your credit report as lots of new credit accounts, which is likely to hurt your credit score.

The more extensive your credit history, the better.

Credit scores are partly based on experience over time. The more evidence you have on how you get and pay for credit, the more information there will be to determine whether you are a good credit risk.

Here are some more ideas: Buying items with a debit card

Officials at the Consumer Financial Protection Bureau have offered several tips for building good credit and improving an individual’s credit score, including consistently paying your mortgage, credit cards and other bills on time. /Photo courtesy of Afrikanlife.com

or cash will not build your credit score. Some are afraid of getting into trouble with credit cards, so they vow never to have one. The

problem in buying with cash or using a debit card can be found in that it doesn’t establish a credit repayment history that will be reported to a credit bureau.

So, when you do need a loan for a big-ticket item like a car or home, you won’t have the credit file to make a lender willing to take a chance on you.

Pay with a credit card to build credit but try not to carry a balance and make sure you pay your bill on time. You’ll build credit by using your credit card even if you pay off your balances in full each month.

And, you’ll avoid finance charges since these only kick in when you carry over a balance from month-to-month, which happens when you pay only the minimum amount due or any other amount less than the full balance owed each month.

If you can’t qualify for a regular credit card, a secured card account that you put a deposit on can build credit, too. You can get a secured card from many banks or credit unions. With most of these cards your credit line starts out small, but as you demonstrate reliable payments, most companies will extend you more credit and eventually refund your deposit. Secured cards can be expensive and often come with a number of different fees, though, so before you resort to a secured card consider applying to see if you can be approved for a regular credit card with attrac-

The Washington Informer Financial Literacy Supplement 2014

tive features and pricing.

File an “active-duty alert” with the credit reporting agencies before you go on deployment. This makes businesses verify your identity before they issue credit in your name and should help protect you from identity theft.

If you want to go even farther, you can freeze your credit. A freeze prevents prospective creditors from accessing your credit file at all, which will keep any new accounts from being opened in your name.

There may be a small charge to set up a freeze, unless you are a victim of identity theft. If you decide to freeze your credit, you’ll have to set up the freezes separately with each of the three big credit reporting agencies: TransUnion, Equifax, and Experian.

Keep an eye on your credit reports. You can get a free copy of your credit report from each of the three major credit-reporting agencies every year at www. annualcreditreport.com. There’s a chance you may find incorrect information that is bringing your score down. If you do, file a dispute with the credit reporting agency. WI For more information about credit reports and credit scores visit Ask CFPB at www.consumerfinance.gov/ askcfpb.

Source: Consumer Financial Protection Bureau

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Momentum Builds to End Payday Loan Debt Trap Broad House Support Shown for Reform

By Charlene Crowell For more than a decade, the Center for Responsible Lending has shared research on the predatory nature of payday loans. In its early days, like many businesses, payday lending occurred through its ubiquitous retail locations in neighborhoods of color and high-traffic areas. Prominent signage, often with bright neon lights beckoned customers to come in for quick and easy cash without a credit check.

And like many things that sound too good to be true, the small dollar loans came with big costs that left nearly all customers in worse financial shape than before.

Through a series of hard-fought efforts that united numerous state coalitions with consumer advocates, a string of state payday victories limited the loan shark, triple-digit interest rates lenders charged. For 17 states and the District of Columbia, double-digit interest rates are the law.

As encouraging as these consumer victories are, the reality is that millions of Americans are still without protections against the payday loan debt trap. But right now, Congress has the chance to bring real payday reform to all of America.

Pending in Congress is a bill that would cap payday interest rates at 36 percent and require clear billing statements that show both fees and interest rates. Introduced by Illinois’ Senator Richard Durban (S 673) and Scranton, Pennsylvania’s Congressman Matt Cartwright, (H.R. 5130) the measures would prevent 300 percent debt trap loans like payday and car title. They would also reduce interest rates to 36 percent annually.

To date, 38 Members of Congress including DC’s own Rep. Eleanor Holmes Norton, have added their support as co-sponsors. Together, they represent 20 states and include many members of both the Congressional Black Caucus and the Congressional Hispanic

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Caucus. Upon Congress’ return from the fall recess, both bills await further review and actions.

Research by both the Center for Responsible Lending (CRL) and the Consumer Financial Protection Bureau (CFPB) found that the payday loan industry relies upon its customers becoming entrapped into a turnstile of debt that deepens with every loan.

