BRIDGES. Reverse Mortgages the Next Hot Spot? According to the National Council on Aging, the development of the reverse mortgage

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1 LINKING LENDERS AND COMMUNITIES SPRING 2008 P U B L I S H E D Q UA RT E R LY BY T H E C O M MU N I T Y A F FA I RS D E PA RTM E N T O F T H E F E D E R A L R E S E RV E B A N K O F S T. L O U I S INDEX 4 Teaching Teen about Entrepreneurhip BRIDGES 6 What in Your Credit File? An IDA for Youth on Their Own 8 w w w. t l o u i f e d. or g Exploring Innovation in Community Development Revere Mortgage the Next Hot Spot? By Heidi Kaplan Senior Community Affair Analyt Board of Governor Federal Reerve Sytem A revere mortgage i a pecial type of home loan that allow eligible homeowner to convert a portion of their home equity into cah. Depite recent trouble in the national mortgage market, revere mortgage are growing at a rapid rate. Expanion of thi hot pot in mortgage lending i expected to continue with increaingly flexible product, new ource of capital and a growing upply of potential borrower. A the revere mortgage market develop, it i important that potential borrower are educated about thi complex product to protect them from taking out unuitable loan. Revere mortgage are characterized by the payment flow: Rather than making mortgage payment, the borrower receive cah from the lender. A revere mortgage enable enior citizen to bor- row againt their home equity to create a tax-free ource of income while they continue living in their home. Borrower have no monthly repayment obligation until the home i no longer their primary reidence. According to the National Council on Aging, the development of the revere mortgage i an important tool for enior intending to live at home a they grow older, alo known a aging in place. Thee loan can provide enior with vital income for home maintenance, taxe and health care. Some older adult ue revere mortgage for indulgence uch a a econd car, family gift or lavih vacation. The American Aociation for Retired Peron alo upport revere mortgage a a valid financial option, but urge borrower to carefully conider whether the revere mortgage i the correct product to meet their need. To that end, borrower hould determine whether there are le cotly option to acce continued on Page 2

2 Revere Mortgage continued from Page 1 needed cah, make a long-term plan for managing aet, and develop a clear undertanding of the revere mortgage product. The Revere Mortgage Explained The revere mortgage market i dominated by the Home Equity Converion Mortgage (HECM), a product adminitered by the Department of Houing and Urban Development (HUD) and inured by HUD Federal Houing Adminitration (FHA). HECM loan are originated by private lender and purchaed by Fannie Mae. With 90 percent of the revere mortgage hare, HECM ha led thi market ince becoming active in In 1995, Fannie Mae introduced the initial HECM competitor with a proprietary product known a the Home Keeper Mortgage. HECM and Home Keeper hare characteritic that have defined the revere mortgage market to date. Both product require borrower to be at leat 62 year old and have a ubtantial amount of equity in their principal reidence. Each product ue a formula to determine the maximum amount of principal a homeowner can borrow. Neither product upport jumbo loan, loan that exceed $417,000. Borrower can draw down payment in monthly intallment, lump um, line of credit or a combination of thee option. HECM and Home Keeper are adjutable rate mortgage. Fee for thee product include cloing cot, a monthly ervicing fee and, for HECM, an inurance fee. For both product, the loan principal increae with each payment, a interet and other charge accrued are rolled into the total fund advanced to the borrower. Borrower are not required to repay a revere mortgage until a maturity event, namely the death of the borrower, ale of the property or violation of the mortgage agreement. Although borrower are not required to make payment until they no longer inhabit the home, they are required to maintain the property, pay property taxe and pay the home inurance. Borrower and lender are protected from payment rik with both HECM and Home Keeper loan. HECM loan carry FHA inurance that enure that the borrower will receive all payment due and the lender will receive full repayment of the loan balance. Fannie Mae guarantee Home Keeper loan. Depite the dominance of HECM, proprietary product have been entering the revere mortgage market. In 1999, Financial Freedom Senior Funding Corp., a ubidiary of IndyMac Bank of F.S.B, introduced the firt private-ector revere mortgage, known a the Cah Account. The onet of new product i bringing more conumer option, including lower age requirement; greater principal amount, including jumbo revere mortgage; more flexible rate tructure, including fixed rate; and lower fee. However, the majority of new product do not include mortgage inurance. Growth in the Market The introduction of revere mortgage wa marked by a period of very low growth from 1990 to 2002, followed by exponential growth in recent year. Revere mortgage repreent only 1 percent of the overall mortgage-lending market, but thee loan are expected to expand by a much a tenfold in the next 20 year. According to HUD, ince 1990, enior citizen have taken out more than 308,000 HECM, which repreent nearly 90 percent of the revere mortgage market. And, between 2000 and 2006 alone, there ha been a tenfold increae in the number of HECM. More recently, bigger player in the mortgage market have gained interet in revere mortgage. A a reult, the latet growth in the revere mortgage market ha occurred acro product, with new proprietary product lowly