Focus Group with New Jersey Citizen Action Loan (NJCA) Counselors:

The focus group with the New Jersey Citizen Action Loan Counselors was conducted on February 29, 1996 at the New Jersey Citizen Action office in New Brunswick. The group was comprised of seven NJCA employees (loan counselors and supervisory staff) representing all serviced regions of New Jersey. A summary of the findings and recommendations follows.

The lending process is highly technical, and filled with jargon which is confusing to the layperson. NJCA’s clients range from welfare recipients to teachers and lawyers—regardless, many clients enter the process unable to ask the most basic and important questions. For example, clients focus on payment amounts but are unaware of the importance of interest rates.

NJCA’s role is to empower clients to ask the right questions and educate themselves. Judging from the counselors comments, there are no other agents/intermediaries in the process who are compelled to educate the clients on these issues. Also, clients have no one in their personal networks (family, co-workers, etc.) who are able to provide them with reliable information. In low-income neighborhoods, for example, many NJCA clients are the first in their family to buy a house.

Clients are not knowledgeable about the implications of their own credit histories. Many assume that they have bad credit, without acquiring the relevant credit information. Even those who are aware of their credit histories may not know how the banks/underwriters will interpret it.

The issue of self esteem emerged repeatedly throughout the group. The counselors indicated that the clients are fearful of the process: clients do not believe that they can successfully obtain a home purchase mortgage loan. The counselors suggested that women are not trained to be as aggressive as men, and therefore are hesitant to enter the process altogether or to "ask the right questions".

The lending process goes beyond the relationship between the bank and the client (or between the bank, the counselor and the client). The counselors indicated that the following actors and their inter-relationships can influence the process: underwriters, realtors, banks, and mortgage companies.

The NJCA Loan Counseling program serves as an intermediary between their clients and the lending institution. Usually there is little or no direct contact between the client and the lending institution. This a critical finding. NJCA’s intervention has limited their clients’ exposure to many of the problematic aspects of the lending process.

NJCA’s clients are rarely denied mortgage loans because mortgage applications are not submitted unless the client is mortgage-ready. Counselors resolve the clients’ application problems through a pre-screening process and either short or long term counseling. In addition, counselors make certain that the application is accompanied by the appropriate materials—this is one of the major technical barriers in the process.

The counselors asserted that CRA loan products are marketed altogether differently than conventional loan products. They suggested that loan officers either do not know about CRA products, or are less likely to promote them because they will receive a smaller commission. According to the counselors, lending institutions are less enthusiastic about originating CRA loans because lenders say they cannot move these originations to the secondary market and will have to maintain these loans in their portfolios.

Weak bank community relationships influence citizens’ access to credit. The counselors suggested that their clients have a superficial relationship with their local bank. The clients are unlikely to contact their local financial institution for information beyond checking and savings accounts, and therefore have limited resources when they are seeking mortgage credit.

In addition, due to the common lack of banks in many inner-city neighborhoods, clients often turn to mortgage and loan companies for financial assistance. The high interest rates that are offered to those with few or no other alternatives are often the cause of extreme debt and poor credit histories.

The focus group with the clients from the New Jersey Citizen Action Loan Counseling Program was conducted April 4, 1996 at the Center for Urban Policy Research at Civic Square in New Brunswick.

The group was comprised of eight women who were recruited from NJCA’s client list. The selection process aimed at gathering a group of mixed characteristics in terms of race, income, family structure, and mortgage status. The final group had the following characteristics. There were five Black women, one White woman, and two Hispanic women. Over half of the women were single mothers. All of the women were either moderate or low-income. Half of the women already had mortgages. The rest were either beginning the mortgage process or in short/long term counseling with NJCA.

The group agreed that education was one of the most important aspects in obtaining and managing a loan. Knowledge of the process and the formulas used in determining loan eligibility were helpful in enabling the women to become an active member of the process.

Once these women became aware that home ownership was affordable, they actively pursued this goal. The most daunting elements of entering the market are credit liabilities and run-around at the lending institutions. However, once armed with knowledge, experience and the aid of NJCA, the women were able to effectively solve these dilemmas.

There is a consensus that underlying the mortgage application process is a sense of discrimination, primarily tied to gender and single-motherhood. Although the lending process is considered difficult on any level, certain areas particular to women are more easily targeted. One main area concerns single-motherhood.

The overall agreement was that women often feel intimidated by their status and shy away from lending institutions regardless of their financial condition.

