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By D.B. YOUNG

Contributing Reporter

Until recently, residents of L.A.’s poorest neighborhoods had only a handful of choices for their consumer banking.

For many, check-cashing services where commissions typically average about 2 percent of the check’s amount were the bank of last resort. The little money left over for savings was kept as cash around the house, and any thought of a car- or home loan required long trips to bank branches miles away.

Community leaders faulted the major banks for having few or no branches in low-income areas like South Central and East L.A., while banks defended their absence by saying those areas were not profitable enough.

Meanwhile, both sides essentially conceded that most inner-city residents probably would continue in their old banking ways even if branches were available because they mistrusted banks and often didn’t know about mainstream products and services.

In short, opening more inner-city branches was only part of a solution; almost as important was education.

That realization was a catalyst for the recent creation of a crop of home-grown institutions many of them non-profits with strong ties to major banks that specialize in consumer banking services for L.A.’s lower-income residents.

“The idea of grooming people to become consumers at banks is now resting on the non-profit community, but the banks are supporting us,” said Forescee Hogan Rowles, executive director of Community Financial Resources Center, a 5-year-old financial services center in South Central L.A. that counsels inner-city consumers on the basics of banking. This includes helping them open accounts, establish credit and apply for loans.

“(The banks) are trying to find other ways to serve the area without making the full commitment of opening a branch,” she said.

In addition to the CFRC, L.A.’s inner city is served by Operation Hope and Los Angeles Neighborhood Housing Services, which also counsel consumers on the nuts and bolts of such banking fundamentals as establishing credit, setting up bank accounts and applying for mortgages and consumer loans.

The non-profits function mostly as counseling centers, letting their commercial banking partners step in to provide products and services.

For example, Operation Hope partnered with Hawthorne Savings Bank to open a banking center in South Central last September. Hawthorne Savings is the exclusive provider of some financial services, such as check cashing at a reduced commission rate of 1 percent, said Operation Hope Chief Executive John Bryant.

Also offered are various financial products offered by Operation Hope’s other commercial banking partners. They range from checking and savings accounts to consumer loans and home mortgages. Operation Hope staffers confer with customers to determine the banking products and services that best meet each customer’s needs.

But while customers can buy financial products there, the center is just as much a place where inner-city residents can simply sit down with counselors to learn about banking, Bryant said.

Subj: new graf for doug’s piece

Date: 98-03-24 20:23:47 EST

From: odysseuz@ix.netcom.com (Charles Shao)

To: labjtalk@aol.com

Mike,

Here’s the chunk of text with the new graf inserted. (actually, it’s

two grafs).

Doug

“We don’t tell anybody ‘No,'” he said. “We work with people until

they’re (bankable). The focus at these centers is on economic

education, credit counseling, budget counseling and case management.”

Operation Hope’s partnership with Hawthorne Savings has attracted the

attention of other major banks as well. Similar joint venture branches

with Home Savings of America and Wells Fargo Bank are slated to open

later this year, Bryant said.

“These are not simply replicates of mainstream (branches),” he said.

“They are very specialized delivery channels that understand the market

they’re dealing with.”

— new graf — Similarly, CFRC has a “bankers rotation program” that

brings representatives from major commercial banks into its office to

work with smaller inner city banking organizations.

— new graf — “The purpose of that is to allow banks to meet with

community banks so (community bankers) don’t have to travel halfway

across town to meet with the banks,” Rowles said. “We have a couple of

banks that want to push their consumer loan side on the autos and

mortgages, so they push that.”

CFRC also recently formed a partnership with Bank of America to open a

BofA banking center within the CFRC site, she said.

And a Wells Fargo-backed mortgage company in South Central has teamed

up with Los Angeles Neighborhood Housing Services to open a home

mortgage office staffed by a loan officer from the Wells Fargo venture

and loan counse

lors from NHS, said Brenda Ross-Dulan, vice president of corporate

community development for Wells Fargo.

