Bridges Summer 2016

Bridges is a quarterly review of regional community and economic development issues, projects and regulatory changes for practitioners from community-based organizations, as well as for Community Reinvestment Act officers, academics and government of

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I N D E X T H E F E D E R A L R E S E R V E B A N K o f S T . L O U I S | C E N T R A L T O A M E R I C A ' S E C O N O M Y S U M M E R 2 0 1 6 8 Moving First-Time Buyers Off the Fence 6 10 12 Entrepreneurship and Economic Development Fueled by Students and Faculty Impacting Homelessness in Missouri cdac spotlight Innovative Partnership Brings Hope to Small Towns >> continued on Page 4 By Mike Eggleston S tark disparities in consumer credit exist in low- and-moderate-income (LMI) neighborhoods across metropoli- tan areas (MSAs). Consider George, who lives in Montgomery, Ala., and Francine, who lives in Madison, Wis. Both individuals live in an LMI neigh- borhood, which is defined as an area where the median income is 80 percent of the average median income in the metro area or state. Each is looking to purchase a car, both to reduce their commute time to work and to allow them more options for child care for their young children. Like many in his neighborhood, George has poor credit and, as a result, is not able to secure financing from a financial institution to buy a car. However, Francine is part of the vast majority of people in her neighborhood who have good credit and, consequently, she has no trouble securing a car loan from a bank. e example above is played out across 200-plus MSAs for which data is available. Boulder, Colo., is on one end of the spectrum, with 35.9 percent of All Low- and Moderate-Income Areas Are Not Created Equal the population in LMI neighborhoods credit constrained, defined as having poor/fair or no credit history. On the other end is Memphis, Tenn., where 77.4 percent of the population in LMI neighborhoods (nearly eight out of every 10 people) are credit constrained. (See Figure 1.) is disparity has big implications for both the residents of these neighborhoods and the regulated financial institutions that serve these markets, which have certain obliga- tions under the Community Reinvest- ment Act (CRA). Before describing the implications of this disparity, it's worth noting some observations. Observations LMI neighborhoods comprised of residents with relatively better credit tend to have a larger percentage of white occupants; they are usually located in the East, West and parts of the upper Midwest, and they tend to have relatively low poverty rates. LMI neighborhoods comprised of residents with poor credit tend to have a larger share of African-American 77.4 77.0 76.0 75.2 74.8 73.7 72.8 72.1 71.6 71.3 35.9 37.6 38.0 38.0 38.0 38.6 38.7 39.7 41.3 41.9 0 10 20 30 40 50 60 70 80 FIGURE 1 Top 10 and Bottom 10 Metros—Credit Constrained Population in LMI Neighborhoods Percent Credit Constrained Population Boulder, CO Provo, UT Madison, WI San Jose, CA Santa Rosa, CA Santa Cruz, CA Fort Collins, CO Honolulu, HI San Francisco, CA Bend, OR Memphis, TN Albany, GA Montgomery, AL Jackson, MS Monroe, LA Macon, GA Shreveport, LA Columbus, GA Lubbock, TX Flint, MI

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