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


                     AN EXAMINATION OF THE HOUSING
                      CRISIS IN MICHIGAN, 11 YEARS
                          AFTER THE RECESSION

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

                             FIELD HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             AUGUST 2, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-43
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
40-161 PDF                  WASHINGTON : 2020                     
          
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                 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 Oversight and Investigations

                        AL GREEN, Texas Chairman

JOYCE BEATTY, Ohio                   ANDY BARR, Kentucky, Ranking 
STEPHEN F. LYNCH, Massachusetts          Member
NYDIA M. VELAZQUEZ, New York         BILL POSEY, Florida
ED PERLMUTTER, Colorado              LEE M. ZELDIN, New York, Vice 
RASHIDA TLAIB, Michigan                  Ranking Member
SEAN CASTEN, Illinois                BARRY LOUDERMILK, Georgia
MADELEINE DEAN, Pennsylvania         WARREN DAVIDSON, Ohio
SYLVIA GARCIA, Texas                 JOHN ROSE, Tennessee
DEAN PHILLIPS, Minnesota             BRYAN STEIL, Wisconsin
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    August 2, 2019...............................................     1
Appendix:
    August 2, 2019...............................................    37

                               WITNESSES
                         Friday, August 2, 2019

Atuahene, Bernadette, Senior Research Scholar, University of 
  Michigan.......................................................     5
Fluker, Vanessa, Fellow Practitioner, Vanessa G. Fluker, Esq., 
  PLLC...........................................................    11
George, Taz, Senior Research Analyst, Community Development and 
  Policy Studies Division, Federal Reserve Bank of Chicago.......    14
Hernandez, Hector, Director, Housing Opportunity Center, 
  Southwest Economic Solutions...................................     7
Mason, Lauren, Member and Housing Committee Chair, Detroit Action    13
Phillips, Ted, Executive Director, United Community Housing 
  Coalition......................................................     9

                                APPENDIX

Prepared statements:
    Fluker, Vanessa,.............................................    38
    George, Taz..................................................    48
    Hernandez, Hector............................................    89
    Phillips, Ted................................................    94

 
                     AN EXAMINATION OF THE HOUSING
                      CRISIS IN MICHIGAN, 11 YEARS
                          AFTER THE RECESSION