Among CRL’s independent research findings: Although payday loans are marketed as a quick financial fix, the typical borrower is stuck in nine loans a year; A borrower with 10 loans in a year paid $458 in interest to borrow only $350; Money spent paying down 400 percent interest rates denies monies for other living needs such as groceries, transportation or medical bills; and Defaulting on payday loans can lead to closure of bank accounts, forcing already low-income borrowers to pay more to get their checks cashed.

When CFPB analyzed 11-months of borrowing at 12 million payday storefront locations, its findings mirrored those of CRL: an estimated 12 million consumers are caught in a turnstile of debt each year that leaves borrowers financially worse off than before they began the loans.

At the time, Richard Cordray, CFPB’s Director noted that, “Our concern is that all too often those loans lead to a perpetuat-

ing sequence.

That is where the consumer ends up being hurt rather than helped by this extremely high-cost loan product.”

CFPB is also poised to issue new regulations in the near

future that have the potential to end the debt trap nationally and ensure lenders make only affordable loans after considering borrowers’ incomes and expenses.

Just as civil rights leaders vigilantly pushed for fair housing, access to public accommodations and the right to vote, consumers must now be just as vigilant in supporting financial reforms that protect their monies and their credit.

The Washington Informer Financial Literacy Supplement 2014

A key part of financial literacy is recognizing that not every financial product functions in the way it is marketed. Promises that sound too good to be true often are. Secondly, it is the job of our lawmakers to level the credit playing field to eliminate those that prey upon consumers’ problems. And thirdly, once those laws are enacted, we must be able to count on regulators at all levels to respect the law and America’s people.

Payday lenders are among the worst exploiters of consumers who have the least. No consumer needs that kind of ‘service’.

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

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Consumer Financial Protection Bureau Scrutinized

Some Question Whether Agency Helps Americans

By Stacy M. Brown WI Contributing Writer When Harvard Law School Professor Elizabeth Warren originally proposed the creation of a Consumer Financial Protection Bureau in 2007, she staunchly maintained that an informed consumer counts as the first line of defense against abusive practices.

Now, seven years later, some have argued that the bureau, which supervises banks, credit unions and other fiscal companies while tasked with enforcing consumer financial laws, hasn’t done its job in protecting American citizens.

“Ironically, an agency that Congress created to protect consumers has been collecting an unprece-

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dented amount of personal information about the very consumers it was tasked with protecting,” Sen. Mike Crapo (R-Idaho), and the ranking member on the Senate Banking Committee, said in a post to Forbes Magazine.

Crapo argued that since its inception, the bureau has collected information on millions of consumers on products ranging from automobile sales, consumer credit reports, credit cards, credit scores, payday loans, mortgages, student loans and overdraft fees.

“The bureau even teamed up with the Federal Housing Finance Agency to create and maintain a national mortgage database containing borrowers’ social security numbers and personalized information about religion, education

President Barack Obama and Sen. Elizabeth Warren have come under fire from opponents of the Consumer Financial Protection Bureau. /Photo courtesy of politico.com

and military records, languages spoken, age of children at home and major life events,” Crapo said.

“Only after I demanded an explanation of what exactly a borrowers’ religion has to do with his or her mortgage, did the agencies agree to cease collecting that information.”

However, a spokesman for President Barack Obama defended the agency. In an email, White House officials said the bureau ensures consumers have accurate information to help them make informed decisions about financial products

and services and it makes sure that financial companies disclose the actual price of products and services to consumers so they can comparison shop and make appropriate decisions.

Located in Northwest, the bureau also educates consumers about abusive practices and officials also gather and analyze data to gain knowledge on consumer behavior and spending habits, financial industries and institutions while it continues to develop rules and regulations related to consumer protection.

“Americans benefit because we have a federal agency that can regulate and enforce laws regarding the financial industry and this is the first government agency created to regulate banks, credit unions and financial institutions,” said financial expert Harrine Freeman, the owner and CEO of H.E. Freeman Enterprises in Bethesda, Maryland.

Freeman noted that, for example, in January 2013, the bureau required mortgage lenders to provide mortgage loan applicants with a list of free or low-cost housing counselors who can educate borrowers on the best mortgage loan that’s right for them.

She said mortgage lenders who sell mortgages with high-interest rates are now required to have an independent appraiser that does not work for the mortgage company to determine the value of the home for the borrower.

