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MORTGAGE LENDING DISCRIMINATION

FIELD HEARING
BEFORE THE

COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION

OCTOBER 15, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–69

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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
LUIS V. GUTIERREZ, Illinois
NYDIA M. VELÁZQUEZ, New York
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
JULIA CARSON, Indiana
BRAD SHERMAN, California
GREGORY W. MEEKS, New York
DENNIS MOORE, Kansas
MICHAEL E. CAPUANO, Massachusetts
RUBÉN HINOJOSA, Texas
WM. LACY CLAY, Missouri
CAROLYN MCCARTHY, New York
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
AL GREEN, Texas
EMANUEL CLEAVER, Missouri
MELISSA L. BEAN, Illinois
GWEN MOORE, Wisconsin,
LINCOLN DAVIS, Tennessee
ALBIO SIRES, New Jersey
PAUL W. HODES, New Hampshire
KEITH ELLISON, Minnesota
RON KLEIN, Florida
TIM MAHONEY, Florida
CHARLES WILSON, Ohio
ED PERLMUTTER, Colorado
CHRISTOPHER S. MURPHY, Connecticut
JOE DONNELLY, Indiana
ROBERT WEXLER, Florida
JIM MARSHALL, Georgia
DAN BOREN, Oklahoma

SPENCER BACHUS, Alabama
RICHARD H. BAKER, Louisiana
DEBORAH PRYCE, Ohio
MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
RON PAUL, Texas
STEVEN C. LATOURETTE, Ohio
DONALD A. MANZULLO, Illinois
WALTER B. JONES, JR., North Carolina
JUDY BIGGERT, Illinois
CHRISTOPHER SHAYS, Connecticut
GARY G. MILLER, California
SHELLEY MOORE CAPITO, West Virginia
TOM FEENEY, Florida
JEB HENSARLING, Texas
SCOTT GARRETT, New Jersey
GINNY BROWN-WAITE, Florida
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
STEVAN PEARCE, New Mexico
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia
GEOFF DAVIS, Kentucky
PATRICK T. MCHENRY, North Carolina
JOHN CAMPBELL, California
ADAM PUTNAM, Florida
MICHELE BACHMANN, Minnesota
PETER J. ROSKAM, Illinois
KENNY MARCHANT, Texas
THADDEUS G. McCOTTER, Michigan
KEVIN McCARTHY, California

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel

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CONTENTS
Page

Hearing held on:
October 15, 2007 ...............................................................................................
Appendix:
October 15, 2007 ...............................................................................................

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41

WITNESSES
MONDAY, OCTOBER 15, 2007
Adams-Heath, Acia, President, Massachusetts Affordable Housing Alliance ....
Alkins, Leonard, President Emeritus, NAACP Boston Branch ...........................
Browne, Lynn E., Executive Vice President and Senior Economist, Federal
Reserve Bank of Boston .......................................................................................
Campen, Jim, Executive Director, Americans for Fairness in Lending ..............
Coakley, Hon. Martha, Attorney General, Commonwealth of Massachusetts ...
Hamilton, Ginny, Executive Director, Fair Housing Center of Greater Boston .
Kennedy, Thomas B., Senior Vice President, Sovereign Bank New England ....
Menino, Hon. Thomas M., Mayor, City of Boston .................................................
Patrick, Hon. Deval L., Governor, Commonwealth of Massachusetts .................
Taylor, Chuck, City Councilor, City of Boston ......................................................
Yoon, Sam, At-Large Boston City Councilor .........................................................

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12
26
32
9
7
18
20

APPENDIX
Prepared statements:
Adams-Heath, Acia ...........................................................................................
Alkins, Leonard ................................................................................................
Browne, Lynn E. ...............................................................................................
Campen, Jim .....................................................................................................
Coakley, Hon. Martha ......................................................................................
Hamilton, Ginny ...............................................................................................
Kennedy, Thomas B. ........................................................................................
Menino, Hon. Thomas M. .................................................................................
Patrick, Hon. Deval L. .....................................................................................
Yoon, Sam .........................................................................................................
ADDITIONAL MATERIAL SUBMITTED

FOR THE

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48
55
84
92
105
112
119
116

RECORD

Frank, Hon. Barney:
Letter from Action for Boston Community Development, Inc. .....................
Article from the Boston Globe, ‘‘As foreclosures widen, a neighborhood
erodes’’ ............................................................................................................
Alkins, Leonard:
Information on NAACP lawsuit ......................................................................
Adams-Heath, Acia:
‘‘Expanding Homeownership Opportunity II, The SoftSecond Loan Program, 1991–2006’’ .........................................................................................

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137

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MORTGAGE LENDING DISCRIMINATION
Monday, October 15, 2007

U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 11 a.m., in Roxbury
Community College, Reggie Lewis Track and Athletic Center, 2nd
floor, 1350 Tremont Street, Boston, Massachusetts, Hon. Barney
Frank [chairman of the committee] presiding.
Members present: Representatives Frank, Capuano, and Lynch.
The CHAIRMAN. This hearing of the Financial Services Committee will come to order. This is an official hearing of the Financial Services Committee of the U.S. House of Representatives. I
would note, as chairman of the committee, that there are three
members present—myself, and my colleagues, Mr. Capuano and
Mr. Lynch—which is a quorum for an official committee hearing,
so this is an official hearing.
We have limited time. We go into session later today, and my
two colleagues and I have to go to Washington to cast a vote.
We have a panel of officials. We have a panel of citizens. I have
already received a statement from Deborah Rhoderick on behalf of
Mass Acorn, and if there are any other statements, this will be
made part of the official record. If there are any other statements
that others would like to have entered into the record, let’s have
a staff member— Ms. Rightguard here will accept them. We will
make note publicly of their having been submitted, and they will
all be part of the official record, which will read better than it
sounds, apparently.
To begin, I want to acknowledge the gracious hospitality of this
very important institution. We are enjoying the hospitality of
Roxbury Community College, a very important institution educationally, economically, and culturally in the City, and, indeed in the
greater Boston area, and I want to now introduce President Gomes,
who is going to welcome us and express our appreciation on behalf
of the Congress and the citizens for hosting this event.
Mr. President.
Mr. GOMES. Good morning, and thank you, Chairman Frank.
On behalf of the trustees, the faculty, staff, and students of
Roxbury Community College, I want to welcome you, Chairman
Frank, and also the distinguished members of the House Committee on Financial Services.
As a college, we pride ourselves on being of service to the members of this community, and we certainly appreciate your bringing
this important matter, having this hearing here at the college
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today. Mayor Menino and Attorney General Coakley, thank you for
coming as well, and I want to extend a thank you to those who will
be giving testimony this morning. I know Governor Patrick is
showing up shortly as well. I just want you to know, this is in
keeping with our spirit and effort to serve the members of this
community, and again, we thank you for being here and want you
to know, Chairman Frank, that you are welcome here at this point
in time.
Thank you.
The CHAIRMAN. Thank you, Mr. President.
We will now have opening statements. Let me begin with mine.
This hearing really has a dual focus. We are, in part, talking
about the sad record of discrimination in the granting of mortgages. We have a piece of legislation known as the Home Mortgage
Disclosure Act. That is a statistics-gathering device. It was amended about 15 years ago, under the leadership of my former colleague, Mr. Capuano’s predecessor, Joe Kennedy, who was a devoted fighter for fairness and against discrimination. And, with Joe
Kennedy in the lead, the Congress explicitly mandated the collection under the Home Mortgage Disclosure Act of statistics involving the racial and ethnic identity of people who receive mortgages.
Not surprisingly, but unfortunately, the data shows that racial
and ethnic discrimination persists, and no matter what other economic figures you throw in, it still turns out that if you are African
American or Hispanic in this country, and, unfortunately, particularly so if you are in Boston, you are less likely to get a mortgage,
and more likely, if you do get a mortgage, to have to pay more for
it than you should.
Part of what we want to address here is the persistent pattern
of discrimination, and we need to acknowledge that years of racism
in this country, hundreds of years, have obviously not disappeared.
We have made great progress in fighting racism but these statistics
are a sad confirmation of the fact that it still exists.
Secondly, this merges into the problem of subprime mortgages
and the foreclosures that come, and part of the connection is that
people who are put into subprime mortgages who should not have
had to be there, because those mortgages are more expensive are
more likely to find themselves in trouble if an economic downturn
hits them.
The fact that subprime mortgages are disproportionately given to
people who are African American or Hispanic merges into, as we
say, the problem of the foreclosure rate.
Now let me address one question right away. I don’t know why
I say, ‘‘let me,’’ because no one would stop me. I don’t know why
we say those things, but I do want to address one question, which
is, well, some people say, you know, they made their own mistake,
the people who took out those mortgages, so why are you intervening?
Well, for two reasons. First of all, if you read today’s New York
Times, and yesterday’s, you will see that the urging of the Secretary of the Treasury, and I believe also the president of the New
York Federal Reserve, the three largest banks in this country have
come together to form a consortium to help bail each other out.
That is, the notion that there needs to be some government inter-

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3
vention to help out is not restricted to people who took subprime
mortgages.
Secondly, as we just said, the subprime mortgages were not randomly given. There are people who because of their race or ethnicity got subprime mortgages when they would have qualified by
any reasonable standard for a regular mortgage.
Third, there was, to some extent, some deception. Now, most of
the people who grant mortgages are honest. Part of our problem
has been that because of a lack of regulation in one sector of our
economy, there were mortgages granted by the unscrupulous minority of people who originated mortgages with no regulation to
protect people. So, people, in fact, were put upon, they were misled,
they were deceived.
Finally, and this goes back again to the discriminatory aspect in
part, subprime mortgages, and the foreclosures that result therefrom were not, and are not, randomly distributed. What that
means is that the foreclosures hit particular neighborhoods harder
than other neighborhoods.
I represent a variety of communities, as do my two colleagues.
Subprime foreclosures are not a serious problem in Wellesley, but
they are a serious problem elsewhere, but here’s the problem. If
you are a hard-working woman, making $40,000 a year in this
economy, and doing everything you can as scrupulously and as
carefully as you can to pay your mortgage, but the house across the
street goes into foreclosure, and the house four doors down goes
into foreclosure, pretty soon you have a problem. And, I would salute the Boston Globe, there was a very good article on the front
page of the Globe, I think, a week ago Sunday about what is happening in Lawrence, and it is, unfortunately, not the only city in
which this happens, where foreclosures have negatively affected
not just those whose houses were foreclosed upon but others as
well.
So, we are dealing here with the dual problems of discrimination
and of foreclosures.
I would just make one announcement before I turn to my colleagues. We will be meeting—and I have been working with Mayor
Menino on this, and with Governor Patrick; I know the Governor
has made some announcements about some efforts to try to help
out with the foreclosures—a week from Friday, and we’ll have more
details on that, at the Federal Reserve Bank, and we have arranged this with Jim Siegel, my special counsel, who will be working on this. We are going to ask, not too politely, all of the lenders,
all of the servicers, all of the people who hold the mortgages, to
come to meet with various neighborhood advocate groups. We will
have the FHA there. We will have Fannie Mae and Freddie Mac
there. We will have officials from the city and the State there, and
from the Attorney General’s office, who has been taking a very active role here, and we hope that out of that meeting a week from
Friday will come some concrete agreements and some concrete
steps people will know they can take to alleviate this kind of problem, because the foreclosure issue is one that threatens, as I said,
not just those upon whom the foreclosures will hit, and they deserve some help, many of them, but others as well.