pilfering market hare from the etablihed HECM market. Overall, approximately 90,000 revere mortgage, totaling $10 billion in loan, were originated in 2006, doubling the number from Interet in revere mortgage continue to grow by both lender and conumer. A noted, the revere mortgage can enable older adult to age in place on a fixed income. A the indutry grow, conumer interet will potentially be driven by the increae in product option, including jumbo loan, fixed rate and more flexible eligibility option. Furthermore, the growing number of revere mortgage lender ha brought increaed competition to the indutry, which i reulting in lower pricing and additional product innovation. Conumer growth in the revere mortgage market i expected to continue rapidly due to national demographic change. Today, there i already an etimated $4.3 trillion in home equity held by American age 62 and over. A baby boomer quickly become age-eligible, thi number will increae dramatically. Lender interet in the revere mortgage market alo i increaing a additional capital become available from the development of a econdary market. An etablihed econdary market for revere mortgage would provide increaed liquidity and could broaden the lender ditribution channel and expand the invetor bae. Securitizing thee product i complicated, but the market i lowly adopting technique to do o. In 2006, the Lehman Brother iued the firt HECM-backed ecuritie to invetor. Later that ame year, Ginnie Mae announced that the organization LINKING LENDERS #2 AND COMMUNITIES

3 i in the proce of creating a HECM ecuritization program. With it new program, Ginnie Mae intend to deepen the availability of HECM lending, create a broader econdary market for HECM loan, reduce the cot to borrower and broaden option available to lender and homeowner. Private invetor are anticipated to be player in the revere mortgage ecuritization market in the near future. Conumer Protection Revere mortgage are a new and complicated financial product that are being offered at an increaing rate to the nation enior. With a growing number of product offering a variety of rate tructure and feature, it i increaingly difficult for borrower to determine which revere mortgage, if any, i a uitable financial option. Furthermore, mot people lack familiarity with the revere mortgage market, leaving eligible borrower expoed to loan that they might not undertand or that might not be appropriate for their need. Accordingly, it i critical that potential borrower of revere mortgage get adequate information and, preferably, couneling. To take out a HECM or a Home Keeper loan, borrower are required to complete HUDcertified couneling. However, with private product that do not require couneling, conumer are increaingly left on their own to determine product uitability. Government and indutry effort to increae quality couneling option have faced ome challenge. Firt, the quality of the revere mortgage couneling available appear to vary greatly. HUD-certified counelor and their counterpart face different tandard for couneling. HUD-approved agencie are, at a minimum, required to focu on product uitability for the borrower and the poible alternative. But even within thi certified circle, there i till a great deal of variety, a couneling may be offered by video, telephone or in peron, and eion may range from 10 minute to two hour. Second, couneling ha been a troubleome iue from time to time due to a lack of available counelor in ome location, particularly thoe area with an increaed volume of revere mortgage. Currently, the need to train counelor who pecialize in revere mortgage i competing with the national urge in training for forecloure couneling. Third, anecdotal evidence ugget that there i an increae in predatory lending practice around revere mortgage. A a reult, counelor mut be even more equipped to educate borrower regarding ma marketing for high-cot product, ale preure and general financial planning. One practice that ha raied particular concern i a tactic to advie revere mortgage borrower to bundle their loan with a econd financial product, uch a an annuity or Where To Find Information A number of reputable organization with information on revere mortgage are available. The following web ite were ued a ource for the accompanying article and are a good place to begin a revere mortgage invetigation. American Aociation for Retired Peron Fannie Mae revere/index.jhtml Mortgage Banker Aociation National Council on Aging National Revere Mortgage Lender Aociation Department of Houing and Urban Development inurance. Becaue of the high cot of revere mortgage, uing thi product to purchae annuitie or inurance i almot alway financially unound. Depite the rik, revere mortgage offer conumer an increaingly important option for acceing additional cah a they age. Sound information can inform borrower whether a revere mortgage i a uitable product for them. ON T H E INTERNET AT #3 ED. ORG