“Loan servicers must promptly credit mortgage loan payments to homeowners’ accounts and they must keep accurate homeowner records and avoid lost paperwork,” Freeman said.

However, critics of the bureau remain and complaints have extended even to Warren, the Democratic senator from Massachusetts and special advisor for the bureau.

“I am not at all certain that the Consumer Financial Protection

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Bureau has the potential to benefit anyone, except for politicians using it to propagandize and buy votes and Elizabeth Warren has consistently shown a disdain for business, and it would appear that nothing in her vision of the bureau is designed to better the business environment,” said Rob Drury, executive director of the Association of Christian Financial Advisors in San Antonio, Texas.

“Take the issue of dealer reserve in the auto industry, which the bureau has sought to eliminate. Dealer reserve is simply a commission paid to an auto dealer by a lender for bringing a customer’s business to the bank,” he said. “The customary two percent caps that lenders typically place on dealer reserve are extremely reasonable, and has no significant effect on the buyer in the purchase of a vehicle. It can, however, make or break the possibility of a car deal, as that markup is very often the only profit made on a car sale.”

Drury said the bureau’s policy eliminates the very competition that often keeps the buyer’s interest rate low and offers greater financing options.

Bureau officials, however, said they’re working hard to protect consumers.

For example, on Sept. 25, the agency’s director ordered U.S. Bank, headquartered in Minneapolis to provide an estimated $48 million in relief to consumers harmed by illegal billing practices after officials said consumers were unfairly charged for certain identity protection and credit monitoring services that they did not receive.

“We have consistently warned companies about practices related to add-on products,” said bureau director Richard Cordray. “We will do what is necessary to prevent further harm to consumers.” WI To learn more about the Consumer Financial Protection Bureau, visit www. consumerfinance.gov www.washingtoninformer.com

By Stacy M. Brown WI Contributing Writer Congresswoman Maxine Waters, a ranking member of the House Financial Services Committee, has proposed an overhaul of the Fair Credit Reporting Act. The California Democrat said too many Americans, particularly blacks and Latinos, have been devastated by damaging information in their credit reports as a result of incomplete or erroneous information that’s been reported by TransUnion, Equifax, and Experian, the nation’s three major reporting bureaus.

“A person’s credit is too important in determining access to a wide array of opportunities for these reports to contain inaccurate and incomplete information,” said Waters, 76.

“Credit reports are no longer just used exclusively by lenders in making a credit decision.

More and more, credit reports are used in a variety of ways, from employment decisions, to determining a consumer’s ability to rent a home, buy a car, or purchase insurance.”

Also, the congresswoman echoed a September report released by the Mortgage Professional America (MPA) newsletter which noted a finding by the Urban Institute that the current credit environment has constrained mortgage lending and it has also disproportionately affected African Americans and Latinos, who tend to have less personal savings and lower credit scores than whites.

Further, blacks have experienced a denial rate of 29 percent for conventional home mortgages compared to a denial rate of 11 percent for whites.

Meanwhile, upper-income African Americans and Latinos were 2.3 times and 1.8 times more likely than whites to be denied conventional mortgage loans respectively, the MPA reported.

“A new America is being created where homeownership is being replaced with higher cost rentals,” said John Taylor, president and CEO of the National Community Reinvestment Coalition, located in Northwest and formed in 1990 to develop and harness the collective energies of community reinvestment organizations from across the country to help increase the flow of private capital into traditionally underserved communities.

“Our housing industry suffers from this model and workwww.washingtoninformer.com

Congresswoman Seeks Changes in Credit Reporting Maxine Waters Proposes Overhaul of Current System

California Democrat Maxine Waters said she must take action to end the heartache that has plagued millions of consumers who have been unable to obtain a job, go to college, or buy a car because of their credit score. /Photo courtesy of allfacebook.com

ing-class Americans are stopped from building wealth,” said Taylor, 62.

Under Waters’ proposal, which Congress may consider later this year or early next year; reforms to the Fair Credit Reporting Act would help to protect consumers. Her proposal would include removing adverse information about residential loans that are found to be unfair, deceptive, abusive, fraudulent or illegal.

The proposal also includes

ending what she called unreasonably long periods that most adverse information can remain on an individual’s credit report, shortening such periods by three years.

She also wants to provide consumers the tools to accurately verify reports and to mandate that lenders retain all records for as long as adverse information remains.