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I did save one last point. A year ago, there was a lot of talk in
the country about the need to deregulate. We were told that if we
didn’t cut back on regulation every corporation in America would
go to England, where they would be more nicely treated. By the
way, in England they just raised the taxes on private equity, so
maybe they are not going there so much.
But, we have had mortgages originated by two groups in this
country. Mortgages have been originated traditionally by regulated
entities, banks and credit unions, and if only banks and credit
unions regulated by the FDIC and the State Bank Commission, or
the National Credit Union Administration, etc., etc., if they were
the only originators of mortgages we would not have a crisis, because the rules under which they operated prevented many of these
abuses.
We have a wholly unregulated sector—the mortgage brokers.
Now, most mortgage brokers are perfectly honest and decent people. It’s not that they have more people who want to cut corners,
it is that for the minority who might want to cut corners, they were
subject to no checks and balances, and so what we had were mortgages originated by an unregulated sector, and then in turn sold
in an unregulated way into a secondary market, so that the concerns people had with the payments not being made got dissolved.
And, one of the things we will be doing on this committee, my
colleagues and I have been working on this, going forward we plan
to adopt a law, a Federal law, that will cover all mortgage originators with the same set of rules that have applied to those regulated
entities, and we will also be putting some rules on those who syndicate these into the secondary market.
Essentially we are saying that there are mortgage loans that
shouldn’t be made, a very exotic concept—don’t lend people money
if they can’t possibly pay it back. Apparently, that’s surprising to
some people, but that’s going to be a rule. And then to the
servicers, don’t sell into the secondary market mortgages that
never should have been made in the first place.
Those are the rules we are going to enact.
So, with that, let me welcome our officials, and let me turn to
my colleague, in whose district we now sit, the gentleman from
Massachusetts, the former Mayor of Somerville, who is very well
aware of these problems. He has been a leading advocate in fighting for the housing needs of the Commonwealth, Mike Capuano.
Mr. CAPUANO. Thanks, Barney.
First of all, I want to thank you all for being here today. This
is an important step in the process. In Congress, we don’t do anything until we have a sufficient number of hearings, and we get
enough people convinced to actually take action.
I’m not going to reiterate what Barney said about the substance
of the issue, and I also know that there are many people in this
room who actually know the details of the issue more than I do,
but I do want to say one thing very, very clearly. In the last 9
months, a lot of my friends in this district have said to me, well,
what’s the difference, Congress hasn’t changed, Washington hasn’t
changed, we voted for Democrats and what happened.
Well, here’s what happened. We are here today making another
step in the right direction on an important issue that affects people

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5
at the bottom end of the socio-economic scale. I guarantee you, on
my father’s soul and on my childrens’ souls, this hearing, this
issue, would not be on the table, would not be making progress, if
there wasn’t change in Washington last November that you helped
to bring.
And, I understand that some people want more change, as I do,
as I will speak for my colleagues, as all three of us here do, but
we do what we can, and we cannot do anything unless the voters
of America stand up and say they want a government that is activist, they want a government that watches out for the interests of
regular people.
Now, we take it for granted here in Massachusetts, particularly
in the greater Boston area, we take it for granted that all of our
public officials care about that. Well, I will tell you, I’m sure you
have been watching Washington over the last dozen years, and
that has not usually been the case. There are those of us in the
minority who voice it strongly that we want these things to happen. We did not talk about subprime loans on the Financial Services Committee in any serious way last year, when Republicans
were running the Congress. This year, with Barney Frank as the
chairman, not only are we talking about it, but we are taking action and we are going to make a difference this year. That is a
major, major change in Washington, because you and the rest of
the American people stood up and said, ‘‘Enough is enough.’’
So, for me, we are here today to learn a few more details, but
I’m here today, really, to say thank you and to remind you all of
the actions that you took to make this change possible, to make
this progress possible, and, please, in any way, it will probably
never be enough, but in any way, if you don’t recognize the dramatic change that has happened in Washington in the last year,
and, hopefully, will continue to happen over the foreseeable years,
is major and will make our lives better.
Thank you for being here.
The CHAIRMAN. Next, another very strong advocate for the housing needs of the citizens of both his district and the whole Commonwealth and, indeed, the country, Representative Steve Lynch.
Mr. LYNCH. Thank you, Mr. Chairman.
First of all, I want to thank Barney for holding this hearing on
mortgage lending discrimination in the City of Boston. The pattern
of discrimination revealed by the Home Mortgage Disclosure Act
data requires our utmost attention.
Just so you know, the 2005 HMDA data, like the 2004 data, did
reveal that Blacks and Hispanic borrowers in the City of Boston
are more likely to obtain loans with prices above the pricing
thresholds than are non-Hispanic Whites. And sadly, in greater
Boston and throughout Massachusetts we have discrimination
numbers that are much higher than the national average.
I was disturbed to learn from Mr. Campen’s testimony at a previous hearing, and his written testimony today, that from 2003 to
2005, 77 percent of the loans provided to Blacks in greater Boston
were concentrated in a small number of communities, not only in
the City, but also in three other districts—three other towns in my
district, Milton, Randolph, and Stilton. At the same time, we have
seen a dramatic decrease in CRA loans, Community Reinvestment

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Act loans, that require a diversity of outreach by the lenders and
actually scores the lenders on their ability and their willingness to
spread to non-traditional employees the benefits of fair mortgage
lending.
I am particularly pleased to have a constituent of mine here to
testify on the second panel, Ginny Hamilton. She is the executive
director of the Fair Housing Center of Boston, a group that does
great work in fighting illegal housing discrimination in Essex, Middlesex, Norfolk, Plymouth, and Suffolk Counties in Massachusetts.
As part of their mission, the Fair Housing Center researches the
documents and nature and extent of housing discrimination, as
well as fair housing impacts on public policies.
Ms. Hamilton will testify today—she has a report that is available, ‘‘The Gap Persists: A Report on Racial and Ethnic Discrimination in the Greater Boston Home Mortgage Lending Market.’’ And
I think it is very telling, her report; it indicates that there were differences in the treatment of disadvantaged minority home buyers
in 9 out of 20 matched pair sets, so what the Fair Housing Office
does is sends out people with, basically, the same criteria, going in
to lenders to see if they are being treated differently because of the
color of their skin.
And, what’s going on, and what this report has shown, is that
when Latino and Black applicants walk in, 9 out of 20 cases, it is
showing a positive correlation to their race, in terms of getting a
mortgage at fair terms.
So, that’s an alarming statistic, and I think it serves as a basis
for the work that we are doing—45 percent of the time we are seeing a discriminatory impact based on race in the availability of
mortgages in the City of Boston.
Lastly, I would say, as Chairman Frank has already indicated,
we have a couple of things that we are trying to do here today.
Number one is to make sure that we can provide some relief for
people who have found themselves in this position, who are at risk
of foreclosure, and who have no place to turn. I compliment the
Governor on his work with the Mass Fair Housing Agency to help
address part of that problem.
The other problem is a moral hazard that we have, and the
chairman has talked about this before. We want to provide relief
for the families who have been victims here. We do not wish to provide relief for mortgage companies that came in and tried to take
advantage of these families. So, we have to make sure that the
tools that we provide to correct this imbalance, that the relief goes
to the families who have been most affected.
And, with that, I’ll yield back the balance of my time.
The CHAIRMAN. Thank you, Mr. Lynch.
Mr. Lynch makes one point that I want to just announce. One
of the things that we have seen happen over these 20 years or so
is that the Community Reinvestment Act has been diminished, not
by anybody’s deliberate action. When the Community Reinvestment
Act was first passed, most of the lending was done by banks. In
the years since then, a number of other financial institutions have
stepped in, and one of the things this committee will be doing next
year is to begin some hearings, and I hope write some legislation,
that will extend the reach of the Community Reinvestment Act so

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7
that we will get back to the percentage of economic activity that
it was originally supposed to cover.
With that, I’m going to begin with our panel of witnesses. I am
very grateful to these three very busy and important officials for
taking the time to come and join us today. All three have been
leaders, not just here, but nationally, in addressing these various
problems, and we will begin with the Governor of Massachusetts,
Governor Patrick.
STATEMENT OF THE HONORABLE DEVAL L. PATRICK,
GOVERNOR, COMMONWEALTH OF MASSACHUSETTS

Governor PATRICK. Thank you very much, Mr. Chairman.
Is that all right? Can everybody hear me who needs to?
The CHAIRMAN. Well, I can, but I’m 10 feet in front of you. I don’t
know about the people 200 feet back here.
Governor PATRICK. How’s that, is that better? Okay.
Mr. Chairman, thank you very much, to you, and Congressman
Lynch, and Congressman Capuano, and the members of your committee who are not here, for caring about this issue, and for convening here in Boston so that we can talk about the challenges and
what we are trying to do to help meet them.
First of all, if you will permit me, I’ll just submit my written testimony for the record.
The CHAIRMAN. Without objection, all of the written statements
submitted by any of the witnesses, as well as members of the audience, will be made part of this official record.
Governor PATRICK. Great.
And, I’ll just try to focus on some of the things that we are trying
to do at the State level here in Massachusetts to address the issue.
You know what the issue is, foreclosure rates are up 76 percent
in just the last 12 months here in Massachusetts, 25,000 foreclosures have been initiated in the last 12 months here in Massachusetts. It’s a serious challenge, and it’s a primary concern of our
administration.
Although the complex issues surrounding foreclosure and abuses
within the mortgage lending industry are national in scope, as you
and your colleagues have laid out, there are important steps that
can be taken at the State level to protect consumers, while maintaining a viable, competitive mortgage lending industry in Massachusetts.
I want to thank you for allowing me to share with you some initiatives we are undertaking to provide comprehensive short-term
solutions to assist homeowners, and to develop long-term strategies
to prevent foreclosure crises and address potential disparities in
loan access and pricing.
First of all, in April of this year, I directed our Division of Banks
to seek, on a case-by-case basis, brief stays for consumers who were
facing imminent foreclosures. The goal was to provide some time,
allowing the division to refer homeowners to reputable homeownership counseling firms, and encourage mortgage lenders and services to use this time to work with homeowners who are unable to
make their mortgage payments.
To date, through a hotline we established to help homeowners
gain access to our services, the Division has fielded over 1,000 Mas-

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8
sachusetts residents’ calls, who are either in the foreclosure process
or having difficulty maintaining their mortgage obligations, and
we’ve secured voluntary stays in half of those cases so far.
Mass Housing, in collaboration with Fannie Mae, and I appreciate your calling attention to this, Congressman Lynch, has designed and implemented one of the most aggressive foreclosure prevention programs in the country. The program includes $250 million, a commitment that includes $190 million in funds from
Fannie Mae, and $60 million in a contribution from Mass Housing
through the sale of bonds. In other words, no taxpayer money is
used for this program.
Through the program, borrowers may be up to 60 days delinquent with credit scores as low as 560 and still be able to refinance
their existing mortgage loans under manageable terms. That’s
1,000 homes—1,000 homes—and we ought to be doing more of this.
Through our Division of Banks, Massachusetts will be one of the
first States in the country to implement a nationwide database of
mortgage professionals. Nearly 4 years in the making, the system
goes live on January 1st of next year, to provide a uniform application process for mortgage lenders and brokers operating across
State lines, and will be a central repository of information about licensing and enforcement actions. The database will substantially
improve the existing regulatory framework and reduce fraud on a
nationwide basis.
We have also filed legislation in June of this year to criminalize
mortgage fraud, prohibit abuse of foreclosure rescue schemes, and
update various provisions of the laws that currently govern the
foreclosure process here in the State. The bill also establishes a
central repository of foreclosure information at the Division of
Banks to allow us to track foreclosures by product, geographic region, originator, broker, and lender, so that we can watch for patterns and anticipate where trouble may come.
Furthermore, the legislation prohibits a lender from making an
adjustable rate subprime loan unless a consumer affirmatively opts
out of a fixed-rate product, and completes a home buyer counseling
program, and we look forward to working with the legislature to
enact this legislation. It was submitted and heard in a public hearing just last month.
In addition, we continue to support legislative initiatives to license mortgage loan originators and extend provisions of the Massachusetts Community Reinvestment Act to certain licensed mortgage lenders. The establishment of a CAR-like requirement for
non-bank mortgage lenders will result in public evaluations and
ratings summarizing non-bank lenders’ performance in meeting
housing credit needs in compliance with State and Federal fair
lending laws.
I believe this increased level of scrutiny will significantly decrease the impact of the disparities in mortgage pricing.
Finally, my staff and I have held ongoing meetings with lenders,
industry trade groups, community and housing advocates, and others, to discuss possibilities to assist home buyers, and homeowners,
and housing counselors. It’s clear that a comprehensive response to
the complexity of these problems of foreclosure and mortgage lenders lending abuses will require the ongoing participation of mort-

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9
gage lending industry members and other non-governmental entities, as well as our State government. We continue to work with
all participants in the mortgage lending process to discuss and determine what further steps can be taken at the State level.
In an effort to expand on some of these initiatives, we will later
this week announce six municipalities who will take part in a pilot
program designed to cover a range of possible needs for homeowners, especially vulnerable homeowners. We’ve developed a fivepoint plan to bring together government, lenders, homeowners, and
nonprofits to develop and raise awareness about alternatives to
foreclosure, to create support systems for transition assistance
where necessary, and keep neighborhood homes occupied. The plan
is based basically on outreach, best practices, rescue products,
neighborhood stabilization—a very key point that you raised in
your opening remarks, Mr. Chairman—and transition assistance.
The six cities and towns will be selected based on number and concentration of foreclosures to date, as well as the overall fiscal needs
of the region.
Through that program, we’ll be able to implement and refine
strategies to help homeowners stay in their homes and keep communities stable, sound, and safe.
I want to thank Secretary Dan O’Connell, our Secretary of Housing and Economic Development, and Undersecretary for Housing,
Community, and Community Development, Tina Brooks, for their
leadership within our government.
I also want to acknowledge and thank the cooperation and partnership we have had with the Mayor and with the Attorney General, who have been just wonderful on these subjects.
We have been fortunate to work in collaboration with various
concerned members of the Massachusetts legislature as well, and
we are making a coordinated effort in Massachusetts and look forward to working with Federal authorities in any way that we can
to keep people in their homes, and to keep families and communities as stable as possible.
Thank you very much for having us participate today.
[The prepared statement of Governor Patrick can be found on
page 119 of the appendix.]
The CHAIRMAN. Thank you, Governor. I just want to echo your
last point, it is important that all levels of government—Federal,
State, and local—work together. That is why I am particularly glad
that we have this panel, and I am very pleased to welcome the
Mayor here, both as a sign that we all work together, and also for
those people who frequently confuse me and the Mayor, I want to
dissuade them. We are two separate people, but we are both working on the same project.
Your Honor.
STATEMENT OF THE HONORABLE THOMAS MENINO, MAYOR,
CITY OF BOSTON