4 Young Entrepreneur An Invetment in Our Future By Kathy Cowan Community Affair Specialit Federal Reerve Bank of St. Loui P ay cloe attention to how to pell the name Bentrail Milow. It i a name you will ee in the future. Thi 16-year-old entrepreneur from Tunica, Mi., launched Milow Cutom Car Wah Service lat fall and immediately landed hi firt cutomer: Firt Security Bank. The bank hired Bentrail to wah and detail it repoeed vehicle. While it may be unuual for a 16-year-old to have hi own buine, there are thouand of young people in the United State like Bentrail who want to be their own bo. A recent urvey by Harri Interactive, an Internet-baed market reearch firm, polled 2,400 people between the age of 8 and 21 about entrepreneurhip. Forty percent aid they wanted to tart their own buine. That new i encouraging, conidering the importance of entrepreneurhip to the American economy. According to the Small Buine Adminitration, from 1988 to 2004, buinee with fewer than 20 employee accounted for 90 percent of all U.S. firm and created more than 97 percent Bentrail Milow wahe a repoeed vehicle at Firt Security Bank in Tunica, Mi. Bentrail, 16, i owner of Milow Cutom Car Wah. of all new job. By 2004, thee buinee employed 21 million worker. The tatitic confirm the value of nurturing a pirit of entrepreneurhip among the country youth. But how doe a young peron get tarted? Bentrail did not go it alone when he went into buine. He had help from alt.youth, an entrepreneurhip program for young people. Bentrail wa among the firt graduate of the program, which wa conceived by alt.conulting, a nonprofit management conulting firm baed in Memphi, Tenn. Kerry Temple, vice preident LINKING LENDERS of Firt Security Bank, attended the graduation ceremony and ay he wa o impreed with Bentrail and hi preentation of hi buine plan that he hired him on the pot to clean the bank repoeed vehicle that are offered for reale. At the graduation, Temple ay, Bentrail wa well-dreed, well-poken, maintained eye contact and imply wowed the audience all kill taught by the alt.youth program. When Firt Security Bank repoee a vehicle, Temple alert Bentrail o he can chedule the job. However, nothing 4 # AND COMMUNITIES i done to the vehicle before a 10-day redemption period expire. Bentrail currently come on Monday and Wedneday, but it hi buine, Temple ay. He call the hot. He know when we need the job completed, and we trut him to complete the job. After eeing the quality of Bentrail work on the bank vehicle, ome bank employee have become hi cutomer. Alt.Conulting did not have to ell Jame Dunn, executive director of the Tunica County Community Development Coalition, on it idea for the youth entrepreneurhip program. After working with alt.conulting to provide ervice to mall buinee in Tunica, it wa Dunn viion to implement alt.youth. Dunn ay he want young people to know they do not alway have to work for omebody they can be elf-employed. Tunica i a thriving community with lot of opportunitie, Dunn ay. A the community grow, I am intereted in eeing more minoritie tart buinee in order to hare in the reward of the community growth, he ay. The program offer the

5 kill kid need to know o that they can plan a early a poible and know how to manage their finance. Dunn approached Billy Willi, director of the Tunica County Recreation Commiion, about the program. Willi decided to offer it to teen who had uccefully completed the city ummer job-training program. Alt.Youth goe beyond training young people to tart and manage a buine. The program actually help them launch a buine. There are three level of training. Level 1 i an introduction to entrepreneurhip and baic buine training, money management and elf aement. Speaker from the buine community hare their experience with the young entrepreneur. Participant look at their trength and weaknee. At the completion of Level 1, participant hould have an idea about the type of buine they want to tart, an idea they can work on immediately and a ky -the-limit idea. Level 2 focue on the feaibility of the young entrepreneur idea and on creating a buine plan. Participant receive one-on-one coaching through each tep of the feaibility tudy. They analyze the available market, tartup and monthly operating expene, earning potential and neceary management kill. At the end of Level 2, participant ue the tudy reult to ae the feaibility of tarting their buinee, review leon learned and make a deciion to launch or not. After completion of level 1 and 2, which lat a total of 12 week, there i a graduation ceremony where each participant preent hi or her buine plan to the audience. In Level 3, all the young entrepreneur receive up to 40 hour of one-on-one aitance a they tart their buine and 20 hour of additional coaching after the buine i launched. Parent receive training on the tax implication of the new buine. In addition, each buine owner can apply for an equity invetment in the buine. The firt eion of the alt.youth program ran from September to November of Twice a week from 3:30 p.m. to 6:30 p.m., Mark Hudon of the Tunica County Community Development Coalition and Cynthia Norwood and Voneha Mitchell, both of alt.conulting, erved a facilitator for the program. On the firt day of cla, there were 16 participant. At the end of Level 1, there were 10 participant. By the end of Level 2, there were only five to graduate. At the graduation, the participant preented buine plan for a candy hop, a baby-itting ervice, a cleaning company, a hair braiding alon and, of coure, a car wah ervice. Four of the five graduate decided to launch their buinee. And who wa the firt? Bentrail Milow. The econd eion of the alt.youth program tarted Jan. 7, 2008, with 12 apiring entrepreneur who had a variety of idea for buinee. Barbara Young want to deign hoe tenni hoe, flip-flop, boot all kind of hoe. Demari Black plan to tart a buine deigning rim and tire for car. And Sherica Conway idea i for a nail hop/retaurant. Sound like an odd combination? Maybe o, but before you judge, you might want to read her buine plan. For information about the alt.youth program, call Voneha Mitchell at It i gratifying to ee that American youth apire to not jut take a job, but to make a job. Denni Cheek, vice preident, education Kauffman Foundation Reource for Young Entrepreneur Ewing Marion Kauffman Foundation entrepreneurhip.cfm McKelvey Foundation entrepreneurial Mind Your Own Buine SCORE Reource for Young Entrepreneur young.html SBA Young Entrepreneur pecialaudience/young entrepreneur/index.html National Federation of Independent Buine Young Entrepreneur Foundation EntrepreneurFoundation Youth About Buine Youth Venture ON T H E INTERNET AT #5 ED. ORG