Further, Waters seeks to eliminate punitive credit scoring practices by removing fully

paid or settled debt from credit reports, including medical debt, which has been found to be an unreliable predictor of an individual’s credit worthiness.

“I also want a change that will provide distressed private education loan borrowers the same opportunity to repair their credit as federal student loan borrowers, by removing adverse information when delinquent private education loan borrowers make consecutive on-time

The Washington Informer Financial Literacy Supplement 2014

monthly payments for a certain period of time,” she said.

If accomplished, Waters said providing distressed private education loan borrower’s similar opportunities as federal student loan borrowers would result in a needed boost to the economy.

She said, student loan debt in 2013 totaled as much as $1 trillion and Waters cautioned that an increasing volume of such debt would further burden the economy by hindering a borrower’s ability to qualify for car and mortgage loans, save for retirement, and pursue entrepreneurial ventures that help grow the economy.

The congresswoman also wants to restrict the use of credit reports for employment purposes, which she said employers are increasingly using to screen qualified job applicants despite a lack of adequate data to show that an individual’s credit reflects on their job performance.

Under a new Fair Credit Reporting Act, two narrow exemptions would be created in which credit reports could be used for employment purposes, one would be for local, state or federal law and the other for security clearances.

The practice of using credit reports to screen job applicants would also be restricted, a practice that Waters said continues despite the lack of any reliable data demonstrating that credit information correlates to a person’s job performance or character.

She said studies have found that one in four unemployed Americans have been required to undergo a credit check when applying for a job and one in 10 have been denied jobs as a result of their credit report.

“Over 10 years ago, Congress tried to strengthen consumer protections, but our consumer reporting system still has a number of systemic flaws,” Waters said.

“I believe we must take action to end the heartache that has plagued millions of consumers who have been unable to obtain a job, go to college, or buy a car because of their credit score,” she said.

“Many of these problems have stymied our country’s economic growth. This draft proposal attempts to meet our obligation to ensure that consumers who have fallen victim or fallen on hard times are not deprived of the chance to achieve the American Dream.”

WI Oct 9 - Oct 15, 2014

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By Hermond Palmer Most people go through life looking for ways to create a safe and stable economic existence for themselves and their family. Getting a job and going to work is how many were taught to make money. For every hour you work, you earn an hourly wage. If you want to earn more money, you simply work more hours. The challenge here is twofold. First, you may not make a high hourly wage and second, with only 24 hours in a day, there is a limit to the maximum number of hours any one person can work in a day, week, month, or year, even with overtime. The question then becomes how to achieve financial security.

One method often used to achieve financial security is to have your money work for you.

I am talking about investing.

WHAT INVESTING IS: Buying an asset with the hope that it will generate income or increase in value in the future for the purpose of creating wealth.

WHAT INVESTING IS NOT: Investing is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money.

To start investing, you need to learn about the business of investing which includes learning about: • the vocabulary used by investors and investment professionals • the different types of investment options available to you • the different strategies used to earn a return on investment Smart investors do their homework before investing.

This includes doing research on the stock market, available investment options, and potential vehicles they are considering before they invest.

To help determine if investing may be something you want to consider, below is some critical information you will need to know before taking the plunge.

STOCK: A share in the ownership of a company. A share of stock represents a legal, financial claim on the company’s assets and earnings. People refer to shares, equity, or stock, as the same thing, part ownership in a company.

BONDS: Also known as a fixed-income security. Used by corporate and governmental organizations to finance a

The Washington Informer Financial Literacy Supplement 2014

range of projects and activities.

The money is borrowed for a specific time period at a fixed interest rate. The organization that is the borrower, issuer of the bond, is obligated to pay you, the investor, interest (the coupon) and/or to repay the principal at a specified later date, termed the maturity date.

RISK: Investment risk is defined as the possibility of investment losses versus possible gain on any specific investment.

Diversification: A risk management technique that tries to lower the possibility of loss from investing by collecting a group or portfolio of investment options so that the positive performance of some investments in the portfolio will neutralize the potential negative performance of others in the portfolio.

INVESTMENT PORTFOLIO: A collection of investments held by a company or individual.

DOLLAR COST AVERAGING: A strategy where an investor puts a fixed dollar amount into a given investment (usually common stock) no matter the share price on a regular basis, usually monthly, regardless of what is occurring in the financial markets. With this strategy, more shares are purchased when prices are low, and fewer shares are purchased when prices are high. The idea behind this strategy is that eventually, the average cost per share of the stock will become smaller and smaller; thereby, lessening the risk of investing a large amount in a single investment at the wrong time.