Several women commented that they felt they received more "run-around" about questions they were asked and issues that they thought had already been resolved. In the case of one client, she had problems trying to obtain materials. She noted, "My friend (a male) called and asked for the exact same information that I did... They sent him everything... I had to call back three times to get the exact same packet that he got." Said another, "I do think that they do take women through extra loops."

In other instances, the clients remarked that they felt women were looked down upon by the lending institutions as a whole. As one client commented, "I think they tend to look at us (women) as being on the irresponsible side. Because they don’t think that we’re responsible enough to handle the kids, the house, the bills,..."

It was suggested that lending institutions need to re-evaluate the criteria used to determine mortgage eligibility. The guidelines used to determine eligibility reflect traditional gender and employment roles. As more females enter the home purchase mortgage market, attention should be paid to the fact that their financial situations often reflect issues such as credit problems from previous relationships, child support, wage gaps by gender, or lack of credit history. The formulas used in the process are antiquated and do not reflect the changing circumstances and special needs of the growing segment of female home-buyers.

The lending process goes beyond the relationship between the bank and the client (or between the bank, the counselor and the client). The clients indicated that the realtors and mortgage companies and their relationships can influence the process.

Several comments were made about the difficult and lengthy procedure associated with the mortgage application process. There is a great deal of paperwork, transactions, investigations, fees and waiting involved. The onus of this procedural gauntlet often causes clients to despair of ever completing the process or of being approved. One women revealed that she had lost $6,000 due to appraisals and applications fees as a result of time limits expiring due to long procedures.

It was in this area that NJCA received the most endorsements. The clients found that the counselors were able to eliminate much of the red tape and significantly smooth and speed the process. The clients also noted that NJCA helped to negotiate flexibility in areas such as Private Mortgage Insurance, closing costs, interest rates, and points.

The theme of consumer education arose as an important topic. Several of the women were able to self-educate themselves through the use of materials produced by HUD/Fannie Mae. Others mentioned scanning the newspapers for information on mortgage opportunities. The main source of consumer knowledge about special programs like NJCA was communicated by word-of-mouth.

The most visible for their marketing are mortgage companies and savings and loan corporations through television and newspaper campaigns. Banks were generally agreed to be the least likely to attract female clients through the use of marketing techniques. In addition, upon arrival in banks, it was observed that banks with special mortgage packages either did not offer them to the clients or claimed ignorance that such packages were available. It was only after intervention of counselors from NJCA that access to special mortgage packages was possible. In the questionnaire distributed at the end of the session, it was noted that NJCA would benefit from a greater marketing campaign.

Both groups strongly stressed the need for education among clients. In order to play an active and knowledgeable role in the mortgage process, it is necessary for clients to be able to ask the right questions and to access the right information to check the validity of the answers.

The main area in which there was a discrepancy was the issue of discrimination. Among the counselors, there was not a feeling that their female clients experienced any discrimination from the lending institutions. However, the female clients expressed a common sense that they did encounter gender discrimination in previous dealings with lending institutions. The discrepancy between these two perceptions may arise from the difference between the treatment counselors and clients receive from lending institutions. A counselor, with his/her training, experience and position, would be less likely to encounter difficulties with lending personnel. A client however, is more vulnerable because she lacks the professional sophistication of a loan counselor, and the lenders are aware of this vulnerability. A bank would be much less likely to hassle a CRA-activist than a private citizen.

The fact that there is a perceived discrimination among the clients may be a factor in women’s access to credit. The perception may make women less likely to begin the application process.

Both the counselors and the clients remarked that realtors and underwriters and their relationships to banks and mortgage companies were significant in the lending process. These actors have an ability to influence the process and the individuals involved in it. In studying the issue of access to credit, the role of these intermediaries must be considered.

Both counselors and clients expressed their beliefs that NJCA plays an important role in the lending process. The main areas that they facilitate the process are in educating the client, clearing credit problems, processing the paperwork, negotiating with the banks, and trouble-shooting when problems arise.

The counselors and the clients recognized the issue of credit as one of the most onerous in the lending process. First it is important for a client to have reliable information about their credit history and its implications in the process. Secondly, clients must have the understanding of how to go about cleaning up their credit and the means to do it. It is important to acquire the relevant information, interpret it accurately, and react accordingly. This comprehension will allow the client to be an active participant in the process.

Both groups asserted that banks do not promote CRA loan products effectively. Market forces influence a lender’s decision about whether or not to market a product that results in a lower profit margin. This may result in some resistance in marketing CRA loans. In addition, there seems to be some ignorance among lending institutions about the available CRA loan products and their eligibility requirements. This may further limit accessibility to these loans.