Friday, July 8, 2016

Some advice to bankers who seriously want to help

I was delighted to read last week that Frost Bank has opened a new branch on San Antonio’s East Side.

The 148-year-old downtown bank has branches throughout the suburbs, but this is its first branch in City Council District 2.

The area is historically the home of the city’s African-American community, and still has the largest black population in the city.

The move comes after considerable pressure from federal regulators.

In addition to the East Side branch here, Frost has either opened or is planning to open branches in underserved neighborhoods around the state: three each in Dallas and Houston and one in Austin.

Chairman and CEO Phillip Green told the Express-News the push into underserved areas was “representative of a heightened focus (by regulators) that affected a lot of banks.”

I’m glad to hear that, too.

That means people in those neighborhoods might to be able to enjoy competition for their business.

I should disclose that I’ve been a Frost Bank customer for 30 years and I hope they will give the East Side as good a service as they have given me.

To that end, I would like to introduce them to Ed Speed.

Ed’s an interesting man.


That was after a lengthy career as a banker.

Now he is retired and enjoying photography.

Back in the 1980s and early 1990s he was head of mortgage lending for SACU, San Antonio’s largest credit union.

At some point he took time out from work and went out of town for a religious retreat.

At the end of the retreat, he told the priest he was inspired to get involved in some sort of social ministry, but didn’t know where to start.

The priest told him to go back to San Antonio and find a Jesuit.

He found his Jesuit, Father Marty Elsner at Our Lady of Guadalupe on the West Side. And Elsner introduced him to Rod Radle, who had founded a fledgling nonprofit to work on housing for low-income families.

“We couldn’t get mortgages from anyone in the city,” Radle recalls.

Speed wanted to know why, so Radle gathered 30 or 40 residents into a community hall.

Speed brought the barbecue and a dozen of his staffers —labeled “Ed’s apostles” by Radle.

Speed put one question to the gathering: What keeps you from buying a house.

The people gave a variety of reasons, but one came up repeatedly.

A medical crisis had ruined their credit rating.

Through listening to these people and consulting with Radle, Speed came up with a nontraditional set of criteria for evaluating credit worthiness, and he trained his staff on it.

If people had a bad credit score, check to see if it was because of bad medical debts.

If it was, discount its value.

The key evidence of mortgage worthiness was whether people had been faithful for at least a few years in paying a rent either the same as or greater than what their mortgage payments would be.

“If affluent people lose their home, it’s an inconvenience.

They buy or rent a smaller house,” he said.

“If low-income people lose their home, they’re moving onto a relative’s couch or into their car.

They’ll miss a lot of payments if they have to, but not their mortgage.”

He recalled a woman telling him her son would rob a grocery store rather than miss a rent payment.

“I got the impression she would help him,” he joked.

There was more: for example, document the income of everyone in the house, the grandmother’s social security check and the money the older children brought in.

It worked.

Speed’s team wrote hundreds of mortgages for Rod Radle’s clients, and had such a low foreclosure rate that it caught the attention of federal officials who asked how they did it.

Unfortunately, in the wake of the 2008 housing crash lenders are requiring better credit scores and higher down payments than low-income families can afford.

Some even blame the crash on federal pressure to lend to low-income people.

Ironically, the crash was partly caused by something called “reverse redlining” in which unethical mortgage brokers sought out unsophisticated minorities and sold them mortgages with low payments at the beginning, but with ballooning later payments that they clearly couldn’t afford.

So if my friends at Frost or any other bankers who have been pushed into low-income neighborhoods seriously want to help, they can call a Jesuit.

Or they can call me and I’ll try to put them in touch with Ed Speed.

1 comment:

Steve Hennigan said...

Rick, thanks for sharing this story. Ed Speed's work continues to serve as inspiration to all of us at SACU as we work to give even greater focus and resources to underserved communities amidst an environment that has not been favorable to those with less than stellar profiles. Leadership and courage are the essential ingredients and Ed Speed possesses both in far larger quantities than most in the financial services industry.

According to the Center for Financial Services Innovation, 57 percent of American adults are struggling financially. The 2015 study reports that more than one-fifth of Americans are so worried about bills that they have no idea how long they could make ends meet if they lose their jobs.

The work to be done requires all of the financial services industry to re-focus on our societal purpose to serve as a intermediaries between borrowers and savings to facilitate the movement of savings and credit for the collective good. That means inclusion of all people and developing products with our conscience that help rather than harm.

We have much to do and your story serves as a reminder to all of what's important.