Keep in mind that investing involves an element of risk.

Meaning, while you may put money in, there is no guaranty you will make money or even get back all of the money you put in. If you choose to invest /purchase stocks, bonds, or mutual funds, you must understand that you could lose part or all of the money you invested.

If you are thinking about investing to achieve financial security, make sure you do your homework to understand the risks involved and why the investment(s) you have selected provide the best chance of being successful.

If you ever find you are in the market for a bank partner, Industrial Bank is ready to support you. Call us at (202)7222000 or go to www.industrial-bank.com. WI www.washingtoninformer.com

Money Matter$

By Hermond Palmer VP/Director of Marketing and Sales

www.industrial-bank.com

Industrial Bank Industrial Strong Member FDIC

Student Financial Aid Understanding the FAFSA Any student planning to attend college in the United States is expected to contribute towards the cost of their college education. The amount they are expected to pay depends on their financial situation. If you are a college bound high school senior, or the parent or guardian of a college bound high school senior, now is the time for you to become familiar with the Free Application for Federal Student Aid or FAFSA. The FAFSA is the form used by the U.S. Department of Education to determine how much the student and his/her family will be expected to pay (the student’s Expected Family Contribution - EFC) by conducting a “need analysis.” This need analysis is based on financial information the student and his/ her family provide including, income, assets and other household information, which the student and his/her parents (if he/ she is a dependent student) will be asked to provide. The form is submitted to and processed by a federal processor and the results are electronically transmitted to the financial aid offices of the schools that the student lists on his/her application.

The FAFSA application is used to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans, and work-study programs.

Who is eligible for federal financial aid? Nearly every student is eligible for some form of financial aid, including low-interest Federal Stafford and/or parent PLUS loans, regardless of income or circumstances, provided that they: • are a U.S. citizen, a U.S. national or an eligible non-citizen; • have a valid Social Security Number; • have a high school diploma or GED; www.washingtoninformer.com

• are registered with the U.S. Selective Service (if you are a male aged 18-25); • complete a FAFSA promising to use any federal aid for educational purposes; • do not owe refunds on any federal student grants; • are not in default on any student loans; and • have not been found guilty of the sale or possession of illegal drugs during a period in which federal aid was being received.

To be considered for federal financial aid, a student must complete and submit a FAFSA. To complete the FAFSA, the student will need: • His or Her Social Security Number • His or Her Alien Registration Number (if he/she is not a U.S. citizen) • His or Her most recent federal income tax returns, W-2s, and other records of money earned. (Note: He or She may be able to transfer his/her federal tax return information into his/ her FAFSA using the IRS Data Retrieval Tool.)

• Bank statements and records of investments (if applicable) • Records of untaxed income (if applicable) • A Federal Student Aid PIN to sign electronically. (If he/she do not already have one, visit www. pin.ed.gov to obtain one.)

• If the student is a dependent student, then he/she will also need most of the above information for his/her parent(s).

Federal money, to which the FAFSA gives students access, is dispersed as the applications are approved. That means it is to your benefit to submit the form completely and accurately as soon as possible.

line provides a benefit because the site identifies mistakes for immediate correction. Financial packages can be delayed by inaccuracies, which can affect the amount and type of award received. Being late can cause what would have been a grant or scholarship (free money) to become a loan (money you have to pay back with interest).

Do not be intimidated by the FAFSA. If you need help filling out the FAFSA, contact Federal Student Aid: an office of the U.S. Department of Education.

Their contact information is:

Telephone: 1-800-4FEDAID (433-3243) Email: https://studentaid.ed.gov/ fafsa/filling-out Call them! They exist is to help the public get access to the financial aid and supportive services necessary to make dreams of getting a college education come true.

As people journey through life, they will invariably encounter new, unchartered territory. This

is especially true when it comes to experiences related to Money Matters. When you encounter new territory, do not be afraid.

Be excited! Roll up your sleeves and put in the work. You are being presented with an opportunity to learn something new.

And, if you ever find you are in the market for a bank partner, Industrial Bank is ready to support you. Call us at (202)7222000 or go to www.industrial-bank.com. WI

Our work is driven by a vision of achieving Financial Security and Prosperity for All. To learn more about how CAAB can assist you to take control of your finances, increase your savings and build wealth for a better future, please visit www.caab.org or call us at (202) 419-1440.

