CBA Financial Literacy Survey Shows Efforts Aimed

ARLINGTON, VA ? Bank financial literacy programs continue to reach more consumers, with an emphasis on mortgage lending and teaching consumers about credit scores and the underwriting process, according to preliminary findings of CBA?s 2005 Financial Literacy Survey.

?Consumers need to understand how lenders use credit scores and evaluate creditworthiness, and 91% of respondent banks are addressing this in their financial literacy programs,? according to CBA President Joe Belew.

?As credit is available to an unprecedented spectrum of the public, and attention has shifted to pricing, efforts to educate consumers on the use of credit scores and other underwriting measures is well-placed,? Belew said. ?Not enough can be said about the importance of educating consumers about how their credit worthiness is evaluated, so they can improve their prospects and ensure that they get a competitive price for their circumstances,?.

Responses from 46 banks are included in the preliminary findings of CBA?s fifth annual Financial Literacy Survey. April is Financial Literacy Month.

?Banks are committed to delivering affordable mortgage products to all segments of society, as demonstrated by their longstanding support of affordable mortgage programs and homeownership counseling,? Belew said.

?Banks don?t leave it up to their customers to ensure that they are receiving a fair price for their mortgage. CBA?s survey shows that of those banks that either offer risk-based pricing or have a separate channel for subprime loans, typically a finance company affiliate, 92% now also have an additional policy or program in place to ensure that customers with prime credit are offered the prime loan product. This is called ?referral up,? and we are happy to report that it is becoming standard practice at banks,? Belew said. ?While economic disparities remain a major challenge for our society, we are pleased to report that education works, and that steady progress continues to be made in closing economic gaps.”

Also, 82% of respondents said that in addition to receiving regular federal examinations they engage in fair lending self-evaluation to ensure parity in mortgage lending among various ethnic groups.

Responding banks reported a 57% increase in participation in their homeownership counseling programs, reaching an average of 10,600 consumers, compared to 6,035 a year earlier. The average total budget for financial literacy programs was $5.6 million (not measured in 2004), and banks mostly partner with other organizations on these efforts to extend their reach. Homeownership counseling programs are aimed at low-and moderate-income homebuyers, first-time homebuyers, and minorities. While almost all banks target all three groups, this year 88%, compared to 81% last year, list minorities as among the target audiences.

CBA?s survey reports that 69% of banks track the number of hours employees spend on financial literacy efforts, an increase from 60% a year earlier. Seventy-five percent also provide financial literacy publications in at least one foreign language.

Ninety-one percent of the homeownership programs are evaluated for effectiveness, compared to 80% a year earlier. Evaluations are mostly based on the percent of participants who complete the program (81%) and number of qualified mortgage applicants produced (64%).

Ninety-one percent of the respondents offer an affordable mortgage program, which typically offers more flexible underwriting criteria. Credit counseling is a mandatory part of these programs at 80% of those institutions. Additionally, 69% of respondents have financial literacy programs that ?target issues associated with predatory or abusive lending practices.? These are most often aimed at minorities (81%) and senior citizens (74%).