Mr. MENINO. Well, thank you, Mr. Chairman.
You and I think alike on issues, that’s one thing, and I thank
Congressman Lynch and Congressman Capuano for being here.
This is a very important meeting this morning. I appreciate your

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leadership on these lending issues, especially when those lending
issues affect the consumer.
Before I begin, Congressman Frank, let me congratulate you for
your tremendous success in passing the National Affordable Housing Trust Fund in the House. It’s a tremendous opportunity for us.
I hope you get your Senate colleagues to move this bill in just
half the time that it took to get it through the House. I know with
your determination and drive you will show the Senate how to do
this, and it’s very important that we do this on a national level.
We are here today to discuss discrimination in mortgage lending.
I can’t tell you how frustrating it is, after all these years, and after
so much work on the part of government, consumer organizations,
and corporate America that we even have to have a hearing like
this. So, here we are, truly part of a marathon, not a sprint, to
bring equality to all Americans.
I want to acknowledge the important work of the Massachusetts
Community and Banking Council, the academic community, and
people like Joe Cappan and Bill Abgar. Their years of research
have quantified for us disparities in lending, so let’s listen to some
of their findings.
In Boston, in greater Boston, throughout the Commonwealth,
high-priced loans account for over half of the home mortgage loans
of both Blacks and Latinos, and Congressman Lynch also took note
of that.
In Boston, the four neighborhoods with the highest percentage of
minorities—Hyde Park, Mattapan, Roxbury, and Dorchester—received more high-cost loans than the other neighbors in our City.
Borrowers are grouped by race and income level, and the proportionate share of high-cost mortgage loans is constantly higher for
Blacks and Latinos than for Whites at the same income level.
One last piece of information from the Mass Community and
Banking Council, here are the lenders who are among the highest
providers of high-cost loans to the neighborhoods of Boston:
Ameriquest; Fremont Investment and Loan; Countrywide; New
Century; and Option 1. I really get angry when I look at these
data, not just because families who are affected are paying more
than they should, but also because I see the impact these high-cost
loans have on our residents and our neighborhoods. When foreclosures increase, properties are often left vacant, as investors and
their services refuse to acknowledge market realities. They hold out
with sales prices that are not realistic. That has happened in Hyde
Park, Mattapan, Roxbury, and Dorchester, the very area where
high-cost loans prevail.
Now, who are the top lenders—I mentioned them before—who
are doing the damage in Boston? They are the ones who have the
very high-cost lenders.
In the past, we have seen them board up properties, bringing
down the value of other homes in the area. We don’t want to slide
back to where we were in 1992 when housing values hit the skids
for 3 decades of selling for less than $100,000. The lending industry
has changed since the 1990’s. Our lenders, the banks, have a much
lower share of the market, about 20 percent. In their place have
come non-traditional lenders offering teaser rates, expensive loans
that rely on the promise of future refinancing, and high fees.

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No one at the front end cares about the long-term performance
of these loans. It’s all about short-term gains, taking the fees and
sending the high-cost mortgage forward. Now it seems like Boston,
Brockton, Lawrence, and hundreds of communities across the country are paying the price for these lending malpractices which are
out of control with little oversight.
Foreclosures have increased in Boston, but our City has fewer
foreclosures than any other city in the State. I attribute our relatively good numbers to the efforts that are put into home buyer
education and foreclosure prevention.
Our foreclosure prevention program, Don’t Borrow Trouble, has
been helping homeowners since 1999. Ten years ago, I established
a Home Center, a one-stop shopping place for home buyers. We
offer information on mortgage products and sponsor home buying
education classes, and require home buyers to take part in certified
classes in order to receive city down-payment assistance. More
than 4,400 people have participated in this program, predominantly, low and moderate income, have bought homes in Boston,
after completing our classes and receiving our financial help.
Notably, the foreclosure rate for this group is less than 1 percent,
compared to the market foreclosure rate in Boston of 2.5 percent.
Now, who receives our financial assistance? 40 percent are Black,
20 percent are Hispanic. Our graduates are proof that minority
families can succeed at homeownership. Our classes teach people
to become savvy buyers, choosing reputable lenders, and asking the
right questions.
Based on our experience, I recommend the following. The mortgage lending industry must re-commit itself to home buyer education, so every time buyers—first-time buyers have the opportunity to complete a certified course, much like those offered
through the Home Care Center.
Congress must do everything in its power to continue to shed
light on disparities in lending by non-traditional lenders, much like
we are doing today with this hearing. I urge Congress to support
more natural efforts, such as Freddie Mac’s Credit Smart Program
which provides families with the competence and knowledge to succeed financially, because poverty should not be a life sentence.
I further recommend that the Massachusetts State Legislature
support pending legislation that requires mortgage companies, licensed in Massachusetts, to comply with laws that require them to
meet local credit needs.
For many years, I have supported this legislation. It has become
more important now that non-bank mortgage lenders provide most
of the home mortgage loans in the State.
Finally, I recommend that our community organizations become
proponents of consumer education, all aspects of consumer lending.
This means that financial literacy would be as common as driver’s
education for new drivers, with information offered through workshops, public service announcements, and adult education.
Thank you for your thoughts on this issue, and I want to say
that this issue, once again, plagues the most vulnerable in our society. There are folks who go out there and sell these mortgages to
these individuals with a blue note, you know, low down payment,
no interest, and 5 years later you get whacked.

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12
Mr. Chairman, and your committee, thank you for listening to us
today. It’s an important issue and it affects all our neighborhoods.
[The prepared statement of Mayor Menino can be found on page
112 of the appendix.]
The CHAIRMAN. Thank you, Mayor. I just want to emphasize to
the Governor, the Mayor, the Attorney General, local officials, and
others Members of Congress that this hearing is not a one-track
deal. This is part of a sustained cooperative effort at all levels to
make this thing work.
Next, another official who has taken a real lead in this, in setting
a national example, the Attorney General of the Commonwealth,
Martha Coakley.
STATEMENT OF THE HONORABLE MARTHA COAKLEY,
ATTORNEY GENERAL, COMMONWEALTH OF MASSACHUSETTS

Ms. COAKLEY. Thank you, Chairman Frank, Congressmen Lynch
and Capuano, and my colleagues, Governor Patrick and Mayor
Menino, for your comments today and for your ongoing efforts in
this State to address what we can.
I appreciate the opportunity today to address the critical issue of
mortgage lending and foreclosure crisis, and, particularly, the issue
of racial and ethnic disparities in mortgage lending.
I had the privilege of taking office to serve as Attorney General
in January of this year, with the rising wave of home foreclosures
that continue to have a devastating impact on the people and communities across Massachusetts. And, if the statistics are true, we’ll
continue to in the next few years. We have not seen the worst of
this in some respects.
We began to take a multi-faceted approach consistent with my
role as Attorney General that has four prongs. We began investigations and enforcement actions, civil litigation, to hold accountable
those who engage in unlawful predatory lending or foreclosure conduct, including lenders, brokers, closing attorneys, appraisers, foreclosure rescue scam artists, and others who cross the line of fair,
lawful lending practices.
After hearings across the State this summer, we are promulgating, very shortly, more comprehensive and finely-tuned mortgage broker and lender regulations, based upon our authority
under the Massachusetts Consumer Protection Act, Chapter 93A.
Working with the National Consumer Law Center, the Boston
Bar Association, and others, we created a pro bono lawyer referral
service, so those facing foreclosure, potentially, could have access to
legal advice that otherwise would be unavailable, and we appreciate the Governor’s incentives and initiatives in this area where
we have cooperated trying to provide legal assistance to people who
can get it under the current law.
We continue to work with State and Federal legislators, regulators, and law enforcers to seek solutions for the present lending
and foreclosure crisis, and our role also is to look at preventing a
recurrence in the future.
I want to commend Mayor Menino for his work in the financial
literacy area. I think that’s extremely important that we able to
focus on that.

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We did, as a result of what we thought was an immediate crisis,
issue an emergency regulation that under Chapter 93A bans foreclosure rescue schemes that are unfair and deceptive. We just recently made that a permanent regulation, and we will shortly
issue, not only a report as a result of our hearings this summer,
which the Mayor attended, many other legislators and individuals
in Massachusetts, but four additional regulations under Chapter
93A, one of which may help address the issues that we’re talking
about today, because it will prohibit mortgage lenders from steering borrowers to loan products that are more costly than those the
borrower qualified for, and it prohibits lenders from discriminating
between similarly situated borrowers, one of the reasons that we
face the problem we do, particularly, in our minority communities
today.
In our efforts this summer, we have gone across Massachusetts.
We have talked with victims of unfair, deceptive, and illegal lending practices, as well as those who have been victimized, doubly
victimized, by the foreclosure rescue scams.
And, we have had, we’ve seen in the last 180 days in Boston
1,000 home foreclosures. They’ve been clustered in low-income and
minority neighborhoods, particularly, in Dorchester, East Boston,
Mattapan, Hyde Park, and Roxbury. For example, in Mattapan,
which is 77 percent African American and 13 percent Latino, from
January of 2006 to May of 2007, there were 164 closures out of a
total 479 loans.
The disproportionate impact of foreclosures on minority communities may be a predictable, but no less disturbing reflection of the
fact that African American and Latino borrowers are more likely
to get high APR adjustable percentage rate loans than their White
counterparts, regardless of their income level. This fact has been
confirmed by the Federal Reserve Board, with its release last
month of mortgage lending data under the Federal Home Mortgage
Disclosure Act, or HMDA as referenced earlier.
Before addressing that 2006 data, I just want to acknowledge the
work, and I know you will hear from him later, Professor Jim
Campen and the Mass Community Banking Council, analyzing
that information, as he mentioned earlier this year, year after year,
in a way that may have seemed fruitless, but, certainly, is extremely important to the work we do today and the work we will
do tomorrow, on this issue of lending and racial disparities.
In greater Boston, the high APR share for African Americans is
nearly 4 times greater than the share for Whites with respect to
home purchase loans, and 3 times greater for finance loans. Among
Latino borrowers, the share of high APR home purchase loans is
4 times higher than for White borrowers, and the share of high
APR refinance loans is 3 times higher.
These patterns are present at all income levels, with the racial
disparities becoming more pronounced among higher income borrowers. In Boston, only 9.4 percent of the highest income White
home purchase borrowers received high APR loans. In contrast,
71.1 percent of the highest income Black home purchase borrowers
received high APR loans. The figure was 56.2 percent for the highest income Latinos.

