MyMoney Resources - Researcher

This article discusses the results of and lessons learnt from the Financial Opportunities Project (FOP), a comprehensive effort by the Center for Economic Progress identify, implement, and disseminate strategies for integrating financial services and asset-building opportunities with community-based tax-preparation services at IRS Volunteer Income Tax Assistance (VITA) sites. The goal of the FOP was that 15 percent of tax clients would take on an asset building service, an improvement from the 8-12 percent take-up rate achieved in past pilot studies by the Center and tests on the take-up of savings matches or Savings Bonds. The Center developed the Asset Building Service Delivery System (ABSDS)—a process-based model for offering asset-building products and services to clients served by community-based programs. The components of the ABSDS include 1) strategic program planning around asset promotion, 2) simplicity in process design, 3) specialization of staff to promote assets, 4) specific and targeted promotional strategies, and 5) customer-focused processes. From the fall of 2008 through the end of the 2009 tax season, the Center oversaw the national launch of the ABSDS and awarded three programs grants to assess the effectiveness and versatility of the op- erational models and programmatic guides of the ABSDS. To the extent programs adapted the model and tested new ideas, this season provided an opportunity to further refine the ABSDS. Overall, take-up rates surpassed expectations, with almost 27 percent of clients enrolled in at least one service. The article provides a more detailed overview of the FOP findings and identifies recommendations for improved delivery of asset building services, concluding that such tax programs can effectively include simple messages and financial education to encourage savings and improve financial management skills.

The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers' financial literacy—their numerical ability—may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately two-thirds lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. The result is robust to controlling for a broad set of sociodemographic variables and not driven by other aspects of cognitive ability or the characteristics of the mortgage contracts. Our results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis.

This article provides a brief overview of the field of financial education and explores some of the challenges and potential solutions. The author describes developments in the contemporary financial education movement since the 1990s and the background economic changes that stimulated its growth; reviews currently available financial education initiatives for youth and adults and discusses the evidence about its effectiveness as well as broader challenges for the field. The article concludes by highlighting both general and specific examples of efforts to move the field forward.

The Community Financial Access Pilot (CFAP) began in 2008 and was implemented through December 2009 by the U.S.

We evaluate laws designed to protect borrowers from foreclosure. We find that these laws delay but do not prevent foreclosures. We first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a build-up in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. We next analyze a "right-to-cure" law instituted in Massachusetts on May 1, 2008. Using a difference-in-differences approach to evaluate the effect of the policy, we compare Massachusetts with neighboring states that did not adopt similar laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.

This paper tests for the presence of age and gender discrimination in the loan underwriting process. We modify the tools used during the past exams to test for racial discrimination and apply them here to test for the presence of disparate treatment on the basis of age and gender. Using HMDA data along with data from 18 fair lending exams recently conducted by the OCC, between1996 – 2001, we find no evidence of systematic discrimination on the basis of age or gender. Further, the tools used and tested for in this analysis are now readily available for use in future fair lending exams.

This report was prepared to provide background on the “Bank On” model, a new approach for expanding access to safe, affordable financial services for unbanked households. The purpose of this report is to describe the landscape of Bank On programs, their origins, and their context within a broader financial access field. The report provides basic information about Bank On programs that currently exist, including information about program structure, partnerships, and funding as well as an assessment of successes, challenges, special considerations and gaps in the field. Information for this report comes from several sources: a Bank On program survey, research and information gathered for NLC’s publication, Bank On Cities: Connecting Residents to the Financial Mainstream, research and analysis from CFED’s forthcoming publication on the role of financial institutions in Bank On programs, conversations with Bank On program staff and research from experts in the field, including the Center for Financial Services Innovation (CFSI), the New America Foundation, the Brookings Institution, the U.S. Department of the Treasury, and others. The report describes the overall financial access field, the emergence and growth of Bank On initiatives, details about the structure of existing programs, direct and indirect benefits and outcomes, key components of successful programs, challenges facing the Bank On field, and opportunities for expanding the reach and effectiveness of Bank On within the context of comprehensive financial access initiatives.

The U.S. Department of the Treasury and U.S. Department of Agriculture convened the National Research Symposium on Financial Literacy and Education on October 6-7, 2008 in Washington, DC. Twenty-nine experts from the fields of behavioral and consumer economics, financial risk assessment and financial education evaluation were invited to summarize existing research findings, identify gaps in the literature, and define and prioritize questions for future analysis. Participants included academics from public and private universities and scholars and administrators from non-profit organizations and government officials. Numerous individuals also attended as observers. This document summarizes the proceedings of the symposium. The two-day symposium featured four discussion groups on the topics of behavior theory application, consumer economic socialization, financial education and program evaluation, and financial risk assessment.On day one, participants presented key research findings in their assigned topic area and outlined the most pressing research gaps. A discussion with the whole group followed. On day two, topic area groups met separately to prioritize key research questions in their respective topic area. The decisions made by each team were reported to the whole group. The total group then discussed and agreed upon ten recommended research priorities.

This article provides an overview of bank-based financial education. The role of banks more generally is reviewed, and examples of Marshall and Isley (M&I) Bank's Consumer Education (CE) program are discussed. Evaluation methods used by M&I are described. Key factors for success include clearly defined priorities, a standardized high-quality curriculum, appropriately designed delivery, well-integrated assessment and evaluation, effective community partnerships and a willingness to provide supporting tools.

About 10 million American households do not use any aspect of the banking system. A large body of research provides evidence that limited involvement in the mainstream financial sector is most common among low- and moderate-income (LMI) households. Although their income may be relatively low, these individuals hold assets and regularly conduct financial transactions, frequently with nonbank financial companies. Estimates of nonbank financial company transaction volume as high as $250 billion annually suggest a reasonable business case for insured institutions trying to attract the banking business of low- and moderate-income consumers. A relatively low-risk way for banks to introduce low- and moderate-income households to the banking system is through a particular type of savings account—the Individual Development Account (IDA). This article explains how IDAs operate, discusses banks’ experience with IDAs, and provides resources for bankers who want to know more about these programs.