6 It Not Jut a Number, It the Number What in Your Credit File? Conumer can requet a free copy of their credit report from all three credit-reporting agencie on an annual bai at creditreport.com. In addition, the numerical credit core are available for a nominal fee. People can alo requet a free report by calling and going through a verification proce or by completing the online form and mailing it to the addre provided on the web ite. Once the report i received, conumer hould check to enure all of the information i correct. If there are dicrepancie, the conumer need to write to the credit-reporting agency that provided the report and outline the inaccurate information. Credit-reporting agencie are required to verify the information and remove any information that i incorrect. Some group are more at rik when negative information appear in their credit core. An error indicating a late payment will not have much impact on the overall core for omeone with etablihed credit and a long hitory of paying bill promptly. However, for thoe without etablihed credit or who have had credit problem in the pat, error in the credit file have a greater impact and can be the tipping point that caue the peron to pay a higher rate of interet. For more information, viit: By Jean Morieau-Kuni Community Affair Specialit Federal Reerve Bank of St. Loui What ha the power to lower car inurance rate, rent an apartment and buy a cell phone? It certainly not Superman or Wonder Woman. The anwer i a number but not jut any number. It the number: your credit core. It hard to believe that a number ha o much effect on what you can buy and where you can work or live. So, why do credit core have uch influence? And who create them, what information do they ue, where doe it come from and why? At one time, mortgage banker were the only lender who looked at credit report. In today world, landlord, employer, government agencie, and inurance, utility and cell phone companie all ue credit report to determine the character and creditworthine of potential cutomer, tenant and employee. Why? Becaue credit report provide a quick naphot of how people handle peronal finance. Studie have hown that thoe with high credit core act more reponibly in their live and are le likely to file claim than thoe with lower credit core. (See the Inurance Information Intitute web ite, There i a lot of miundertood information and mytery urrounding credit core and the credit-coring proce. Even financially avvy conumer may not know what element make up their credit core or how data i compiled to create their core. Taking the Mytery Out of Credit Scoring Fair Iaac Corp. (FICO), the developer of the credit-coring ytem, define a credit core a an automated tatitical analyi of creditworthine a numerical profile to ae how debt are repaid, how much and to whom money i owed and how reponibly available credit i ued. Some lender refer to a credit core a a FICO core. However, FICO i not the only credit-coring ytem. Experian, TranUnion and Equifax, the credit reporting agencie, alo ue credit-coring ytem. All credit-coring ytem are imilar and provide much of the ame information. However, the file format are not the ame and the end report have different appearance. Lender, utility companie, department tore, landlord and other player in the financial world electronically forward payment and liability information to the creditreporting agencie. The agencie ue an automated ytem to compile the data into individual conumer file and evaluate the file by dividing the data into categorie for analyi. The data normally include payment hitory, outtanding debt, length of credit hitory, newly etablihed credit account, number of inquirie from creditor, and the type of credit ued by the conumer. Becaue peronal characteritic uch a age, race, ex, education or ethnic background are not included in the analyi, credit-coring ytem are believed to remove any illegal bia from the analyi. Once the analyi i complete, the ytem aign a number, between 300 and 850. The number i the credit core and repreent the rik factor of the borrower. According to Fair Iaac web ite, 2 percent of the U.S. population credit core are in the lowet range ( ) and 15 percent are in the highet range ( ). Other core are between 500 and 800, with the majority, 27 percent, falling in the range. The median core i 723, meaning that half of core are below and half are above 723 and the average credit core i 692. LINKING LENDERS #6 AND COMMUNITIES

7 The Bottom Line Conumer with etablihed credit hitorie, who pay bill in a timely manner and ue credit reponibly, generally have higher core. Thoe without etablihed credit hitorie or who have lien, collection, forecloure, bankruptcy or a hitory of paying their bill late will have lower core. Credit core below 620 are in the high-rik range. Conumer with core in that range will generally pay higher interet and inurance rate. In addition, they alo may be denied credit or employment and may have problem renting a place to live. Conumer can improve low credit core by changing the way they handle peronal finance. Payment hitory and outtanding debt make up 65 percent of a credit core. By improving payment hitory, lowering the amount of outtanding revolving debt and limiting the amount of available credit, a conumer can ignificantly raie a credit core. Thoe who have trouble making credit card or other loan payment hould talk to their lender. Mot are willing to work with cutomer by changing billing date, lowering the amount of available credit