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14
The 2006 HMDA data released in September indicates similar
nationwide trends, and the analysis revealed substantial differences across racial and ethnic lines in the incidence of higherpriced mending, and in denial rates. Further, it showed that such
differences could not be fully explained by factors in the HMDA
data.
The fact of racial and ethnic disparities in mortgage lending and
in foreclosures is clear. The reason for these disparities are less
clear, I will acknowledge that, but the complexity of this issue
should not be underestimated. We cannot ignore economic factors,
but neither can we ignore a history of housing discrimination and
resulting segregated housing patterns, imbalanced and unequal access to financial services, and discriminatory lending practices.
Let me just give you two quick illustrations of the people behind
these numbers. We just recently brought a civil suit against Fremont. It is pending. The allegations are just that, but we have alleged that Fremont, who originally approximately originated approximately 15,000 loans to Massachusetts borrowers since 2004,
and it’s set forth in that complaint, Fremont used a network of brokers and sales people to sell unduly risky loans that were designated to fail, including loan products with 100 percent financing,
stated income loans and adjustable rate mortgages with dramatic
increases in monthly payments after 2 or 3 years.
Borrowers were qualified for adjustable rate mortgages based
upon the initial teaser low interest rate without regard to their
ability to pay the higher adjustable rates which would increase
every 6 months.
One Fremont customer lives in Dorchester. She’s a single mother
of three children, and a mortgage broker steered her to Fremont
to finance the purchase of two multi-family homes. Fremont approved her for two loans, despite the fact that her total monthly
income was $1,800. Her broker promised her that she’d be able to
reduce her mortgage payments through refinancing, and induced
her to sign a blank loan application which the broker used to submit false information about her employment and monthly income.
She was discouraged from hiring counsel by her broker. She
learned for the first time at closing that her monthly mortgage payments would be more than $7,000 a month, and could adjust from
her initial interest rate up to 14.65 percent.
Although Fremont, obviously, should have known she did not
qualify for the mortgage, Fremont paid the broker over $7,000 for
arranging that mortgage. Fremont then passed this cost on to her.
Another Fremont borrower resides in Dorchester, and purchased
a multi-family house by taking out a Fremont loan. Although she
filled out a loan application listing her salary of $2,000 a month,
she received letters from Fremont stating her mortgage payments
would be more than her entire monthly salary. She called her
broker to say she could not afford the mortgages and did not want
to go forward. Her broker told her the letters were wrong, her
monthly payments would be lower. When she attended the closing
and saw the fees, she initially refused to sign the papers, but Fremont’s lawyer told her it was too late to back out and she would
owe the money anyway. In her efforts to pay her mortgages, she

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15
depleted her entire life savings and then lost her home to foreclosure.
These are just two of the thousands of people in Massachusetts
who have lost their homes and their savings as a result of irresponsible and in some cases illegal lending practices in recent years.
I want to make an additional request to our panel today, and I
would like to address the issue of Federal preemption, respectfully
ask this committee to consider whether a return to the well-tested
dual enforcement roles of the State and Federal Government would
better serve both consumers and responsible lenders.
Increasingly, the traditional and critical role of the States in ensuring fair lending is challenged by those who argue the rule is
preempted by Federal law. In fact, recently, when New York, the
New York Attorney General began an investigation, the OCC, the
Office of the Comptroller of the Currency, argued that he could not
do that because he was preempted by Federal law. A recent Supreme Court decision upholds those findings and said that the New
York Attorney General could not issue subpoenas or inspect books
and records, because it was not within the scope of his responsibility anymore to institute actions in the Court of Justice against
national banks to enforce State fair lending laws.
It is increasingly important, I think, that we be allowed to do the
kinds of enforcement that we have done so far, but we are stopped.
As Mayor Menino noted, of the five top lenders in Massachusetts
for subprime mortgages, only one of them, Fremont Investment and
Loan, against whom we have filed suit, is under our jurisdiction.
The other are nationally chartered banks and we have no authority
to investigate or to bring lawsuits against them.
In order to best address this, we would ask that the committee
give serious consideration to restoring the effective dual Federal
and State enforcement role by limiting in certain circumstances
Federal preemption.
Finally, Congressman Frank, I appreciate your efforts to expand
reporting under HMDA. Unless we have the data, we can’t know
where this is going. We see the statistics. We see the impact. We
need the data.
We also know that credit scores are one of the several variables
that logically should be reported by lenders to the Federal Reserve
Board for inclusion in that data.
Finally, we understand that the public has not had information
about how interest rates below the threshold are distributed.
Banks do not report points, pre-payment penalties, loan to value
ratios, or the debt to income ratios. All of these variable and more
could help enforcement authorities to better understand the critical
issue of racial and ethnic disparity in mortgage lending.
We must act at the State and Federal level to address these
abuses now and going forward. I will continue to do so in my role
as Attorney General. I know I will have the cooperation of my colleagues today, the Governor and Mayor Menino, and we appreciate
that you and the members of this committee are taking this so seriously.
Thank you for your opportunity to testify today.
[The prepared statement of Attorney General Coakley can be
found on page 84 of the appendix.]

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16
The CHAIRMAN. I want to assure you, Attorney General, first of
all, that many of us on the Democratic side were very unhappy
with the degree of pre-emptiveness which the Comptroller of the
Currency and has engaged in.
As a practical matter, we would not be able to totally undo that.
I can give you two encouragements. First of all, we will, in the legislature and our committee, have dual relationships. We will have
a set of rules that will apply to brokers, but where the States have
good rules in place we will defer to them, that is, we will set a Federal floor.
And secondly, there’s a very important case now pending that
you are probably familiar with out of Ohio, where the Office of Peer
Supervision was overruled on a preemption case, and allowed the
State to regulate the mortgage broker, was upheld, and we are in
the process of urging the Office of Peer Supervision not to appeal
that case, but to allow that and continue that.
Mr. Capuano.
Mr. CAPUANO. Mr. Chairman, I don’t have any questions, I just
want to thank the three panelists. I mean, I’m familiar with all
their work, and it’s not just now. I want to make it very clear that
the three of them that I know of have been working at this stuff
for a long time.
And, I can’t tell you how proud it makes me to come from Massachusetts and the greater Boston area to have people like this representing me, and working on our behalf, because as we all know,
I want to draw a nice big bold line under this, we will get through
pretty much whatever legislation Barney wants us to get through
with the House. And, people need to understand that. And, I can’t
tell you how beneficial that is for all of us. But, we will have difficulties probably in the Senate, and we will have significant difficulties in the White House for another 18 months or so.
So, therefore, some of the things, typically, like preemption, I
don’t know whether we’ll actually succeed in doing some of the
things that we want to do. We’ll get them through the House with
no question, but I just don’t know how far they are going to go.
And, it becomes very important that the three of you and others
are doing this as well, actually continue to proceed as strongly and
as vehemently as you can, and we will do everything we can to
help you and support you.
I also want to, again, reiterate what I said earlier. I was talking
about the Congress, but I want to point out very clearly that the
Governor is a representation of significant change. Many of the
people in this room know that the concern about subprime loans
is not new. Now, some of the results of that concern have only been
seen in the last 6 to 9 months, or a year, but the concern has been
there for many, many years, for those of us who have watched this
issue grow.
And, I will tell you, unequivocally, that last year, and the year
before that, and the year before that, the Governor’s office and all
his appointees really didn’t react, and the fact that this Governor
is new and reacting so strongly, and so positively, I think is a great
thing for all of us and I want to thank the Governor for participating like this.
Governor PATRICK. Thank you.

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The CHAIRMAN. Representative Lynch.
Mr. LYNCH. Thank you, and again, thank you for your willingness to come here and help the committee with its work.
One of the frustrating parts about this, the whole problem with
the foreclosures, and the subprime market, is the speed of response. Now, we heard on our committee from the Bush Administration about things they are going to do in the future, but all of
the relief that we’ve heard them talk about has been prospective.
They speak nothing about the families who have already been hurt,
and that’s very troubling.
In fact, the only, I think, real-time response that we’ve seen in
this has been from the three of you, in terms of legal action against
Fremont, the work with HMFA, the Mass Housing Finance Agency,
coming up with that money, and the work that the Mayor has
done.
One of the frustrating parts of this is that the time that it’s taking to help the families who are going under is maddening, it’s
frustrating, and are there tools that we might be able to provide
to you, are there things that we could be doing to help you on the
local level, since it’s taking so long to convince this current Administration of the urgency of this matter, are there things that we
could help the three of you with in terms of freeing you up?
I know, Attorney General, you mentioned some of the reporting
requirements, and those are good once they are in place, but are
there things that we could be doing now to help you step in in a
quicker fashion to save some of these families’ homes?
Governor PATRICK. Well, I just thank you for the opening, Congressman. First of all, on the rescue fund and Mass Housing’s contribution, that would not be possible or as effective without Fannie
Mae’s participation, and I know that the chairman was helpful in
getting Fannie Mae to pony up and, frankly, it would be helpful to
get them to pony up some more. We’ll be working with Mass Housing to do that, because the refinancing opportunity, creating terms
that allow families to stay in their homes, seems to me to be the
first order of business.
Now, not all of that has to be done by rescue funds like the Mass
Housing Fund. Some of that has to be taken on by lenders themselves, willing to refinance the terms.
And so, I congratulate the chairman and all of you for calling together the various stakeholders at the Fed soon to start to juggle
around that. But, there’s no doubt about the fact that having funds
available to help with refinancing, or your additional pressure on
some of the lenders together with us to refinance those loans so
people can stay in their homes is very, very effective and helpful.
The CHAIRMAN. Mayor?
Mr. MENINO. The Governor is correct. Several months ago, I
brought several of the lending institutions to my office, talking
about the mortgage issue, and they’ve set up a pool of resources together.
We, as elected officials, have that opportunity to bring those individuals, they don’t want us to be talking to them in public, they
want to help us when they see the problem out there, because they
are afraid of the press they are going to get, and it’s important we

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18
use our usability pulpit to make sure that these lending institutions know that we are watching them.
The mortgage companies need some regulations now. We can’t
wait 6 months, 9 months, or 10 months.
The CHAIRMAN. Well, I appreciate that. We put in the usability
pulpit, and if necessary we may be a little stronger to bully all
week on the pulpit. But, we do plan to be as persuasive as we can.
I thank the panel. We will dismiss them now.
The next panel we are going to hear consists of City Councilors
Sam Yoon and Chuck Turner, if they want to come forward, and
we’ll take a brief recess while our three officials depart.
[Recess]
The CHAIRMAN. We will resume the hearing, and we have two
City Councilors, Councilor Yoon and Councilor Turner. I understand Councilor Yoon is an At-Large Councilor, but we are in
Councilor Turner’s district, and he’s my college classmate.
So, on grounds of seniority, we are going to begin with Councilor
Turner, Councilor Chuck Turner who is our host here at RCC.
Chuck?
STATEMENT OF CHUCK TAYLOR, CITY COUNCILOR, CITY OF
BOSTON

Mr. TAYLOR. Thank you very much, Congressmen Frank, Lynch,
and Capuano.
I’m going to try to be very brief and hold my comments within
2 minutes, so that you can have time to hear all the other speakers.
I want to begin just by saying that I really appreciate the way
Congressman Frank framed the issue in terms of pointing out the
discrimination against potential homeowners of color, and how that
discrimination has led to the development of the predatory lending
practice which in the last 2, 3, or 4 years has grown to a level of
greed and financial obscenity that I have never seen in my 67
years.
I’m a member of an organization that was recently formed to
fight back. Obviously, there are other organizations, but we
thought that given the situation we are facing there needed to be
a coming together of organizations, so we formed the Mass Alliance
Against Predatory Lenders.
On Thursday, last Thursday, we held a press conference and set
of demonstrations, a press conference to announce the formation of
the Mass Alliance, but also to give an opportunity to Countrywide
mortgage holders, as well as mortgage holders from other predatory lenders, so that the press could begin to understand what I
think the Attorney General so clearly pointed out, and that is that
the vast majority of these foreclosures are not because people have
been irresponsible, it was because the mortgage companies were irresponsible and criminal in terms of setting up mortgages that
were designed not to succeed.
Because of that, we sent a letter, the Alliance sent a letter to the
head of Countrywide, who, interestingly enough, just sold all his
stock, saying that he and his company had a responsibility as the
largest of these predatory lending companies in this country to restructure the loans in terms that people could afford, that is, that

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they had to do what they should have done before, and that is
make sure that these loans are affordable, and that our only alternative, as the people of this City, and State, and country, if they
aren’t willing to do that, is to shut them down, shut them down
through a boycott.
And so, I’m just using this opportunity to, one, announce that
there is a boycott that has been launched against Countrywide and
other lenders who refuse to restructure the loans in ways that are
affordable and appropriate.
Secondly, we are going to ask the State to move beyond the suggestions that were put forward today. We believe that the State
needs to have a law that would require a financial institution to
go to court in order to exercise a foreclosure.
When you look at these loan agreements, when you hear homeowners who are facing these horrendous situations talk about how
this situation was created with these mortgage companies, it becomes clear that the courts need to be looking at each and every
one of these agreements.
The National Bankers Association has come out with a set of
principles that they feel should guide the writing of these mortgages. They are not being adhered to by many of these companies,
but we believe that a law needs to be passed immediately in Massachusetts that would require each and every foreclosure to go before a judge, and the judge to have a set of standards to use to determine whether that foreclosure is, in fact, a fair one, and if not,
to take action to prevent the company from moving forward.
Thirdly, in terms of Federal actions, we applaud the action to
bring all companies, mortgage companies, financial service companies, under the provisions that are now covering the State—covering banks that are chartered by the Federal Government. However, we think you need to move beyond that. We think there needs
to be Federal protection of the tenants and resident homeowners in
buildings that are foreclosed. You know, and I know, that once the
building is foreclosed, the next step is to go into court and clear the
building so that these institutions can then put them back on the
market to make even more illegal profits, from my perspective.
The Federal Government could play a major role in stopping this
action by having a provision that stops these companies from clearing the buildings. Tenants are paying their rent, and only because
of the actions of the bank to foreclose are they being evicted. These
financial institutions need to be stopped from being able to do that.
And finally, we would call on Congress, particularly the House,
to appoint a special prosecutor to investigate what we think is a
‘‘Mortgagegate,’’ that is, we think that this is a situation where a
group of institutions have worked to misuse our financial system,
and misuse people in this country, and that we need to, in fact, as
a country, and, particularly, the Federal Government, step forward
and acknowledge that this isn’t just irresponsible lending, it’s
criminal action, appoint a special prosecutor. If Milliken could go
to jail for selling junk bonds, then certainly the Wall Street people
and these bankers, who put together these packages of subprime
lending, should be sent to jail for selling junk mortgages to investors, when they knew the mortgage was going to fail.
Thank you.

