09/16/98 1S:SS FAX 2064439851_ LOW INCOm HOUSING 0004 1 

WASHINGTON REMVESTMENT ALLIANCE 

2407 1st Avem+ SuiiQ Zoo 

SeaKlq WA 98121-1311 

phone: (206) 403-9935 x12.4 fruc (206) 441985 I emall: kn%st@wo~U.~~m RtnrK 

Thursday, Scpt 17,1998 

So. OF TESXTMONY 

The Wasb@ton Reinvearment Alliance (WRA) supports a condirional approval of 

acquisition of Wells Fargo and Co. by Narrmsr Cap.. based on the unsatisfncmry 

pufonnance of Norwe.& opera&g subsidia ty, Nonvest Mortgage, in meet@ the 

needs of low-income homebupas in Wasb&,~ stak The acquiskion should bc 

~ppmved conditionel to the mersd cornpan:, seeking to resolve Norwest 

Mows poor mortgage defxult record wit3 a gtcaut trpining and technical 

rssistancc commirmmt, and establish a target: on single-family low- and mod-- 

iacome customers that r&cts the mmbincd banlcs en+ged matkct shue. 

TxxrOFTwTIMONY 

Honorable Govemots of the Fedad IEtstrvl:: 

The W’zshingtw Rcinvcstment All&cc (WRA) o&n ttwimony m@ing the 

merges of Wells Fargo md Nonvest Mangy+ The WRA is concuncd that 

Norwcst’s poor record of mortgage lending to low- and mcderam-income 

commmlitics within w&lington aate will ie ;ult in this mergeis twguive efkct on 

these commlmi~. 

Wells Fargo’s prcsenct in Washington hu bwn ma&cd by honest efforts to expand 

services to low- and modawe-time communities. _In 1996, when Wells Fago 

acquited the Washington branches of Fit Irrtawzte BE& they attemptal too 

quicldy to change the locally-based cultum &First Intersmte’s lending and 

corpOrarc Biving nmqmIet3k. ‘Ihi ~PtutC in ~oLpoTsre culturss, c0mbix-d With 

mishnps in customf; setvice related to the acquisitioq cpused Wells Fargo’s new 

customcr~ to withdraw twck to @teen percent of their deposits from the bank. 

Despite this loss in anticipated market shut, the bank haa made some progress in 

communiy minvestmmt pcrfotmaac t. WCIS made contlct with the WRA to 

discu%l the merger% impact on c-unity r.?in..estmcrIt ia the s*lte. In addit& 

Wells has made invesrmmts aad conmiutio.as that First Intastatc had previously 

avoided The baa& has concentrated on cor;,orate giving nnd im’estultnk fix 

community economic devclopmcat, u/i& such groups p1 Cascadia Revolviog Loan. 

Fund and Seat&z Jobs Initi&vt benefiting from ticit investments pmgrama 
LOW INCOBB HOUSING @loo5 

Nocwesc Mortgqe’s pcrfomumce has not been so pniisewortby. WI& this opcraiing 

subsJdJaty of Norwere Carp. cnjoya the Jargest marka: &arc of any morqage Jendcr in 

Washiqton, it has made no special efforts to hdp low- and modcrate-income communities. 

Besides 1 small grant for the homebuilding oa!gmbtin>n Habitat for Humanity, the company 

makes no contdbutions wiidrin the state. Un&e its mortgage branches in states with 

No-t Bank brancbcs, Norwcst does not widely offer mortgqe products to Washingma 

borrowers that htJp the bank cam credit under the CIIA. In 1997, the company made SO 

percent more Downpayment Assistance Program (DAP) loans in South D&ma - whets it 

ori&atcd at Lenor six rimes fewu loans to low- and modcmte-income borrowers - than in 

Washington. l&v- and modantbjncome borrowen :n Weshingmn could gready benc6t 

from a grcatcr mzmbec of DAP loans. 