                              ----------                              


                         Friday, August 2, 2019

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 12 p.m., in 
the Larry K. Lewis Education Center, Wayne County Community 
College, NW Campus, Detroit, Michigan, Hon. Al Green [chairman 
of the subcommittee] presiding.
    Members present: Representatives Green, Tlaib, and Garcia 
of Texas.
    Also present: Representatives Lawrence and Dingell.
    Chairman Green. The Oversight and Investigations 
Subcommittee will now come to order. The title of today's 
hearing is, ``An Examination of the Housing Crisis in Michigan, 
11 Years After the Recession.''
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the House of Representatives who are not 
members of the subcommittee may participate in today's hearing 
for the purposes of making an opening statement and questioning 
the witnesses.
    The Chair is going to recognize, first, the Congressperson 
from this area, the Honorable Rashida Tlaib, to give her 
opening statement, and I, as Chair, have indicated already that 
we may give her a little bit more latitude because we are in 
her congressional district.
    So we do now recognize you for a 3-minute opening 
statement.
    Ms. Tlaib. Thank you so much.
    Chairman Green. By the way, we have a little bell here that 
will give you an indication that you have one minute left.
    Ms. Tlaib. He will use it too.
    I want to thank you so much, Chairman Green, and, of 
course, our incredible Financial Services Committee Chairwoman, 
Maxine Waters, for agreeing to bring Congress to Detroit, to 
bring a field hearing of a critical issue to the 13th 
Congressional District, which we all know is a very challenged 
district, as the third-poorest congressional district in the 
country, but also with the most resilient people, the folks on 
the ground who have been working on this issue of housing 
justice, whom we need to hear from and get the information in 
the hearing record.
    I do want to thank, also, our incredible colleague, 
Congresswoman Sylvia Garcia, for traveling all the way from 
Texas to come here, as well as my colleagues, Congresswoman 
Debbie Dingell and Congresswoman Brenda Lawrence, for their 
continued partnership on this issue.
    This morning, all of my residents need to know, was really 
important. We always want people in Congress to see our 
neighborhoods, to see what is going on, and I want to thank 
Representative Garcia and Chairman Green for coming with the 
Detroit People's Platform this morning to travel throughout the 
community, many of the communities and neighborhoods, to see 
exactly what is going on, on the ground. It is something that I 
think is going to help, especially around the issue of housing 
justice, being much more committed to addressing some of those 
concerns. But I want to thank you all so much for being here 
and being rooted in the community and helping bring a voice, 
and to all those who are testifying before our committee, thank 
you so much for agreeing to do this, and thank you for sharing 
your stories, and thank you for your continued commitment.
    I am so thrilled that this is the first field hearing of 
the Financial Services Committee, and that they chose to hold 
it in our beautiful City, so I want to thank you guys all so 
much, my colleagues, for your continued leadership.
    I hope this hearing helps you feel heard and feel seen. 
That is so critically important. And I know Chairman Green 
knows I am very tenacious, and when I said to him, this is one 
of the most critical issues for our district is increasing home 
ownership but also the fact that it is so interconnected to 
racial justice, environmental justice, economic justice, and 
all of those things.
    So again, thank you so much, Chairman Green.
    Chairman Green. Thank you. Let me add this: The media is in 
attendance today, and I would like to make note that, without 
objection, members of the local media are invited to this 
hearing and may engage in audio and visual coverage of the 
subcommittee's proceedings. Such coverage is solely to educate, 
enlighten, and inform the general public, on an accurate and 
impartial basis, of the subcommittee's operations and 
consideration of legislative issues, as well as developing an 
understanding and perspective of the U.S. House of 
Representatives and its role in our government. This coverage 
