Congressman Jerrold Nadler, Chair of the House Judiciary Subcommittee on the Constitution, Civil Rights and Civil Liberties, held a hearing yesterday on Combating Predatory Lending Under the Fair Housing Act.
In his opening statement, Chairman Nadler spoke of “redlining” in the past, when people of color were denied credit based on race rather than creditworthiness, and the practice was “simply drawing a red line around a minority neighborhood and refusing to lend in that area.”
“What we witness today, however, is reverse redlining--a mortgage brokerage or bank’s practice of systematically singling out minority borrowers and neighborhoods for loans with inferior terms like high up-front fees, high interest rates, and lax underwriting practices,” said the Congressman. “It seems that everything old is new again. Here we are again looking at the impact of discriminatory lending practices on families and communities…. And what is most disgraceful is that it didn’t have to happen. Many could easily have qualified for conventional mortgages.”
Nadler called on Thomas Perez, the Assistant Attorney General who runs the previously embattled and politicized Civil Rights Division to testify on how the DOJ is “attempting to address the harm.”
Perez clearly gets it. He cited a New York Times investigative report that showed African-Americans in New York City earning over $68,000 annually were “almost five times more likely to have a subprime loan than whites with similar or lower incomes.” He also noted a Center for Responsible Lending study which “concluded that African-Americans and Latinos received higher-priced subprime loans than white borrowers, even after controlling for creditworthiness and other factors.”
In 2007, before he came to the DOJ, Perez was Secretary of the agency that oversees financial regulation in Maryland. He said they passed reforms--recognized as the toughest anti-predatory lending laws in the country--to extend the foreclosure process, crack down on fraud, require lenders to verify a borrower’s ability to repay, and require brokers to offer the best product a borrower is eligible for rather than the one that pays the highest broker fees.
But Perez said “our reach was limited, because large, national players are not subject to state regulation….The Federal government was decidedly absent.” The Assistant Attorney General described how that’s changing now.
He said a new “Fair Lending Unit”--initially made up of more than 20 staff members including career attorneys and new hires--will examine “the entire range of abuses seen in the market, from traditional access to credit issues, such as redlining, to reverse redlining, discrimination and other areas.” He set a high bar when he promised “a series of cases, each one targeted at specific discriminatory lending practices.”
Perez touted a settlement last month with two subsidiaries of AIG in a lawsuit alleging that “African-American borrowers nationwide were charged higher fees on wholesale loans.” He said the $6.1 million won in damages for the victims is the largest amount ever secured by the DOJ in a fair lending settlement. Perez called this and two other cases “just the beginning.”
“We currently have 39 matters open, including 17 investigations,” he said. “We have identified seven national lenders as targets of enforcement efforts.” (One piece of legislation that would devote even more resources to this effort is Congresswoman Marcy Kaptur’s Financial Crisis of 2008 Criminal Investigation and Prosecution Act.)
It’s worth noting that not a single Republican attended this hearing. That comes as little surprise, however. Last year, many did attend the Chairman’s hearing examining the enforcement readiness of the Civil Rights Division after two extensive Government Accountability Office reports shed light on the divisions’ problems under the Bush Administration. Literally the only issues Republicans wanted to discuss at that time were (it turns out bogus) allegations against ACORN and (also bogus) allegations of massive voter fraud. Human Trafficking? Whatever. Hate Crimes? Forget about it. Employment, housing, or lending discrimination? Who has the time.
“It was quite disappointing that no Republicans participated in today’s hearing,” Ilan Kayatsky, communications director for Congressman Nadler, told me. “Predatory and subprime lending, and the massive housing foreclosures that followed, are at the heart of our national recession, and we would have thought that GOP Committee members were also interested in exploring the roots of our current crisis. We were disappointed that by refusing to participate in the hearing, the Republicans demonstrated an utter disregard for ongoing housing discrimination that we have been working to eliminate ever since Martin Luther King, Jr. was assassinated.”
Indeed the Fair Housing Act of 1968 was enacted in the immediate aftermath of Dr. King’s assassination--primarily in response to widespread racial discrimination in housing sales and rentals around the country. Look for Nadler to introduce legislation updating it in the coming months, with predatory lending and enforcement a key focus.
As for the Civil Rights Division’s new effort, it’s still too early to tell if it will have the teeth and reach that is needed, but it’s good to see Chairman Nadler continuing to keep a close watch.
“Congressman Nadler has [seen] a significant transformation of the Department of Justice since the Obama Administration came on board,” said Kayatsky, “particularly within the Civil Rights Division, which is now actually concerned with enforcing civil rights.”