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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

(

(II)

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. VELA ́ ZQUEZ, 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 

RUBE ́ N 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 

(III)

C O N T E N T S 

Page 

Hearing held on: 

October 15, 2007 ............................................................................................... 1

Appendix: 

October 15, 2007 ............................................................................................... 41

WITNESSES 

MONDAY, OCTOBER 15, 2007

Adams-Heath, Acia, President, Massachusetts Affordable Housing Alliance .... 28

Alkins, Leonard, President Emeritus, NAACP Boston Branch ........................... 31

Browne, Lynn E., Executive Vice President and Senior Economist, Federal 

Reserve Bank of Boston ....................................................................................... 33

Campen, Jim, Executive Director, Americans for Fairness in Lending .............. 23

Coakley, Hon. Martha, Attorney General, Commonwealth of Massachusetts ... 12

Hamilton, Ginny, Executive Director, Fair Housing Center of Greater Boston . 26

Kennedy, Thomas B., Senior Vice President, Sovereign Bank New England .... 32

Menino, Hon. Thomas M., Mayor, City of Boston ................................................. 9

Patrick, Hon. Deval L., Governor, Commonwealth of Massachusetts ................. 7

Taylor, Chuck, City Councilor, City of Boston ...................................................... 18

Yoon, Sam, At-Large Boston City Councilor ......................................................... 20

APPENDIX 

Prepared statements: 

Adams-Heath, Acia ........................................................................................... 42

Alkins, Leonard ................................................................................................ 46

Browne, Lynn E. ............................................................................................... 48

Campen, Jim ..................................................................................................... 55

Coakley, Hon. Martha ...................................................................................... 84

Hamilton, Ginny ............................................................................................... 92

Kennedy, Thomas B. ........................................................................................ 105

Menino, Hon. Thomas M. ................................................................................. 112

Patrick, Hon. Deval L. ..................................................................................... 119

Yoon, Sam ......................................................................................................... 116

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

Letter from Action for Boston Community Development, Inc. ..................... 130

Article from the Boston Globe, ‘‘As foreclosures widen, a neighborhood 

erodes’’ ............................................................................................................ 132

Alkins, Leonard: 

Information on NAACP lawsuit ...................................................................... 136

Adams-Heath, Acia: 

‘‘Expanding Homeownership Opportunity II, The SoftSecond Loan Program, 1991–2006’’ ......................................................................................... 137

(1)

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 

2

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 interVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
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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. 

4

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 

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 

6

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 

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 MasVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
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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 mortVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
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 

10

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. 

11

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. 

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. 

13

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. 

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 

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.] 

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. 

17

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 

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 

19

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. 

20

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 

21

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. 

22

[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 

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 

24

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. 

25

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 inVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
26

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 

27

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. 

28

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. 

29

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 raVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
30

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.] 

31

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. 

32

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 

33

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, 

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 

35

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 perVerDate 0ct 09 2002 16:14 Jan 23, 2008 Jkt 039907 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\39907.TXT HFIN PsN: TERRIE
36

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. 

37

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 

38

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. 

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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A P P E N D I X

October 15, 2007

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