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Cadence Bank to pay $8.5M to resolve DOJ, OCC redlining claims

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Dive Brief:

  • Cadence Bank has agreed to pay more than $8.5 million to resolve a Justice Department (DOJ) investigation that alleges the bank avoided mortgage lending in predominantly Black and Hispanic neighborhoods in Houston between 2013 and 2017.
  • The settlement, announced Monday, includes a $3 million penalty from the Office of the Comptroller of the Currency (OCC) and $4.17 million the bank has pledged to invest in a loan subsidy fund for residents of mostly Black and Hispanic neighborhoods. The bank also will put $750,000 toward the development of community partnerships meant to boost access to residential mortgage credit in those neighborhoods, and earmark a further $625,000 for advertising, outreach, consumer financial education and credit repair initiatives.
  • “Cadence believes that at all times it acted in compliance with our nation’s fair lending laws,” the bank’s CEO, Paul Murphy, said in a statement. However, after Cadence’s 2012 acquisition of Houston-based Encore Bank, “we recognized that the mortgage lending program was not where we wanted it to be,” Murphy said. More than half of the bank’s residential mortgage lending in Houston has come from minority neighborhoods over the past several years, he said.

Dive Insight:

Monday’s OCC penalty comes as Cadence is awaiting regulator approval of its proposed merger with BancorpSouth, which it still expects to close in the fourth quarter. Cadence announced this month that its shareholders had approved the tie-up

The redlining allegations, meanwhile, were not entirely a surprise. Cadence warned its shareholders in an early August filing with the Securities and Exchange Commission (SEC) that it had received a letter from the DOJ detailing the allegations. 

OCC examiners in 2018 found Cadence had required minority borrowers pass a wealth threshold that white customers did not have to meet when they borrowed against the equity in their home in second-lien mortgages, ProPublica and The Capitol Forum reported last year.

The OCC referred the case in December 2018 to the Justice Department as a civil rights concern, but the regulator, at the time, did not publicly sanction Cadence, OCC documents showed.

Cadence, in a statement seen by ProPublica, said it had stopped offering piggyback mortgage loans in 2019 and that the bank never discriminated. “Cadence Bank does — and always has — treated minority consumers in a fair and non-discriminatory manner and is always looking for ways we can do better,” the bank said.

In its enforcement action Monday, the OCC said examiners found Cadence did not give equal access to credit to first-lien mortgage seekers in majority-minority and majority-Hispanic census tracts between 2014 and 2016 based on an assessment of its mortgage application and origination activity, branching history, mortgage loan officer structure and operations, marketing and advertising. Specifically, just one of the bank’s 11 Houston-area locations at that time was in a majority-nonwhite neighborhood, but it did not have a mortgage loan officer working in the branch — unlike other Houston-area branches, the OCC said. Further, the bank’s mortgage lending activity in those neighborhoods at that time was consistently lower than that of its peers, the agency said.

As part of the settlement, Cadence must dedicate at least four mortgage loan officers to majority-Black and Hispanic neighborhoods in Houston and open a new branch in one of those neighborhoods. The bank must also employ a director of community lending and development to oversee these efforts.

“There is no place for discrimination in the federal banking system,” Acting Comptroller of the Currency Michael Hsu said in a statement. “The OCC will use the full force of our authority to correct fair lending violations with our supervisory and enforcement tools.”

Cadence, in its statement Monday, said it established a Fair and Responsible Banking Working Group to boost mortgage lending in majority-nonwhite areas “after self-identifying the Houston mortgage lending proportionality issues and on its own initiative.” The bank said it has developed a more competitive product for low- and moderate-income (LMI) mortgage borrowers, opened a retail branch in a majority-nonwhite area of Houston, hired more Spanish-speaking mortgage loan officers, and increased advertising and marketing. In 2019, it said, it launched a five-year, $2.5 billion effort to ensure nonwhite and LMI communities are well served.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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