[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                      A REVIEW OF THE STATE OF AND
                   BARRIERS TO MINORITY HOMEOWNERSHIP

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HOUSING,
                         COMMUNITY DEVELOPMENT,
                             AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 8, 2019

                               __________

       Printed for the use of the Committee on Financial Services
       
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 


                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
37-522 PDF                  WASHINGTON : 2020                     
          
--------------------------------------------------------------------------------------


                           Serial No. 116-23

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                  Subcommittee on Housing, Community 
                       Development, and Insurance

                   WM. LACY CLAY, Missouri, Chairman

NYDIA M. VELAZQUEZ, New York         SEAN P. DUFFY, Wisconsin, Ranking 
EMANUEL CLEAVER, Missouri                Member
BRAD SHERMAN, California             BLAINE LUETKEMEYER, Missouri
JOYCE BEATTY, Ohio                   BILL HUIZENGA, Michigan
AL GREEN, Texas                      SCOTT TIPTON, Colorado
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
CAROLYN B. MALONEY, New York         DAVID KUSTOFF, Tennessee
DENNY HECK, Washington               ANTHONY GONZALEZ, Ohio
JUAN VARGAS, California              JOHN ROSE, Tennessee
AL LAWSON, Florida                   BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas, Vice Ranking 
CINDY AXNE, Iowa                         Member
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 8, 2019..................................................     1
Appendix:
    May 8, 2019..................................................    47

                               WITNESSES
                         Wednesday, May 8, 2019

Bailey, Nikitra, Executive Vice President, Center for Responsible 
  Lending........................................................     7
Castro-Conroy, Carmen, Managing Housing Counselor, Housing 
  Initiative Partnership, Inc....................................    12
Griffith, Joel, Research Fellow, Financial Regulations, The 
  Heritage Group.................................................    15
Hicks, Jeffrey, President, National Association of Real Estate 
  Brokers........................................................    11
McCargo, Alanna, Vice President, Housing Finance Policy, The 
  Urban Institute................................................     5
Nery, Joseph, Partner, Nery & Richardson LLC, and past President, 
  National Association of Hispanic Real Estate Professionals 
  (NAHREP).......................................................     9
Poole, JoAnne, 2019 Vice Chair, Multicultural Real Estate 
  Leadership Advisory Group, National Association of REALTORS....    14

                                APPENDIX

Prepared statements:
    Bailey, Nikitra..............................................    48
    Castro-Conroy, Carmen........................................    80
    Griffith, Joel...............................................    84
    Hicks, Jeffrey...............................................    89
    McCargo, Alanna..............................................    95
    Nery, Joseph.................................................   117
    Poole, JoAnne................................................   128

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    UnidosUS report entitled, ``The State of, and Barriers to, 
      Latino Homeownership,'' dated May 15, 2019.................   157
Clay, Hon. William Lacy:
    Written statement of The Cedar Band of Paiutes' CBC Mortgage 
      Agency (the ``Chenoa Fund''), dated May 8, 2019............   162
    Written statement of The Leadership Conference on Civil and 
      Human Rights and Americans for Financial Reform............   269
    Written statement of the National Community Reinvestment 
      Coalition..................................................   276
McHenry, Hon. Patrick:
    Written statement of David M. Dworkin, President and CEO, 
      National Housing Conference................................   290
Posey, Hon. Bill:
    ``Multifamily Cost of Regulation, 2018 Special Study'' by the 
      National Association of Home Builders and the National 
      Multifamily Housing Council................................   300
Tlaib, Hon. Rashida:
    Written statement of the National Consumer Law Center (on 
      behalf of low-income clients)..............................   317

 
                      A REVIEW OF THE STATE OF AND
                   BARRIERS TO MINORITY HOMEOWNERSHIP

                              ----------                              


                         Wednesday, May 8, 2019

             U.S. House of Representatives,
                           Subcommittee on Housing,
                             Community Development,
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Wm. Lacy Clay 
[chairman of the subcommittee] presiding.
    Members present: Representatives Clay, Velazquez, Cleaver, 
Beatty, Green, Gonzalez of Texas, Maloney, Vargas, Lawson, 
Tlaib, Axne; Duffy, Luetkemeyer, Huizenga, Tipton, Kustoff, 
Gonzalez of Ohio, Rose, Steil, and Gooden.
    Ex officio present: Representatives Waters and McHenry.
    Chairman Clay. The Subcommittee on Housing, Community 
Development, and Insurance will come to order. Good morning, 
and welcome to this morning's hearing entitled, ``A Review of 
the State of and Barriers to Minority Homeownership.''
    As the Chair of the Subcommittee on Housing, I am honored 
to mark the anniversary of the congressional passage of the 
Fair Housing Act during the month of April, which was National 
Fair Housing Month.
    It is clear from the evidence in front of us, though, that 
51 years later there is still much work to be done to promote 
and ensure fair housing in America.
    Just a few weeks ago, The Washington Post published an 
article entitled, ``The Heartbreaking Decrease in Black 
Homeownership'', which told a sad tale but also discussed some 
of the historical discrimination that led the homeownership 
rates to decrease for blacks and other minorities as a result 
of the recent financial crisis.
    President Lyndon Johnson signed the Fair Housing Act on 
April the 11, 1968, 1 week after the assassination of Dr. 
Martin Luther King. The Fair Housing Act was a monumental step 
forward for the civil rights movement and pivotal to 
establishing equal opportunity in housing for all Americans.
    The discrimination which the Act attempted to outlaw did 
not occur through happenstance, and although many private 
actors were complicit, research has shown that the government 
played a significant role. And although it was officially 
outlawed 50 years ago, as the National Fair Housing Alliance's 
2018 report noted, some discriminatory practices are still 
prevalent.
    In fact, since 1988, dozens of cases alleging redlining and 
discrimination by mortgage lenders have resulted in close to $1 
billion in compensation to victims of mortgage lending 
discrimination and for investment in communities.
    A recent New York Times bestseller by researcher Richard 
Rothstein provides a very sobering account of how government 
policy supporting and directing segregation was not accidental. 
And we should all be alarmed that the homeownership rate for 
blacks is now 42 percent, and for Hispanics, is 47 percent, 
compared to 73 percent for white households.
    Homeownership has proven to be one of the most consistent 
paths to attaining wealth in America and narrowing the wealth 
gap. Closing the racial wealth gap will be an essential path 
towards countering historic discrimination and predatory 
lending practices and would no doubt be a boon for the housing 
market.
    It is also clear that minority borrowers must have access 
to credit on the same terms and conditions as everyone else. 
Otherwise, the racial wealth gap will persist.
    In theory, enhanced fair lending, increased financial 
intelligence, and the use of creative ways to promote community 
development will spur the type of development that will help 
the economy grow and help our community to thrive and not just 
survive.
    There is much work to be done but there are resources 
available. And I want to acknowledge the housing advocates in 
St. Louis and to acknowledge the work of the St. Louis 
Affordable Housing Trust Fund Task Force which issued a report 
yesterday that spells out a number of recommendations to 
address affordable housing. And I will be introducing 
comprehensive legislation to address some of the problems that 
still exist.
    Let me also acknowledge the contributions of my colleagues 
who have introduced or are working on legislative proposals 
that will work to improve this dire situation.
    As chairman of this subcommittee, my mission is to promote 
pragmatic policy through smart legislation, intelligent 
collaboration, and sound policy choices to help make that dream 
a reality again. And I look forward to the witnesses' 
testimony.
    At this time, I now recognize the ranking member of the 
subcommittee, Mr. Duffy of Wisconsin.
    Mr. Duffy. Thank you, Mr. Chairman. I appreciate you 
holding this hearing.
    Welcome, witnesses. It is hard to imagine that 50 years 
after passing a myriad of laws aimed at incentivizing low-
income and minority homeownership, we find ourselves in a place 
where African-American ownership is lower than it was when 
Congress passed the Fair Housing Act.
    That is not an assault on Fair Housing. But it is that we 
have to reevaluate what we are doing and how we can be more 
effective, I think to the chairman's point.
    It is especially hard to imagine that with the lowest 
unemployment since 1969 at 3.6 percent, this is actually taking 
place today. I don't have the answers, but I want to work with 
the Majority and Chairman Clay to uncover reasons for the 
disparity of homeownership and what the solutions are to fix 
it.
    Looking at recent history, we know minorities were targeted 
for predatory mortgages prior to 2008 and the crisis. Congress 
acted to ensure that lenders verify employment, debt levels, 
costs involved in the loan, and the borrower's ability to repay 
at the FHA. Those disclosures are important, and we are still 
debating if we have hit the right balance on those disclosures.
    I think most people will point to a lack of financial 
resources for a down payment, poor credit history, a lack of 
understanding of the home buying process, regulatory burdens, 
and housing discrimination as barriers to homeownership.
    Sometimes, we can find microtargeted solutions for these 
issues by allowing the use of alternative data such as paying 
your phone bill or paying your medical bills when lending 
institutions use credit scores to determine a borrower's risk.
    The reality is we have an opportunity to address some of 
the inequities through a more holistic approach to housing 
finance reform and one cause of the financial crisis that 
Congress just hasn't seemed to get its hands around, but I 
think actually we need to address, again, housing finance.
    As I held hearings not long ago when I used to be the 
chairman, we invited many of the groups to testify at a 
roundtable where we discussed the barriers to minority 
homeownership in the context of major housing finance reform. 
And we will hear some of those ideas again today.
    I do want to use this opportunity to call on the chairwoman 
of the full Financial Services Committee to take the issue of 
housing finance reform up and do this in a bipartisan fashion 
because it is long overdue.
    Chairwoman Waters started this Congress by calling for a 
bipartisan working group on flood insurance and I am looking 
forward to participating in that. And I think she can use the 
same model to tackle housing finance reform and the issues that 
we are going to talk about today.
    I, for one, am ready to sit down with Chairman Clay, we 
have a great working relationship, and others on the 
subcommittee to work towards a solution that will benefit 
everyone in this room and all of our communities and all of our 
districts in all of our States.
    In today's hearing, we are looking at four bills and asking 
if they will solve some of the problems that you all will be 
highlighting. If they are legitimate solutions, we should stand 
with those bills and with those ideas. And if not, we want your 
feedback on how we can reform these proposals and make them 
work better and be more effective.
    While I have some initial opinions on the bills, I am 
looking forward to your testimony and your insight and your 
expertise to guide this Congress on how we should move forward.
    With that, if I could ask the Chair for a point of personal 
privilege?
    Chairman Clay. Proceed.
    Mr. Duffy. I would just like to make a quick note that 
Clinton Jones has served our committee and this subcommittee 
for 24 years. I know he doesn't look that old, but we have been 
blessed to have his expertise for 29 years in the Federal 
Government, 2 years at Fannie Mae. I am not sure how he would 
speak about the 2 years at Fannie Mae. Maybe he was happy to 
come back to the committee.
    But this is his last week. This is his last subcommittee 
hearing before he goes over to the FHFA.
    I couldn't have a better friend on the committee as someone 
who gives great insight. And it is fascinating as we go through 
some of these debates that Mr. Jones is sometimes a radical 
conservative and sometimes he is a radical socialist leftist. 
It just depends on the issue.
    And we never know where he is going to stand, but he always 
shares his opinion, and the loss to this committee from Clinton 
leaving will be to the benefit of FHFA. And so, Clinton, I just 
want to say thank you for your service and your friendship, and 
good luck as you make this transition.
    [applause]
    Chairman Clay. The gentleman yields back.
    Let me also congratulate Mr. Jones on your years of service 
here and good luck in your future endeavors.
    Today, we have a well-rounded panel of experts in the area. 
Oh, I see.
    Let me stop there with my opening statement and ask the 
chairwoman, did you want to make an opening statement?
    Chairwoman Waters. Yes. I would like to, right after you 
but not before you.
    Chairman Clay. Oh, I have done it. We have done ours--
    Chairwoman Waters. You have? Okay.
    Chairman Clay. So we will yield to you.
    Chairwoman Waters. Well, thank you for the opportunity. I 
would like to do that. I would like to thank you, Mr. Clay. The 
racial gap in homeownership represents a failure to remedy 
decades of explicit government-sponsored discrimination in our 
housing markets.
    Due to the projected growth of minority households in the 
coming decades and the economic importance of the housing 
market, some analysts have argued that a failure to address the 
gap in minority homeownership and the corresponding wealth gap 
is not only a major civil rights issue, it is a threat to 
America's economic security. This hearing is an important 
hearing to hear from experts about the ongoing barriers to 
homeownership as well as potential solutions.
    I am also very concerned that under Kathy Kraninger's 
leadership, the Consumer Financial Protection Bureau (CFPB) 
last week issued a proposal to severely curtail data reporting 
under the Home Mortgage Disclosure Act (HMDA).
    HMDA data is a crucial tool used by researchers, advocates, 
journalists, and the government to identify and combat 
predatory and discriminatory mortgage lending. And the CFPB 
must rescind this proposal at once. I look forward to 
discussing this and other issues with our witnesses. Thank you 
very much.
    I yield back.
    Chairman Clay. The chairwoman yields back, and I thank you 
for your opening statement.
    We have a well-rounded list of witnesses, and I will start 
off by introducing them all. The first witness will be Ms. 
Alanna McCargo, vice president of housing finance policy at the 
Urban Institute.
    The second witness will be Ms. Nikitra Bailey, executive 
vice president for the Center for Responsible Lending.
    Third, will be Mr. Joseph Nery, partner at Nery & 
Richardson, LLC, and past president of the National Association 
of Hispanic Real Estate Professionals, and a current national 
board member.
    Fourth, will be Mr. Jeffrey Hicks, president of the 
National Association of Real Estate Brokers.
    Fifth, will be Ms. Carmen Castro-Conroy, managing housing 
counselor at the Montgomery County Housing Initiative 
Partnership.
    Sixth, will be Ms. JoAnne Poole, the 2019 vice chair of the 
Multicultural Real Estate Leadership Advisory Group of the 
National Association of REALTORS.
    And finally, Mr. Joel Griffith, research fellow, Financial 
Regulations, from the Heritage Foundation.
    Welcome to you all. You will each be recognized for 5 
minutes to present your oral testimony. And without objection, 
your written statements will be made a part of the record.
    And we will start with Ms. McCargo. You may proceed.