and, in ome cae, changing the minimum amount payable each month. Whether credit coring i a good thing depend on who you talk to. Some ay there i a trong cae that it i unfair to low-income, hitorically undererved people and thoe without etablihed credit. Other ay it give conumer greater acce to credit by providing fair, fat and thorough information. Either way, in today world, credit coring i a conumer link to getting credit. For that reaon, it i crucial for borrower to undertand how it work. Looking at the Component of FICO Score Credit coring i eaier to undertand by evaluating the individual component that comprie each category and the emphai given to each category when determining the core. Credit-coring companie generally ue thee categorie: Payment Hitory 35 percent account payment hitory for pecific type of account, uch a credit card, retail account, intallment loan and mortgage payment; preence of advere public record, uch a bankruptcie, lien and delinquencie; number of pat-due item; and number of account paid a agreed. Outtanding Debt 30 percent amount of money owed on each account; amount of money owed on pecific type of account; number of account with a balance; proportion of balance on certain type of credit line, uch a revolving account; and proportion of intallment loan amount. Type of Credit and Inquirie 10% New Credit 10% Length of Credit Hitory 15% Length of Credit Hitory 15 percent amount of time ince account were opened; amount of time ince pecific type of account were opened, uch a revolving account; and time ince lat activity on account. New Credit 10 percent THE INTERNET Outtanding Debt 30% SOURCE: Type of Credit Ued and Inquirie 10 percent type and number of recently opened account; number of recent credit inquirie by certain lender; and re-etablihment of poitive credit hitory following pat payment problem. ON Payment Hitory 35% AT 7 # type of credit mot frequently ued; how many of each type of account i ued; and how many recent inquirie have been made. Alliance Help Nonprofit Lender Report Credit Hitorie Many low- and moderate-income individual undertand the value of good credit and diligently pay their bill on time. However, if they have a mortgage or microloan through a nonprofit lender, their credit file may not reflect that diligence. The reaon i that major credit bureau do not accept credit report from low-volume lender, and nonprofit lender often fall into that category. Alo, the high cot of creating and ubmitting electronic file to the credit bureau can be prohibitive. Credit Builder Alliance (CBA) ha a olution for nontraditional financial intitution that want to help cutomer build credit report. A nonprofit organization itelf, CBA undertand the relationhip that nonprofit lender have with client. A a reult, CBA work hard to forge relationhip with both lender and credit-reporting agencie. Thoe relationhip allowed them to create tool that help lender collect, analyze and ubmit reliable, high-quality data on the unbanked and underbanked familie they erve. Thi olution ha earned CBA recognition a an innovator. CBA wa created through a partnerhip of indutry leader: Central Vermont Community Action, RUPRI Center for Rural Entrepreneurhip and AEO. The Center for Financial Service provided eed funding. For more information on CBA, contact them by at info@ creditbuilderalliance.org, by telephone at or viit

8 Special Saving Account Provide Safety Net for Youth on Their Own The main thing they helped me with i money management, Fogelbach aid of the program. I worked even day a week, and I would go and pend all my money. But right now I m ahead. I have all my bill paid. I have money in the bank, and I till have ome money to go out and have fun. St. Loui Pot-Dipatch (MO), Dec. 5, 2007, author Greg Jonon A t age 21, how many young adult can ay that? Epecially thoe who have jut left, or aged-out of, the foter care ytem and have no upport ytem to fall back on. The they in the above quote i the United Way of Greater St. Loui and the Univerity of Miouri Extenion. The program i a ground-breaking initiative called The Youth IDA Pilot Program. And Fogelbach i Mike Fogelbach, 21, who recently aged-out of the foter care ytem in St. Loui. He wa featured in a St. Loui Pot-Dipatch article about hi experience in the program. What i an IDA? IDA are individual development account that allow lowto moderate-income working people to participate in a matched-aving program. The aving then help them acquire aet uch a education or down payment on houing. Participant are recommended by caeworker and mut complete 12 hour of financial education. At the end of the program, if participant have met their aving goal and taken part in budget and credit couneling, the aving i matched by a participating ponor. The concept of IDA wa developed by Wahington Univerity Profeor Michael Sherraden, who ay that welfare policy hould be baed on the concept of aving, invetment and accumulation of aet rather than the model of income, pending and conumption that wa the norm into the early How the Youth IDA Project Began Baically the local PBS affiliate, KETC Channel 9, came to LINKING LENDERS u one day and wanted to do more to help the foter children in our region, ay Caandra Kaufman, a community invetment director with the United Way of Greater St. Loui. A piece had aired on their tation about foter kid and how tough it could be for them. The iue at hand wa to create a program to help youth leaving foter care make a ucceful tranition to independent living. After learning about the IDA program for adult and the work United Way had been doing with it, profeional at KETC-TV Channel 9 believed there wa a poibility to rework thi program for youth. And in 2005, the