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The CHAIRMAN. And, now, Councilor Sam Yoon.
STATEMENT OF SAM YOON, AT-LARGE BOSTON CITY
COUNCILOR

Mr. YOON. Mr. Chairman, members of the committee, thank you
very much for this opportunity. I think it’s in line with what has
been said at this hearing, to extend the level of cooperation from
Federal, State, local, and even the local city council level, I think
is tremendously important, and I thank you for this opportunity.
As Chair of the City Council’s Housing Committee, I recently
held hearings on the subprime mortgage foreclosure crisis, which
is one of the topics that you are looking at today.
A lot of the folks who are testifying today had testified at this
City Council hearing as well, too, and I want to thank you for taking the step of having a field hearing on this issue, bringing it to
the community, so that people in the community can bear witness
to the way the government is working together and paying attention to this issue. It’s vitally important.
The City of Boston, while we are not doing as badly in a proportional sense to other cities in the State, has, nevertheless, been
hard hit by this crisis, by the foreclosure crisis, and that’s largely
to do with our size. You know, based on our size and the size of
our minority communities.
I mean, you are going to hear testimony from experts on this
today.
During the hearing that I sponsored on May 7th, it became clear
to me and my Council colleagues that out-of-State mortgage companies were developing business models that feature these aggressive
marketing—featured aggressive marketing of high-cost, exotic
mortgages, to unsuspecting consumers.
And, as the Attorney General laid out, in many cases there was
outright fraud. The idea of these rescue mortgages is something
that is just blatantly wrong and predatory.
And, I support the Attorney General’s efforts to criminalize this
kind of mortgage fraud and predatory lending practice.
It’s great to hear Councilor Turner’s perspective on this as well.
I think that he’s always been a strong ally for us on the City Council, and going to court even to exercise a foreclosure, I think, is
something that’s worth raising as an issue.
Currently, record numbers of foreclosures and auctions are
threatening the stability of Boston’s neighborhoods, and that’s a
large part of the reason why I wanted to have a hearing at the city
level. Stable homeownership and tenancy is an important part of
the city’s ongoing efforts to combat violent crime. Stable homeownership, tenancy, it’s an important part of our efforts to reform
and improve the schools. Homeownership, stable tenancy, is basic
to economic stability of neighborhoods at that level, at a neighborhood and community level. The presence of homeowners is an anchor that creates stability for future generations.
In order to address this crisis, as we are saying here today, legislative remedies are needed at the State and Federal, and even at
the local levels.
I want to thank you, originally, my testimony said I urge you,
but I want to thank you that what you are looking at seems to be

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extending community reinvestment-like requirements on all mortgage brokers and lenders, similar to the requirements that exist for
banks.
It was great to hear Governor Patrick’s testimony that shows
clearly that this is being looked at on the State level, and maybe
legislatively the path to success to some sort of realization will be
sooner, here at the State level.
We have to have comprehensive reporting requirements for all
mortgage lenders in order to review and rate lenders on their performance. The fact that this was triggered in Chairman Frank’s
mind and his office by HMDA data, the Home Mortgage Disclosure
Act, look at what it’s done in order to just be able to say, we need
to have a hearing on this, because the numbers make it clear that
there’s something wrong going on.
So, a CRA style rating system for all mortgage lenders has to be
put into place, and those results must be published every year.
We must also establish annual licensing requirements for mortgage brokers, and require that brokers who are offered high-cost
loans, or borrowers who are offered high cost loans, receive in-person counseling with a qualified nonprofit. We have some of the best
housing nonprofits and advocates in our city, I think nationally. We
should take full advantage of that and, in fact, require it.
We also have to require fuller disclosure of terms for mortgage
advertising, and here again, at a communications level, leadership
at the Federal level for this is going to be essential to realizing it.
Further legislative remedies are needed to round out comprehensive solution to the crisis. I think Congressman Lynch has mentioned this, that there are families who are going through this
right now, or are about to go through it, and we need additional
consumer protection for those facing foreclosure and eviction.
I believe lenders have to give borrowers at least a 90-day period
in which they can correct any ‘‘delinquency’’ and reinstate the loan
before imposing attorney fees.
I think borrowers should have the right to cure mortgage defaults up to the very date of the foreclosure auction.
I think it’s encouraging to hear that you are, basically, going to
call the lenders, mortgage lenders, and even banks, to the carpet
at the Federal Reserve, and I think 2 weeks, as you mentioned,
Congressman Frank, Mr. Chairman.
We should require lenders to work with our housing advocates
and nonprofits, many of which are in this room. As I said, we have
some of the best in Boston. We should provide that relief to borrowers who are facing economic—yes, we’ll wrap up.
In summary, we do need to look for creative solutions to this
problem, and again, cooperation among all levels of government is
absolutely essential.
My office, just to wrap up, has been getting calls from families
who are facing foreclosure every week, and I want to thank the
Mayor, who has been working with us at the city to provide money
to counseling services, referred families to the Mattapan MultiService Center, to ESAC, to Urban Edge, and what I’ve heard
anecdotally is that the workers there who are counseling need to—
Yes, and thank you very much.

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[The prepared statement of Mr. Yoon can be found on page 116
of the appendix.]
The CHAIRMAN. Let me say to Councilor Turner, on the question
of tenants being evicted, I will confess that I was not aware of that.
I was out in August in Minneapolis, at the request of our colleague,
Keith Ellison, and heard that. We have been looking at it.
Unfortunately, there does not appear to be a Federal remedy
now. We have written letters which are going out from our committee to State officials and others urging banks and others who
foreclose not to make that an automatic eviction. The order can
stop them, but it doesn’t make them do it either.
Secondly, and I had this conversation with members of our staff
who were drafting our subprime bill, we are going to write into the
draft of the legislation some protection for tenants. We do want to
make it clear that foreclosures should not eviscerate leases, and we
are going to try to provide some protection for tenants going forward.
So, I thank you for that.
Mr. Capuano.
Mr. CAPUANO. I’m glad you pointed that out, Mr. Chairman, because I would, basically, say the same things. Right now there’s no
Federal hook into the tenancy issues, except some minor things on
the side.
If you can find something that maybe could stand up in court,
we’d be more than happy to work with you, because we understand
fully well it’s a serious issue.
The CHAIRMAN. I’d just say, the other one is a constitution
issue—there’s nothing we can do about a special prosecutor. I
mean, the courts have made that very clear. We can investigate,
but we can’t even hold anybody in contempt of Congress, because
the courts have held that if Members of Congress summon a witness, and the witness declines to testify, even if Congress would
have voted a contempt citation, the Justice Department could decline to prosecute.
But, we will do the other things.
Mr. Lynch.
Mr. LYNCH. Thank you, Mr. Chairman.
I have no questions, I just want to thank both Councilor Turner
and Councilor Yoon for their work. You have been right out in front
on this with tenants and with people who are being affected immediately on this. I want to thank you both for your great work on
it.
And, we, as a committee, will continue to work with you.
I yield back.
The CHAIRMAN. Thank you.
Next, we’ll have our final panel: Mr. Campen, Ms. Hamilton, Ms.
Adams-Heath, Mr. Alkins, Mr. Kennedy, Mr. Clements, and Ms.
Browne.
I want to repeat that if there are any members of the audience,
and I want to repeat again, that we have the statement from
ACORN that Ms. Rhoderick gave us, and I will reassure that one
of our key points about no preemption is going to be—we plan on
that. If there are other organizations or individuals who have statements they would like to submit for the record, please feel free, and

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23
if you came prepared to say something orally, and you are not
ready to hand it in writing, submit it to my office in Newton by
the end of the week and it can be incorporated in the record. So,
we’ll keep the record open. Anyone who wanted to submit anything
further in writing feel free to do that.
And, let’s begin appropriately with Mr. Jim Campen, who is executive director of Americans for Fairness in Lending, and one of the
leading students of this, one of the people whose work has brought
this so much to the forefront.
Mr. Campen.
STATEMENT OF JIM CAMPEN, EXECUTIVE DIRECTOR,
AMERICANS FOR FAIRNESS IN LENDING

Mr. CAMPEN. Thank you.
Chairman Frank, Representative Capuano, and Representative
Lynch, I want to thank you for holding this field hearing, as others
have done today, and for the opportunity to share with you some
of the results of my research.
My name is Jim Campen, and I am now, since October 1st, the
executive director of Americans for Fairness in Lending, AFFIL.
AFFIL is an umbrella organization that was created by and works
with its partners, 17 national and regional consumer and grassroots organizations, including the Center for Responsible Lending,
ACORN, the Consumer Federation of America, Consumers Union,
and the National Consumer Law Center.
AFIL’s mission is to shine a spotlight on the egregiously unfair
practices that are common across the entire spectrum of consumer
lending, in order to build public understanding and outrage that
may translate into broad grassroots pressure on lawmakers to
bring about effective regulation of the lending industry.
I am also professor emeritus of economics at UMASS Boston. I
have concentrated for the last 15 years on researching patterns of
mortgage lending.
My testimony today will highlight three of the most significant
findings that have emerged in the most recent reports in two annual series of reports that I do for the Massachusetts Community
and Banking Council—Changing Patterns 13, about home purchase
lending, and Borrowing Trouble 7, about subprime lending.
First, there are enormous racial and ethnic disparities in mortgage lending here. Second, there have been dramatic changes in
the types of lenders who are making mortgage loans. And third, it
is the nature of the lending done by the expanding sector of the industry, independent mortgage companies who are largely unregulated by anyone, that underlies the enormous racial and ethnic disparities in higher cost lending.
So first, the enormous disparities. Blacks and Latinos and their
neighborhoods receive disproportionate shares of higher-cost loans.
As you know, HMDA data now include limited information on loan
pricing, making it possible to identify what the Fed calls higherprice loans. These are loans for which the annual percentage rate,
APR, is at least 3 percentage points greater than the current interest rate on U.S. Treasury bonds of the same maturity.
For brevity, I like to refer to these high APR loans as H–A–Ls,
or HALs. The statistics that I would give you to illustrate these

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dramatic enormous racial and ethnic disparities have been also referenced earlier today, so I won’t spend much time on that. Blacks
and Latinos are 4 times more likely in the City, in greater Boston,
to get high-cost loans when they make home purchases. 71 percent
of all the Blacks in the highest income category, more than double
the area median income, over $152,000 of income, 71 percent of
these Black home buyers received HALs, compared to just 9 percent of White home buyers. There is great geographical disparity,
for example, not only among cities and towns, but also among Boston neighborhoods. The share of home purchase loans that were
HALs was 58 percent in Mattapan, 12 times higher than the 5 percent share in Charlestown.
And, if you look at individual lenders, the three biggest overall
lenders in Boston each had substantial disparity ratios for their
high APR lending. That is, the share of their loans to Blacks that
were HALs compared to the share of their loans to Whites. The
Black/White disparity ratios were 3.5 at Countrywide, 6.0 at Wells
Fargo, and 3.8 at Washington Mutual.
Secondly, the dramatic changes in the nature of the lenders, the
types of lenders making loans. In my research, I placed each lender
into one of three categories, reflecting the extent to which lending
is subject to Federal and State regulation.
CRA lenders are defined as all banks that have one or more
branches in the State, plus State-chartered credit unions. Lending
in Massachusetts by these lenders is covered by the Federal and/
or State Community Reinvestment Act. Out-of-State banks, consisting, primarily, of banks with no branches in Massachusetts,
they are subject to CRA evaluation of the lending they do in the
areas where they have branches, but their lending in Massachusetts is not covered by the CRA. And, the third category is licensed
mortgage lenders, LML lenders, defined as those who require a license to make mortgage loans in Massachusetts. These are, primarily, independent mortgage companies, not affiliated with any
bank. These lenders are not subject to any kind of regulation by
Federal Bank regulators.
My research shows that the mortgage loan share accounted by
CRA lenders has fallen precipitously, while the share accounted for
by licensed mortgage lenders has risen dramatically. In the City of
Boston, where I have data going back to 1980, the share of all
home purchase loans accounted for by CRA lenders plunged from
almost 4/5, 78 percent, of the loans in 1990 to just 1/5 of the loans
in 2005.
Statewide, the share of total home purchase and refinance loans
accounted for by CRA covered lenders, which I’ve tracked for only
5 years, shrank from 37 percent in 2001 to 22 percent in 2005,
while the loan share of licensed mortgage lenders doubled, from 24
percent to 48 percent.
The linkage between these first two findings, huge disparities
and a changing mix of lenders, is that LML lenders, the fastest
growing and least regulated category, are responsible for the great
majority of high APR loans, the loans that are directed very disproportionately to Black and Latino borrowers and communities.