 STATEMENT OF ALANNA MCCARGO, VICE PRESIDENT, HOUSING FINANCE 
                  POLICY, THE URBAN INSTITUTE

    Ms. McCargo. Chairman Clay, Ranking Member Duffy, and 
members of the subcommittee, thank you for the opportunity to 
testify today.
    My name is Alanna McCargo. I am the vice president of the 
Housing Finance Policy Center at the nonprofit Urban Institute. 
The views I express today are my own and should not be 
attributed to the Urban Institute, its trustees or funders.
    This morning, I will share data on the critical role of 
homeownership access, housing affordability, and sustainability 
for households of color. My remarks will often focus on black 
homeownership because the homeownership trends for black 
Americans today are in a dire and declining state, and the 
Housing Finance Policy Center has been extensively researching 
these issues over the past several years.
    The face of our nation is changing profoundly and 
literally. As communities of color grow, their experiences will 
increasingly come to define the housing market of the future. 
Some projections suggest that in just 25 years, no racial or 
ethnic group will represent more than 50 percent of the U.S. 
population.
    The overwhelming majority of new homebuyers in the next 10 
years will be non-white, with more than half being Hispanic. If 
current trends persist, however, the homeownership rate will 
significantly decline and opportunities to build wealth through 
homeownership will as well.
    Becoming a homeowner in America today is getting further 
out of reach for most families. The cost of buying a home is 
high and it is difficult to get a mortgage unless you have 
pristine credit. High rental cost makes saving for a down 
payment on a house very challenging.
    The result has been a persistent and significant racial 
homeownership rate gap in the United States. Just to level set, 
the national homeownership rate today is at 64 percent. Broken 
down by race, rates stand at 42 percent for blacks, and 47 
percent for Hispanics, reflecting gaps of 30 and 25 percentage 
points less than whites, whose homeownership rate is at around 
72 percent.
    The racial homeownership gap is larger today than it was 50 
years ago, as the chairman mentioned, and that was when race-
based discrimination was actually legal in this country. Not 
only have we failed to make progress, we have lost precious 
ground. New solutions, programs, and policy interventions are 
needed.
    There are four facts I will highlight around the severity 
and persistence of the crisis in homeownership for people of 
color. First, despite big gains made during the housing boom, 
black and Hispanic homeownership rates have never hit 50 
percent in this country, and minorities disproportionately 
suffered the biggest stripping of wealth through the 
foreclosure crisis.
    Second, racial disparities exist across the nation. We 
looked at cities with the 100 largest black populations across 
the country, and there is no city without a racial 
homeownership gap.
    Third, racial homeownership gaps are a generational 
dilemma, intergenerational dilemma. The homeownership gap is 
present with our seniors, our Baby Boomers, and Generation X, 
and our research shows it persists with a large and very 
diverse generation of 74 million-plus millennials.
    Finally, there are historical and structural barriers and 
biases that continue to live in our housing system that cannot 
be ignored or put aside if we are to make any progress over the 
next 50 years. These barriers must be eliminated in order to 
reverse these trends.
    The racial homeownership gap will have consequences for the 
financial health and well-being of future generations and for 
the entire country because homeownership remains the primary 
wealth-building tool for most Americans.
    That survey data shows that homeowners have significantly 
more wealth than renters. Today, the median homeowner has a net 
worth of roughly $200,000 compared to just $5,000 for renters. 
And while the black and Hispanic homeowners have less than half 
the net worth of white homeowners, they still have considerably 
more than black and Hispanic renters.
    The returns on homeownership are not just financial, of 
course. Homeownership provides shelter, stability, and enables 
families forced savings each month when making their mortgage 
payment. And the home equity plays an increasingly important 
part in retirement security for seniors.
    I have shared several ideas for reducing the racial 
homeownership gap in my written testimony. Many of these ideas 
will require action from Federal, State, and local agencies.
    I urge this committee to pursue a bipartisan action that 
will help change the direction of the persistent growing racial 
homeownership gap by addressing these priorities.
    The segregation in our communities and the disparities in 
accessing our housing markets did not come about by accident. 
Our history and the role that the Federal Government played in 
creating segregated and undervalued neighborhoods through 
explicit race-based policies that benefited white families, 
helping them purchase homes through FHA and other programs that 
excluded people of color, is well documented.
    It is my view that intentional policies will be needed to 
reverse decades of wealth-stripping and decline. The data and 
the evidence are clear on this.
    Ensuring an equitable and accessible housing finance system 
is something Congress can and should undertake with all of the 
housing agencies.
    This includes modernizing and bolstering the Federal 
Housing Administration, particularly its outdated servicing 
systems, safely expanding access to fairly-priced conventional 
mortgages to borrowers of color through Fannie Mae and Freddie 
Mac, updating underwriting practices and models to consider 
modern living arrangements and varying income types, and 
innovating to make alternative forms of credit available and 
mortgage decisions to improve access to credit and reduce 
mortgage application denials.
    [The prepared statement of Ms. McCargo can be found on page 
95 of the appendix]
    Chairman Clay. The gentlewoman's time has expired. Thank 
you, Ms. McCargo.
    And now, Ms. Bailey, you are recognized for 5 minutes.

 STATEMENT OF NIKITRA BAILEY, EXECUTIVE VICE PRESIDENT, CENTER 
                    FOR RESPONSIBLE LENDING

    Ms. Bailey. Good morning, Chairwoman Waters, Ranking Member 
McHenry, Chairman Clay, and Ranking Member Duffy. Thank you for 
the opportunity to testify in today's hearing on barriers to 
homeownership for families of color.
    Four hundreds of years after the enslaved Africans arrived 
in Jamestown, Virginia, and hard-fought battles won granting 
citizenship and equal protection to African Americans, 
homeownership remains the driver of inequality.
    Our nation's housing finance system was built with 
discrimination as the cornerstone. The mortgage ecosystem 
favored whites and set them up for success while curtailing 
opportunity for families of color.
    Today's racial wealth gap is the outcome of this 
discrimination. White families have 13 times the wealth of 
African Americans and 10 times the wealth of Latino families. 
The white homeownership rate is 73 percent compared to 41 
percent for African Americans and 47 percent for Latinos.
    These stubborn and persistent figures will only disappear 
when we stop underwriting practices that falsely equate race 
with risk. This hearing can be a catalyst for change, a step 
towards addressing the Federal Government's role in lending 
discrimination that produced winners and losers among American 
citizens in the pursuit of the American Dream.
    I am executive vice president of the Center for Responsible 
Lending, an affiliate of Self-Help, one of the nation's largest 
community economic development lenders based in North Carolina. 
Self-Help has provided over $7 billion in financing to 
borrowers all across the nation, including in a secondary 
market program that has helped low- to moderate-income families 
and people of color succeed in homeownership.
    President Johnson signed the Fair Housing Act in 1968 
following the assassination of Dr. Martin Luther King, Jr., 
stating that he was delivering on the promise of a century, 
referencing Lincoln's emancipation.
    In 1866, Congress passed the Civil Rights Act that promised 
fair lending. It was limited by a private right of action and 
that weakened its enforcement manifesting in discrimination for 
102 years of legal mortgage discrimination. Race remains an 
impediment to fair lending.
    Today, African Americans have the same rates of 
homeownership as they did in 1968. Home Mortgage Disclosure Act 
data consistently show low levels of lending by conventional 
lenders to communities of color, with only 3.1 percent of 
conventional loans going to African Americans and 5.8 percent 
to Latinos in comparison to 70.2 percent to white families in 
2016.
    Discriminatory lending birthed redlining. Redlining birthed 
predatory lending. Predatory lenders target families of color 
with high-cost and risky mortgages.
    CRL's research found that consumers of color were steered 
towards these unsustainable loans even when they qualified for 
loans with lower cost and fewer risks. The spillover costs for 
black and Latino families totaled $1 trillion.
    Today's mortgage market delivers as designed. Conventional 
loans are for whites only. Families of color, including upper-
income Latinos and African Americans, are disproportionately 
represented in the FHA. Government-backed loans cannot and 
should not be the only sources of credit for low-wealth 
families.
    Post-recovery, banks experienced record profits, reporting 
$59.1 billion in the fourth quarter of 2018, up 133.4 percent 
from a year earlier. Fannie Mae data shows that loans to low-
income families originated between 2010 and 2015 had a default 
rate of just 0.3 percent, approximately equal to that of loans 
to high-income borrowers originated in 2002 through 2004.
    Rather than remediate the damage done by abusive subprime 
lending, excessive risk-based pricing dominates in today's 
mortgage market, driving out the very borrowers that a future 
system depends on. Harvard's Joint Center tells us that 7 out 
of 10 future borrowers will be families of color.
    Mortgage discrimination's impact on families of color needs 
a Federal response equal to the problems it created. Now is the 
time for action and not retreat.
    Some ways that we can achieve this goal include increasing 
support for down payment assistance, requiring national banks 
to ensure that 10 percent of their mortgage lending and small 
business lending occurs in communities where at least 20 
percent of the population has experienced poverty for the last 
30 years in exchange for FDIC insurance or to have their loans 
sold to the GSEs or Ginnie Mae.
    Strengthen and fairly enforce our nation's lending laws. 
These laws have never been fairly enforced. African Americans 
and Latinos have never operated in a fair and equitable 
mortgage system. If we had, many of the disparities discussed 
would be smaller than they are today. According to Demos, we 
would see a reduction in the homeownership and equity building 
for communities by considerable percentages.
    Whites have better life outcomes in wealth accumulation, 
housing, education, employment, and health. Our nation's 
lending system contributed to these inequities. Remediating the 
Federal Government's role will level the playing field, 
creating more equity of opportunity so that all Americans can 
share in its prosperity.
    Thank you. I look forward to answering your questions.
    [The prepared statement of Ms. Bailey can be found on page 
48 of the appendix.]
    Chairman Clay. Thank you for your testimony.
    And, Mr. Nery, you are recognized for 5 minutes.

 STATEMENT OF JOSEPH NERY, PARTNER, NERY & RICHARDSON LLC, AND 
  PAST PRESIDENT OF THE NATIONAL ASSOCIATION OF HISPANIC REAL 
                 ESTATE PROFESSIONALS (NAHREP)

    Mr. Nery. Good morning, Chairwoman Waters, Chairman Clay, 
Ranking Member Duffy, and distinguished members of the 
Subcommittee on Housing, Community Development, and Insurance.
    My name is Joseph Nery, and I am here representing the 
National Association of Hispanic Real Estate Professionals 
(NAHREP), both as 2016 NAHREP national president and as a 
Chicago-based real estate attorney where I serve a largely 
Latino market.
    With over 30,000 members in over 80 local chapters, our 
organization is one of the largest Latino business 
organizations in the country. The force and passion behind our 
growing membership revolves around one primary mission: 
advancing sustainable Hispanic homeownership. Bottom line, we 
believe every individual who desires to become a homeowner and 
is able to sustain a mortgage should be granted access to the 
American Dream.
    Today, my testimony will outline the current state of 
Hispanic homeownership and make several actionable 
recommendations for this committee to consider. This year's 
edition of our annual State of Hispanic Homeownership Report 
highlighted four consecutive years of homeownership growth for 
Latinos and the largest increase since 2005.
    In spite of this remarkable growth, homeownership rates 
among Latinos and other minority populations lag behind that of 
their non-Hispanic white counterparts. At the end of 2018, the 
Hispanic homeownership rate was 47.1 percent compared to 73 
percent for the non-Hispanic white population and 64.4 percent 
for the general population.
    While homeownership trends are positive, they should be 
much higher. And this is important because Hispanics will 
account for more than half of all new potential homeowners over 
the next several years and 56 percent of all new homeowners by 
2030.
    Hispanics have also accounted for more than half of the 
nation's population growth since the year 2000. And at a median 
age of 29, Hispanics are just entering into their prime 
homebuying years, further increasing homeownership potential 
for decades to come.
    If homeownership rates across all ethnic groups were to 
remain what they are today, the national homeownership rate 
would decline to 55 percent over the next 40 years. The last 
time the homeownership rate was that low was in the years 
immediately following World War II.
    So that bring us to the unique challenges credit-worthy 
Latinos face in today's market. A young couple I assisted in 
buying their first home are a prime example of the Hispanic 
homebuyer today. Jose and Laura own a small gardening business, 
while Laura occasionally caters at events.
    Laura's mother and sister live with them, both of whom 
contribute to the monthly mortgage payment, yet it took 6 
months for this household to be able to gain access to a 
reasonable loan. Much like my clients, potential Hispanic 
homeowners are more likely to be self-employed or involved in 
the gig economy, live in multi-generational households and tend 
to use cash over credit.
    Given these characteristics, coupled with today's 
regulatory constraints, lenders consistently fail to accurately 
assess the credit risk of many otherwise credit-worthy Hispanic 
borrowers.
    To that end, NAHREP offers these actionable Federal policy 
solutions. First, we must temporarily extend the GSE QM patch 
until it is replaced with a workable solution. Communities of 
color would be disproportionately impacted if the GSE QM patch 
were to expire, given that Hispanics are 38 percent more likely 
to have a high DTI loan.
    As data is still being developed to support alternatives 
and replacements for the patch, the Hispanic community is 
poised to be negatively impacted without clear solutions for 
non-W-2 borrowers, particularly for the growing number of 
Latino small business owners.
    Second, Congress must prioritize efforts to fund FHA's 
much-needed modernization. No Federal housing finance reform 
should be devoid of a plan for how to do so. Today, Hispanics 
are more than twice as likely to make use of the FHA programs 
than non-Hispanics, yet the agency is understaffed, underfunded 
and operating with severely outdated technology and computer 
systems.
    Third, we must put a halt to the practice of denying 
taxpayer-supported loans to taxpaying DACA recipients. We 
support today's Homeownership for Dreamers Act legislation and 
join its co-sponsors in their call to clarify that eligibility 
of a government-sponsored mortgages may not be conditioned on 
the status of a consumer being a DACA recipient. We must ensure 
that FHA and other Federal housing agencies do not get ahead of 
the judiciary to decide immigration law.
    Fourth, we urge the Subcommittee on Diversity and Inclusion 
to take on the issue of diversifying the mortgage industry at 
all levels. A diverse lending community stimulates 
homeownership rates for minority borrowers.
    And finally, we would be remiss if we did not mention the 
need to increase the inventory of affordable owner-occupied 
housing, quite possibly the biggest short-term barrier to 
minority homeownership today.
    While we are proud to see a resilient Latino population 
consistently increasing its rate of homeownership, this 
progress is in spite of the structural barriers to 
homeownership. Today, more than ever, broad access to 
affordable credit, low-down-payment mortgage products, and 
sufficient affordable housing stock will be imperative to 
ensuring the long-term prosperity of the nation.
    Now is not the time to curtail access to the very products 
that have catapulted so many working-class Americans into the 
middle class. Instead, we must ensure that our housing system 
adequately adapts to the changing face of America's aspiring 
homeowner.
    Thank you.
    [The prepared statement of Mr. Nery can be found on page 
117 of the appendix.]
    Chairman Clay. Thank you, Mr. Nery.
    Mr. Hicks, you are recognized for 5 minutes.