Completing the FAFSA on-

The Washington Informer Financial Literacy Supplement 2014

Oct 9 - Oct 15, 2014

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Total Financial Planning

By Aimee D. Griffin, Esq This Special Financial Issue of the Informer is committed to providing information for the primarily African American readership to get its financial house in order.

The Griffin Firm, PLLC is committed to supporting people to cre-

ate wealth and maintaining it through generations. We accomplish this through business and entrepreneurship coaching and estate planning.

This is our commitment for economic development. We know that this is a journey that is best traveled with partners. I read an African proverb while in South African, “To travel fast, travel alone, but if you want to go far, travel together. “ This journey to create generational wealth requires partners for a multigenerational trip.

The development for wealth creation and maintenance is an economic development transformation process. The financial planning requires developing a strategic platform from which to operate and grow in a sustainable fashion.

The book, The Hidden Cost of Being African American; How Wealth Perpetuates Inequality,

by Thomas M Shapiro, docu-

ments the intangibles that persist as a result of the lack of resources and opportunities that have a multigenerational impact. In many ways this book discusses the complexity of racism, poverty and its cost.

An example includes how your educational opportunities are directly impacted by your financial status, which directly impacts earning potential. This not only impacts the job you can acquire or create but by the network and circles that you have entre into. The cycle that is created and maintain widens the economic gap for each subsequent generation.

Financial planning anticipates and prepares for setbacks and works to buffer the impact. A team of professionals working on our behalf should include financial planner, insurance, an estate planning attorney and when appropriate a tax strategist.

The Griffin Firm, PLLC Committed to providing services and supports to increase the capacity of individuals, businesses, and communities.

• • • • •

Estate planning and probate Medicaid planning Elder law Business and succession planning/ coaching Workshops and seminars on legacy creation for economic strength

Aimee D. Griffin, Esq., The Griffin Firm, PLLC 5335 Wisconsin Ave NW Suite 440 Washington DC 20015 www.thegriffinfirm-PLLC.com

202-379-4738 FL-12 Oct 9 - Oct 15, 2014

Planning for financial or personal challenges will not make them happen but having the resources and strategy in hand creates a strength and resolve to move forward. Many people face a time in their lives when they are incapacitated for at least a short period, this preparedness makes a challenging time less so.

I consistently share preparedness for end of life or incapacitation does not deter or hasten the need. It provides a level of peace within a storm for those who care for you to have a plan of action.

Total financial planning is not an easy directive. It means that you need to look at the future and make decisions regarding that future. It means that you must consider the potential that there will be a time when you are less able. It means that you must trust and rely on someone besides yourself with personal, intimate information about how to support you when and if you can’t take care of yourself. Who wants to think of that?! But again, I promise that the planning does not hasten or deter it from happening.

However, selecting the people and the positions in which they support you provide a level of peace to you and comfort to the people who are supporting you.

Total financial planning should include not only build-

The Washington Informer Financial Literacy Supplement 2014

ing your retirement plan. It should include your disability considerations, with long term disability insurance or Medicaid planning in addition to Powers of Attorney to act on your behalf for financial and health care decision making. It should also plan for the distribution of your assets and preservation of attained wealth that considers taxation and dependency on others for access to your assets at the end of your life.

The conversation is vast, deep and personal. But it is an important conversation to begin having. Your financial plan is not complete until all of the factors are considered. Be prepared! Be considerate! Be transformative! WI Aimee D. Griffin, Esq., The Griffin Firm, PLLC 5335 Wisconsin Ave NW Suite 440 Washington DC 20015 www.thegriffinfirm-PLLC.com 202-379-4738 www.washingtoninformer.com

For eighty years, Industrial Bank has made the dreams of homeownership and entrepreneurship a reality.

If you are looking for a bank partner to help you invest in your reality, call us at (202)722-2000 or go to www.industrial-bank.com.

Member FDIC

What Women Need to Know about Money Management and Investments

By Lanta Evans-Motte M.B.A., Financial Advisor

Washington Informer 5.625 in W x 10.5 in H

As more women pursue higher education, become entrepreneurs, and outlive their mates, they will have access to increasing amounts of money to spend, leverage, and invest. Women already have immense

and escalating spending power in America, with estimates ranging anywhere from $5 trillion to $15 trillion annually according to a 2013 Neilson study. The Federal Reserve projects that women will control two-thirds of America’s consumer wealth over the next decade and be the beneficiaries of the largest transference of

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wealth in the history of America.