Youth IDA pilot project wa born. In it role a convener, United Way brought everal agency partner and the Univerity of Miouri Extenion to the table quickly to dicu an effective # 8 AND COMMUNITIES way to launch the program. The creator knew working with youth in the foter care ytem would not be the ame a working with adult or even other youth who grew up with a family upport ytem. Exponentially, the youth in foter care have a much tougher time than other kid going out on their own, Kaufman ay. Thee kid have many more treor in life they re often younger, many are parenting children, many need a place to live, need tranportation, need education, they haven t had the reource to learn how to live on their own, low job kill, no money and they imply do not have the family upport to fall back on if or when anything goe wrong. Many tatitic exit to upport Kaufman tatement. Foter care tudie have hown that four year after leaving

9 foter care, 62 percent have not maintained employment for one year, 46 percent lack a high chool diploma, 42 percent have become parent and 38 percent have been diagnoed with ome ort of emotional problem. We began working with four local agencie that worked with foter kid, and they told u what barrier exited for thee kid once they aged-out, Kaufman ay. They were: needing a place to live, aving money for that and help with the tranition into living on their own. We came up with a curriculum we felt would really work for thee kid. We learned that their age and circumtance made thee kid more likely to be focued on the now, and not the future. And we knew we had to try and help them undertand the importance of aving. We were lucky enough to find the Jim Caey Foundation Building Aet for Your Future Financial Literacy curriculum that they provide free-of-charge and we ued it for a bae. It been educational to ee thee kid go through the clae, Kaufman ay. We ve een ome of the kid take the tet to opt out of the cla, and not do well and you can ee the light bulb go off in their head. They thought they knew the information and didn t. It alo been great to ee the kid helping each other in the clae. Thing we take for granted, balancing a checkbook for example, i omething they ve never learned to do. We try to make the clae a interactive a poible. Who Are Thee Youth and What Happened Next? Each organization involved played a critical role in developing thi project. KETC-Channel 9 erved a the initial convener, bringing United Way and agencie that erve foter youth to the table around the aging-out iue. The Univerity of Miouri Extenion took the Jim Caey Foundation curriculum and tailored it pecifically for thi project. They then had a total of three profeional teach the clae. United Way gathered the organization together, provided the matching fund and provided program overight. The four agencie Covenant Houe Miouri, Epworth Children Home, Family Reource Center and Youth in Need determined which of the teen aging out of foter care would benefit mot from the propoed program and got them involved. Each agency identified 10 youth to take part in the pilot program. The only criteria given to the agencie wa that the youth needed to be working at leat part time and have a ource of earned income to ave. The youth involved came from one of three ituation: agement and living in a foter home or reidential etting; etting and participating in tranitional or independent living program; or ytem, became homele but omehow found themelve back in the ocial ervice ytem. The majority of thoe choen to participate were living in tranitional or independent living program. In July 2006, everything wa in place to tart. The clae for the program were et up to begin that fall. The 40 hand-elected young men and women met one day for the kickoff event at KETC to learn about the Youth IDA project. During that day, they learned that they would need to take 12 hour of clae on financial literacy, houing and nutrition. They alo learned that throughout the 18-month project they would need to ave $1,000. If they did o, that aving would be matched 2:1. Each youth would then ue hi $3,000 or part thereof to make an aet purchae. In October 2006, 34 of the original 40 began the Youth IDA pilot program by taking clae and opening aving account. Mot of thee kid did not have any kind of aving account, Kaufman ay. Another great partner in thi project ha been US Bank. They were behind thi from the beginning and hold all of the aving account for thee kid. The clae were given in two-hour egment and held periodically through the end of 2006 and mot of In order for the participant to receive their matched aving or to make a matched withdrawal, the educational clae had to be fulfilled. Since thi began, even of the youth have reached their $1,000 aving goal, and four have completed the program and purchaed their aet, Kaufman ay. Three of them bought car and one of them ued the aving toward firt and lat month rent and a ecurity depoit for an apartment. Through January, 2008 thee 34 youth have aved a total of $14,700. To watch thee kid undertand and realize they can make it and that there help to do o it been an amazing proce to be involved with. I look forward to thi program expanding to erve more youth aging out of the foter care ytem in the future, Kaufman ay. The 18-month pilot period end thi pring. ON T H E INTERNET AT #9 ED. ORG

