Center for Responsible Lending

The Center for Responsible Lending (CRL) describes itself as a “nonprofit, nonpartisan research and policy organization” working to eliminate predatory lending practices. But CRL’s relationships with its credit union and lending affiliates—as well as several of its donors with vested interests in the financial industry—paint a much different picture. As more is revealed about CRL’s role in the subprime mortgage meltdown, the group’s description of itself as a third-party watchdog seems more disingenuous. The onset of the current financial crisis has raised serious questions about its credibility, suggesting that CRL’s brand of “responsible lending,” characterized by the ability of unqualified borrowers to take out loans many of them are unable to afford, is a misnomer.

It is important to note that CRL is directly affiliated with the Self Help Credit Union, a half-billion-dollar financial institution and player in a network of related financial 501(c) groups including the billion-dollar Self Help Ventures Fund. Through these partnerships, CRL joins itself at the hip to certain players in the financial industry—most notably Bank of America, the controversial banking behemoth that partners in numerous Self Help network projects.

Subprime Funders: Herbert and Marion Sandler

Herbert and Marion Sandler are the billionaire funders of the Center for Responsible Lending. The Sandlers made a fortune in the subprime mortgage industry, thanks to the success of their bank, Golden West Financial. Herb Sandler is credited with encouraging Martin Eakes, CRL’s chief, to take his loan restriction campaign nationwide.

Golden West and its subsidiary, World Savings Bank, were among the biggest sources of subprime mortgages, especially of adjustable-rate loans called option-ARMs. Herb Sandler is credited with the invention of the option-ARM, which his bank marketed as “Pick-a-Payment” mortgages. These loans were extraordinarily popular in the years preceding the subprime mortgage crisis, generating billions in profits for the Sandlers’ banking empire. Golden West was ultimately taken over by Wachovia and later Wells Fargo, which paid a $590 million civil settlement in 2011 that centered on World Savings’ “Pick-a-Pay” loans. “Pick-a-pay” loans created by Golden West’s World Savings were also the subject of a $2 billion loan modification deal brokered by the California Attorney General’s office. Then-Attorney General Jerry Brown said in a statement: “Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford.”

The Sandlers made over $2.3 billion on the sale of their company to Wachovia in 2006, and they have used their fortune to fund organizations advancing their political aims. In addition to CRL, they have given millions of dollars to left-wing groups, including ACORN (the defunct union front group implicated in election fraud investigations in over a dozen states), the Obama Administration-tied Center for American Progress, left-wing environmentalists including the Sierra Club and Oceana, and the liberal American Civil Liberties Union. The Sandler Foundation’s contributions to CRL fund more than half of the Center’s total contributions: In 2012, the last year for which complete records are available, Sandler grants accounted for $4 million of CRL’s $5.7 million in contributions, or 70%.

Investigations by “60 Minutes” and the New York Times  focused national attention on the Sandlers’ role in the subprime crisis. The Sandlers’ loans were described in the Times as “the Typhoid Mary of the mortgage industry.” They risked hitting the economy with another $600 billion in losses. Before the financial collapse, an analyst with Institutional Risk Analytics warned that Golden West was “the poster child for the U.S. real estate bubble.”

In October 2008, “Saturday Night Live” parodied the Sandlers in a skit about the financial crisis. Their characters appeared in a mock congressional hearing, with the caption, “People Who Should Be Shot.” SNL and parent company NBC removed the skit from the Internet and reruns after the Sandlers protested loudly for censorship. That same strategy worked with the New York Times, which softened its criticism of the controversial couple several weeks after the article’s publication.

Marion Sandler died in 2012, but the funding from the Sandler Foundation continues, even after the revelations of the Sandler financial empire’s involvement in developing the financial products that are credited by many with collapsing the banking system and tanking the national economy.

Cozy Relationship with Bank of America

Strangely for a purported “consumer advocate,” the Center for Responsible Lending has loudly endorsed certain practices by controversial multinational banking conglomerate Bank of America. Bank of America has a far-from-spotless record with federal and state regulators. Among other cases:

  • Bank of America agreed to pay federal and state regulators $16.65 billion for various conduct that contributed to the 2008 financial crisis.
  • Bank of America settled allegations the it had misled consumers about certain financial security products to the tune of $772 million; and
  • Bank of America paid Fannie Mae and Freddie Mac a $9.8 billion settlement in response to claims it sold faulty mortgage-backed securities.

That has not stopped CRL and its related organizations under the Self-Help banner from issuing statements in support of the company. A CRL spokesperson called a Bank of America checking account that charges account holders $4.95 per month for the privilege of holding their money “remarkable for the country.” According to a report in The Guardian, Self Help Credit Union offers a similar account that charges between $3 and $6 per month.

Interestingly, Bank of America and the Self Help Credit Union network are close partners on numerous projects. Most notably, Martin Eakes — CEO of Self Help Credit Union, the Self Help Ventures Fund, and CRL — sits on Bank of America’s National Community Advisory Council.

Bank of America supports (through a “community development initiative”) so-called “community development financial institutions” to the tune of $1.5 trillion over ten years. CRL/Self Help takes advantage of its close partnerships with the company to avail itself of a portion of that funding (the exact amount is a BofA trade secret and is unknown).

BofA supports multiple identifiable Self Help/CRL projects. Two are the Self Help Energy Loan Fund (roughly $5.5 million in BofA funds were pledged at discounted interest rates) and the Elizabeth Street Capital Program. In addition, Eakes is credited with partnering with Bank of America and other financial institutions to generate $5.7 billion in loans.

John Paulson

CRL has another major funder who stood to gain from the 2008 financial collapse. John Paulson, a hedge fund billionaire whose “short” positions (bets against) the subprime mortgage markets in collaboration with Goldman Sachs were investigated by the Securities and Exchange Commission, testified before Congress that he had funded CRL to the tune of $15 million. CRL contended that the money was used for legal advice for low-income homebuyers, but money is fungible.

Republicans on the House Committee on Oversight and Government Reform noticed a key conflict: Paulson’s hedge fund was betting against subprime mortgages while Paulson funded CRL, which advocated for subprime lending under the Community Reinvestment Act. A letter was sent to Paulson requesting information on his relationship with CRL and Self Help in mid-2010, and multiple commentators criticized the relationship.