Given their tremendous spending power, women need to understand the rules of money management if they are to make good financial and life decisions for themselves, their families and their communities.

Many cherished financial principals like budgeting, saving for emergencies, spending less than you earn, and avoiding excessive debt may indefinitely hold true. However, due to the complexity of financial and life planning required to judiciously manage their families, careers, health, retirement, and longevity, women may need to incorporate enhanced financial knowledge and strategies going forward.

Here are some steps that women can take to become more financially savvy: PROACTIVELY LEARN ABOUT MONEY. Pursue information on how to save, invest, manage credit and debt, and plan for the future. Increase their financial knowledge and confidence by reading financial magazines and books, or attending workshops or classes to learn about money management and investing. Explore financial education classes, resources and support available through an employer or a local HUD-approved housing counseling agency. Engage in household discussions and decisions regarding finances, and strive to consistently increase their financial competency.

BEGIN PLANNING TO IDENTIFY AND PRIORITIZE FINANCIAL GOALS. Identify shortterm goals such as buying a new car, or longer term goals such as a buying a home, paying for college, or retiring on their own terms. Quantify and add timelines to each goal in order to help determine what resources and tradeoffs may be required, both now and in the future. Work with licensed, professional advisors to help identify ways to reduce any gaps or shortfalls that may exist, or to help modify plans to fit available resources.

BECOME A MORE KNOWLEDGEABLE INVESTOR. Expand their investment knowledge beyond CDs and money market accounts (“safety” assets), and also learn about the appropriate role of investments designed to provide income (like bonds) and growth (like equities) within a portfolio. Learn about basic investment concepts such as risk tolerance, time horizon, diversification, asset allocation, and inflation; and how investment vehicles like IRAs, Roth IRAs, and 401(k) plans can assist with retirement and tax planning. It is important to know basic information regarding a prudent investment strategy and the role

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of particular types of investments and investment vehicles, in order to invest well, communicate effectively, protect oneself against fraud, and avoid panicking during volatile markets.

SAVE AND PLAN FOR RETIREMENT. Since women generally live longer, their money needs to last longer. Women need to estimate how much money they will need for the retirement they envision, and begin to understand how much they might expect from Social Security, an employer pension plan, or their own savings, and how long those resources might last. Earlier identification of shortfalls allows more time to make adjustments.

Healthcare needs often increase with longer lifespans, so it is important that women take care of their health, and investigate Medicare, long-term care, and any potential employer-based resources for retirement.

PROTECT YOUR INCOME AND ASSETS. Throughout their careers, advocate for fair wages and good benefits, and make the most of them. Identify and develop strategies to reduce exposure to various risks that they and their families may face, including unemployment, taxes, inflation, lawsuits, and divorce. Explore options for disability, life, health, longterm care, and liability insurance, and consider basic estate planning documents such as a will, trust, durable power of attorney, and health-care proxy.

SEEK HELP AS NEEDED. Be consistent in their quest for learning about finances and be patient with themselves. Research, plan and prepare in advance to the extent possible, and strive to make improvements along the way. Eagerly ask questions, acknowledge mistakes, and seek professional guidance as necessary.

As they better understand the rules of money management, financially savvy women will be inspired to LEARN how to make more informed choices about their finances, without being too distracted by issues beyond their control such as the financial markets, politics and world events. They will work to DEVELOP the discipline to do the important things even if they seem at first uncomfortable, unfamiliar, or unattainable. Once appropriately engaged in their futures, financially savvy women will more consistently look for opportunities to GROW--not just their portfolios, but their careers and self-confidence as well. WI Lanta Evans-Motte is an independent financial advisor affiliated with Raymond James Financial Services, Inc., 301-4592484 or lanta.evans@raymondjames.com. www.washingtoninformer.com

More-of-the Same Kind of Year

By Theodore R. Daniel Founder and President Society for Financial Education and Professional Development, Inc. Each year, I talk to friends and relatives about their personal finances. There seems to be a recurring theme regarding the use of their financial resources or lack of appropriate use of their financial resources. Many have included in their New Year’s resolutions an improvement of their financial condition.

Let’s look at a few questions to see if you are going to have a “More-of-the Same Kind of the Year.” Answer the questions below honestly to determine places where you may need to shore up your financial condition.