10 THE REGION SPANNING New Initiative Offer $200 Million To Refinance Mortgage in Illinoi Illinoi homeowner facing forecloure have a new ally in the fight to keep their home. The Illinoi Homeowner Aitance Initiative offer help through two component: The Illinoi Statewide Forecloure Prevention Network and the Homeowner Aitance Pool. The forecloure prevention network provide couneling to homeowner on the verge of forecloure about how to negotiate with their lender. The network alo report fraud and deceptive practice. The Homeowner Aitance Pool i a $200 million effort funded by four mortgage lender Chicago Bancorp, Guaranteed Rate, Perl Mortgage and Profeional Mortgage Partner. It will be ued to finance new, fixed-rate mortgage for homeowner facing adjutment to adjutable rate mortgage or for thoe who cannot afford their fixed-rate mortgage due to a high interet rate. The new loan will be 30-year, fixed-rate mortgage with interet rate between 5.75 percent and 8 percent. The maximum loan will be $417,000, covering up to 100 percent of the value of the home. In addition, participating lender agreed to limit their fee to $1,000 or le. The program i available to all Illinoi homeowner and doe not have a maximum income The region erved by the Federal Reerve Bank of requirement. St. Loui encompae all of Arkana and part of Illinoi, However, Indiana, Kentucky, Miiippi, Miouri and Tenneee. participant mut have a credit core educational reource to inform The bank i open Tueday of at leat 580 and agree conumer about the cot aoand Thurday. Fund are to attend mortgage couneling ciated with taking out a payday depoited each day at a local through the Illinoi Statewide loan. AAAPL i making copie Firt Tenneee Bank. Student Forecloure Prevention Network. of the video available to orgakeep record of all tranaction. Funded by a grant from nization that wih to ue it for The bank employee are the Illinoi Houing Developconumer education purpoe. 10th-, 11th- and 12th-grade ment Agency and with upport To order a copy, contact tudent enrolled in the Bankfrom NeighborWork America, Joy Buffalo, chair of the AAAPL ing and Finance Academy at The Illinoi Statewide ForeEducation and Alternative Trezevant. Student learn how cloure Prevention Network Committee, U of A Cooperative a bank operate by rotating i a coalition of 15 nonprofit Extenion Service, 2901 W. every ix week through variou couneling agencie. Rooevelt Road, Little Rock, poition at the bank, including In addition, Illinoi conumar or at application clerk, greeter, teller, er who call the national tollor jbuffalo@uaex.edu. To auditor, ecurity guard and free hotline, HOPE preview the video, viit bank manager. Student alo ( ), will receive learn job readine kill, uch couneling over the phone a etiquette, buine protocol, and, if neceary, a referral to a Memphi School Sytem profeionalim and money couneling agency for further Start Student-Run Bank management. aitance. High chool tudent at Trezevant Bank came about For more information, Trezevant Career and Technolafter Principal Milton A. Burchviit or ogy Center, a Memphi city field II oberved a tudentwww.ihda.org. chool, are learning money managed bank in New York management and employment City. He worked for a number Arkana Coalition Offer kill in a unique program that of year to replicate the bank in DVD on Payday Lending tarted Sept. 25, That Memphi. The venture received A DVD on the peril of when the chool opened Trezehelp from Firt Tenneee payday loan i available from vant Bank, the firt tudent-run Bank, Wachovia Bank and the the Arkanan Againt Abuive bank in Tenneee. Memphi Area Teacher Credit Payday Lending (AAAPL) Depoit on opening day Union. The bank adviory coalition. exceeded $900. A of Jan. 7, board conit of repreentative The DVD wa completed in 2008, the bank had 92 cutomof thoe financial intitution cooperation with the Center for er and aet totaling $2,424. and other community partner, Reponible Lending and highcutomer are motly tudent including the City of Memphi light the torie of borrower at the chool, although ervice Diviion of Career Service and whoe financial ituation were are available to the community at the Federal Reerve Bank of further exacerbated by their large. Due to certain regulation, St. Loui, Memphi Branch. patronage of payday lender. the bank offer only non-interetfuture plan for the bank The 10-minute video i a quick bearing aving account. include partnering with local LINKING LENDERS 0 AND COMMUNITIES

11 Exploring Innovation elementary and high chool to encourage aving, ecuring grant to allow the bank to pay interet on aving account, partnering with churche and other community group, and becoming a member of the National Aociation of Bank. Indiana Network Reache Out to Thoe Facing Forecloure A new tatewide initiative in Indiana i deigned to help homeowner avoid forecloure. The Indiana Forecloure Prevention Network, a publicprivate partnerhip, ditribute information on how to avoid forecloure through a media campaign, a toll-free helpline and a web ite. The helpline, GETHOPE ( ), i available in Indiana from 8 a.m. to 8 p.m. even day a week. The helpline provide free, confidential financial couneling over the phone for anyone who may be at rik of forecloure. The web ite feature an online education aement that help homeowner undertand their option. Viit for more information. The media campaign include billboard, newpaper advertiing and radio commercial. Fed Celebrate Innovation in Community Development Event in everal tate will mark Exploring Innovation in Community Development Week, April 14 to 18, ponored by the Federal Reerve Bank of St. Loui. The Bank Community Affair department ha planned ceremonial event and informational meeting to recognize the important role of community development in American life. It alo ha invited organization to organize event in their area. The following celebration are ponored by the Bank and it branche in Little Rock, Louiville and Memphi. Anyone intereted in attending hould viit the St. Loui Fed new web ite devoted to innovative