may not be used for any partisan political campaign purpose or 
made available for such purposes.
    With this said, I shall now yield to the gentlelady from 
Michigan's 12th Congressional District, the Honorable Debbie 
Dingell.
    Mrs. Dingell. Thank you, Chairman Green. Thank you for 
convening this subcommittee hearing. And thank you, 
Representative Garcia, for coming, and most importantly, thank 
you, Representative Tlaib, for your dedication and passion, and 
for bringing them here to Detroit to talk about an issue.
    You are in Detroit, and it is an issue that significantly 
impacts the City of Detroit and its neighborhoods, but it is 
also an issue that hits people throughout this State. And, 
Chairman Green, I would say, too, there are many elected 
officials in the audience from many of the suburban cities that 
Rashida and I both share, that have been heavily impacted.
    The 2008 recession hit everyone hard, but Michigan 
especially. We saw businesses shuttered, hard-working women and 
men were put out of work by the thousands, the near collapse of 
the U.S. auto industry, and a long, slow, painful recovery, 
and, quite frankly, I don't think anybody has lost that fear or 
anxiety in their hearts and souls that they used to take for 
granted.
    When we are faced with trying times we tend to sit around 
our kitchen tables, often with families, in our homes, but 
after 2008, that was no longer an option for too many people. 
They lost their homes. You will still see today now-vacant 
lots, and while there has been an incredible effort by the City 
and the State and other groups to clean up blighted 
neighborhoods and vacant homes, they remain unoccupied after 10 
years, and we have many challenges.
    These homeowners didn't cause the Great Recession. They 
didn't make a house of cards doomed to fail, they didn't buy 
credit default swaps, and they didn't make risky trades on Wall 
Street. All they did was pursue the American Dream, to make 
enough money to buy a home, to live in a safe neighborhood, and 
to start a family.
    So, I thank the committee for being here, and I look 
forward to hearing the testimony today.
    Chairman Green. Thank you very much. At this time, we will 
hear from my colleague from Houston, Texas, the Honorable 
Sylvia Garcia, the Representative from the 29th Congressional 
District of Texas.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and I, too, 
want to start by thanking Chairwoman Waters of the Financial 
Services Committee, of which we are a subcommittee, for 
allowing us to come here and join your great Congresswoman 
Tlaib in hearing from Detroit directly on some of the housing 
issues. And thank you, too, to Representative Dingell and 
Representative Lawrence for coming, for joining us, because, as 
Chairman Green said, we are here to listen. He and I are not 
here, coming from Texas, to tell you to do anything the Texas 
way, so don't worry. We are not here to Texan-ize you. We are 
here to listen to you and to find the right solution for you 
here in Detroit.
    I appreciate that we have a robust group of panelists to 
talk to us about the things going on here, and I do want to 
especially thank everyone concerned for the great welcome and 
for the tour that we had this morning, to show us about the 
housing crisis here after the Great Recession.
    This committee, and the Congress as a whole, must learn 
from lessons today and focus on how to build a basket of 
national policy that is flexible enough to adapt to the 
concerns of different regions and even to different neighbors, 
based on need. As Chairman Green knows, the Houston region has 
different challenges from Detroit. We have faced decades of 
growth and gentrification in our region, which has put 
pressures on our housing stocks.
    Recently, we saw an uptick in foreclosures following 
Hurricane Harvey. That storm, particularly, was a setback to 
low-income owners and renters, as much of the money of the 
recovery aid was targeted to more valuable properties. I have 
said many times, back home, that Hurricane Harvey just made 
poor people poorer. They were poor before the storm, and they 
are poorer today, as they wait in their rental properties.
    It is important to consider not just homeowners and those 
who want to become homeowners, but we must also consider 
renters. About 48 percent of the households in my district 
rent, which is comparable to this district, which is at 45 