STATEMENT OF JEFFREY HICKS, PRESIDENT, NATIONAL ASSOCIATION OF 
                      REAL ESTATE BROKERS

    Mr. Hicks. Good morning, Chairwoman Waters, Chairman Clay, 
Ranking Member Duffy, and distinguished members of the 
subcommittee. Thank you for holding this hearing and for giving 
me the opportunity to testify about the important issue of 
minority homeownership in America.
    My name is Jeffrey Hicks and I'm from from Atlanta, 
Georgia. I am the president of the National Association of Real 
Estate Brokers, NAREB. Founded in 1947, NAREB is the oldest 
minority real estate trade association in America. Its members 
are known as REALTIST. The primary mission is reflected in 
NAREB's motto: Democracy in Housing.
    For 72 years, the association has worked to ensure that all 
Americans have equal access to homeownership opportunities in 
urban, suburban, and rural communities throughout the United 
States, and equal opportunity in the real estate profession for 
black Americans. I am honored to be here today to provide our 
perspectives on what NAREB believes to be the barriers to 
minority homeownership in the United States.
    Our nation has a very complicated and checkered history 
with providing equal and equitable access to homeownership for 
black Americans.
    At the end of World War II, when black Americans sacrificed 
their lives for the cause of freedom, dignity, and human 
rights, the United States Federal Government created an 
economic divide between black and white veterans, and their 
families were denied the multi-generational enriching impact of 
homeownership and economic security that the G.I. Bill 
conferred on the majority of white veterans, their children, 
and their grandchildren.
    Unequal implementation of the G.I. Bill, along with Federal 
Government policies and practices at the Federal Housing 
Administration, including the redlining of black neighborhoods, 
but at the same time financing the construction of suburbs 
restricted to whites only and providing subsidized mortgages, 
financing only for whites, set the stage for today's wealth and 
homeownership gap statistics.
    It is against this backdrop that I give my testimony. 
Annually, NAREB publishes the State of Housing in Black America 
Report. The 2018 edition examined the need for Federal policies 
to address and bolster the rate of black American homeownership 
since previous Federal policies discriminated against blacks 
which helped to create a disparity in black American 
homeownership, which lags a whopping 32.1 percent behind that 
of white Americans.
    According to the first quarter 2019 Census Bureau 
statistics, the homeownership rate for black Americans is 41.1 
percent for blacks versus 73.2 percent for whites. For these 
reasons, NAREB has adopted three policy principles that can 
work to increase homeownership among minorities.
    One, we must continue to promote homeownership as a high 
priority public policy. NAREB calls for the passage of the 
American Dream Down Payment Savings Plan proposal by 
Congressman Meeks that will function from a tax perspective 
like the 529 College Savings Plan.
    Potential homebuyers and existing homebuyers desiring a 
move-up home would be allowed to save in an authorized account 
where the savings could grow tax free and be used as a down 
payment for purchasing a home.
    Two, loan level equality, which would be the absence of 
hereditary or arbitrary class distinctions, biases or 
privileges in the mortgage origination process.
    And three, non-bank financial institutions should have an 
accountability structure. There is a growing concern about the 
lack of regulation for non-deposit mortgage lenders while these 
entities are the growing force, now more than 50 percent of all 
mortgage originations, yet there is very little regulatory 
accountability.
    In closing, we need lawmakers and policymakers, local 
officials, homebuilders and the financial industry to promote 
homeownership. I fear the value of homeownership is being lost 
on our young people and will be lost on future generations.
    Realtist will continue to be the conscience of the real 
estate industry, forever promoting democracy in housing, which 
is the right for every person to live in a neighborhood of 
their choice. Thank you, and I will be happy to respond to any 
questions.
    [The prepared statement of Mr. Hicks can be found on page 
89 of the appendix.]
    Chairman Clay. Thank you, Mr. Hicks.
    Ms. Castro-Conroy, you are recognized for 5 minutes.

STATEMENT OF CARMEN CASTRO-CONROY, MANAGING HOUSING COUNSELOR, 
              HOUSING INITIATIVE PARTNERSHIP, INC.

    Ms. Castro-Conroy. Good morning, Chairwoman Waters, 
Chairman Clay, Ranking Member Duffy, and members of the 
subcommittee. Thank you for the opportunity to testify today. 
My name is Carmen Castro-Conroy, and I am the managing housing 
counselor at the Housing Initiative Partnership.
    We are a nonprofit affordable housing developer and HUD-
approved housing counseling agency located in Maryland. Our 
housing counselors have provided counseling, education, and 
advocacy to over 20,000 households to help them enter 
homeownership, avoid foreclosure, secure affordable rental 
housing, and strengthen their personal finances.
    We serve Prince Georges County, Maryland, one of the most 
affluent majority African-American communities in the country, 
and Montgomery County, the 25th most diverse county in the 
country. The two primary barriers to minority homeownership our 
counseling staff witnesses are the lack of generational wealth 
and the shortage of affordable housing.
    The parents, grandparents, and great-grandparents of 
African American and immigrant populations either did not 
benefit from or were intentionally excluded from the Federal 
programs that allow white families to build generational 
wealth.
    During the housing bubble, the housing market exploited the 
communities that lack wealth. We worked with over 10,000 
homeowners in default during the foreclosure crisis. A vastly 
disproportionate percentage, 98 percent, of those defaulting 
homeowners were minority households. To a person, our clients 
presented their counselors with the most toxic loan documents 
we had ever seen.
    We know now that lenders created these dangerous predatory 
products to be easily accessible specifically to this 
population that had been historically excluded from access to 
credit.
    The result? The African-American and immigrant households 
we worked with watched as their hard-fought financial gains and 
accumulation of equity slipped through their hands, draining 
their wealth away at an alarming and devastating rate.
    An African-American family we work with illustrates this 
loss of wealth. This family purchased in 2005, and despite 
their solid income and recent savings, their mortgage contained 
an adjustable interest rate that had spiked to 15 percent by 
the time we met in 2008.
    A housing counselor helped negotiate a loan workout with a 
new 4 percent interest rate, but the home had lost value after 
the housing crash, and the family continues to be saddled with 
close to $80,000 in negative equity.
    In communities of color we serve, home values are often far 
below pre-recession levels, and in some cities you will find as 
many as one in five homeowners with negative equity.
    On the purchase side, the lack of affordable rental housing 
creates barriers for minority households seeking to enter 
homeownership. Minority households that have sufficient income 
to qualify for a mortgage are often unable to save or pay down 
debts due to the high cost of rental housing.
    One of our clients who immigrated from the Republic of 
Congo in 1995 and began working as a nursing assistant 
illustrates this challenge. She had achieved a household 
monthly income of $6,000, but her credit was low due to her 
debts.
    She worked steadily for 2 years to adhere to a very strict 
budget, often meeting monthly with a counselor, and succeeded 
in paying down debt, building savings, and purchasing a 
$320,000 townhouse in 2018 with an FHA loan.
    This allowed her to access homeownership, but it came at a 
high cost. Her higher-than-market interest rate and high 
mortgage insurance fees will cost her $89,000 over the life of 
the loan.
    Minority households that have been historically excluded 
from or exploited by the credit market deserve a better Federal 
response, one that provides low-wealth borrowers with safe and 
sustainable mortgages without the prohibitive fees.
    Finally, any Federal response to increase homeownership for 
low-wealth minority communities should include housing 
counseling. Research is clear: Loans made to borrowers who had 
received pre-purchase counseling performed better.
    We hope Congress will improve access to sustainable 
homeownership for the minority communities. Thank you.
    [The prepared statement of Ms. Castro-Conroy can be found 
on page 80 of the appendix.]
    Chairman Clay. Thank you, Ms. Castro-Conroy.
    Ms. Poole, you are recognized for 5 minutes.

STATEMENT OF JOANNE POOLE, 2019 VICE CHAIR, MULTICULTURAL REAL 
   ESTATE LEADERSHIP ADVISORY GROUP, NATIONAL ASSOCIATION OF 
                         REALTORS (NAR)

    Ms. Poole. Thank you. Good morning, Chairwoman Waters, 
Chairman Clay, Ranking Member Duffy, and members of the 
subcommittee.
    My name is JoAnne Poole. As a REALTOR in Baltimore, 
Maryland, I have 33 years of experience working with the people 
of Anne Arundel County, Prince Georges County, Baltimore City, 
and Baltimore County.
    I have been an active member of the National Association of 
REALTORS for over 20 years, serving as its vice president, 
Chair of the Federal Housing Policy Committee, and currently as 
the 2020 chair of the REALTORS Multicultural Real Estate 
Leadership Advisory Group.
    On behalf of NAR's 1.3 million members, I want to thank you 
for the opportunity to present our association's concerns 
surrounding the state of and the barriers to minority 
homeownership in the United States.
    In addition to my work with NAR, I am also a member of the 
National Association of Real Estate Brokers. I am proud to sit 
here today with President Jeffrey Hicks. Under President Hicks' 
leadership, NAREB continues to play its historic role, 
highlighting the critical issues this committee has convened to 
discuss.
    To many people in this country, homeownership is synonymous 
with the American Dream. Homeownership provides for stable 
communities, increases civic participation, and builds our 
feelings of self-worth and self-esteem.
    In fact, studies have shown that the children of homeowners 
go on to earn more as adults. But sadly, stark racial 
disparities in the rate of homeownership demonstrate that this 
dream remains out of reach for countless families and potential 
homebuyers across the United States. For example, the rate of 
homeownership for African Americans has returned to the levels 
not seen since before the passage of the Fair Housing Act. And 
as has been mentioned, that was over 50 years ago.
    NAR and NAREB and the Urban Institute recently convened a 
roundtable focusing on improving African-American homeownership 
rates. A five-point framework that can be applied across all 
minority communities emerged and continues to be developed.
    Namely, these priorities include advancing local policy 
solutions, tackling housing supply constraints and 
affordability, promoting an equitable and accessible housing 
finance system, engaging in outreach to our mortgage-ready 
individuals, and maintaining a focus on sustainable 
homeownership and preservation.
    NAR strongly supports the production of affordable housing 
and efforts to increase the supply of entry level homes. We 
encourage States and municipalities to consider the input of 
local experts and to adopt zoning laws, building codes, and 
other policies that encourage free market production of 
affordable housing units.
    If America is to remain a nation of homeowners, we must 
address the persistent barriers that minorities continue to 
face. NAR's policy solutions and proposals for this national 
issue are outlined in more detail in the official testimony 
submitted to this committee.
    I want to thank you again for the opportunity to address 
this committee, and I look forward to addressing these critical 
issues at today's hearing and in the months and the years to 
come.
    Thank you.
    [The prepared statement of Ms. Poole can be found on page 
128 of the appendix.]
    Chairman Clay. Thank you, Ms. Poole, for your testimony.
    And now, we go to Mr. Griffith. You are recognized for 5 
minutes.

    STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINANCIAL 
                REGULATIONS, THE HERITAGE GROUP

    Mr. Griffith. Good morning, Chairwoman Waters, Chairman 
Clay, Ranking Member Duffy, and members of the subcommittee. 
Thank you for the opportunity to testify this morning.
    My name is Joel Griffith. I am a research fellow at the 
Heritage Foundation. The views I express in this testimony are 
my own and should not be considered as representing the 
official position of the Heritage Foundation.
    Efforts to expand homeownership through government programs 
or policies are often well-intentioned. But as you all know, 
good intentions are an insufficient basis for public policy.
    Directing resources to the housing sector through 
government subsidies, mandates, and guarantees may financially 
benefit select special interests such as MBS investors and 
lenders, but this negatively impacts affordability for all, 
including minorities.
    Furthermore, a focus on simply expanding homeownership 
fails to recognize that homeownership itself does not suddenly 
improve a borrower's financial health, enhance their skillset, 
or expand their economic opportunities.
    In other words, homeownership stems from financial health, 
a profitable skillset, and economic opportunity. These 
desirable conditions are not simply created by virtue of owning 
a home.
    Closing the gap in wealth accumulation and multiplying the 
opportunities to create such wealth requires an approach 
different from the government housing subsidies, mortgage 
guarantees and mandates of the past. Congress can help make 
housing more affordable, but this is actually accomplished by 
shrinking the Federal role in housing finance.
    Data show that heavy government involvement in the home 
finance sector failed to substantially increase homeownership 
long term, despite the trillions of dollars worth of credit 
that flowed to those with lower credit scores, minimal income 
documentation, less stable employment history, and scant down 
payments.
    Robust homeownership in this country was established long 
before the government became heavily involved in the housing 
market. Fannie Mae was not allowed to purchase non-government 
insured mortgages until 1968.
    But in the 2 decades prior to that watershed change, 
government-backed mortgages never accounted for 6 percent of 
the market in any given year. Yet, the homeownership rate was 
64 percent in 1968 overall. That was virtually unchanged 
compared to today.
    For blacks, homeownership actually grew from 35 percent in 
1950 to 42 percent in 1970 and increased to 44 percent in 1980. 
But by 1990, after the securitization market had begun 
expanding, black homeownership actually declined to 43 percent. 
And now in 2019, as discussed already, homeownership in the 
black community has declined even further to 41 percent.
    The fact is that homeownership rates for blacks and for the 
nation as a whole are nearly unchanged today compared to 1990. 
This indicates that additional leverage that many are 
recommending should not be relied upon to increase the rate of 
homeownership further.
    Rather than recognize the realities, congressional inaction 
has expanded the government's role in the wake of the prior 
financial crisis. This is leading once again to widespread 
unaffordability and increased taxpayer risk. In fact, adjusted 
for inflation, residential property prices in the United States 
in the middle of last year had reached levels close to the peak 
of the bubble.
    The home price-to-income ratio is now at 3\1/2\. That is 
very close to the peak prior to the last crisis. The current 
system perpetuates inflated prices and deprives other sectors 
of needed financial resources. It is difficult to argue that 
these policies improve the status quo for anyone other than 
lenders, securitizers, and MBS investors.
    Optimally, Congress will work to make housing more 
affordable by gradually reducing those subsidies, but this 
alone will not close the wealth gap.
    What we need is an increase in economic opportunity. This 
also requires State and local governments sharing that 
responsibility and eliminating the artificial barriers to 
economic growth such as unreasonably high minimum wages, 
occupational licensing, and unreasonable zoning restrictions.
    Lastly, failing public schools contribute to a relative 
lack of education, marketable skills, and other forms of human 
capital. To better equip the next generation to prosper we need 
expanded educational choice. Many of the underperforming public 
schools are located in economically deprived areas with a 
disproportionately large minority population.
    The government-granted education monopoly fails the 
millions of students who are subsequently unable to effectively 
compete in the labor market. Educational choice will help close 
this opportunity gap.
    These three steps will unlock human potential and expand 
opportunities for all. Thank you.
    [The prepared statement of Mr. Griffith can be found on 
page 84 of the appendix.]
    Chairman Clay. Thank you, Mr. Griffith, for your testimony.
    I now recognize myself for 5 minutes for questioning.
    Ms. Castro-Conroy, in your testimony you mentioned an 
African-American family who had solid income but was still 
saddled with a predatory loan.
    Do you suspect that there are other families out there like 
this who unfortunately were not aware of the services that the 
Housing Initiative Partnership provides?
    Ms. Castro-Conroy. Yes. There are other families who do not 
know about the services that we provide. And we have also seen 
other families who have been impacted very similar to this case 
as well.
    Chairman Clay. And as a follow-up, how do we educate other 
families so that they are not subject to the type of bad 
financial practices that this family encountered?
    Ms. Castro-Conroy. We provide financial education to all of 
our clients with the counseling that we do. So when we work 
with them, we look at their budgets, we look at their credit 
reports, we talk about savings, we talk about debt.
    So we start educating them in the process of becoming 
homeowners, whether they are renting. Even when they are actual 
homeowners we always look at their finances, try to educate 
them.
    Chairman Clay. And that counseling service is effective and 
it helps?
    Ms. Castro-Conroy. Yes, we see results. We keep track of 
how they improve in their credit score, how they improve in 
their savings, and how they reduce their debt through time.
    Chairman Clay. Thank you so much.
    Ms. Bailey, from a historical perspective, you talk about 
how Jim Crow laws and groups like the Ku Klux Klan worked 
diligently to keep African Americans down, and when African-
American neighborhoods flourished, like the one known as 
America's Black Wall Street, until the Tulsa Race Riot of 1921 
in which white residents massacred 26 black residents, injured 
hundreds more, and razed the neighborhood within hours.
    The riot was one of the most devastating massacres in the 
history of U.S. race relations, destroying the once thriving 
Greenwood community. Could you discuss how devastating this 
was, not just to the black community in Oklahoma, but how it 
had a chilling effect on blacks' success and wealth?
    Ms. Bailey. Yes, thank you for the opportunity. Many 
African Americans were making an effort to pursue opportunity 
across the country in the same way that white American families 
did. Twenty percent of white American family wealth can be 
attributed to them getting access to land grants from the 
Homestead Act.
    African-American families were following in that trend and 
relocated from the south throughout the nation, including 
western cities like Tulsa, Oklahoma.
    However, they faced terrorism, because right as the nation 
was moving forward with more sound economic and fairness 
policies, it met an equal and opposite reaction where we wanted 
to preserve white supremacy in this nation. And in doing that, 
we created barriers to opportunities for African Americans that 
really jeopardized their communities in the way that you just 
identified with the evidence from Tulsa.
    It is important to say that Tulsa is not the only place. 
There is also evidence that this happened in places like 
Rosewood, Florida, and in other communities across the country.
    So we really need to get at the real hardship that families 
of color face. People who were really pulling themselves up by 
their bootstraps, doing everything right in a nation that 
promised opportunity, we had all of these fair lending laws 
that promised opportunity and that opportunity was resisted by 
white Americans who wanted them to remain as second-class 
citizens.
    Chairman Clay. And you cite some notable historic examples.
    Ms. McCargo, you cited a paper by your colleague, Lori 
Goodman, which concluded that homeownership is still one of the 
better paths towards accumulating wealth. And when you think 
about it, if a family saves for a home, their spending behavior 
changes, usually for the better.
    They become more financially astute and they work towards a 
goal. Could you discuss homeownership and retention and some of 
the solutions which you mentioned in your testimony?
    Ms. McCargo. Thank you for the question, Mr. Chairman. 
Undoubtedly, homeownership has provided a wealth-building 
opportunity for families for generations. It is noteworthy that 
we talk about the homeownership rate nationally at 64 percent. 
It has been, for over 30 years, over 70 percent for white 
households, and the accumulation of wealth during that same 
time has been significant.
    And I think it is important to recognize the significant 
opportunity that forced savings and essentially paying into 
something that you will ultimately own, as well as the 
intergenerational implications of that wealth transfer 
opportunity for families.
    That is something that has been afforded for decades to 
white families. And I think it is really important as a 
foundation for us to think about how disproportionately wealth 
is built in black and Hispanic communities through home equity. 
And that opportunity needs to be made more available and 
readily available for most.
    Chairman Clay. Thank you so much for your response.
    And the gentleman from Wisconsin, Mr. Duffy, is recognized 
for 5 minutes.
    Mr. Duffy. Thank you, Mr. Chairman. Listen, I want to thank 
the panel for the insightful conversation and good insight you 
provided to the committee. Just, it is troubling the disparity 
that we are talking about today in homeownership and actually 
the disparity in wages. And I think it brings us to the point 
that Mr. Griffith was mentioning.
    I don't think there is any one solution here. I think it is 
pretty clear that, as Mr. Jones just mentioned, this is a salad 
bowl of ideas that we are going to have to look at.
    I don't think there is any one single bullet, but you 
talked about regulation and education and choice. What impact 
do you think that will have on incomes but also then on 
homeownership?
    Mr. Griffith. Thank you for your question. I think, yes, 
we, all of us, regardless of what side of the political line we 
fall on, are deeply troubled by the fact that there is this gap 
in opportunity.
    But what we see is that you have minority communities that 
are disproportionately in areas, in local areas that have in an 
inordinate number of regulations that are impeding the ability 
to even get on that first rung of the economic ladder.
    When you compound that with the lack of educational 
opportunities that many minority communities have because of 
where they are located, it compounds the problem. And that is 
why I talked about the educational choice of it.
    This is a more difficult solution than simply subsidizing 
somebody's purchase. But longer term, this can have lasting 
impacts because somebody with a better education will be better 
equipped to make prudent financial choices and probably more 
importantly will have the opportunity to earn more over a 
longer term.
    Mr. Duffy. And I know this is not an education hearing and 
this is not the full solution, but I do think you are right. 
When you can look at the success of a young child based on 
their ZIP code because the quality of their school, not giving 
kids an equal opportunity for economic success because we keep 
them in failing schools is a problem and that we wouldn't give 
families, parents, and children a choice to go to a better 
school.
    I find that to be outrageous because I think better than 
Mr. Clay and myself, families know better what is best for 
their children and we don't offer that opportunity. I think 
that is maybe getting more to some of the root causes as to 
some of the other issues that were brought up today. But I 
appreciate that.
    Also, you have to be able to save money, right? So if you 
start out as a renter, you have to be able to save money for a 
down payment. And Mr. Hicks, I like your testimony and some of 
the ideas that you brought up.
    Let's give people an incentive to save for a down payment. 
Maybe a tax-free incentive to say, I am not paying that 
whatever percent you are at. I get to keep all that money and I 
am going to work towards that homeownership.
    But one of the problems that we have discussed in this 
committee is, and as we dealt with flood insurance, I am all 
about making sure that we have smart regulations so we are 
building quality homes for the spaces in which we build.
    But if we have too many rules and regulations and too many 
ordinances, all of a sudden we start jacking up the cost of 
housing so we have people who can least afford it paying higher 
rents. That is less money they can put in the bank to save for 
a home.
    And I think, again, it is a holistic approach that is going 
to put people in a better situation to take that leap, because 
I agree with everyone on the panel that homeownership does help 
you create wealth, and it helps you buy into a community. And I 
think it is better for families.
    And if we have policies that don't incentivize that, that 
is a problem here. But also I, as and we have talked about this 
since the 2008 crisis, I don't want to see people buy homes 
that they can't afford because--we have heard countless 
witnesses testify that if you are foreclosed upon how far that 
sets your family back and just the personal anguish that a 
foreclosure does to a family.
    We don't want anyone to go through that. Is that fair? We 
don't want to give loans to people who can't afford them just 
to say homeownership is the highest priority? Actually, 
homeownership for a home that you can afford is the highest 
priority. Is that fair?
    Mr. Hicks. Yes.
    Mr. Duffy. I only have 40 seconds. If you could just give 
us your one, the one thing, and I know there is no silver 
bullet so you are all going to have different answers, but give 
me the one thing we can do that you think will make the biggest 
different on minority homeownership?
    And by the way, my wife is a Latina, and she will tell you 
that Hispanics start businesses at 3 times the national 
average, and your point on W-2s is exactly right. And my wife 
would be singing off your sheet. But I'm sorry.
    Ms. McCargo, would you start?
    Ms. McCargo. Sure. I think that one of the critical things 
is increasing the supply of affordable housing. I think that 
that is one of the most important things that we need in this 
country.
    Mr. Duffy. Supply.
    Ms. McCargo. Absolutely, supply.
    Mr. Duffy. Great.
    Ms. Bailey?
    Ms. Bailey. Reforming the housing finance system, GSEs, to 
regulated utilities with oversight to preserve the important 
public interest mission of duty to serve.
    Mr. Duffy. Great.
    Mr. Nery?
    Mr. Nery. And I would say definitely some modernization of 
FHA is vitally important to make sure that we don't lose some 
important protections that we have for communities of color 
because we need to have low down payment assistance programs. 
Those are vital to our communities to be able to obtain and 
increase our homeownership rates.
    Mr. Duffy. Mr. Hicks?
    Mr. Hicks. I would say support of the American Dream Down 
Payment Savings Plan, and support of programs like the Federal 
Home Loan Bank of San Francisco's WISH Program, which is a 4:1 
percent match for savings.
    Mr. Duffy. Great.
    Ms. Castro-Conroy?
    Ms. Castro-Conroy. I would have to say to support 
comprehensive housing counseling agencies that provide credit 
counseling, rental counseling--
    Mr. Duffy. Education.
    Ms. Castro-Conroy. Repurchase, homebuyer relocation which 
we see all the cases. We see the needs. We know how we can help 
our families.
    Mr. Duffy. Ms. Poole?
    Ms. Poole. Removing some of the local zoning issues and 
restrictions that cause affordable housing not to be built.
    Mr. Duffy. Absolutely.
    Mr. Griffith?
    Mr. Griffith. Equipping the next generation to earn more so 
they can seize economic opportunities to make investment 
decisions of their own choosing.
    Mr. Duffy. Thank you.
    Chairman Clay. The gentleman's time has expired.
    The Chair now recognizes the Chair of the full Financial 
Services Committee, Chairwoman Waters, for 5 minutes.
    Chairwoman Waters. Thank you very much.
    Let me thank all of our panelists.
    And allow me to thank you, Mr. Clay, for putting this panel 
together. This is perhaps one of, if not the most, diverse 
panel that we have had before us on any issue. And it is good 
to know that with the fact that Democrats are in the 
leadership, we can have these kinds of panels that reflect 
America. Thank you so very much for putting this panel 
together.
    I just want to say to our panelists today that during the 
crisis I got very much involved in learning a lot about loan 
modifications. Of course we were advised by, I think, our 