idea in community development. A calendar liting of all event, including thoe ponored by other organization, i available on the web ite. If you have quetion, call the Bank community development taff member in your area: St. Loui, ; Little Rock, ; Louiville, ; or Memphi, LITTLE ROCK, APRIL 14 Innovation in the Natural State Communitie and organization from acro the tate will be honored for their innovative approache to community and economic development in a celebration at the Peabody Hotel. LITTLE ROCK, APRIL 16 Creating a Road Map for Innovation Satih Nambian, author of The Global Brain: Your Road Map for Innovating Fater and Smarter in a Networked World, will explore the critical role of innovation in the rapidly evolving marketplace. A panel dicuion, book igning and reception will follow. Location: Peabody Hotel. LO U I SV I L L E, A PR I L 17 Cloing the Wealth Divide New Way to Help the Undererved Build Credit and Aet John Hope Bryant of Operation HOPE, a nonprofit ocial invetment banking organization, will deliver the keynote addre during a luncheon at the Galt Houe Hotel. Afternoon eion will focu on innovation in credit building. MEMPHIS, APRIL 18 Puruing A Viion of Excellence The United Way Venture Fund: Planting the Seed of Innovation Thi event at The Old Rock Houe in the hitoric Soulard neighborhood will feature pecial guet, governmental proclamation, a brief program, tour of The Art of Living Building and food and entertainment. Thi luncheon at the Memphi Marriott Eat will recognize the United Way of the Mid-South Avron B. Fogelman Venture Fund and the contribution of the fund grant recipient. (By invitation only.) M T. V E R N O N, I L L., A P R I L 1 8 CLEVEL AND, MISS., APRIL 14 S T. L O U I S, A P R I L 1 4 Innovative Solution for Rural Communitie A banker and community roundtable will focu on forging partnerhip for better communitie. There will be a panel dicuion on how CDC and CDFI can help to improve rural communitie. Location: Cedarhurt Center for the Art. ON THE INTERNET AT # Rural Community Development Forum: Developing Innovative Strategie to Addre Unmet Community Need A reception and forum will focu on tourim and early childhood education a development trategie for the Lower Miiippi Delta. Location: Delta State Univerity.

12 Bill Poole Retire from St. Loui Fed B ill Poole, preident of the Federal Reerve Bank of St. Loui, retired March 31, 2008, after erving 10 year a Bank preident. A earch i under way for hi ucceor. A preident, Poole directed the Bank activitie at it headquarter in St. Loui and it three branche in Little Rock, Louiville and Memphi. In addition, he repreented the Bank on the Federal Open Market Committee, the Federal Reerve chief monetary policy making body. In recent year, Poole poke about the economic impact of community development and about the Bank role in gathering and dieminating information on the topic to it contituent. It important to learn what ome communitie are doing well in order for u to bring the knowledge back to our own ditrict, he aid at a 2007 conference convened by the Bank Community Affair Office. The Federal Reerve Bank of St. Loui, one of 12 regional Reerve bank, erve the Eighth Federal Reerve Ditrict. The regional Reerve bank, along with the Board of Governor in Wahington, D.C., contitute the Federal Reerve Sytem. Before joining the Federal Reerve Bank of St. Loui, Poole wa the Herbert H. Goldberger Profeor of Economic at Brown Univerity in Providence, R.I. He joined the faculty at Brown in 1974 and twice erved a chairman of the economic department. He erved on the economic faculty at The John Hopkin Univerity from 1963 to He wa inducted into The John Hopkin Society of Scholar in May MAY Poole JUNE Roadmap to Revitalization Detroit Sponor: Brownfield Underbanked Financial Service Forum Miami. Fla. Sponor: Center for Financial Service Innovation Overarching Strategie: Catalyzing Local, State and Federal Financing Source St. Loui Sponor: Council of Development Finance Agencie (CDFA) NeighborWork Training Intitute Cincinnati Sponor: NeighborWork 30 Homebuyer Club Webinar Training Indianapoli Sponor: Indiana Aociation for Community Economic Development Glenda Wilon Community Affair Officer, Aitant Vice Preident and Managing Editor Community Affair taff Exploring Innovation Week Sponor: Federal Reerve Bank of St. Loui or ee Page 11 of thi publication 29-May 1 Bridge i a publication of the Community Affair department of the Federal Reerve Bank of St. Loui. It i intended to inform banker, community development organization, repreentative of tate and local government agencie and other in the Eighth Ditrict about current iue and initiative in community and economic development. The Eighth Ditrict include the tate of Arkana and part of Illinoi, Indiana, Kentucky, Miiippi, Miouri and Tenneee. Linda Ficher Editor CALENDAR APRIL BRIDGES 12 Forecloure Couneling Training Sponor: Indiana Aociation for Community Economic Development Payment Fraud: Perception Veru Reality Chicago Sponor: Federal Reerve Bank of Chicago new/index.cfm St. Loui: Matthew Ahby Jean Morieau-Kuni Eileen Wolfington Memphi: Michael Minor Kathy Moore Cowan Little Rock: Lyn Haralon Amy Simpkin Louiville: Lia Locke Faith Weekly The view expreed in Bridge are not necearily thoe of the Federal Reerve Bank of St. Loui or the Federal Reerve Sytem. Material herein may be reprinted or abtracted a long a Bridge i credited. Pleae provide the editor with a copy of any reprinted article. If you have an intereting community development program or idea for an article, we would like to hear from you. Pleae contact the editor. Free ubcription and additional copie are available by calling or by to communityaffair@tl.frb.org.