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On the other hand, CRA lenders, whose share of total lending is
rapidly shrinking, have by far the best record of making prime
loans to those same borrowers and neighborhoods.
In Massachusetts in 2005, CRA lenders accounted for just 1 percent of the total Massachusetts HALs, while LML lenders, licensed
mortgage lenders, totally unregulated by the Federal Bank examiners, were responsible for 71 percent of all the HALs in the State.
In 2005 in Massachusetts, none of the 20 biggest high APR lenders
were covered by the CRA, while 16 of the top 20, including 4 of the
top 5, were licensed mortgage lenders.
In 2000, Boston’s lower-income, predominantly Black and Latino
census tracts received 13 percent of all the loans made by CRA-covered lenders, twice the share that they got from prime, out-of-State
banks, and licensed mortgage lenders, but far below the 31 percent
share of all the loans made by subprime lenders, none of whom
were CRA lenders.
These findings are highly suggestive of reverse redlining by
subprime lenders, that is, targeting the same highly-minority
neighborhoods that were previously covered from redlining by
prime mortgage lenders.
In conclusion, I want to emphasize two principles that I believe
should underline Congress’ response to the enormous racial disparities in mortgage lending, things that I believe you, members of
this committee, understand well. First, the playing field really
needs to be level, so that all mortgage lenders are subject to similar
laws and regulations, so it will protect consumers from unfair and
predatory practices, promote wealth building by households and
communities, and prevent a race to the bottom where lenders who
choose to maintain responsible lending practices face loss of market
share to unscrupulous competitors. Part of that is a comprehensive
anti-predatory lending legislation, but I think that my research
findings underline, in particular, the need for modernizing the
CRA, so that banks receive CRA performance evaluations everywhere that they account for a substantial share of total lending,
not just where they have branches, so that CRA evaluations are
formed on a comprehensive, corporate-wide level, rather than separately for each lending institution, each depository institution and
affiliate or subsidiary, and that independent mortgage companies
and credit unions will be subject to regulations, performance evaluations and ratings analogous to those that the CRA imposes on
banks.
Secondly, it’s important to enforce the laws that exist. It’s not
true that all the lenders who aren’t licensed mortgage lenders do
well, but some of the worst performers, including Fremont, which
the Attorney General has lawsuits against, is a bank in California.
And, in spite of this, it is a predatory lender that was allowed to
run unchecked, basically, at least to the end of 2006.
In an important respect, the current subprime mortgage lending
crisis reminds me of the savings and loan crisis that was in full
swing when I first began to focus my research on banking and
mortgage lending in 1989. Then, as now, irresponsible lending on
a massive scale had resulted in serious hardship for many borrowers and neighborhoods, failures for numerous large financial in-

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stitutions and significant impacts on the overall economy. The response then included new legislation to promote—
The CHAIRMAN. Let’s stick with this one. We are running out of
time, so let’s forget the S&L crisis and stick with the current crisis.
Mr. CAMPEN. Okay, then, as now, then my Representative took
the lead in that, Joe Kennedy. His successor, my Representative,
is now taking the lead in this, along with you, who represents an
adjacent district, and I’m proud of that.
And, thanks again for the opportunity, I’ll answer any questions.
[The prepared statement of Mr. Campen can be found on page
55 of the appendix.]
The CHAIRMAN. Thank you. We will be addressing the need to expand CRA next year, and we will be inviting you down to Washington to particularly focus on how best to reshape the CRA.
Next, Ms. Ginny Hamilton, has already been introduced by her
Congressman, Congressman Lynch. Ms. Hamilton is the executive
director of the Fair Housing Center of Greater Boston.
Ms. Hamilton.
STATEMENT OF GINNY HAMILTON, EXECUTIVE DIRECTOR,
FAIR HOUSING CENTER OF GREATER BOSTON

Ms. HAMILTON. Thank you, Mr. Chairman, and members of the
committee, including my Representative, for summarizing my comments quite well.
My name is Ginny Hamilton. I work with the Fair Housing Center of Greater Boston, and we work to eliminate housing discrimination and promote open communities throughout the greater Boston region. We do this by providing education and training, community outreach, testing, research, policy advocacy, and case advocacy
for people who have experienced housing discrimination.
Approximately half of our funding comes from the Department of
Housing and Urban Development, Fair Housing Initiatives Program, and we are active members of the National Fair Housing Alliance.
My comments today are about our use of paired testing to document racial discrimination in lending in Boston and eastern Massachusetts.
I come to you today because commentary on the foreclosure crisis
regularly includes statements about African American and Latino
borrowers posing more of a credit risk to lenders than White borrowers. Therefore, the logic goes, these buyers are more likely to
end up with a subprime or potentially risky loan. This scenario
may describe one piece of the problem, but it is not a complete accounting of the situation. Our testing shows evidence of discrimination against African American, Latino, and Asian home buyers,
with good credit histories, sufficient savings, and solid income to
secure prime market loans.
During the 4 months from October 2005, to January 2006, we
conducted testing to determine the extent and nature of discrimination in our region. We used racially matched pairs of trained volunteers to visit 10 banks and 10 mortgage lenders, and to report in
detail on their experiences. Not low-income borrowers, all our testers inquired about a $475,000 mortgage, with $25,000 to put down
as a downpayment. Ten pairs of testers were assigned credit scores

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of approximately 750, and ten pairs assigned credit scores of approximately 650. In all pairs, the African American, Latino, and
Asian testers were assigned slightly higher credit scores in income,
slightly lower debt compared to their White counterpart, so that in
a discrimination free environment the tester of color would have
been slightly better qualified for the home loan.
Even so, as Congressman Lynch referred, we found differences in
treatment which disadvantaged the home buyer of color in 9 of the
20 matched pair tests which were conducted, 45 percent. Three
specific examples to highlight, in 7 of the 20 tests, the White loan
seeker received substantially more information from the lender
about loan products and services, the financial literacy piece discussed earlier. In 4 of the 20 tests, the lender contacted the White
tester after their meeting to follow up, but did not contact the tester of color. However, this never happened in reverse. And in 5 out
of 20 tests, the White tester was offered a discount on closing costs,
which was not offered to the tester of color, or was quoted a substantially lower closing cost than the tester of color, and these differences ranged from $500 to $3,600.
In the first stages of shopping for a mortgage, limited product information, lack of follow-up, and quotes with high closing costs can
discourage home seekers of color from pursuing homeownership at
all, and if such specials, follow-up contact, and detailed product information are made available to Whites, but not to loan seekers of
color, the lender is pursuing White customers, while allowing nonWhite potential customers to walk away.
It’s important to note that none of the testers of color or the
Whites were aware of their relative advantage or disadvantage. No
individuals were subjected to overt discrimination, but this simple
fact underscores the need for testing as a means of gauging discrimination, particularly in a lending industry characterized by
such large differences and outcome as Jim and his data has described.
If a loan seeker can’t detect these differences, and is going to a
lender who is disadvantaging them, they may end up paying more
for a loan, either within the main-line lending institution, or by
turning to a subprime lender or a predatory lender who welcomes
his or her business. And, when African American and Latinos pay
substantially more per month than similarly-situated White people,
these costs perpetuate the wealth vat between Whites and other racial groups, despite rising incomes and rates of homeownership
amongst people of color.
These higher costs also expose African American and Latino
home buyers to higher risk of foreclosure than their White counterparts, who are welcomed into the prime market.
Currently, most of the fair lending cases are brought by private
fair housing organizations and individual attorneys, and while
these private efforts are important the full engagement of responsible Federal Government agencies is an essential component of
any serious effort to combat lending discrimination. If the Government fails to pursue such cases, or does not engage in competent
effort to uncover discrimination, then most lending discrimination
goes unchecked, and, indeed, for the entire history of our country
it has.

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Increased and expanded regulation is important. However, enforcement is key as well. The lack of Federal enforcement actually
provides a form of safe harbor for those in the industry engaging
in discriminatory practices.
This summer, HUD established fair lending enforcement offices,
and recently announced funding for enforcement in eight of its regional partners, including the Massachusetts Commission Against
Discrimination. We believe that this HUD office, and its State and
local affiliates, should be given appropriate resources, especially including in-depth training, to proactively investigate fair lending
violations, and we welcome this increased enforcement capacity locally and have begun conversations with the staff at MCAD and
the Attorney General’s office to utilize testing to assist with their
enforcement proceedings.
As you have heard all morning, Massachusetts is at the forefront
of the foreclosure crisis, but also at the forefront of efforts to remediate the problem, and we see today the State and local officials are
engaged with community groups to enforce existing laws, strengthen oversight, and assist communities and consumers in duress.
Congressional efforts to solve this problem nationally should not
undermine efforts in the State to do so, and we appreciate your
commitment, Mr. Chairman, to having Federal legislation be a
floor, not a ceiling.
To wrap up, I want to offer just a few recommendations. Congress should move to regulate all financial institutions active in
lending, and many of the details of that have been shared by others
today. That should not preempt the ability of State governments to
enforce stricter consumer protection standards.
Congress should require Federal enforcement in regulatory to undertake more aggressive, effective and expansive oversight and enforcement activities, and should make more extensive use of paired
testing in their own enforcement activities, by contracting and
working directly with qualified fair housing enforcement organizations.
Congress and Federal agencies should provide an exemption to
qualified fair housing organizations to allow mortgage lending testing beyond the pre-application phase of the mortgage lending process, which is all that we can test at this moment.
Thank you for this opportunity to testify, and I’m happy to answer questions or share more details of our work.
[The prepared statement of Ms. Hamilton can be found on page
92 of the appendix.]
The CHAIRMAN. Thank you.
I do want to note that we have been joined by another one of our
hosts, State Representative Gloria Fox. Representative Fox, thank
you for joining us.
Ms. FOX. Good afternoon.
The CHAIRMAN. And next, we will hear from Ms. Acia AdamsHeath, who is the president of the Massachusetts Affordable Housing Alliance.
STATEMENT OF ACIA ADAMS-HEATH, PRESIDENT,
MASSACHUSETTS AFFORDABLE HOUSING ALLIANCE

Ms. ADAMS-HEATH. Good afternoon, and thank you, everyone.