Ethics Committee that we were not supposed to do that, but I 
defied all of that. And I started to call these institutions to 
find out about why certain of my constituents were being 
foreclosed on and the way that it was happening.
    Now, in doing all of this, I learned a lot about what has 
evolved and what is being utilized in the banking community in 
different ways that they operate. For example, and I just want 
to give you a few of the things that I would like to see us 
scrub all of the practices and laws that are employed by the 
banks, many of which we take for granted.
    Let us take, for example, interest-only loans, which have 
an adjustable rate. When the adjustable rate, I guess expires, 
I don't know how many years it is and whether or not we should 
have a law to say how many years it is, take 5 to 10 years, and 
now you are paying not only interest but you are paying for the 
principal.
    And on that adjustable rate, the interest rate is going to 
increase, and so now what you have is a homeowner who is paying 
interest only. And based on their income and all of that, they 
got into it because they thought this was a good way to do it.
    But now they are paying the principal and the interest, and 
because of the adjustable rate, they are paying a high interest 
rate. They can't afford the loan anymore and they are 
foreclosed on.
    The other thing that I noticed was too many of the banks 
were saying they wouldn't even entertain a loan modification 
unless you have missed at least two payments. And by the time 
you miss two payments and you go through a loan modification 
attempt, you can't afford to pay up and get back into the loan. 
We want to take a look at that kind of stuff.
    The other thing is many of these foreclosures and 
particularly what was happening with the robocalling that was 
done and you found that there were people who lost their homes 
because they missed x number of payments. And then they 
packaged these loans with hedge funds or some of these other 
folks who go about, I call them scavengers almost, and then the 
equity that was built up in the home is not given any 
consideration for the cost of selling that or putting it in the 
package.
    That home might be worth, I don't know, $300,000, but when 
they packaged them, you have Countrywide that used to be in 
operation and all of their folks who are buying the things for 
pennies on the dollar. And if you had done that for the people 
living in the homes who could not afford to make their payments 
for a couple of months, they could have stayed in their home.
    So I bring this to your attention along with fraud. I had 
folks who said that this person who sold me this loan said 
don't worry about my income. They could fix that and they 
signed the loan for me.
    Where do they turn? If they don't have a private attorney, 
there is no fraud division in the bank that is going to take a 
look at that and help out with unraveling this fraud.
    So there are a lot of things that have developed, some of 
which we take for granted, in the way that they do business. We 
need to scrub these mortgages and all of the rules and 
practices and come up with a laundry list of what we think 
needs to be taken out of the way that these home mortgages are 
done.
    These are just some of the things that I ran into as I was 
helping to do loan modifications. And so I would like to ask 
all of you who are experts, Ms. Bailey, all of you, to begin to 
take a look at all of the practices. Let us not assume that 
just because they do it, it is right to do.
    Let us begin to think about what just is not right and what 
absolutely operates against the homeowner's ability to stay in 
that home, and see if we can't get rid of some of the practices 
and laws in operation today.
    Thank you so very much. And that is not a question as much 
as it is a plea to you because you know this stuff. And let us 
scrub them and find out what we can eliminate. Thank you so 
much.
    I yield back.
    Chairman Clay. Thank you. I thank the chairwoman for her 
comments.
    I now recognize Mr. Luetkemeyer from Missouri for 5 
minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And first, I would like to recognize my good friend, Mr. 
Clinton Jones. I was the chairman of the Housing and Insurance 
Subcommittee for a couple of years and I got to know Clinton 
very well. He is a fantastic individual, a wonderful staff 
person, and I just wish him the very, very best in his new 
endeavor.
    I know he will be very successful. I am just thankful this 
opportunity came his way and he is able to take advantage of 
it. So again, all my best to you, Clinton.
    With regards to what we are doing here today, we are 
looking at barriers to minority homeownership. And a couple of 
weeks ago, we had a hearing that talked about regulations 
being, like, 34 percent of the cost of a home. And today, a 
number of you have talked about adequate and affordable housing 
finance system.
    And what I want to do is talk about a regulation that is in 
that that I believe is causing or could cause the housing 
financial system to hurt people to be able to afford a home 
because of the increased cost. And it is called CECL. How many 
of you have heard of CECL already? One?
    One? Okay. Okay, let us educate. Current Expected Credit 
Loss (CECL) is proposed by the Federal Accounting Standards 
Board (FASB). And what they are proposing to do is they believe 
that there needs to be better transparency with regards to loss 
on a bank's balance sheet with regards to mortgage loan 
exposure.
    Unfortunately, that goes across the board, not just banks 
but credit unions, mortgage bankers, anybody that makes a 
housing loan, as well as the GSEs. I have even had asset 
managers, insurance companies as well as credit card companies 
talk to me because it will affect them in certain ways.
    Last week, we even had one of the bankers here talk about 
how $6 billion to $10 billion of additional reserves are going 
to have to be put because of credit card exposure.
    The reason it is concerning to me is because in a committee 
back in December that I chaired, which was the Financial 
Institutions Subcommittee, the Home Builders Association 
indicated that it would cost, if you have increased cost of a 
home loan of $1,000, 100,000 people across the country no 
longer have access to home loans.
    Is that familiar? Are you familiar with that, Mr. Nery?
    Mr. Nery. I am familiar with it. It definitely is a 
proposal that would be onerously burdensome for a lot of the 
smaller regional banks. Certainly if you are going to have a 
standard rule that is going to apply across the board I think, 
obviously, you would have more adherence and it would be easier 
to adhere to by the larger institutions.
    But when you are talking about credit unions and you are 
talking about municipal, small, regional banks, it is going to 
be a higher burden, which I think is very, very difficult to 
accept because we have institutions, at least in communities of 
color, that are often reliant on these local institutions as 
well.
    And if you burden them and put them out of business or make 
it unreasonable for them to be able to afford or to be able to 
offer loans, it really would do an injustice to those 
communities which they serve.
    Mr. Luetkemeyer. Yes, my thought process is this is going 
to really impact the low- and moderate-income folks 
tremendously because when you increase these costs, which, you 
know, the credit unions have given me a couple of studies. So 
different ones said there were going to be an additional $30 
billion in lost capital they are going to have to replace.
    One of them talked like over 30 percent of their members 
are either going to cut lending or they are going to have to 
increase costs or increase the cost to the consumer for their 
services. And if that happens, the availability of home loans 
is not going to be there. And so that is one part of it.
    The other part is the procyclicality of this thing. In 
other words, one of the problems is that if this happens and 
the economy turns down the financial institutions have to 
reserve more. And if they reserve more it means they have to 
charge more, which means they have less ability to lend, which 
means you start spiraling downward.
    And this is what happened with the mark-to-market. This is 
exactly the problem that the FASB folks caused and helped 
exacerbate the crash of 2008 because of the mark-to-market 
situation which they then had to pull that rule back because 
they didn't study the potential impacts.
    And in this situation they haven't put they haven't studied 
the potential impacts either. They admit to me that they have 
not studied this to see once what could happen here.
    So this is very, very concerning to me. I am hopeful that 
all of you will look into this. To me, it is going to have a 
dramatic impact on especially the groups that you are talking 
about here, the low- and moderate-income folks that we want to 
make sure they have the ability to have that American Dream: 
the home.
    And if you can do a study, please send it to me. I would be 
more than happy to take it and run with it. I know the 
REALTOR's association, I have talked to some of your folks 
already. This is going to have a dramatic impact on your 
ability, Mr. Hicks, on yours as well, Mr. Nery.
    This one regulation could be as impactful as any other 
regulation that is being proposed right now by anybody across 
the board if you think about what is going on. And the GSEs, 
you have a $5 trillion portfolio of 30-year loans? Imagine how 
much money is going to have to be reserved for that.
    I am out of time, but thank you so much. And again, if you 
can send me your studies, I would sure appreciate it. Thank 
you.
    Chairman Clay. The gentleman from Missouri's time has 
expired.
    The gentlewoman from Ohio, Mrs. Beatty, who is also the 
Chair of our Subcommittee on Diversity and Inclusion, is 
recognized for 5 minutes.
    Mrs. Beatty. Thank you very much, Chairman Clay.
    Thank you also to Ranking Member Duffy and to the panel.
    Before I get started, let me also echo my thanks and 
congratulations, Clinton, to you for all your years of service.
    I want to start out by thanking you, as our chairwoman of 
Financial Services stated, for having a panel that is very 
diverse, not only in gender and race and ethnicity but their 
brilliance that they bring to the diversity of their experience 
in this very important issue.
    For some 20 years, I worked as a consultant in housing, so 
I give you a personal thank you for helping and fighting for 
all those who benefit from your services.
    Today is an exciting day for me, Mr. Chairman. One, I like 
that you said you are going to include pragmatic legislation in 
the work that we do.
    Mr. Duffy, I am sorry he is not here, but I want to thank 
him for acknowledging and reminding us that some 50 years later 
we still have disparities, especially with African Americans.
    So when we talk about funding and moving that needle, I am 
sure Mr. Duffy will be right there with you, Mr. Clay, in 
making sure that we fund and finance FHA and all of the housing 
programs.
    But on the pragmatic side, let me share with you all today 
that included in today's hearing is my bill, the House 
Financial Literacy Act, H.R. 2162. To the panel, I am very 
pleased to hear you, Ms. Castro-Conroy, Mr. Hicks, and Mr. Nery 
talking about the value of education in making sure that we 
include legislation and programs that can be helpful.
    Well, this bill will give first-time homeowners a 25 basic 
point reduction on their up-front mortgage insurance premiums 
if they take a HUD-approved housing counseling program. This 
bill will essentially lower the cost due at closing by reducing 
the current up-front mortgage insurance premium on a FHA loan 
of 1.75 to 1.5 percent.
    So basically, if you were buying a home at $200,000, you 
would get a $500 reduction. If it was $300,000, you can do the 
math, $750; $400,000, $1,000. And here is what is so important 
about this and many of you have talked about first-time 
homeowners, who purchase a home.
    If they have the counseling classes, if they have the 
support system, they are one-third less likely to default on 
their mortgages, which in the case of FHA leads to cost savings 
for the mutual mortgage insurance program.
    Also, I think it is important to note that FHA's 2016 
annual report to Congress found that in 2015, FHA was used for 
47 percent of homes purchased by African Americans and 49 
percent of purchases by Hispanic households. It also found that 
82.1 percent of FHA purchase loans were for first-time 
homebuyers.
    Now, all of you are probably very familiar with Section 
2126 of the 2008, when Congress passed and the President 
signed, the Housing and Economic Recovery Act. Well, as you 
will be reminded, it authorized $25 million a year between 2009 
and 2015.
    So I would like to ask you all, do you support the fact of 
having education and counseling and that we should, of course, 
make sure that Congress should pass those dollars again. So I 
only have about 30 seconds.
    Ms. Castro-Conroy, Mr. Hicks?
    Mr. Hicks. Absolutely.
    Ms. Castro-Conroy. Strongly support, yes.
    Mrs. Beatty. Thank you.
    Ms. Bailey?
    Ms. Bailey. Yes.
    Mrs. Beatty. Mr. Griffith?
    Mr. Griffith. I can't endorse specific legislation, but I 
support education of borrowers.
    Mrs. Beatty. Ms. Poole?
    Ms. Poole. NAR absolutely supports this.
    Mrs. Beatty. Ms. McCargo?
    Ms. McCargo. Absolutely. I think that the educational 
component is critical to the solving of these issues and 
housing counseling as well.
    Mrs. Beatty. Okay, thank you very much.
    Mr. Chairman, I yield back.
    Chairman Clay. I thank the gentlewoman from Ohio.
    And I recognize the gentleman from Michigan, Mr. Huizenga, 
for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. And I have had a 
kind of a front row seat into some of these issues in my own 
career. I have been a licensed REALTOR in the past. I have had 
family members who have been licensed REALTORS literally since, 
well, my earliest memories.
    And I thought it was the coolest thing when my uncle's 
beeper went off, and it was for those of you that have been in 
the industry, and Ms. Poole, you are nodding your head. You 
had, I think, two times that you could hear whatever that 
message was, right?
    But it has been a problem, as has been pointed out by many 
of you, some of the inequities that have existed in housing. 
And I know, again, from being a licensed REALTOR and from 
having a family involved in construction, there are a number of 
barriers that have been in place.
    Mr. Hicks and some of the others had noted some of those 
formal barriers and certainly historic barriers that we, in a 
modern society, look at and say, completely unacceptable.
    Mr. Hicks. Yes.
    Mr. Huizenga. Mr. Hicks, though, on page three of your 
testimony, I just wanted to kind of give you an opportunity to 
be a little more specific here. And I know you then continue on 
with some policy recommendations.
    And I am going to quote you here, ``Housing experts such as 
scholar Richard Rothstein find that segregated neighborhoods 
are not an accident, but the result of laws and policies passed 
by local, State, and Federal Governments that promote 
segregation and discriminatory practices.''
    Can you be more specific on what some of those local and 
State laws might be? And this goes back to some of the 
discussion that we have had in this committee a number of 
times, which are what are some of those cost barriers that are 
put up by local governments that, whether it is lot size, 
whether it is certain building requirements?
    Mr. Nery, I see you nodding your head, too, but please 
either of you can jump in.
    Ms. Poole?
    Mr. Hicks. Well, when you start talking about cost barriers 
historically, is that what you are asking?
    Mr. Huizenga. No, I am asking right now, what are State and 
local governments and expand upon that if you need to, on the 
Federal Government as well. But what are some of those barriers 
for that entry?
    And Mr. Nery if you want to jump in?
    Mr. Nery. I just wanted to clarify, are you speaking as to, 
maybe, some of the costs for affordable housing or building 
homes? Is that what we are discussing?
    Mr. Huizenga. That is what I guess I am trying to get--
    Mr. Nery. Okay.
    Mr. Huizenga. Mr. Hicks to find out if that is what he 
meant--
    Mr. Nery. Well, I will speak to that.
    Mr. Huizenga. --by that. Yes?
    Mr. Nery. Definitely one of the grave issues that we see 
across the country when you are talking about building 
affordable homes for first-time homebuyers is the fact that 
there is just exorbitant amounts of costs just to start really 
shovel to ground.
    Our friends at the Home Builders would tell you that in the 
average municipality, the average builder is spending about 
$90,000 just in permits, in zoning, and what have you before 
they can actually construct a home.
    Then if you add on top of that $120,000 it will take to 
actually build a property, you are talking a cost, an upfront 
cost of $220,000, $230,000. So you are probably going to have 
to sell in the $300,000 to $400,000 range.
    That would not constitute a first-time homebuyer option, 
right? That is not going to be for somebody at an entry level. 
It is going be most likely a move-up buyer.
    But again, those are just cost-prohibitive measures that 
exist across the country so we really need to have some Federal 
legislation that can work with a lot of the local 
municipalities to ensure that we can reduce some of that red 
tape, that we can reduce some of those zoning costs and 
building costs.
    Mr. Huizenga. How does the Federal Government do that, 
though?
    Mr. Nery. I think it really would be a question of putting 
