Editor’s note: This is the last in a series of stories marking the 25th anniversary of Self-Help.
By Ret Boney
In the 1990’s, hard-won gains by Self-Help, the Durham-based community-development bank that Martin Eakes started 25 years ago to build wealth among minority and poor families, faced a big threat.
The emergence of predatory lending, which strips wealth from low-income people through deceptive practices like charging exorbitant fees for mortgage loans, began to erode the progress Self-Help had achieved.
“This practice, abusing the vulnerable with the effect of stealing the cash value of their homes, made a mockery of everything I’d worked for the last 20 years,” says Eakes.
So in 1999, Self-Help added the mission of maintaining wealth, and in 2002 created the Center for Responsible Lending, an affiliated nonprofit that aims to end to predatory lending through legislation, research, litigation and advocacy.
Today, the center estimates, various abusive lending practices cost Americans $25 billion a year.
In the late-90’s, Self-Help realized large companies were systematically targeting African-American and low-income neighborhoods with deceptive mortgage products, mostly through refinancing, that trick homeowners into giving up part of the hard-earned equity in their homes.
To fight that trend, Self-Help formed a coalition in 1999 that included, among others, the N.C. Mortgage Bankers Association, the N.C. Fair Housing Center, the N.C. Credit Union League, African-American churches and the elderly, and successfully pushed for legislation limiting certain practices, including the fees that could be charged on mortgages.
The center estimates that North Carolinians save some $100 million a year in excessive mortgage fees as a result of that legislation.
A few years later, a California mortgage broker agreed to provide funding if Self-Help would take the fight to other states and, in 2002, the Center for Responsible Lending was born.
Today, the center has more than 50 employees in its Durham and Washington, D.C., and has provided technical assistance to 30 states fighting predatory lending.
Now, the center is taking the fight to the national level, pushing for a bill that sets minimum requirements for states in stemming predatory lending, and opposing another that would preempt states’ efforts to limit predatory mortgage lending.
It also is fighting the burgeoning payday lending industry, which charges annual interest rates of some 400 percent for short-term loans for people living paycheck to paycheck, and recently released research on excessive overdraft fees.
“Industries have fads,” says Eakes. “For the last five to seven years, the fad has been targeting poor people with financial products that are unsuitable. We had no choice but to become an advocacy organization. They had made a mockery out of me.”
Self-Help has come a long way over the last quarter century, says Tom Lambeth, senior fellow at the Z. Smith Reynolds Foundation in Winston-Salem, who met with Eakes when Self-Help was just a concept.
“We were impressed with him and his imagination,” says Lambeth, at the time the foundation’s executive director. “But we weren’t certain whether this was not an unrealizable dream.”
Self-Help has come a long way since then and Lambeth, who says the foundation has provided funding for Self-Help off and on over the years, says he finds it hard to separate the institution from the individual.
“Martin is clearly the equal of most traditional bank CEOs, and superior to many of them,” he says.
In the next several years, Eakes says. he wants to continue to establish the center’s lending and advocacy work in Washington, D.C., and if past experience is any indication, Self-Help will likely evolve depending on what the market does.
“I hope we will stay responsive and adaptive to problems we may not even know about right now,” Eakes says. “We’re not afraid of failing. We’d rather test something and terminate it than plan to death and not take a step into a potentially positive new program area.”
Other stories in the series:
Part 1: Durham community development bank works to narrow wealth gap.
Part 2: Building wealth by boosting small business, communities.
Part 3: Protecting hard-earned wealth as important as creating it.