percent. And just as we have seen home ownership slip out of 
reach for many people, we know that rent prices have increased 
in some neighborhoods, pushing more families to the financial 
edge.
    So finally, working together, I am convinced that we can 
focus on the issues related to housing, to make it better for 
all Americans.
    Thank you, again, for being here and joining us, and thank 
you, again, Mr. Chairman, for allowing me to make a few 
remarks.
    Chairman Green. I would like to, at this time, thank you, 
and recognize myself for 3 minutes.
    I want to thank Ms. Tlaib and her staff. They have done an 
outstanding job in helping us to facilitate this hearing. The 
full Financial Services Committee also has staffers who are 
here, and they have been very helpful.
    The Honorable Maxine Waters is the Chairwoman of the full 
Financial Services Committee. She is the person who authorized 
this field hearing, so we owe her a debt of gratitude for 
allowing it to take place as well.
    I want to talk to you very briefly, in my opening 
statement, about a complete recovery. The recovery is not 
complete unless everybody benefits from the recovery. And I am 
here today because, as often is the case, African Americans, 
minorities, are the canary in the coal mine. Some of the 
information that has been shared with me causes me great 
concern.
    Example: In the second quarter of 2019, the Black home 
ownership rate was at a 50-year low, at 40.6 percent in 
Michigan. The current rate of Black home ownership in Michigan 
is lower than before the passage of the Fair Housing Act in 
1968. Currently, you are experiencing foreclosures wherein 21 
percent of the homeowners don't know that they are behind on 
their taxes. I want to know why. How can this happen that you 
are foreclosed upon and don't know that you are behind on your 
taxes?
    I am also interested in what is happening to renters. I 
have been informed that some 61 percent don't know the tax 
status of the property that they are living in, and they, too, 
find themselves being the victims of foreclosures when owners 
are foreclosed upon; renters have paid their rent, but find 
that they have to relocate.
    So there are many things that would cause me a good deal of 
consternation, but the thing that concerns me most is the fact 
that we don't have a complete recovery. It appears to me that 
we, in Congress, did a good thing when we bailed out the auto 
industry, but we expect the auto industry to help bail out the 
people who buy their products. We did a good thing when we 
bailed out the banks, but we expect the banks to bail out their 
customers, their depositors.
    We are here today to try to complete the recovery. We don't 
want the industry to recover without the people who are a part 
of the tax-paying public who helped the industry to recover, to 
not benefit from the recovery. The recovery is not complete and 
we are here to find out what we can do to help have a complete 
recovery.
    With this I will now introduce the witnesses, and each 
witness will be given approximately 5 minutes for your 
statements.
    And our witnesses are Professor Bernadette--I am going to 
take a stab at your name one time, but I will have you tell me 
first.
    Ms. Atuahene. ``Atuahene.''
    Chairman Green. ``Atuahene.'' All right. And she is a 
professor of law at the Chicago Kent College of Law. We also 
have Mr. Hector Hernandez, who is executive director of 
Southwest Economic Solutions Housing Opportunity Center; Mr. 
Ted Phillips, executive director, United Community Housing 
Coalition; Ms. Vanessa Fluker, who is an attorney with Vanessa 
G. Fluker, Esq., PLLC; Ms. Lauren Mason, who is the housing 
committee chair for Detroit Action; and Mr. Taz George, senior 
research analyst, Federal Reserve Bank of Chicago, Community 
Development and Policy Studies Division.
    We welcome all of you. We greatly appreciate you taking the 
time to be with us. You will each have 5 minutes, and without 
objection, each witness' written statement will be made a part 
of the record. Once the witness has finished testifying, each 
member of the subcommittee will have 5 minutes within which to 
ask questions. I am the timekeeper and I will give you a signal 
when you have one minute left. This is the signal [rings bell], 
and after this, your time will expire one minute later.
    The witnesses will now make their opening statements, and 
we will start with Professor Atuahene.