together some sort of a body that would govern some of these 
zoning regulations that I think there would have to--
    Mr. Huizenga. But we may have some 10th Amendment issues--
    Mr. Nery. Right, right, right.
    Mr. Huizenga. --in that.
    Mr. Nery. Sure, but I think there would definitely be some 
standards that can be put into place for zoning departments, 
building departments for municipalities across the country. I 
think cities would adopt a lot of those regulations to try to 
create some uniformity.
    But you also have issues right now just when you are 
talking about labor and when you are talking about building 
costs right now there has been a lot of stories written about 
the costs in lumber and costs in labor shortages so you have 
higher costs for builders as well.
    So those are obviously ancillary issues that need to be 
dealt with as well. But I think there needs to be some sort of 
a uniform system across the country to try to reduce some of 
those upfront costs.
    Mr. Huizenga. Ms. Poole, if--
    Ms. Poole. Yes, I would love to add to that. In addition to 
some of the zoning laws and some of the cost of building new 
construction, if grants are not there, a lot of times there are 
no affordable homes put in those developments.
    Another piece that we have to consider is that when some 
new construction is being built there are deferred costs that 
are then pushed off to the homeowner so that the builder 
doesn't absorb those costs, things like front foot assessments, 
that in this case could total an additional $400 to $600 a year 
just in paying for the deferred charges of putting in public 
water and sewer.
    So as they go through, you start thinking about all the 
costs that are then referred over to the homeowner and it all 
of a sudden disqualifies them possibly for a loan.
    Mr. Huizenga. My time has expired. I am in the process of 
building new construction. I hear Mr. Nery. I have never been a 
part of any project, other than vacant land, that has put any 
kind of delayed sewer and water assessment on those. But maybe 
we can talk about that at a--
    Ms. Poole. I would love to talk to you about it.
    Chairman Clay. The gentleman from Michigan's time has 
expired.
    I now recognize the gentleman from California, Mr. Vargas, 
for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I appreciate 
what you are doing here today and especially the panel being 
here. I agree with Mr. Luetkemeyer completely, that it is still 
the American Dream to own a house. I still believe that.
    It certainly was the case in my family. I know that once 
our family was able to buy a house, it really stabilized our 
finances. And it allowed my parents later on to help us with 
college costs, and so I am very appreciative of that.
    I did want to ask some specific questions, however, with 
regard to DACA recipients since we are talking about dreams. It 
was the case in the past that HUD and FHA was not preventing 
DACA recipients from getting FHA loans.
    Now, my understanding is that there is nothing in writing 
that prevents them from getting FHA loans but now that both FHA 
and HUD are verbally saying that they are not eligible. Who 
would like to comment on that if they know the information?
    Ms. Bailey, it sounds like you have some information. Go 
ahead please.
    Ms. Bailey. Yes, thank you so much for the opportunity. We 
think that the practice has a very chilling effect on potential 
homeowners for an important subset of our nation's citizens and 
residents. And we think that it is important for HUD to really 
clarify its position and ensure that DACA recipients are 
eligible for FHA loans without legislation.
    Mr. Vargas. Mr. Nery, yes, sir?
    Mr. Nery. I would echo Ms. Bailey's thoughts. DACA 
recipients really, under FHA guidelines when you are looking at 
them, the whole issue is legal status. And from NAHREP's 
perspective, it really is inappropriate for a government agency 
to be setting up immigration legislation.
    And in my statement I mentioned that really is something 
for the judiciary to decide as opposed to have a body such as 
FHA really dictate that. So our feeling really is it is more of 
an administrative issue that is going on right now. 
Administration forcing that immigration question to be 
addressed through FHA which, again, is inappropriate in our 
eyes.
    Mr. Vargas. Well, we have, in fact, cases where there are 
individuals who have arrived in our country and undocumently 
when they were 3 years old. They have lived here their whole 
lives.
    Mr. Nery. Absolutely.
    Mr. Vargas. They got married. They had kids. They have very 
stable incomes and they believe that everything is going to 
work out. They have saved for their down payment.
    And then they go to the bank and the bank looks and all of 
a sudden they are denied because they receive verbal 
instructions from FHA that they don't qualify, even though 
their legal status is such that they should qualify and they 
did previously qualify.
    Mr. Nery. Right.
    Mr. Vargas. Mr. Nery, you were going to comment?
    Mr. Nery. No, I would agree with that. I have had personal 
experience with that with a number of clients that had they 
applied for a loan a year ago, 2 years ago, they would have 
easily received a loan. But now because of their DACA status 
they have been unable to obtain loans.
    And these are folks and individuals for all intents and 
purposes you would say they are as American as apple pie 
because some of them have been here since they were born, 
right?
    They were here. They just happened to be born in another 
country, but they have been here since they were 6 months old, 
a year old. So for all intents and purposes, they are American 
through and through.
    Mr. Vargas. Okay, thank you. You were going to say 
something, Ms. Bailey. Go ahead.
    Ms. Bailey. If I could hold up the study that I cited 
earlier by the UNC Center for Community Capital of Self-Help 
Credit Union's mortgage loan. Self-Help is one of the primary 
lenders to undocumented families across the nation. And again, 
when consumers are given safe and responsible loans, they 
perform well in those. So we know that these consumers can 
succeed. So again, HUD needs to really clarify its position.
    Mr. Vargas. Thank you. Well, I appreciate that. I have to 
say also with respect to affordable housing, I was on the San 
Diego City Council for many years. And it is interesting being 
on the other side of those fees because at the same time, it 
used to be in California that the State would pick up a lot of 
the infrastructure issues. They would pick up the roads, the 
schools, the sewer, the water.
    And because of Prop 13, property values continued to grow 
but the assessment didn't except for 1 percent a year. So the 
amount of money that was coming into the government just wasn't 
there.
    So that is why you put it on the new homeowner. They had to 
pay then upfront, all of those costs, and that does create a 
huge burden for new homes to be built.
    And also, of course, the NIMBYism. Everyone loves density 
somewhere else, but not in their own community, which is too 
bad. I love to travel, and I travel quite extensively with my 
family.
    One of the places we have traveled to is Vienna. It is one 
of the most dense cities in the world. It is also the most 
livable. And so I hope that we get over that notion that 
density is wrong and bad, especially in places like California 
where people want to live. The price is too darn high.
    So again, I appreciate very much the work that you have 
done here. Again, I am someone who believes in homeownership. I 
know some people are saying that maybe it is not the best way 
to create wealth. It certainly has been historically, and it 
certainly has stabilized families.
    And I think it is still the dream that we all aim for. And 
certainly, I hope that we can make it affordable for people. 
Again, thank you guys. God bless you.
    And I thank you, Mr. Chairman. Thank you, sir.
    Chairman Clay. You are very welcome, Mr. Vargas.
    I now recognize the gentlewoman from Michigan, Ms. Talib, 
for 5 minutes.
    Ms. Tlaib. Thank you, Mr. Chairman. I thank all of you so 
much for your incredible advocacy on this important issue in 
our country. A lot of folks are locked out of the traditional 
mortgage market. I think we can all agree to that, due to a 
number of factors that all of you have mentioned from 
institutional racism to, you know, I would like to wrap it up 
into access.
    Access is so key. In the 13th Congressional District, many 
homes are under $50,000 where it is nearly impossible to get a 
traditional mortgage company or folks to finance. This has led 
to my district becoming ground zero for land contracts.
    And I want to urge my colleagues, as I am working with 
Chairwoman Waters and her team on the Land Contract Homebuyers 
Protection Act, that I am hoping to provide eviction 
protections for buyers by allowing termination of those 
contracts only through foreclosure proceedings, similar to 
foreclosure proceedings, again giving them access to due 
process.
    It seems like a great idea, land contracts. And I worked at 
nonprofit organizations where that is where we lean to when we 
couldn't get folks to traditional access to finance. And now it 
is becoming a thing. Many of the folks who are pushing 
predatory lending and so forth have gotten into the business of 
land contracts.
    Many buyers, many of our residents don't realize that and 
there are repairs that are needed, hidden fees and interest and 
so forth, again, not fully disclosed to the homeowner. Later 
down the line, the seller forces the buyer to make the repairs 
that should have been made.
    And if the resident doesn't make those repairs, they evict 
them, literally taking everything, their time, their energy, 
every single ounce of what was put into the home.
    So based on your experience, Mr. Hicks, would you say that 
homes sold under land installment contracts are habitable 
condition to rent?
    Mr. Hicks. Well, we totally discourage the use of land 
contracts and that is because I am from Georgia, and we believe 
in the owner getting title at time of closing.
    Ms. Tlaib. Yes.
    Mr. Hicks. And because of that we just discourage the use 
of it. And because, like I say, there is too much fraud that 
can occur in that type of transaction.
    Ms. Tlaib. I agree.
    Mr. Nery?
    Mr. Nery. So I would say, as a practicing a real estate 
attorney, land contracts is something that I understand well. 
And when I first read about your bill, I was taken aback 
because, honestly, when I have been involved, I make sure I am 
pulling title in escrow and ensuring that there aren't any 
issues with liens or--
    Ms. Tlaib. Yes. Can we--
    Mr. Nery. --previous ownership--
    Ms. Tlaib. The thing is, we have to get--
    Mr. Nery. I can establish that.
    Ms. Tlaib. --residents in front of you.
    Mr. Nery. Correct, correct.
    Ms. Tlaib. And that is what is happening is they are not.
    Mr. Nery. The majority of people--
    Ms. Tlaib. And I am an attorney myself.
    Mr. Hicks. Right.
    Ms. Tlaib. But these are the same. I mean, renters have 
more rights than--
    Mr. Nery. Right.
    Ms. Tlaib. --land contracts.
    Mr. Nery. Right.
    Ms. Tlaib. Some of these places can't even be rented out 
because of certain--
    Mr. Nery. Absolutely.
    Ms. Tlaib. --requirements for conditions like roofing and 
so forth. Many of these folks who are pushing the land 
contracts can't rent them out because of the condition of the 
home.
    Mr. Nery. Right. No, I--
    Ms. Tlaib. But I really have to reclaim my time.
    Mr. Nery. Yes.
    Ms. Tlaib. It is really, really important. In 2015, the 
Detroit News found that more land contracts than traditional 
mortgages have been filed with the Wayne County registrar in my 
district.
    Ms. Bailey, compared to a traditional mortgage offered by 
financial institutions, how high are interest rates on land 
installments?
    Ms. Bailey. They are extremely high, and we know that these 
are not new practices, right? This is, again, reincarnating 
things that had been really problematic in places like 
Illinois. We know that those types of contracts cost consumers 
in the City of Chicago more than $500 million. So you are right 
to be concerned.
    We think two things need to happen that are essential. 
Every contract should be recorded immediately. And then we also 
believe that the termination of the contract needs to be 
enforced through judicial foreclosure.
    Ms. Tlaib. That is right.
    Ms. Bailey. That is really important. And then, we want to 
highlight that TILA already provides substantive protections 
around these transactions. So we don't really need to 
reincorporate that language in any of the bills.
    Ms. Tlaib. Yes, thank you.
    And, Ms. McCargo, why are companies allowed to get around 
regulations that address predatory lending, the Truth in 
Lending Act, and offer these products with outstanding property 
taxes and liens to consumers without letting the potential 
homeowners know?
    Ms. McCargo. For me?
    Ms. Tlaib. Yes, you go ahead.
    Ms. McCargo. Thank you.
    Ms. Tlaib. I am, like, where are you?
    Ms. McCargo. Thank you for the question. So land contracts, 
we have done a tremendous amount of research on low-cost 
markets. There is an inadequate amount of financing available 
for the purchase of lower-cost properties.
    And so we have looked at small-dollar access to lending, 
and I think that the workarounds in terms of, I shouldn't call 
them workarounds, the issues that you are describing are 
pervasive, predatory, and essentially inadequate.
    And I think it is an issue that we need to spend more time 
on in terms of how to deal with land contracts. But I do think 
that the mortgage system, the finance system, in supporting 
properties in lower-cost markets needs a tremendous amount of 
modernization.
    Small-dollar lending and the ability to actually finance 
anything that is frankly under $80,000 in communities like 
yours and many others around the country are completely 
insufficient and inadequate. And that there is an opportunity 
to look at how we can propel and advance small-dollar financing 
for more safe, consumer-friendly products to allow for 
affordable home buying at the lower end of the market.
    Ms. Tlaib. And thank you.
    And, just really quickly, Chairman Clay, I would like to 
submit a statement by the National Consumer Law Center that 
outlines the racist history of land contracts that I couldn't 
get a deeper dive into during my questioning.
    Chairman Clay. Without objection, it is so ordered.
    The gentlewoman's time has expired.
    I recognize the gentleman from Ohio, Mr. Gonzalez, for 5 
minutes.
    Mr. Gonzalez of Ohio. I first want to thank the chairman 
for holding this hearing and thank all of the witnesses for 
your participation today. Let me start by saying that, like all 
my colleagues on this committee, I believe that for many 
Americans and for many of my constituents, homeownership is an 
integral part of achieving the American Dream.
    Along with the pride and accomplishment of owning a home, 
homeownership encourages civic and community engagement, helps 
lead to better educational achievement, and also improves 
health outcomes. Based on the testimony today, it is clear that 
minority communities have a more difficult time achieving 
homeownership and that this is by no means an easy problem to 
address.
    As you said in your testimony, Ms. Poole, there is no end 
all, be all solution. It is multifaceted. That being said, Ms. 
Poole and Mr. Nery, you both mentioned the issue of access to 
credit for many minority communities.
    Ms. Poole, you specifically stated that for Hispanic 
households, more than a quarter are either credit invisible or 
have an unscored credit record.
    Mr. Nery, you stated that millions of Hispanics pay their 
bills with cash which prevents individuals from gaining access 
to credit. So my first question is for Mr. Nery. You briefly 
mention in your testimony that alternative credit models are 
currently unavailable in the mortgage space.
    We had the credit rating agencies in here earlier this 
session. I met with FICO the other day. I couldn't agree more. 
It is pretty clear that this is an industry, and I think, Ms. 
McCargo, you kind of were alluding to it. This is an industry 
in need of major innovation, and it is not happening. And I 
think that is primarily structural, frankly.
    But, Ms. Poole, what are your recommendations for expanding 
access to credit for individuals who may be credit invisible in 
a more responsible way?
    Ms. Poole. Thank you for the question. One of the things 
that needs to happen is, as we look at alternative credit, is 
to recognize that everything doesn't fit in a box--
    Mr. Gonzalez of Ohio. Absolutely.
    Ms. Poole. When we are looking at the multicultural 
individuals that we serve, what we are looking at is saying, 
there are credit vendors who report credit scores for positive 
and negative. But the positives of paying rent and paying 
utilities and things that they do, paying car insurance, only 
show up if they are delinquent. It never shows up as a 
positive.
    If we could move towards, if anything, that one alternative 
piece and being able to say is there a way that all credit, no 
matter what it is that they are paying on a monthly basis and 
installments, be reported as current good credit.
    Mr. Gonzalez of Ohio. Right.
    And Mr. Nery?
    Mr. Nery. Yes, NAHREP firmly would agree with that. There 
is a company, VantageScore, that already is successful in the 
automotive and the lending, small lending, personal loan, or 
their credit models are being implemented already for credit 
cards and automotive loans.
    That company would be somebody that can certainly introduce 
an alternative credit model that can be utilized by the GSEs. 