IS YOUR DEBT BECOMING BURDENSOME? Check your debtto-income Ratio. You probably know that lenders use your credit score (a mathematical calculation based on information on your credit report) when making lending decisions. But lenders also like to review your debt-toincome ratio. You debt-toincome ratio indicates how much debt you carry in relation to your income. To calculate your debt-to-income ratio add up all your monthly debt obligations, including your mortgage, home-equity loans, auto loans, student loans, minimum credit card payments, and other debts.

Divide that number by your monthly gross income to find your debt-to-income ratio.

You should have debt-to-income ratio of 20% or less.

DO YOU HAVE AN INVESTMENT PLAN? It’s difficult to achieve your financial goals by chance or luck. You’ll need to make

monthly investments of a specific sum to help achieve your goals, e.g. retirement income, college education, and more.

DO YOU KNOW YOUR NET WORTH? You should add all of your assets which includes investments, savings, home value and furnishings and other valuables you own and subtract the total from your liabilities (debts); the difference is your net worth. This should be done at least annually. Your net worth statement can help you assess your financial progress. Ideally, your net worth should grow every year.

Are you saving something from every paycheck? Saving on a consistent basis is one of the best habits you can develop to help you achieve your financial goals. Start out with small amounts if you need to, increasing the amount periodically as you receive a raise or bonus, reduce expenses. If you save $4 a day, each week you would accumulate $28 in savings, 30 days, $120, oneyear $1,460, 5 years $7,304, ten years $10,508, and 20 years$29,220.00.

DO YOU HAVE A BUDGET? Take the time to develop a budget by tracking your actual expenditures over a 30 or 60 day period. A budget will enable you to become more efficient in the use of your financial resources as well as help you control your spending. Review your budget every six months to determine if your spending is aligned with your budget. Keep in mind you’re your budget should always include sufficient money to cover: shelter, food, transportation, insurance, utilities, and savings and investments. Everything else is discretionary.

Do you own a home? His-

Lanta Evans-Motte, MBA

Financial Advisor

Raymond James, Member FINRA/SIPC 4061 Powder Mill Road, Ste. 705, Beltsville, MD 20705 Office: 301-459-2484 • Branch: 301-595-8600 lanta.evans@raymondjames.com www.raymondjames.com/lantaevans

www.washingtoninformer.com

torically, homes have provided a good source to create wealth. There are also significant tax advantages to home ownership. Consider saving to accumulate the typical down payment of 10% to 20% of the home’s cost. Furthermore, you don’t want to be subject to the whims of a landlord who might sell your rented apartment or home after you have paid thousands in rent payments.

ARE YOU PREPARED FOR FINANCIAL CATASTROPHES? Making arrangements to handle financial emergencies will prevent them from adversely affecting your financial goals. Make sure to have an emergency fund covering several months of living expenses, insurance to cover catastrophes, and a power of attorney so some-

one can step in and take over your finances if you become incapacitated.

ARE YOU UTILIZING ALL APPROPRIATE STRATEGIES TO REDUCE YOUR INCOME TAXES? If you are not participating in your employer’s defined-contribution plan (401k) plan you should start. Each dollar you contribute to accumulate funds for your retirement in tax deductible. If you don’t contribution to your employer’s 401(k) plan you will pay more in income taxes each year. If your employer does not have a 401(k) plan contribute to an Individual Retirement Account. Any amount you invest in this account will also result in tax-savings.

IS YOUR ESTATE PLAN UP TO DATE? To avoid family dissen-

sion and legal expenses you need a will to provide for your estate’s distribution and to name guardians for your minor children. You should also consider a durable power of attorney, which designates someone to control your financial affairs if you become incapacitated and a health care proxy, which delegates health care decisions when you are unable to make those decisions.

If you answered “no” to any of these questions, you need to take action(s) to avoid having a “moreof the same kind of year.”

You should make plans to accomplish financial goals each year to grow wealth and maintain financial stability.

For more information: www. sfepd.org WI

Seeks partnership with organizations located in Ward 7 and Ward 8 To present Ally Wallet Wise Financial Education Program to their constituents and surrounding community.

Subjects to be covered: Credit Management Budgeting Banking Investing For more information contact SFEPD’s office at (703) 920-3807 or send requests to info@sfepd.org.

The Washington Informer Financial Literacy Supplement 2014

Oct 9 - Oct 15, 2014

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