  STATEMENT OF BERNADETTE ATUAHENE, SENIOR RESEARCH SCHOLAR, 
                     UNIVERSITY OF MICHIGAN

    Ms. Atuahene. Thank you, Chairman Green.
    Between 2011 and 2015, one in four properties has been 
subject to property tax foreclosure: one in four. We haven't 
seen this number of property tax foreclosures in American 
history since the Great Depression. So the real question is, 
what in the world is going on?
    Well, the Michigan State Constitution is quite clear. No 
property can be assessed at more than 50 percent of its market 
value. Although the Michigan State Constitution is quite clear, 
we did a study and we found that between 2009 and 2013, in each 
of those 7 years, anywhere between 53 and 83 percent of 
properties were being assessed in violation of the Michigan 
State Constitution. And I need you to understand that these 
estimates are the most conservative estimates possible.
    The second step was we then broke the data into what we 
call five quintile, quintile 1 being the lowest-valued homes, 
all the way to Quintile 5 being the highest-valued homes. And 
what we found is that in the lowest-valued homes, 95 percent or 
more were being assessed in violation of the Michigan State 
Constitution, but when you got to the highest-valued homes, 
less than 20 percent were being assessed in violation of the 
Michigan State Constitution, which means that the most 
vulnerable amongst us are being subjected to these 
unconstitutional property tax assessments.
    The next study we did is lots of things cause tax 
foreclosure, right? Not just these illegally inflated property 
tax assessments but also poverty, divorce, lots of things. So 
the challenge in the second study was to hold all those things 
constant so we can measure the effect of unconstitutional 
property tax assessments on foreclosure rates, and our findings 
were astounding. We found that 10 percent of all property tax 
foreclosures that happened between 2009 and 2013 would not have 
happened but for these unconstitutional property tax 
assessments. And when you look at just that lowest quintile, 
the lowest-valued homes--remember, I said of those ones, 95 
percent or more were being assessed in violation of the 
Michigan State Constitution--for just that quintile, 25 percent 
of those homes would not have gone into property tax 
foreclosure but for these unconstitutional property tax 
assessments.
    The next study we did has to do with race, specifically, 
because if you are doing work in Detroit and you don't address 
race directly, you are doing everyone a disservice. What we did 
is we looked at all of the cities in Wayne County, and what we 
found is that the predominantly African-American cities in 
Wayne County were being subject to unconstitutional tax 
assessments and foreclosures at a greater rate than the 
predominantly white cities in Wayne County.
    What I need you to understand here is that these 
unconstitutional property tax assessments are just the latest 
chapter in a longer history of racially discriminatory housing 
policies that start at the beginning with racial zoning, 
racially restrictive covenants, urban renewal, racially biased 
mortgage rates, and I can go on and on. So, it is important to 
understand these racially based, unconstitutional tax 
assessments, again, not as an isolated incident but part of a 
larger legacy.
    And the key here, for all of you who are not from Detroit, 
is that this is not just happening in Detroit. The Chicago 
Tribune just published a Pulitzer Prize-nominated series 
called, ``The Tax Divide,'' and it finds that these same 
patterns of racially discriminatory property tax administration 
are also happening in Chicago. One of my co-authors, 
Christopher Berry, who is at the University of Chicago, is 
currently doing a study, and he is looking at the seven most 
populated cities in America, and he is finding similar patterns 
in each of these cities.
    So the real question is, we have this evidence before us--
what do we do? What do we do about it? One thing that Congress 
can do about it is what I am asking for today, that Congress 
initiate a congressional investigation into how the Fair 
Housing Act can address this ominous threat, can address this 
latest chapter in this racially discriminatory housing 
policies. Because at the end of the day, your children, your 
grandchildren, and your great-grandchildren are going to look 
back in history and ask, ``What did you do when faced with this 
astounding injustice? What did you do?''
    And at the very least, again, a congressional investigation 
into how the Fair Housing Act can be adopted to address this 
issue.
    I know my time is running out, so I want to end with the 
story of Mr. Jones. I met Mr. Jones in my empirical work when I 
was interviewing. He used to work at a factory--remember when 
working at a factory put you comfortably in the middle class? 
And when the factory jobs went away, Mr. Jones, like many other 
faithful Detroiters, stayed, and they stuck it out here.
    In 2012, Mr. Jones was able to finally buy his first home, 
which was a threadbare home that he bought for $2,500. The home 
had no--it was stripped, as we know here in Detroit. It was 
just a shell of a home. Despite that, the fact that he bought 
the home for $2,500, and similarly situated homes cost just the 
same, the City of Detroit taxed his home as if it was worth 
$50,000--20 times what he paid for it.
    Mr. Jones qualified for something called the poverty tax 
exemption, because all he had was his pension and he lived 
below the poverty line. But because the City of Detroit erected 
so many barriers to people finding out about the poverty tax 
exemption, he didn't qualify. He didn't even apply.
    So, we have a situation for Mr. Jones, and in Detroit--and 
these are my last words; I am wrapping it up--where, number 
one, people were subject to unconstitutional tax assessments. 
When they couldn't afford to pay these illegally inflated 
property tax assessments, they were foreclosed on, at record 
rates, for property taxes they shouldn't have been paying in 
the first place, because 40 percent of Detroiters live under 
the poverty lines and qualify for the poverty tax exemption. My 
God.
    In my last sentence, I want to just give you a quote from 
Mr. Jones, that really perfectly describes the structural 
violence that is perpetrated by these unconstitutional tax 
assessments. And he said, ``This whole mess makes me feel like 
I was stuck up and robbed.''
    Chairman Green. Thank you for your testimony, Professor 
Atuahene.
    We will now hear from Mr. Hernandez. You have 5 minutes, 
sir.