They have been using the same model essentially for 20 years. 
If they adopted a new model, if they took that decision, made 
that decision themselves to implement new credit scoring 
models, I think you would see a drastic change.
    Mr. Gonzalez of Ohio. My understanding is VantageScore is 
owned by the three credit bureaus. Do you know if that is 
accurate?
    Mr. Nery. To my knowledge, that is not accurate.
    Mr. Gonzalez of Ohio. I will have to look into that. I 
think when we met with some folks last week, they suggested 
that that was true. If it is true, I think we may need to find 
another vehicle.
    Mr. Nery. Right.
    Mr. Gonzalez of Ohio. But kind of next question more 
broadly, and again, this gets into the competition. I will open 
this question up to the entire panel, but more broadly 
speaking, do you all think there is adequate competition in the 
credit reporting industry? And maybe just go down the line, a 
simple yes or no.
    Ms. McCargo. No.
    Ms. Bailey. No.
    Mr. Nery. Absolutely not.
    Mr. Hicks. No.
    Ms. Castro-Conroy. No.
    Ms. Poole. No.
    Mr. Griffith. No opinion on that.
    Mr. Gonzalez of Ohio. No opinion? Okay. Well, again, I 
thank you all for your time. I am as committed as anybody to 
making sure that there is more competition.
    One of the promises of A.I. is that when you have robust 
datasets if they are opened up and people can innovate in a 
space that we can find those better predictors so that we can 
more accurately distribute credit into the marketplace. And I 
look forward to working with anybody on the committee who is 
committed to that fundamental mission.
    So thank you, and I yield back.
    Chairman Clay. Okay. The gentleman from Ohio yields back.
    I now recognize the gentleman from Florida, Mr. Lawson, for 
5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman, and witnesses, welcome 
to the committee.
    Mr. Hicks, I want this question to go to you. I want to 
make sure that I am on the right track and I am not out there 
in left field. I have been concerned a great deal about 
millennials who are coming out and would like to become 
homeowners.
    And I have been working on what I call a rentals IRA which 
allows them to put money into an IRA account on a deferred 
basis that can only be used for a down payment on a house. But 
what I would like to know from your perspective or any anyone 
else's perspective is what is the limit of the amount that they 
should be able to put in those IRAs earning interest in order 
to be adequate for a down payment?
    I will tell you the reason why. In about 1973 or 1974, I 
was purchasing a house through FHA. I think the interest rate 
was 21.5 percent, and they required that you had to put down 10 
percent. And I was trying to find out how I am going to get the 
10 percent.
    So when you see all these rental units and everybody rent 
them and even housing, how they get out, and I think that has 
been my perspective. So judging from that if they can have this 
IRA that they can put money into and know that they can use it 
and I just wanted to see if anybody can respond to that. Okay.
    Ms. McCargo. Did you have--
    Mr. Hicks. That is a very interesting concept. In our down 
payment savings plan proposal what we are suggesting is as much 
as $500,000 could be accumulated in a tax savings plan. The 
reason why we say $500,000 is because that paints a broad brush 
of all Americans.
    Certainly, $500,000 is not a large amount for very wealthy 
people buying $5 million and $6 million houses, but we are 
talking about a down payment savings plan where the wealthy 
could contribute that maybe to a family member.
    So in a renter's IRA I do think that is a very unique 
concept because there are a lot of lease purchase programs that 
are out there that probably that type of a structure could be 
beneficial. And I think that that is an excellent idea. So I 
think you asked the amount. I would say about $500,000.
    Mr. Lawson. Okay.
    Ms. McCargo. The rents in this country are incredibly high. 
We have been talking about the housing supply problem and so 
those constraints are really pushing up the issue on 
affordability.
    Research that we recently have done has indicated that the 
average or median down payment for most home purchases in the 
last year is 5 percent. And there is still a belief out there 
that there is a need for a down payment of 20 percent, 10 
percent.
    There are a tremendous number of low down payment programs 
out there. Both Fannie Mae and Freddie Mac have introduced such 
programs that have allowed for as low as 3 percent down. The 
V.A. home lending is 0 down.
    So I think it is really important to just note that part of 
the educational process and kind of demystifying is that the 
majority of people don't put down 20 percent; 5 percent is the 
median down payment amount in America today. And I think there 
is a lot of opportunity for down payment assistance programs to 
help meet or go support homebuyers in purchasing at that level.
    Ms. Bailey. And I would share that you are right. Many 
Americans are now paying more than 50 percent of their income 
in rental housing costs. So it is really difficult for them to 
be able to save for a down payment.
    And we know that student loan debt, $1.7 trillion, is 
really delaying homeownership entry by many first-time 
homebuyers and many of those people will be families of color.
    So other options that have been promoted have been promoted 
by people like Sandy Darity and others coming up with ideas 
around baby bonds to make sure that people have sufficient 
resources for entry into homeownership and money already 
reserved for entry into homeownership.
    And because we got a question earlier about education and 
how education can really solve these issues, what we know is 
that students of color are disproportionately burdened with 
debt because of historical housing discrimination.
    White families got access to homeownership because of 
Federal housing policy so they were able to build up home 
equity and then use that home equity across generations to 
support their family members. So your idea is definitely taking 
us in the right direction.
    Mr. Nery. I think NAHREP would wholeheartedly agree that we 
should have something. If it is going to be use of an IRA it 
would be something that would be aligned with low down payment 
assistance programs.
    So if we are talking about 3\1/2\ percent, simply because 
in the Latino space we are talking it is about 16 years before 
homeowners would be able to achieve a 20 percent down payment.
    And we are challenged because of the fact that we are 
younger, at 29 years old, we live in large metro areas that are 
more expensive, and we also don't have intergenerational 
wealth.
    So we are not inheriting money at the rates that non-Latino 
communities are doing. So it definitely would be a challenge 
for us. I would say something commensurate with the loan down 
payment programs that exist would be ideal.
    Mr. Lawson. Thank you. My time has run out, but I need you 
all to help as we move forward with this. Thank you.
    Chairman Clay. The gentleman from Florida yields back.
    I now recognize the gentlewoman from New York, Mrs. 
Maloney, who is also the Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets. She is 
recognized for 5 minutes.
    Mrs. Maloney. I thank the gentleman for calling this 
important hearing and for yielding me the time and I thank all 
of the panelists today.
    I would like to ask Joseph Nery, we all know that 
homeownership is absolutely critical for wealth creation in our 
country. We also know that the financial crisis really caused 
havoc on the foundations of homeownership and 
disproportionately hurt minority homeowners and borrowers.
    This led all of us to acknowledge the need for smart 
regulations and strong consumer protections. The ability to 
repay and qualified mortgage rules that went into effect a few 
years ago provide some of the vital consumer protections that 
we now know are necessary.
    But when thinking about barriers to homeownership today, 
particularly for minorities, I have heard concerns that some 
credit-worthy borrowers with non-traditional sources of income 
like individuals who are self-employed, farmers or gig workers 
have difficulty in verifying their income using documentation 
other than their W-2 and therefore they have more obstacles 
than anybody else in obtaining mortgages.
    And with an increasing number of Americans making their 
living through alternative work arrangements, I would like to 
get your perspective. Have some of the income verification form 
requirements unnecessarily shut people out of the mortgage 
market and particularly affected minority borrowers? So your 
take on that, please?
    Mr. Nery. I would say that NAHREP would agree that the 
current credit scoring models that exist have 
disproportionately affected a lot of minority consumers 
because, again, we have thin credit files or no credit really 
through the current models. Yet, we have made some strides and 
some improvements.
    The GSEs have had HomeReady. They have had Home Possible 
and those programs have then started to take into account some 
of the different scoring or the different ways of establishing 
credit that Latinos have, again, being self-employed, having 
gig-economy, dealing in cash.
    But there still needs to be more done on that front. I 
think a lot of the legislation as we are looking at either 
modernizing FHA, if we are looking at the continuation of the 
QM patch for the GSEs, we really have to make sure that that is 
one of the factors that is incorporated in there.
    We have to ensure that whether it is through alternative 
credit scoring models or whether the existing models are 
modified, there has to be a mechanism which accounts for the 
way Latinos and minorities traditionally bank.
    Because again, if we are talking about how we pay cash for 
credit card payments, for utility bills, for rental payments, 
that is not captured in the credit models that exist today 
which were really developed in the 1990s. So, they are 
outdated. We need to make sure that they become updated and 
they reflect the way the communities establish their credit and 
bank today.
    Mrs. Maloney. Well, could you elaborate and explain and 
maybe give examples of other types of documentation that non-
traditionally employed individuals could use to build their 
credit score?
    Mr. Nery. I would say one of the things when you are 
talking about the ability to repay for lenders that are 
employing some of these more traditional models, one of the 
things that they look at is they really look at banking 
accounts because they will see the deposits.
    They will see that over time, there actually is money. 
There is sufficient money that comes in. And I will give you an 
example. Earlier, I had mentioned one of my clients who had a 
tree trimming business. If you were to look into his deposits 
and you were to look at his monthly statements you would see 
that there are sufficient funds to afford that mortgage 
payment.
    The payments that he is receiving in cash, that his wife is 
receiving in cash, that the other family members were 
contributing to the bank account, that would be sufficient to 
cover the mortgage. But again, sometimes some of the more 
traditional models that are out there don't really look at 
deposits. They don't look at bank statements.
    They really look at the W-2s. They look at the tax returns. 
So if you are looking simply at bank statements, I think that 
would be one thing that would be important. Even if you were 
looking at receipts for rental payments. If you are looking at 
monthly statements for credit cards, those I think are all 
indicators of the ability to repay.
    Mrs. Maloney. Do you think it would be a good idea to 
include all of those in the criteria that they could be looking 
at?
    Mr. Nery. I think so. I think it is very important because, 
again, as we look at millennials, in the Latino space we are 
talking about 29 year olds, but if we look just at non-Latinos, 
if we look at millennials across the board there are so many 
folks that in that gig-economy if you are an Uber driver by day 
or if you are doing something else online by night, you are not 
receiving your traditional W-2.
    Perhaps you are a 1099 person so you are not receiving that 
easily identifiable salary that is nine to five. Right now, you 
have young folks who are not working at companies for 30 years. 
They are moving every 3 years to a different company. They are 
creating their own jobs. So we have to be flexible.
    We have to adjust with how a lot of our younger generation, 
the future of the country, really, how they are developing, how 
they are earning their income. So I think those are factors 
that have to be incorporated.
    Mrs. Maloney. I would like to follow up with you further, 
my time is almost up, because there has been legislation and 
proposals out that say you can use these other forms that 
include some of the things you said, yet organizations that 
advocate for these communities have been very much opposed to 
the use of it.
    To me it seems like a practical good step forward, but I 
don't want to advocate or work on something that people who are 
most affected are against. And some of these organizations have 
been against it. I don't quite understand why. Maybe this is a 
further conversation we could have but thank you and all the 
panelists for being here. My time is over. Thank you.
    Chairman Clay. The gentlewoman's time has expired. Give me 
names on the other side.
    What is his name?
    Voice. Brad Steil. Mr. Steil.
    Chairman Clay. Where is he from? Give me the State.
    Voice. Wisconsin.
    Chairman Clay. The gentleman from Wisconsin, Mr. Steil, is 
recognized for 5 minutes.
    Mr. Steil. Thank you, Mr. Chairman. Thank you for calling 
today's hearing on a really important topic. I was digging into 
some numbers in particular at the distinction between some of 
the different cities in the United States.
    Seeing homeownership, in particular for African Americans 
in Milwaukee, and the disparity we see is between different 
cities, maybe higher in the south, Atlanta seemed to be 
significantly higher than, say, New York; Milwaukee is in 
between.
    Looking at why that might be the case and what we can learn 
from the distinction between specific cities in the United 
States where it is statistically pretty significant variations.
    I was wondering if maybe you, Ms. Poole, could comment as 
to what you have seen from that and then ask some of your 
colleagues on the panel to comment as well?
    Ms. Poole. The differences depend on where they come from, 
high-rent districts or high-cost areas versus median prices 
that we see every day. Some of it are barriers related to 
zoning issues that we talked about earlier and cause homeowners 
not to be able to cross those barriers.
    In some cases, we know that the sophistication leads to 
barriers to homeownership that are higher in some areas than 
others purposely. Some are put in place to cause homeownership 
not to occur and especially for minorities.
    So that would be one of the barriers when we are talking 
about fair housing and moving forward, and some of them are 
intentional.
    Mr. Steil. And so those local land use regulations that we 
are seeing have a statistically significant impact--
    Ms. Poole. Oh, absolutely.
    Mr. Steil. In your observation?
    Ms. Poole. Absolutely.
    Mr. Steil. Thank you.
    Ms. Bailey. And if--
    Mr. Steil. Ms. Bailey, please?
    Ms. Bailey. And if I may add, what we see from those local 
ordinances is that there is a preference for single family 
housing, and because of the history of discrimination, African 
Americans oftentimes were not allowed to live in those 
communities.
    They were actually relegated to the industry areas and 
local jurisdictions. So all of those things combined with an 
inability to get access to safe and affordable loans over time 
has created regional disparities.
    And we should just always note that African Americans and a 
lot of our history is rooted in the south so you see 
opportunities in those southern cities that might be different 
from when we migrated during the great migration up north 
because we lived in close proximity, quite frankly, to many of 
our southern white neighbors and attempted to do that when we 
migrated to the north.
    But these local ordinances that were a response to our 
progress emerged that really denied that and created kind of 
barriers, even with highways around our communities that locked 
us in. And because of that, we have this persistent residential 
segregation.
    Mr. Steil. I appreciate that comment.
    Mr. Hicks?
    Mr. Hicks. The thing that hasn't been mentioned along with 
what Nikitra is saying is that we have to look at historical 
redlining maps that existed in certain cities across the 
country. And I think that that has a lot to do with how we see 
the level of homeownership disparities that exist in the 
nation.
    Mr. Steil. Thank you.
    Maybe to just shift gears for a moment with my limited 
time, Mr. Griffith, if I can you a question? I have been 
looking at the Dodd-Frank Act and the mortgage lending standard 
getting tightened significantly following the economic 
downturn.
    And we have seen, I think, a disproportionate impact maybe 
on the minority communities and lower-income Americans as a 
result of some of the regulations in the Dodd-Frank Act. Could 
you comment on what you think might have been some of the key 
problems in Dodd-Frank and what impact that has had in 
particular with minority communities and homeownership?
    Mr. Griffith. I thank you for your question. What we have 
been focused on at the Heritage Foundation are ways in which we 
can restore affordability to the market in general, not for 