“(NHS) does the credit counseling, the credit repair to get first-time

home buyers ready for a mortgage,” she said.

“We don’t tell anybody ‘No,'” he said. “We work with people until they’re (bankable). The focus at these centers is on economic education, credit counseling, budget counseling and case management.”

Operation Hope’s partnership with Hawthorne Savings has attracted the attention of other major banks and thrifts as well. Similar Operation Hope joint ventures with Home Savings of America and Wells Fargo Bank are slated to open later this year, Bryant said. Like the one with Hawthorne Savings, the new ventures will involve Home Savings and Wells Fargo having the exclusive right to sell certain products or services in certain areas.

“These are not simply replicates of mainstream (branches),” he said. “They are very specialized delivery channels that understand the market they’re dealing with.”

Similarly, CFRC has a “bankers rotation program” that brings representatives from major commercial banks into its office to work with smaller inner-city banking organizations.

“The purpose of that is to allow banks to meet with community banks so (community bankers) don’t have to travel halfway across town to meet with the banks,” Rowles said. “We have a couple of banks that want to push their consumer loan side on the autos and mortgages, so they push that.”

The CFRC recently formed a similar partnership with Bank of America, according to Rowles. And a Wells Fargo-backed mortgage company in South Central has teamed up with Los Angeles Neighborhood Housing Services, a non-profit group that offers counseling and lending services to home buyers.

That Wells Fargo-NHS partnership opened a home mortgage office staffed by a loan officer from the Wells Fargo venture and loan counselors from NHS, said Brenda Ross-Dulan, vice president of corporate community development for Wells Fargo.

“(Neighborhood Housing Services) does the credit counseling, the credit repair to get first-time home buyers ready for a mortgage,” she said.

Another major player to recently enter L.A.’s low-income consumer banking market is Merrill Lynch, which last year announced a three-year pilot program to make $77 million in home mortgage loans in underserved areas of Los Angeles and Orange counties.

“What we’ve found is that working with community-based organizations is the most effective way right now,” said Pete Case, senior district vice president for Merrill Lynch. “We’re looking to place teams of financial consultants in organizations that serve inner cities. In L.A., we’re working with Neighborhood Housing Services. In fact, the Merrill Lynch/NHS partnership made its first mortgage loan to a Pacoima family just about a month ago.”

Merrill Lynch also hopes to offer more conventional financial planning services, including brokerage services, to L.A.’s underserved areas, he added.

“We don’t expect to open (brokerage) accounts yet,” he said. “These are people that are learning to get into the economic mainstream for the first time. There are a lot of issues. People have to understand what long-term investing can do.”

In addition to partnering with the community non-profits, the large commercial banks and thrifts are investing directly in inner-city financial institutions to bolster retail banking services in those areas.

One recipient of such investment is Founders National Bank of Los Angeles, which has received investments in excess of $200,000 each from Sumitomo Bank of California, Citibank and BofA. Those investments are at least partially motivated by the banks’ need to demonstrate a good faith effort to make inner-city investments, as required by the Community Reinvestment Act.

Similarly, Wells Fargo has $100,000 on deposit at the Watts Federal Credit Union, and Wells Fargo and Manufacturers Bank are among the investors in the newly launched Communidades Federal Credit Union serving the Pico-Union area. (Direct investments in credit unions are effectively made through deposits because credit unions are owned by their members.)

Commercial banks also have tailored some of their retail products to appeal to lower-income retail customers.

For example, BofA announced a $500 million “zero-down” loan program earlier this month targeted specifically to low-income home buyers, said spokesman Carry Walker. And Wells Fargo has introduced a “low-lift” loan product, which offers low-income customers small loans (up to $5,000). The program waives all fees on loans of $2,000 or less and drastically reduces fees on loans between $2,001 and $5,000, said Ross-Dulan.

“Our general approach is deep penetration in all low-income communities,” she said. “Our approach is to first lead with products and services that the bank currently has, but also to partner with community leaders and groups to clearly understand the needs of the community.”

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