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Chairman Frank, Congressman Capuano, and other members of
the committee, I just wanted to thank you for holding this field
hearing, just to echo Sam Yoon, in Roxbury today. My name is Acia
Adams-Heath, and I am president of the Massachusetts Affordable
Housing Alliance and a resident of Dorchester.
MAHA is a nonprofit organization that works to increase public
and private sector investment in affordable housing, and to break
down the barriers facing low- and moderate-income first-time home
buyers.
MAHA’s signature achievement has been the establishment and
expansion of the SoftSecond Mortgage Loan Program, which, with
the support of the Massachusetts Housing Partnership, has helped
10,000 families buy their first home.
In today’s testimony, I wanted to summarize how the SoftSecond
Program came to be and detail some of the remarkable statistics
that make the program a model homeownership initiative.
Finally, I will offer some recommendations for updating State
and Federal laws regarding a lender’s responsibility to borrowers
and to communities, but I will summarize in the interest of time.
To understand how the SoftSecond came into play such an important role in the Boston area mortgage lending, you need to go
back to 1989. On January 11, 1989, the Boston Globe front page
had a lead story on a leak draft study from the Federal Reserve
Bank of Boston. The study found racial disparities in bank mortgage lending patterns in Boston neighborhoods. That leak draft
kicked off a 2-year effort to address these racial disparities that included protests, confrontations, negotiations, and ultimately collaboration.
The centerpiece of these negotiations was a mortgage program
that MAHA hoped would address these patterns of racial disparities and we call that the SoftSecond.
The SoftSecond works because it is smartly designed and affordable over the long term for lower-income, first-time home buyers,
and it gets its name from the fact that each borrower receives two
loans, a 77 percent first mortgage and a second 20 percent mortgage that is interest only for 10 years before becoming a fully amortized loan over the last 20 years. Both loans are originated as
slightly below market interest rates, and come with a small public
subsidy that acts as a loan loss reserve for the lender and a further
interest rate subsidy for the borrower.
In the City of Boston, the SoftSecond program has become the
leading anti-redlining program. From 1991 to 2006, 3,546 people
received a SoftSecond loan. Over the last 3 years, the Black loan
share in the program was 33 percent, while Black households account for just 21 percent of the City households. Latino share was
nearly 27 percent, while they account for just under 11 percent of
the households in the City, and the Asian share loan was 8.5 percent, while they account for just under 7 percent of the City’s
households.
Statewide, the numbers are just as impressive, with Black,
Latino, and Asian loan shares anywhere from 2 to 5 times higher
than these groups shares of total households in the State. The program is clearly worked to help bank lenders reverse patterns of ra-

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cial disparities, and it has been a significant program in terms of
its impacts as well.
SoftSecond loans total $1.4 billion in private sector lending to
low- and moderate-income Massachusetts residents.
In the City of Boston alone, in 2005, SoftSecond loans accounted
for 20 percent of all home purchase loans to low- and moderate-income borrowers.
The delinquency rates in the program still remain low, even with
the growing foreclosure crisis in many of our neighborhoods. Our
SoftSecond Statewide delinquency rate as of the end of 2006 is 2.2
percent compared to an overall Statewide delinquency rate on all
mortgages of 2.8 for prime mortgages, and 15.4 percent for
subprime. We have attached a complete report of the SoftSecond
loan program offered by Professor Campen for the MCBC to our
testimony today. It’s called, ‘‘Expanding Home Ownership Opportunities to the SoftSecond Loan Program, 1991 to 2006,’’ and it provides many more details about this incredible program.
Lastly, the policy recommendations that those of us at MAHA
have learned a lot over the past 20 years, we have seen the negative effects of not enough lending in our neighborhoods, have participated in the rise of homeownership levels for many of our fellow
Black, Latino, and Asian neighbors, as the SoftSecond Program has
grown, and now are fighting the impact of too many bad lending
by largely unregulated institutions.
Our State and Nation’s laws have simply not kept pace with the
rapid change in our mortgage lending industry, and we urge the
following policy changes. As has been said before, we support comprehensive anti-predatory lending legislation that would apply to
all mortgage lenders. What Massachusetts did in 2004 is just not
enough, and the current crisis is ample evidence of that.
We need anti-predatory language that strikes at the heart of the
business model used by many subprime lenders, language that
makes it impossible for lenders to give a borrower a loan they know
the borrower cannot pay back. It requires them to clearly market
the terms and conditions of such loans in all advertising.
Second, we need to do more than just stop bad lending. We must
encourage good lending in all our neighborhoods. We support extending CRA or CRA-like requirements to all mortgage lenders
wherever they lend. We believe this can be best done with States
acting to impose CRA-like requirements on State license mortgage
lenders, similar to Massachusetts Senate Bill No. 2299 that’s currently under consideration in the House of Representatives.
In addition, we believe Congress should move to, one, extend
bank CRA performance evaluations, not only for lending and assessment areas defined around the location of bank branches, but
also for bank lending in every geographical area in which they
have significant market share. In Boston, that would mean Wells
Fargo and Washington Mutual, which have the same CRA responsibilities as Bank of America and Sovereign.
Again, I’d like to thank you for the opportunity to testify today,
and I will be happy to answer any questions you have.
Thank you.
[The prepared statement of Ms. Adams-Heath can be found on
page 42 of the appendix.]

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The CHAIRMAN. Thank you, Ms. Adams-Heath. Let me say that
I note that we have also been joined by another member of the legislature, State Representative Liz Malia, our neighbor from Jamaica Plains is here.
Next, the president emeritus of the Boston Chapter of the
NAACP, Mr. Lenny Alkins.
STATEMENT OF LEONARD ALKINS, PRESIDENT EMERITUS,
NAACP BOSTON BRANCH

Mr. ALKINS. Thank you. Mr. Chairman, Congressman Capuano,
Congressman Lynch, I want to thank you for the opportunity to address this prestigious committee on a very important issue which
has destroyed the hopes and desires of families and individuals
working to achieve the American dream.
As it was said, I am Leonard Alkins, the former president of the
Boston branch of the NAACP, which is the oldest branch of the National Association of the Advancement of Colored People established in 1911.
Over the last century, the NAACP has been an agent for change
in some of the key civil rights activities of our time: housing; banking; and economic development, to name a few.
The perpetual drive of equality led the NAACP to fight against
the practices of redlining and to challenge financial institutions to
reinvest in the community. How ironic is it that we are now faced
with a different side of the problem? Today, many of those same
families that we fought with to become homeowners are witnessing
the curdling of their American dream.
On July 11th of this year, the National Association for the Advancement of Colored People in Baltimore, Maryland, filed a Federal class action lawsuit against 14 of the country’s largest
subprime mortgage lenders including: Ameriquest; Fremont; Option One; WMC Mortgage; Long Beach Mortgage; BNC Mortgage;
Accredited Home Lending; Encore; First Franklin; HSBC; and
Washington Mutual. The lawsuit is designed to bring about equitable lending practices that do not adversely affect borrowers based
on their race.
In 2004, Chapter 268 of the Acts of 2004 was enacted to address
predatory lending here in Massachusetts, by forbidding anyone
from arranging a high-cost mortgage unless he or she ‘‘reasonably
believes’’ that the borrower will be able to repay it. State consumer
protection regulations also prevented brokers from withholding information that might cause potential borrowers to back off. However, many brokers ignored that provision. What does this tell us?
We need legislation that is strong and has the necessary consequences for anyone who is found guilty of violating the law. Congress and the President of the United States must commit to passing and signing a bill that ensures accountability with substantial
fines and potential incarceration for anyone who violates the law.
Only then will we begin to see the fruits of our labor.
Mr. Chairman, as well as members of this distinguished committee, let me caution you that anything short of what I am suggesting will have us addressing the same issue again within the
next decade.

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In closing, let me remind you of the words of a great drum major
in the struggle for equality and justice for all people, the late civil
rights leader, Ms. Fannie Lou Hamer, who eloquently stated, ‘‘I’m
sick and tired of being sick and tired.’’ Our community is calling
on this Congress to create lasting protection for the many people
who attempted to own their homes and fulfill that American
dream.
I humbly suggest that you take all of the testimony that is offered here today, as well as other testimony you may have received
from individuals and organizations from around the country, and
use this information to build a bipartisan coalition to redraft a
strong bill that will address all the problems of predatory lending.
The time is now for the Congress to stand up and speak for the
people, to tell the special interest groups that too many individuals
and families have been harmed or destroyed by these illegal practices. Enough is enough.
Thank you, Mr. Chairman, and members of this committee, for
taking the time to travel to Roxbury in the City of Boston to listen
to our concerns.
[The prepared statement of Mr. Alkins can be found on page 46
of the appendix.]
The CHAIRMAN. Next we will have Mr. Thomas Kennedy, the senior vice president of Sovereign Bank.
STATEMENT OF THOMAS B. KENNEDY, SENIOR VICE
PRESIDENT, SOVEREIGN BANK NEW ENGLAND

Mr. KENNEDY. Thank you, Mr. Chairman. I’m honored to be here
to testify before you and your committee, Representative Lynch,
and Representative Capuano. I have to say that Congressman
Frank has been my Congressman now ever since he has been in
Congress, a fact of which I’m very proud, and I am especially
pleased to be here to testify.
I have submitted written testimony. I will not recite all of that
here. I would just give you some highlights from my perspective,
in terms of an $81 billion bank that has a significant presence, not
only in Massachusetts, but throughout the northeast, and the MidAtlantic States begin by saying that community reinvestment and
community development starts at the top of the house, and we are
very fortunate in that we have leadership, first when Sovereign
came to New England in March of 2000, with John Hamill, who remains as chairman of the bank in New England, and now Joseph
Camponelli, who is president and CEO of the bank, to lead our
commitment in terms of reinvestment in terms of, not only this
community, but throughout our footprint.
We see that community development, indeed, is good business
and, indeed, mortgage lending is very good business as well.
We have demonstrated that through significant commitments
that we have made over an extended period of time. We are currently in a commitment of some $16 billion to reinvest in the communities in which we have a principal banking presence, including
mortgage lending. This gets reflected in local agreements that we
have signed here, first with the Community Advisory Committee
here in the Commonwealth of Massachusetts, and, specifically,
with Massachusetts Affordable Housing Alliance with the

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SoftSecond Mortgage Program, has already been testified the most
successful first-time, low-income mortgage program in the Commonwealth of Massachusetts, and we are now the leading mortgage
originator of that product here in the Commonwealth.
One of the reasons I believe for the success of what we have
learned as a banking institution in this community has come about
as a result of collaboration, not only with State and local government, but community groups as well. And, this has led to significant commitments and has led to success in terms of our being a
banking institution in this community.
I’d also like to say that this has led to significant demonstration
of personnel, of product, of program—
The CHAIRMAN. Kenny, we really are here for a very specific
point, so let’s not get way beyond—personnel, we’ll get to it in another hearing. We are here about subprime and we are here about
housing mortgage discrimination.
Mr. KENNEDY. All right. In terms of subprime, that is not a product that we are participating in, that’s not—we have some 35—
The CHAIRMAN. Well then, you can just move on to the next—
then the question would be discrimination in home mortgages,
would the other issue be relevant to it?
Mr. KENNEDY. The other issue, we do analyze very carefully the
mortgage denial rate disparity that when you do the analysis of our
206 mortgage lending data, there is a disparity there that we notice, and has been, that we are attempting to address with these
particular programs, that is something that we are not proud of,
but it is something that we, as an industry, have been working on
through the Massachusetts Community and Banking Council, attempting to address those issues, to put in programs and policies
that would address and bring that closer to parody.
And, in my testimony, I’ve demonstrated what we’ve attempted
to do in terms of trying to address that, in terms of our continuing
outreach to the community, per se.
[The prepared statement of Mr. Kennedy can be found on page
105 of the appendix.]
The CHAIRMAN. Ms. Browne, Lynn Browne, is executive vice
president and senior economist, Federal Reserve Bank of Boston.
STATEMENT OF LYNN E. BROWNE, EXECUTIVE VICE PRESIDENT AND SENIOR ECONOMIST, FEDERAL RESERVE BANK
OF BOSTON

Ms. BROWNE. Chairman Frank, Representative Capuano, and
Representative Lynch, I’m very pleased to be here and share my
views on housing patterns in the greater Boston area.
I am responsible for community affairs and consumer education
at the Federal Reserve Bank of Boston. The past 10 years have
seen dramatic changes in housing and mortgage markets, both nationally and here in the Boston area. Until quite recently, housing
prices were rising rapidly, and homeownership was rising, especially, for minorities.
There were, as you’ve heard from others, negative developments,
in particular, it was apparent with the HMDA data that Blacks
and Latinos were disproportionately likely to get high-rate loans,

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34
and disproportionately likely to be served by mortgage lenders specializing in high-rate loans.
While these were certainly disturbing developments, many people took comfort from the fact that homeownership was rising.
With housing prices rising, presumably, many households were accumulating housing equity and wealth.
That situation has changed dramatically in the past year. We
have seen housing prices level off, and in the greater Boston area
by some measures they have declined. We have seen foreclosure
initiations increase sharply. Here in Massachusetts, they have gone
from way below the national average to about the national average.
Foreclosure initiations are also rising nationally, but not quite as
sharply because there were parts of the country like the Great
Lake States that had pretty high foreclosure rates for some time.
The rise in foreclosure initiations has been particularly pronounced for subprime loans with adjustable rates. Although these
account for only about 10 percent of mortgages, in Massachusetts,
they account for about 50 percent of the foreclosure initiations. But,
it is not just those categories of loans. We are also seeing pick ups
in foreclosure initiations among subprime fixed loans and prime adjustable.
I think the problem is going to get worse before it gets better.
In particular, in the recent past, with housing prices rising rapidly,
borrowers who faced difficulties or faced the prospect of a reset in
their adjustable rate mortgages could refinance. Now that housing
prices have leveled off or are declining, that option is much less
likely to be available.
Additionally, many recent subprime borrowers do, indeed, face
the prospect of substantial increases in their interest rates. What
are commonly called 2/28 and 3/27 mortgages have been quite popular recently. These have an initial teaser rate that holds for about
2 or 3 years before resetting, and these were quite prevalent in
2005 and 2006. So we are coming up—have been coming up on the
resets.
In fact, and this is relevant as we think about what to do going
forward, that teaser rate is not all that low. We have had some
Boston Fed researchers looking at loans in the Middlesex County
area, and they find that the teaser rate for 2/28s originated in 2005
was about 7 percent, and 8 percent for 2/28s originated in 2006.
These rates are going to reset to about 11 percent. But, it is relevant that the initial rate is actually quite high.
Now, as Representative Lynch has already said, the options for
dealing with the foreclosure problem in the here and now, as opposed to looking forward, are frustratingly limited, and we hope
that one message gets out, that borrowers have to be very active
in seeking help. They have to go to their servicers if they expect
any difficulty with their mortgage payments. They need to shop
around. And, I acknowledge that they have to be very persistent,
because most servicers are not staffed to cope with the volume of
problems that they are currently handling.
We think it is possible that some subprime borrowers might have
the opportunity to transition from a subprime loan into a better
product, either a prime product or, perhaps, a subprime fixed product, before their interest rates reset. Although subprime loans are