just minorities but for everyone in general.
    And we really do believe that as that footprint has grown 
substantially even in the wake of the crisis that this has 
fueled another increase in prices that is making it very 
difficult for minority communities, the middle class in 
general, and that the way long term to restore that 
affordability is to gradually diminish the size of the imprint.
    And just one thing on that, if you look at the proportion 
of these, the loans that are guaranteed that are for cash-out 
refis, how does that actually help people build wealth long 
term? I think that is something that Congress should look at.
    Mr. Steil. Thank you very much. I appreciate everyone's 
time here.
    I yield back.
    Chairman Clay. The gentleman yields back.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I thank the witnesses for appearing as well.
    And I thank Mr. Duffy for his engagement.
    Mr. Chairman, I would like to ask a few questions of the 
witnesses with your consent and permission. Friends, if you 
believe that invidious discrimination has been a significant 
reason for the inability of African Americans to achieve wealth 
in this country, would you kindly extend a hand into the air.
    Please let the record reflect that some persons have 
extended 2 hands--
    [laughter]
    --but that everyone extended hands into the air.
    If you believe that invidious discrimination to this very 
day, as I speak to you now, as I say these words, if you 
believe that invidious discrimination is still a part of the 
obstacle to wealth-building for minorities in this country, 
extend a hand into the air.
    Let the record reflect again that all have raised their 
hands. I am grateful that you have done this because we have 
been trying to build this record to let the world know that we 
still have discrimination. Regulations have to be dealt with, 
but our original sin was discrimination.
    To be more specific, racism, a word that we don't like to 
hear in hearings like this, institutionalized racism. With this 
understanding, those of you who may know, are you familiar with 
something called testing such that you can ascertain whether or 
not discrimination exists?
    If you are familiar with testing, would you kindly extend a 
hand into the air? All but one person, I believe. If you are 
not familiar with it, would you kindly extend your hand? Okay, 
one person. That is Mr. Griffith. Is that correct? Is that your 
name, sir?
    Mr. Griffith. That is correct.
    Mr. Green. Okay, not familiar with testing. Those of you 
who are familiar with testing, is testing a valuable tool in 
determining whether or not invidious discrimination exists? If 
you believe that it is, extend your hand. All have extended 
hands. Let the record reflect such.
    Now, given that testing is a valuable tool, would testing 
be a valuable tool in ascertaining whether or not invidious 
discrimination exists in lending by using testing, having 
persons go into lending institutions, banks and credit unions, 
and test them to see if they are engaging in invidious 
discrimination?
    Do you think this is a tool that can be useful to help us 
ascertain whether or not invidious discrimination exists in 
lending? If so, raise your hand. All have raised their hands 
who are familiar with testing. Let the record so reflect.
    Finally, on this question, I have a bill, H.R. 166, the 
Fair Lending for All Act. This bill would establish criminal 
penalties for invidious discrimination and would allow testing 
to determine whether it exists.
    I think that it is time for us to move now a quantum leap 
forward. We have talked about this for years, how this 
discrimination exists in lending but now we can do something 
about it. We may have a Congress that will act.
    If you think it would be beneficial to have this sort of 
testing and penalize persons for invidious discrimination, 
which is harmful discrimination, raise your hand please. All 
who agree that testing is helpful have raised their hands.
    Moving to the next bill, H.R. 123, you have talked about 
credit. This bill would allow additional credit scoring, a 
pilot program such that people who pay their light bills, their 
gas bills, their water bills, their phone bills, and 
utilities--these things could be scored in an automated 
fashion.
    This would help the people with the thin files that you 
have talked about. This would give people an opportunity who 
are paying rent to possibly buy a home for less than they are 
spending on rent.
    If you believe in scoring light, gas, water, phone, and 
cable as additional scoring, not as a substitute for current 
scoring but in addition to it, kindly raise your hand. Okay.
    Mr. Griffith, you don't think that that would be beneficial 
I take it? You didn't raise your hand. Is that correct?
    Mr. Griffith. It is a bit nuanced, but I don't believe that 
it should be forced congressionally.
    Mr. Green. You don't think it should be forced.
    Mr. Griffith. Correct.
    Mr. Green. I see. Well, you and I--
    Chairman Clay. The gentleman from Texas--
    Mr. Green. We have a difference in opinion.
    Chairman Clay. I am going to ask you to wrap up.
    Mr. Green. Yes, sir. I will. I want to thank the panel. All 
but Mr. Griffith indicated that this would be beneficial.
    With this said, thank you for the time, Mr. Chairman. I 
will yield back the balance of my time and I ask unanimous 
consent that H.R. 123 and H.R. 148 be made a part of the 
record.
    Chairman Clay. Without objection, it is so ordered.
    Mr. Green. Thank you.
    Chairman Clay. The gentlewoman from New York, Ms. 
Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman. Let me thank you 
and the ranking member for holding this important hearing. And 
I would like to take this opportunity to thank the 
distinguished panel.
    Ms. Bailey, earlier this year I introduced H.R. 963, the 
Home Loan Quality Transparency Act of 2019, which reinstates 
Dodd-Frank's expanded HMDA reporting requirements that were 
stripped out of law last year as part of the passage of S. 
2155.
    Senator Cortez Masto has introduced companion legislation 
in the Senate. Can you talk about the importance of these 
expanded reporting requirements and how, without them, finding 
and prosecuting mortgage lenders and financial institutions for 
discriminatory lending practices will be far less effective?
    Ms. Bailey. Yes, thank you so much for the question. The 
Home Mortgage Disclosure Act data has brought a lot of 
transparency into the marketplace. Because of HMDA data, every 
year we know which lenders are serving which borrowers.
    So we know that conventional lenders are not serving 
consumers of color and the service that they are provided is 
very minimal in comparison to the more than 70 percent of 
mortgages that they are giving to white homeowners.
    The rollback took away that transparency that we need. We 
need the data. Part of the challenge that we have in the 
consumer advocacy and fair lending space is oftentimes we don't 
have the data, and that is one of the important things that 
HMDA has provided. And your legislation gives us the tools that 
we need to really strengthen and get back that data that is 
really foundational for consumers.
    And then in terms of compliance, because I know a lot of 
what we heard during S. 2155, a lot of smaller lenders were 
saying that they were having difficulty with compliance, we 
felt like a lot of larger banks were really hiding behind those 
smaller lenders.
    We do understand the burdens of complying with our laws and 
regulations. My organization is part of a small credit union 
administration organization in the country so we understand 
compliance costs. But for years, banks have consistently been 
able to comply with our nation's fair lending laws and do it in 
a way that has really allowed us to give credit to consumers. 
So your bill takes us back where we need to go.
    Ms. Velazquez. Thank you. Ms. Bailey, last week the CFPB 
issued a notice of proposed rulemaking regarding changes to 
HMDA's reporting requirements as required by the passage of S. 
2155. Can you explain any concerns you have with the CFPB's 
notice of proposed rulemaking?
    Ms. Bailey. Yes. We are concerned that they have put out 
this idea that we can either increase or decrease the 
thresholds, and it is around 50 closed-end mortgages.
    Ms. Velazquez. Yes.
    Ms. Bailey. So it is, once again, going back and undoing 
the transparency opportunities that we need HMDA to continue to 
provide.
    Ms. Velazquez. Thank you.
    Ms. Poole, in your testimony you state the homeownership 
rate for African Americans, Hispanics, and Asian Americans 
remains at an unacceptably lower rate than that of white non-
Hispanic Americans. I agree. What is the National Association 
of REALTORS doing to address discrimination in housing?
    Ms. Poole. I am glad that you asked that question because 
we are an organization which is evolving and moving forward, 
not revolving and staying in the past.
    We are intentionally moving forward with programs to help 
our REALTOR members stay current on fair housing, to reduce any 
discrimination policies that might be happening locally for 
them. We are helping local and State associations to provide 
programs at no cost to them that they can filter down to their 
members.
    We are working with a multicultural leadership across the 
country, and some are represented here today, and trying to 
find ways that we can work together to reduce a lot of the 
discriminatory practices that occur. Because in some cases we 
hear from each other some practices that we don't even know 
about.
    We kind of thought that we were a solo and come to find out 
that individually, we are together. So we are working together 
to try to move our agenda forward and we are progressive in 
doing so.
    Ms. Velazquez. Thank you.
    I yield back.
    Chairman Clay. The gentlewoman from New York yields back.
    I now recognize the gentleman from Missouri, Mr. Cleaver, 
who is also the Chair of our Subcommittee on National Security, 
International Development and Monetary Policy. He is recognized 
for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. I may not take up the 
entire 5 minutes. Thank you for calling this hearing.
    Mr. Griffith, I am not sure, I may have misunderstood you. 
Do you believe that there is such a thing as racial 
discrimination in housing?
    Mr. Griffith. Racial discrimination does occur. And when 
that does occur, the people perpetrating that should be 
prosecuted to the fullest extent of the law.
    Mr. Cleaver. Well, the only reason I am bringing this up is 
because Mr. Green raised four issues and your hand was the only 
one that didn't raise. I think one of them was about 
discrimination. And so I am a little, more than a little, 
concerned. I am still, even with your answer I am not sure I 
understand what you are suggesting?
    Mr. Griffith. Oh, yes, and thank you for the opportunity to 
clarify that. I was unfamiliar with the details regarding 
testing for discrimination, the random testing of entering 
institutions to actually determine whether or not the 
discrimination is occurring.
    That is something that I am not actually fully apprised on 
and that is why my hand was not raised for that question, 
simply because I am not familiar with that practice in 
determining whether or not discrimination is occurring.
    Mr. Cleaver. Well, what practices are you familiar with?
    Mr. Griffith. That I am not aware of the different 
mechanisms in which people randomly enter in order to 
determine. I am just not aware of that.
    I am aware, of course, of being able to report to the FHA 
through our civil system when discrimination is occurring. I 
think, of course, that is very helpful that we have that 
opportunity.
    Mr. Cleaver. And I am still getting a headache.
    Ms. Bailey, will you--
    Ms. Bailey. Yes, thank you for this opportunity. I want to 
highlight a report that the National Fair Housing Alliance did 
recently. They conducted an in-depth investigation on how 
consumers are treated when they shop for auto loans, so I want 
to--
    Mr. Cleaver. I will yield.
    Ms. Bailey. --talk about it in the auto lending context. 
Mr. Green held a hearing last week on auto lending 
discrimination. The National Fair Housing Alliance found in 
that testing case, that in 62.5 percent of the cases, consumers 
of color received unfavorable treatment and more costly price 
options than the less-qualified white counterparts.
    So if you were white and your credit wasn't as good, you 
received better credit. I would really refer our co-panelist to 
that study. We know that discrimination is real and ongoing.
    Mr. Cleaver. Yes. We always have a problem in solving a 
problem. If you don't think you can get cancer from cigarettes, 
there is no point in trying to stop people from smoking.
    If you don't think there is discrimination, there is no 
point in trying to stop people from discriminating. And 
obviously, it is massive.
    I would like to yield the balance of my time to Ms. Tlaib 
of Michigan.
    Chairman Clay. The gentlewoman from Michigan is recognized.
    Ms. Tlaib. Thank you so much, and I wanted to actually 
allow Mr. Nery to finish. We were both very eager to hear what 
you have to say about land contracts. But before I do that, I 
do want the record to note that between the 1930s and the 
1960s, contracts were used to redline and prevent minorities 
from being homeowners.
    As you all know, 50 years later, we still allow for the 
land contract system to exist to hurt communities of color. And 
so it is really important that we allow it to happen but with 
safeguards.
    And so, Mr. Nery, we are very curious about your response 
of, we know and I think we want access, because access is key.
    Mr. Nery. Absolutely.
    Ms. Tlaib. But this seems to be a predatory process, a 
redlining process that hurts predominantly blacks--
    Mr. Nery. I would--
    Ms. Tlaib. --in our country.
    Mr. Nery. --wholeheartedly agree. I was just expressing as 
an attorney, that it surprised me because when I am involved, I 
make sure that those issues that we are concerned about don't 
occur. But I didn't imagine, I didn't think about in the 
majority of transactions people are obtaining land contracts 
consumer-to-consumer without having any of those protectionary 
measures.
    I would say NAREB completely and wholeheartedly agrees that 
there has to be some uniformity. There has to be some standard 
to it because you have to, at a minimum, make sure that you 
have some sort of a memorandum of agreement that identifies 
that this contract is there.
    You want to make sure that you have title and--
    Ms. Tlaib. Oh, I know.
    Mr. Nery. --that you can ensure that all of those 
protectionary measures are there for the consumers. You don't 
want someone to inherit any kind of liens or foreclosure or any 
kind of debts or other mortgages that exist.
    So absolutely, I think there has to be a standard that is 
applied across the country for consumers to be protected 
because you have to make sure that although in some cases this 
may be the only option that people have for financing, you have 
to make sure that they are protected.
    Ms. Tlaib. Thank you.
    Lastly, Ms. Bailey, you said something really shocking and 
profound. I lost more black homeownership in the State of 
Michigan than anywhere in the country. But you said black 
homeownership is at the same rate today that it was in 1968. 
What is the rate now, since 1968 to 2019, the same rate?
    Ms. Bailey. Indeed, it is. Today, it is at 41.4 percent. 
And it is important to really help us understand, we had 
progress after the Fair Housing Act, however, the market 
shifted. Reverend Jackson says that when we get in the game and 
the rules are clear and the referees are fair, we win.
    Black and Latino families have never been in a mortgage 
market that operated in that way. Instead, we have had dual 
systems where we are tracked to dangerous and risky mortgages 
and other financial services products that stop our ability to 
build wealth over time and pass on to future generations. Each 
of our generations continually have to start over again as 
opposed to building on legacies of families' opportunity.
    Chairman Clay. The gentlewoman's time has expired.
    Did the gentleman from Florida have something to add?
    Mr. Lawson. Yes. Ms. Bailey, I just want to say you made 
reference to Rosewood?
    Ms. Bailey. Yes.
    Mr. Lawson. And the reason why I'm interested is that I am 
the one who did a bill in Florida.
    Ms. Bailey. Yes.
    Mr. Lawson. And that was in 1923 when African Americans had 
homes and all that kind of stuff before the massacre and 
everything took place, but it was interesting that you 
mentioned Rosewood. It just stimulated me when you mentioned 
something about it.
    Ms. Bailey. And if I may? People keep asking, why do we 
look back? Why do we look at yesterday? The only way we are 
going to learn the lessons of the past is by understanding what 
the facts present. And we have a chance today to make sure we 
do not pass on to our children the burdens of discrimination.
    Chairman Clay. The gentleman is welcome.
    And I would like to thank our witnesses for their testimony 
today, as well as say that I am encouraged by the thoughtful 
questions and answers to this intractable issue of barriers to 
minority homeownership. But I am confident after hearing your 
testimony and your responses that we can find solutions to this 
issue.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And, thank you all.
    This hearing is adjourned.
    [Whereupon, at 12:17 p.m., the hearing was adjourned.]

                            A P P E N D I X



                              May 8, 2019 
                              
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