 STATEMENT OF HECTOR HERNANDEZ, DIRECTOR, HOUSING OPPORTUNITY 
              CENTER, SOUTHWEST ECONOMIC SOLUTIONS

    Mr. Hernandez. Thank you, and I appreciate the opportunity 
to speak before this honorable body.
    For historical context, I am going to focus on home 
ownership. I would like to cite a homebuyer ecosystem study 
that was authored by a local working group that I participated 
in, and they did a really comprehensive review of the 
challenges in Detroit to make some good recommendations.
    From 1990 to 2014, Detroit lost over 250,000 residents, 
more than 30 percent of its population. As a result of that 
population loss and the national credit crisis, Detroit's 
housing market obviously crashed. Almost 110,000 housing units 
stood vacant that year, roughly a third of all units. From 2006 
to 2010, the median home sale price in Detroit plummeted by 
over 75 percent. Every year from 2009 to 2016, over 95 percent 
of home purchases in Detroit have been cash sales.
    This economic hurricane blew away virtually an entire 
industry of experienced and knowledgeable lenders, REALTORS, 
community development corporations, and homebuyer counseling 
agencies. The homebuyer ecosystem, in effect, was devastated by 
that crisis and it is still attempting to recover. It is coming 
around but it is still slow.
    To give you another snapshot of the challenges in Detroit, 
from 2001 to 2006, there were, on average, 6,000 to 8,000 
mortgages per year. In 2007, that dropped to 3,900 mortgages, 
and in 2008, it dropped to 1,400 mortgages. Get this--from 2009 
to 2016, the average number of mortgages per year in Detroit 
was 416. That is not a functioning mortgage market. Even though 
there are, on average, 4,000 transactions per year, and only 
400 of those, on average, were with a mortgage, that leaves you 
with cash sales and land contracts, and I will talk more about 
that later. It is starting to recover but it is awfully slow. 
In 2017, we had 1,000 mortgages issued in Detroit.
    Detroit's lingering underperformance after the recession is 
due to a range of factors, from tighter credit standards to the 
hollowing out of the local real estate professions, to buyers' 
cautious mindsets. Nurturing this market back to health 
requires intentionality, working to attract capable buyers and 
creating demand so that sellers can gradually create a viable 
market and sell at a reasonable price. Valuation has been 
really challenged during this time as well.
    In the last couple of years, according to REALTORS and 
lenders, demand has increased for purchasing single-family 
homes in some neighborhoods. In these areas, demand outpaces 
the supply of move-in-ready homes. So we have a really 
distressed portfolio of properties. Most developers with the 
skills to develop these blighted properties and renovate homes 
believe that renting to tenants is more profitable than selling 
to an owner-occupant.
    With few finished homes for sale, the purchase market is 
not currently in equilibrium. When move-in-ready homes are 
available in concentrated areas, then a critical mass of 
activity that changes the neighborhood perceptions can take 
hold. Think of Marygrove. Think of Grandmont Rosedale. There is 
a litany of other neighborhoods that fall into that category.
    I also recently participated, in March of this year, in an 
interview with John Gallagher, and he cited really good data 
and really current data, and I am going to reference a few 
things from his article.
    White people make up just 10 percent of Detroit's 
population, yet make up nearly half of the home mortgage loans 
made in 2017, for which the race of the applicant was known. 
And then citing Home Mortgage Disclosure Act data, white 
borrowers got almost the same number of mortgages as Black 
borrowers, just by being a much smaller percentage of the 
City's population. Of the 1,072 mortgage loans made in Detroit 
in 2017, the most recent year for which data is available, 442 
went to white borrowers and 461 to Black borrowers.
    The mortgage market doesn't exist, or barely exists in more 
than half of the City. Of the 297 census tracts in Detroit, 
each tract measuring several square blocks, 139 tracks saw no 
mortgages at all in 2017, and another 91 saw just 1 to 5 
mortgages. So, you can see how the challenge really impacts the 
whole City.
    In part because mortgages are less readily available in the 
City, Black buyers may be more likely to buy in the suburbs 
than in the City. In 2017, just two suburbs locally, Southfield 
and Redford, accounted for more mortgage loans to Black 
homebuyers than mortgage loans made to Black homebuyers in 
Detroit.
    The lack of mortgage loans does not mean that there are no 
home sales in the City. Finance experts estimate 4,000 to 5,000 
home sales in Detroit each year, but up to 80 percent of those 
transactions are cash or land contracts that open up 
individuals to obviously predatory loans. They obviously open 
themselves up to a lot of other legal challenges as well, in 
terms of losing that property much quicker than they would if 
they had a mortgage.
    The problem is not, however, limited to access to mortgages 
or lack of capital available in the City.
    Chairman Green. You can wrap up.
    Mr. Hernandez. Okay. Thank you. Southwest Solutions worked 
with a land bank to create an appetite for more properties, and 
still the demand for move-in-ready products is strong.
    Other challenges, in 2019, there is a sharp decline in 
branches in the area. So if you think of the amount of mergers 
that are happening in the City, that typically results in a 
loss of branches, so that is a challenge. Home-buyer counseling 
works, so some of the strategies--if you provide homebuyer 
counseling to help homebuyers in communities, they often can 
purchase a home. HUD, however, only makes $47 million available 
nationwide for home buyer counseling. Michigan had a miniscule 
amount and it is not nearly enough to meet the demand. There 
are other opportunities for CRA reform that could help improve 
the access to credit, be it through protecting the reporting as 
well as ensuring that you expand that to credit unions and 
fintech agencies. Thank you.
    [The prepared statement of Mr. Hernandez can be found on 
page 89 of the appendix.]
    Chairman Green. Thank you for your testimony, Mr. 
Hernandez.
    We will now hear from Mr. Phillips. You are recognized for 
5 minutes, sir.

