Transcript Increase Savings and Customers

Opportunities to Expand
Mission Impact
Presentation to the AHAC,
Federal Home Loan Bank
of Indianapolis
CFED
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CFED works to expand economic opportunity
by helping more people save and invest,
succeed as entrepreneurs, contribute to and
benefit from the economy.
CFED operates at the nexus of public policy,
private markets, and community practice by
identifying and researching promising ideas,
collaborating with public and private partners
to test those ideas, and driving the
application of proven models.
Policy Environment
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Specific asset data for MI and IN
110th Congress: new leadership
110th Congress: new priorities
Opportunities for FHLBank members
and partners
s
Grades by State
Financial Assets Data
Indiana
Michigan
Net Worth
$64,935
$86,150
Rank
22
11
Households
with Zero Net
worth
14.9%
26 rank
18.7%
14 rank
Households
with Checking
Accounts
28.6%
32 rank
30.8%
24 rank
Households
with Savings
Accounts
62%
26 rank
68.2%
20 rank
Bankruptcy
rate
8.9%
46 rank
6.2%
34 rank
Suprime Loans
14.9%
47 rank
11.9%
36 rank
Indiana
Michigan
Asset Poverty
21.4%
18.7%
Rank
22
14
Asset Poverty
by Race
White 19%
Minority 44%
Ratio .43
Rank 14
White 14%
Minority 40%
Ratio .34
Rank 25
Asset Poverty
by Gender
Male 19%
Female 24%
Ratio .78
Rank 10
Male 14%
Female 25%
Ratio .58
Rank 37
Asset Equality
by Race
White $68,446
Minority $4,400
Ratio 15.6
Rank 26
Whit $118,400
Minority $9,701
Ratio 12.2
Rank 23
Asset Equality
by Gender
Male $65,000
Female $62,438
Ratio 1
Rank 3
Male $126,612
Female $52,600
Ratio 2.4
Rank 35
Homeownership Assets Data
Indiana
Michigan
Home Value
3.37
15 rank
3.8
25 rank
Homeownership Rate
74.4%
8 rank
75.6%
5
Homeownership by Race
White 78%
Minority 54%
Ratio 1.44
Rank 23
White 82%
Minority 55%
Ratio 1.51
Rank 29
Homeownership by Income
Top 92%
Bottom 54%
Rank 16
Ratio 1.72
Top 92%
Bottom 59%
Rank 7
Ratio 1.56
Homeownership by Gender
Male 78%
Female 73%
Ratio 1.07
Rank 2
Male 81%
Female 72%
Ratio 1.12
Rank 15
Foreclosure Rate
2.77%
50 rank
1.67%
44 rank
New Leadership & Priorities
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Democrats Control 110th Congress
Key Members on Critical Committees
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Julia Carson (IN), House Financial Services
Sander Levin, David Camp, (MI) House Ways and Means
Evan Bayh (IN) Senate Banking
Debbie Stabenow (MI) Senate Finance
Policy issues -- mission investment, GSE Regulatory
Reform, Public/Community Interest Directors,
Affordable housing and community economic
development are all high priorities
New Opportunities
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Pension Bill
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Opt-out
Saver’s Credit
Split Refunds
Public Interest Director Appointments
GSE Regulatory Reform
Savings Incentives
National Housing Trust Fund
H.R. 4 Pension Bill:
Sec. 902: Opt Outs
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Removes barriers for employers to offer
qualified automatic contribution arrangements
for employees.
Behavioral research has shown that requiring
employees to opt-out -instead of opting-in significantly increased low-income workers'
participation in retirement plans.
The bill provides the legal framework and guidance
for an employer to automatically enroll employees
into a retirement plan.
The bill suggests setting the base contribution level
at no less than 3 percent of an employee's salary,
and to increase that contribution rate by 1
percentage point a year until it reaches 6 percent and
no more than 10 percent.
Saver’s Credit
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The Saver's Credit is made permanent and indexed for
inflation.
Reduces income taxes based on contributions up to $2,000 to
retirement savings of households earning less than $25,000
(single) $50,000 (married) a year.
Income limits will rise with inflation
Match amounts and rates vary between 10%, 25% and 50%.
There is no similar indexing of the credit amount, which will
therefore lose value over time.
Unfortunately, the bill did not make the credit refundable, thus
limiting its availability to only 5 million out of a possible 61
million households. Refundable credits enable households
without a federal income tax income tax liability to be eligible
for matches to their retirement account.
Split Refunds
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Beginning in 2007 for tax year 2006, taxpayers will have the option of
having their tax refunds direct deposited in up to three accounts,
including an Individual Retirement Account (IRA), a savings and/or a
checking account, or children’s education account.
IRS Form 8888
The split tax refund presents working poor families with an opportunity
to use their savings toward an asset building purchase that would
improve their economic security. Many working poor families receive
significant tax refunds, including the federal Earned Income Tax Credit
(EITC) which in 2006, was worth up to $4,400.
Telephone Excise Tax Refund (1040EZT). Taxpayers are eligible to file
for refunds of all excise tax they have paid on long-distance service
billed to them after February 28, 2003 and before August 1, 2006.
Tax filers can claim this refund on their 2006 tax returns and the IRS is
preparing to announce a simplified method that individuals can use.
Expected refund is $30-$60
Proposed Asset Policy:
Savings for Working Families
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Federal tax credit to financial institutions that match the
savings of 900,000 adults between ages 18-60.
Federal adjusted gross income does not exceed $20,000
(single), $30,000 (head of household), or $40,000
(married).
accounts restricted to three uses that help low-income
families build appreciating assets: (1) buying a first home;
(2) receiving post-secondary education; or (3) starting or
expanding a small business.
Financial institutions would be reimbursed for the matching
funds they provide, plus a limited amount of the program
and administrative costs incurred, specifically:
The aggregate amount of dollar-for-dollar match funding
provided (up to $500 per person per year for four years),
plus
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an annual $50 per account credit to maintain the account
and provide financial education.
The National Housing Trust
Fund Legislation:
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Produce, rehabilitate, & preserve 1.5 million units of housing over next
10 years.
Funded by 5% of after-tax profits from Fannie Mae and Freddie Mac -$500 million
Funds can be used for both grants and loans; Co-ops are eligible uses
as long as income requirements are met.
Fund provides extremely low and very low-income, first-time home
buyers with closing cost assistance, downpayment assistance, and
interest rate buy-downs.
The initial purchase price of the first home cannot exceed 95 percent of
the median purchase price for the area and is subject to resale
restrictions that are established by the participating grantee.
Grants are competitive and will be distributed yearly; 60% of Trust
Fund assistance will be allocated to localities and 40% of Trust Fund
assistance will be allocated to states; At least half of the state
allocation must be used in rural areas.
Housing Trust Fund Eligibility
Requirements
Fund Allocation
25%
45%
30%
Families earning <= 30% of state or area median
income
Families earning minimum wage
Families earning <= 80% of state or area median
income
www.cfed.org/
www.cfed.org/go/advocacy
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Carol Wayman
[email protected]
(202) 207 0125