As ACORN goes after institutions it accuses of predatory lending such as Wells Fargo, it has formed an alliance to increase homeownership with a major New York-based bank that was previously involved in one of the largest consumer protection settlements.
The Association for Community Organizations Reform Now (ACORN) and Citigroup jointly announced yesterday a landmark partnership that they say will advance homeownership in low-and moderate-income neighborhoods, especially in immigrant communities, expand availability of affordable credit and promote financial education.
The groups have reportedly agreed to develop a specialized mortgage product for ACORN Housing Corp. homeownership centers, which make homes available by acquiring and rehabilitating abandoned buildings. They will also collaborate on offering home loans to immigrants who have previously been denied credit.
"With this agreement, ACORN will be able to expand our mission of strengthening communities by helping low-and moderate-income families, including new immigrants to this country, become homeowners," ACORN president Maude Hurde said in a written statement.
ACORN has long been a critic of many banks' lending practices. Over a year ago, the advocacy group started a campaign against Wells Fargo and its subprime financing unit accusing them of abusive lending practices and recently filed lawsuits in California and Illinois against the companies. ACORN also accused Household International and its subsidiaries of a wide range of fraud and misrepresentation in a class-action lawsuit that resulted in a nationwide settlement of $484 million.
In 2002, Citigroup, which in the joint announcement was described as "a key industry leader in responsible and innovative lending practices," paid $215 million to the Federal Trade Commission to resolve charges that a subprime finance company it had integrated into its subsidiary, CitiFinancial, engaged in widespread deceptive and abusive lending practices.
According to yesterday's announcement, CitiFinancial has done several changes to its real estate loan programs over the last three years such as halting the sale of single premium credit insurance, eliminating balloon payments, and capping points at three points. While CitiFinancial already offers loans without prepayment penalties, it has agreed with ACORN that, on real estate loans that do have such terms, it will reduce the amount of the prepay penalty in the second and third years, and will remove prepayment penalties after the third year.
"This is another strong step in Citigroup's responsible, fair, and innovative leadership in the industry," said Kevin Kessinger, a Citigroup consumer finance vice president, in the announcement. "By working together, Citigroup and ACORN can use the power of both organizations to improve the lives of our customers and create stable, healthy communities for the long term. This is the beginning of what we believe will be a long and successful relationship."
The two organizations said they will also collaborate to expand access to the Earned Income Tax Credit and that, in immigrant communities, they will expand access to Citigroup bank accounts designed for consumers who have not traditionally had banking relationships.
They will also work together in expanding education to low-and moderate-income consumers on saving, and obtaining and using credit wisely, the report said.