STATEMENT OF TED PHILLIPS, EXECUTIVE DIRECTOR, UNITED COMMUNITY 
                       HOUSING COALITION

    Mr. Phillips. Thank you very much for the opportunity 
today. I am the executive director of the United Community 
Housing Coalition (UCHC), and I am also a life-long Detroiter, 
living a few miles from here. At UCHC, we provide a wide range 
of social and legal services focused on resolving various kinds 
of housing problems, primarily related to affordability and 
quality for low-income residents.
    The foreclosure crisis, nationally and in Detroit, was well 
described in the memo that you had before this committee and 
has been elaborated on by the two previous speakers. I would 
like to add to some of what was said on that, that we recognize 
that there has been a massive loss of home ownership, 
particularly Black home ownership, and we have also an 
overwhelming abandonment problem, which I don't think has been 
mentioned much yet, and a glut of homes that became available 
for sale, all of which contributed to as much as a 90 percent 
reduction in value in some communities in the City of Detroit.
    Concurrent with the mortgage crisis, and basically caused 
by the mortgage crisis, but concurrent with the mortgage crisis 
has been a tax foreclosure crisis. Much of this has been driven 
by over-assessments, as Professor Atuahene has mentioned, that 
were created, in large part, by a loss in value and the 
inability of local government to keep up with the new 
assessments.
    Federal hardest-hit funds have been allocated to Michigan, 
but not nearly as much as what was needed to do the job, and 
they were not used nearly as effectively as they should have 
been.
    Homes that were lost to foreclosure, mortgage, and taxes 
were often channeled to investors or companies doing rental 
agreements and what have you. Where many lenders would not 
offer the occupants of the foreclosed homes, sometimes even 
tenants, any discounted purchase amount, they would often sell 
or transfer to investors just to get them off of their 
inventory.
    Tax-foreclosed homes were often purchased at tax auctions 
for as little as $500. Many of these were flipped on bad land 
contracts to avoid local rental housing laws and to ensure that 
the investor would be better able to declare a default and take 
the property back and sell it again and again until there was 
no value left.
    The response that we have tried to make at United Community 
Housing Coalition, and in the advocacy community in general, 
has been to work with individual homeowners and occupants of 
foreclosed homes to keep people in their homes through 
counseling--I would agree with Mr. Hernandez on that part--
through litigation and some financial assistance. This has been 
either by resolving whatever their issues were or assisting 
them in being able to repurchase their homes. Most cases that 
we have resolved have been without buybacks.
    But this month, with about 500 purchases, we are going to 
make in collaboration with the City of Detroit, the Wayne 
County Treasurer, and several individual funders, one of them 
being the Quicken Loan Community Fund, we will have purchased, 
for the occupants of the home, over 4,000 homes in the last 10 
years, 1,100 of them through the program with the City of 
Detroit. Other purchases have been buying out bad land 
contracts, tax auction purchases, and other things like that. I 
should note that all of these purchases have been for the 
occupant. All of them have been at cost for the occupant.
    And that brings me to some of the suggestions that I have 
had in the written testimony that was provided. We would like 
to see an expanded use of the hardest-hit funds, to provide 
additional resources for them to be able to be used for 
purchases, for redemptions, for buying out of predatory land 
contracts, as well as repairs. Right now, we use hardest-hit 
funds to eliminate blight, but we only seem to define that as 
demolition of properties. Why not prevent blight by some of 
these other methods?
    For federally insured mortgages, we believe we should hold 
the financial institutions more accountable for providing 
significant forbearance relief.
    We should recognize that conventional mortgages are needed. 
One of the reasons why so many people go to land contracts is 
that there is not any loan product available. Many homes can be 
purchased still in the City of Detroit for $10,000 to $20,000 
to $30,000. Lenders are not providing those kinds of loans.
    We would also like to look at some reform around the land 
contract, and we do not believe land contracts should be 
eliminated, but we do think there is a lot of need for 
transparency concerning property conditions. Very often, people 
are not told of the conditions that exist in a property. 
Disclosing true housing values requiring independent 
assessments as a condition of getting into a land contract.
    Classifying hybrids. There are a lot of lease purchase 
agreements that people enter into that are even worse than land 
contracts. They require substantial down payments. They require 
rehabbing property. They require paying taxes and insurance. 
They are every bit as much as a land contract but they are sold 
as a lease-to-purchase, so that when somebody defaults on them 
they are simply brought into court as a tenant and evicted, and 
they lose all of their equity and all that they have put into 
it. We would like to see those defined in such a way that they 
are legally a land contract.
    And in conclusion, to provide help in the efforts to 
enforce this, we do need additional legal assistance. In the 
City of Detroit, there are 30,000 cases brought in the 36th 
District Court annually. About 4 percent of those have legal 
help. So when you have all of these predatory land contracts 
and hybrid agreements there is a need for help, and we urge you 
to look at ways to do that.
    Thank you.
    [The prepared statement of Mr. Phillips can be found on 
page 94 of the appendix.]
    Chairman Green. Thank you, Mr. Phillips.
    Ms. Fluker, you are now recognized for 5 minutes.