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generally regarded as loans to individuals with weak credit histories, Boston Fed researchers again, just looking at Middlesex
County data, have found that a significant fraction of the Middlesex County borrowers with subprime loans have pretty decent
FICO scores. Now, why they are in the subprime mortgage, I don’t
know, in some cases maybe a high loan to value, in some cases
they may have been misplaced, in some cases it was just easy to
go to that lender. But, it’s conceivable that those borrowers, by
shopping around, might be able to refinance.
Additionally, as I pointed out, the actual teaser rates for some
of these subprime loans aren’t all that low. In fact, if you made
your mortgage payments on a regular basis for the past year or so,
you might be a promising candidate for a better mortgage product.
And finally, some subprime borrowers have been in their house
long enough that they have accumulated equity, so that they,
again, might be able to refinance into a better product, because of
their large equity.
The whole subprime market is predicated on borrowers being
able to refinance. It is quite important that responsible subprime
lending continue, because otherwise people are going to be stuck
with these quite sharp increases in rates. But, it is also possible
that there may be an opportunity for banks and thrift institutions
to play a larger role than they have done. We’ve already heard that
they have lost market share to mortgage banks. Eric Rosengren,
president of the Federal Reserve Bank of Boston, has been trying
to reach out to bankers in New England to explore the possibility
for commercial banks to play a more active role in providing liquidity to this market. Most commercial banks and savings banks at
the local level are not in the subprime market, many of them don’t
want to be, but there are, potentially, customers there who might
be eligible for prime products.
We are trying to get out the word, both to bankers, but also to
the consumer. We are developing a Web site, and developing some
brochures, to try and spread the word that borrowers need to shop
around. They need to act now before they are in trouble.
And we, at the Boston Fed, hope to work with financial institutions, community groups, government officials, and other regulators
to address what really is a very, very difficult and unfortunate situation.
[The prepared statement of Ms. Browne can be found on page 48
of the appendix.]
The CHAIRMAN. Thank you, Ms. Browne.
Let me say, and you have been very responsive, but, frankly, one
of your comments sort of underlined the problem when you said,
well, there were people who have good credit and they are in
subprime, and you listed possible reasons why they were there.
You didn’t mention racial discrimination, and I think it’s clear that
discrimination is one of the reasons, and we just have to get our
minds around that.
I mean, you said maybe they had too high a debt to loan value,
and maybe this, and maybe this, and undeniably discrimination,
and that’s—and I have to ask you, and Mr. Kennedy, you say in
your testimony that the denial rate disparity we are talking about
from your testimony was more than double for minorities, 25 per-

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cent versus 11 percent for Whites. White originations, 38 percent,
minority originations, 55, the denial rate between Whites 14, minorities, 28, and it is not entirely due, as you acknowledge, to creditworthiness.
My question is this, and I don’t know if you’ll know this off the
top of your head: Has anybody at Sovereign Bank ever been disciplined for not treating people fairly? Has there ever, and I would
also ask, look, here’s the problem, we’ve been working on this in
our committee, where is the enforcement record? We have this on
the books, Ms. Hamilton has talked about this, you have to start
taking it seriously, there has to be, and we are going to keep pushing this, and it has to be, here’s the terrible facts, we have an enormous disparity, some of which clearly is racial and ethnic discrimination. That’s the only explanation for it. And, we have, virtually,
no record of any discipline, virtually, no record of any enforcement,
and that cannot continue, and I say that to the banks, who should
be disciplining people, and to the regulators who will be enforcing?
Mr. Kennedy, I’d be interested, you know, I don’t expect you
know it off the top of your head, but has anybody ever been disciplined by the bank for this?
Mr. KENNEDY. Congressman, I do not know that they have. I
know that we look at that, all denials that come through we have
a Second Look Committee. We examine the terms and conditions
of the loan, the background, etc. Sometimes those denials have
been overturned by that process. I do not know, and I do not believe that anyone has specifically been disciplined in that regard.
The CHAIRMAN. But, with all the effort, you do say the denial disparity rates have increased in recent years.
Mr. KENNEDY. Yes.
The CHAIRMAN. It has gotten worse rather than better.
Mr. KENNEDY. Well, I agree, that is something that has disturbed us as well. One of the reasons, as we have expanded our efforts here in Massachusetts, continued to add staff, reach out further, work more closely with community groups, have expanded the
pool of applicants as well, and, you know, that’s one of the conundrums that we’ve looked at.
The CHAIRMAN. Well, I can see that would account for everything
else being equal for an increase in the absolute number of denials.
Mr. KENNEDY. Yes.
The CHAIRMAN. But not for an increase in the disparity rate.
The only other thing I would ask is, Ms. Browne, I was struck,
and I appreciate it, because the quality of the research has been
very helpful, as has Mr. Campen’s, you said that the servicers are
not well staffed to be able to redo this.
Now, we are going to be dealing with legislation, and one of the
things that we have in mind is to put some restrictions on the
servicers and some liability, and they are telling us that this would
be a bad thing.
I want to serve notice now, if the servicers can’t do a much better
job than they are doing, of trying to provide some relief, then their
argument against restrictions on them is going to be weakened.
There’s some relationship here.
And, people are telling us, leave us alone, who aren’t able to deliver, let me just say this, it’s a very important part of legislation.

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I know we have Representative Fox, Representation Malia, we’ve
been joined by Councilor Yancey, my colleague, every legislator
knows, we can’t compel people to be flexible, but they can’t compel
us to write the bill they want us to.
And, I think everybody ought to remember a very important
piece of legislation is that the ankle bone is connected to the shoulder bone, and we intend to look at this as we make our judgments.
Mr. Capuano.
Mr. CAPUANO. Thank you, Mr. Chairman.
Mr. Chairman, I just want to, first of all, thank our panelists. I
mean, I’ve dealt with pretty much all of you at one level or another, and, you know, you have been doing this a long time, and
you are doing a great job with it. So, I really appreciate you being
here today.
But, I also—I need to ask for help as we go forward. Most of you
know how legislation is made, and again, as I’ve said earlier, you
know, the fact that we have Barney Frank as our chairman and
overseeing the staff is very, very helpful and very beneficial. At the
same time, you are the people on the front lines, and sometimes
we do have difficulty in Washington connecting the rubber and the
road, and it’s not because of lack of trying or lack of desire, it’s just
sometimes we don’t always see some of the things that happen. So,
I’m encouraging you, and asking you, and begging you, as we go
forward with this legislation, please let us know if we are missing
something, if there are some holes in it that we can fill in, also understanding, you know, limitations that we have, which you’ll be
told if we think that, well, it’s a good idea but we can’t get it done.
But, that’s of great interest to me, because that’s usually where
the holes are. I’m never concerned with Barney as the chairman
and with the staff that he has, I’m never concerned that the big
picture issue is going to be missed or the intent is going to be
missed, but sometimes there are holes here and there that you will
see, because you are living it, more than we will see it.
I encourage you to let us know that.
I guess I’ll stop there. That’s the most important thing. You guys
are doing a great job. I appreciate you letting us know numbers.
Numbers are important, but what’s more important is individuals.
I also want to be clear that, you know, on the legislation that we
draft, we will not be able to help everyone. We’d like to. I think
that would be a wonderful goal and a wonderful desire, but it’s just
not going to be possible. There are going to be people, some people,
who got loans who can’t carry those loans, that we just can’t help.
But, we can, hopefully, do the best we can to prevent it from happening again, and that’s where I encourage you to help us look.
That’s the thing that I think we are the best at, and, you know,
I just want to make sure that whatever we do do fills all the holes
that are possible.
So, thank you.
The CHAIRMAN. I thank the Representative for saying that, because that is a very important point, not to raise false hopes for
a lot of people.
Mr. ALKINS. Mr. Chairman, could I just interject, the important
thing here is that people who are arrested for shoplifting have

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more chance of going to jail than somebody who is found guilty of
predatory lending.
And, if we don’t put some teeth into the legislation to hold people
accountable, we have to recognize that lives are being destroyed.
Some will rebound, but many more will not.
So, I ask you to work with us as the community, we will work
with you and fight for you to get the network out there to get whatever you put, as long as it is a strong and meaningful piece of legislation, we will work with you and fight with the other Members of
Congress to put it forward.
The CHAIRMAN. Mr. Lynch.
Mr. LYNCH. Thank you, Mr. Chairman.
One of the most troubling aspects of Ms. Hamilton’s report was
that even in some of the instances where she found discrimination
occurring, that data would not be picked up under current disclosure, under the Home Mortgage Disclosure Act, a lot of that criteria is missed.
If you go back to 1977 when the Community and Reinvestment
Act was passed, it was passed in response to urban decay in a lot
of the minority neighborhoods that are served by the CRA today.
The problem is that when it was passed the vast, vast, vast, vast
majority of mortgages originated with either banks or thrift institutions. Today, you know, you fast forward and today it looks like almost 70 percent of mortgages are written by private mortgage companies that are not subject to coverage of the CRA. So, we are losing the focus of the CRA by attrition.
Now, Mr. Kennedy, you testified today, and I read your rating,
I went on line and checked out Sovereign’s CRA, you got an outstanding rating, so I’ll put that out there, but what can we do,
what can we do to bring back all those people who are right now
writing mortgages, underwriting mortgages, the brokers, the mortgage companies, who aren’t subject to CRA, how can we make them
more accountable? I know that they don’t have some of the advantages that were sort of the quid pro quo for the original CRA application, but what can we do to make them live up to what I think
is a responsibility that they have to the communities that they
serve, to make sure that credit is democratic throughout the communities that they do serve?
Mr. KENNEDY. I guess, Congressman, I would respond to your
question by saying that when CRA was passed in 1997, indeed, you
are correct, it was trying to address the issues of disinvestment in
our urban areas.
We had the Great Society Program, and billions of dollars poured
in, and things seemed to be getting worse, and this was an attempt
to bring focus to those assessment areas where financial institutions had their principal banking presence.
It took, as we know, a while for banks to fully understand what
that meant.
I guess I would address that question by saying, banks, I think,
on the whole, have stepped up to the plate and have come to a very
mature understanding as to what that is, and to realize there is
an affirmative responsibility when one is dealing with capital and
putting it back into the community, and being able to do business
there.

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39
We are a chartered financial institution, and so we are obligated,
as a result of that.
I think the proof is in the pudding, as to what has happened
there for the financial institutions. We’ve seen, just what I’ve seen
in the 18 years that I’ve been directly involved with this here in
New England, and, specifically, Massachusetts and Boston, it is a
significant transformation. There is a tremendous amount of work
that still needs to be done, and yet as other financial institutions
have come in we have had to, you know, obviously, meet that competition.
Regulation, I think that’s something that has to be seriously explored.
The CHAIRMAN. Let me just, a closing note here on this, yes, one
of the several sets that was here, but that intelligent, and thoughtful, and flexible regulation is essential, not because we are antimarket, but because we understand the market works better in
that situation.
The problem with subprime loans was much worse in the totally
unregulated sector than in the regulated sector. CRA is a very important and thoughtful regulation, and there’s a great deal to be
said here for that, as is, of course, fair lending.
We’ve come to a time, let me say, I know we’ve been joined by
Representative Fox, City Councilor Yancey, and Representative
Malia, we do not have time for further testimony, we will be glad
to acknowledge that all of them are people who have a great deal
of concern about this. We’ve discussed it, I’ve talked with all three
of them about it. I know that they share these concerns.
We will leave the record open and written statements will be accepted up until the end of the week. So, I apologize, but we did run
out of time. I do know that Representative Fox, City Councilor
Yancey, and Representative Malia have all been in the forefront of
this; they have been collaborators with us, and will continue to be.
The hearing is now adjourned.
[Whereupon, at 1:12 p.m., the hearing was adjourned.]

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APPENDIX

October 15, 2007

(41)

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