AnaJysis conducted by the Frcmonr PubJic Association (PpA), a HUD-cat&al agency that 

provides mortgage default counseJing based in Seat& shows that Nonvest’s default rate is 

much higher tbvr M Jmders in proportion with its ma&t share In 1996. Washin@n 

MucuaJ otiginatcd 6.15 percent of HMDA-reported Jcam m Jaw- and moderate-income 

census tracts in rhe Sea&BcUaac-Everen meuopolibcL satistiat UEP (MU). 

Washingtoo Mutual accouna for only 5.5% of FpA’s clent cnscload, putting that bvlk near@ 

on par with it5 market sJaarc Of Wa&ington Muaral’r troubled bonoarcrs,brcFFAarnS 

successful in hcJping these cJicnrs bting the loan anrear or negotiate II repayment 82 percent 

of the dme. Norwest Motrgag+ widI P marker share of five percent of Joans oziginltcd m 

low- md modaa-income census tracts in the same nra, accounted for ten percent of 

FPA’s caseJoad. The FPA was s-&J in br.Jp+ tl> sa-+c rhe home only 30 puccnt of the 

time. This data shows that Nonvcst’s cJienrs, at Jan in the Seacde area, run a higher risk of 

defaulting on their Jeans. 

N-t has also been a difficuJr lender to work wirh >n servicing issues. In one &u.ncc, 

the l?pA had a. client with muJdpJc he&h problems. E he was foqetfuJ and difE.alt to work 

arich. CertaJn Norwest staff &cd to cake her calls, IO the FPA stepped in to advocate on 

ha beI-& FPA counsclorr had to speak with no Ins &an six Nmesr staff, pad had to 

make no leas than ted & m sort out the issue. The end result IVRS posit&, but it was 

diff&Jt the whoJe way through. 

Norwzst’s incon&tcnt suvicc is rq.licated on P scrbtoidc JeveL No-t osiginaud 2,223 

FIX&insured mortgage loans in the Spokane judsdicti~~n in PY 1997, mnking second in the 

number of PHA loana made. Yet Norwest’s de&& a.& on thcsc Ioans apti higher than 12 

of the 24 lenders surveyed In Scat&, tht record is worse: Norwest Mortgage ranked 34th 

out of 43 Jcndas Jn loss n&i&on performtance Ihe bank is the lprgcsL mortgage lender in 

the state, and it uses FHA insurance - public money pmvidcd by HUD - to co- ita losses 

very fiequcndy. Based on these f&a, the WRA can oily coach& that Norwest is wing is 

&xx m&et share and its plentiful supply of HUD-iaturcd mortgages to originate loans 

without supporting its los and modrxarc-income bonsnvas. 

Insum,rhcWT(A~iadicrtianstfurNorwestMortg;~~hyla~cantnnesncivc 

impact ou low- and moderare income communities pnxected uodcr the Communky 

Reinvcsuncut Act To ensure &at momgage Jending becomes more support&~ of the 
08/16/98 14:07 FAX 20644388S1 LOW INCOME HOUm 

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coznmmity in the w&t of the merger, rbe WRA mcomncnds the following measuxcs be 

taken bv t&e combiwd companr _ 

Lending officers employed at Nozwest Morrgage’s \Qashingcon state branches receive 

wining to protidc mom customer~tered eeivicirig of theit loans, in&&g specitic 

training in preparing loss midgation plans in coopaationwith borrowers at tisk of 

moRffdgc debl~ 

l-b comhiwd company m&c a significant lending qqzt on .singi+my home loans to 

low- and modemt&xome individuals and c-s was aod roimxiq homebuyers. This 

commiunmt should amicipate the larger &UC of c~womes~ that cunmdy receive home 

loand thmugh wells Fargo. 

The comb&d company wntziiutc 51.25 million w home pm-purchase and wxtgagc 

de&It counecling agtxcies over dle next fmc years. 

Thank you for par kind conoiderafion of dlese CzommCnP. 

Shaton H. Lee L--- 

for the Washiqton 

Reinvcst¶nem x4lliance