 STATEMENT OF VANESSA FLUKER, FELLOW PRACTITIONER, VANESSA G. 
                       FLUKER, ESQ., PLLC

    Ms. Fluker. Thank you very much, and thank you for the 
opportunity to testify here today. I certainly appreciate it.
    I would like to first start by kind of looking back. We are 
talking about tax foreclosures, installment contracts, the 
decline of home ownership, but you cannot look at that without 
looking at where all this is emanating from, which was the 
foreclosure crisis. Yes, there was a recession, but the bulk of 
our home ownership issues came from the foreclosure crisis.
    And I just want to use a quote from the 2010 House 
Judiciary Committee hearing that was held on December 2, 2010, 
and I was honored and privileged to have an opportunity to 
testify at that hearing about the outrageous foreclosure 
conditions here in Detroit. At the end of my testimony, 
Congressman Trent said this:
    ``But the end result, Ms. Fluker is correct; the end result 
is that because of government involvement here and the lack of 
market discipline that seems to hold the system together, we 
are in a situation now where banks have an incentive oftentimes 
to foreclose rather than working things out with the homeowner. 
And I think there is something desperately wrong with all of 
that.''
    That has not changed.
    I am in court every day. I am on the front lines every day. 
The government funded a foreclosure trend. They gave a huge 
bill up to the banks, who have, in turn, infused all types of 
law firms to fight tooth and nail to foreclose on people. They 
are not trying to engage in loss mitigation--never have, 
despite the HAMP program. They will litigate this stuff ad 
nauseum. And this has disparately impacted minorities, 
particularly African Americans, closely followed by Hispanics, 
and here in Michigan, people of Middle Eastern descent.
    The very programs that were designed to help the homeowners 
failed the homeowners, which is why we have the 90 percent 
property value drop. It is not like the property value just 
dropped. It dropped because it was artificially depressed by 
the banks after they were infused with our tax dollars.
    Now we bring this forward, and as Mr. Phillips has stated, 
rather than work with a homeowner, give them a modification or 
forbearance or anything, they would rather turn around and sell 
it to an investor for $1. And I don't say that flippantly. I 
actually litigated a case for a senior citizen, where they sold 
her property for $1 rather than working with her. They get 
these properties and they start putting people into these 
installment contracts.
    I am fighting a case right now--I am in and out of court 
every other week. They are trying to evict this woman, after 
they locked her out, under Fannie Mae, I might add. She entered 
into a contract with deed with someone, had saved up her money, 
put down $9,000, $1,000 a month, and thinks she is safe. She 
comes home one day and all of the locks are changed, and all of 
her stuff is gone, including her dead daughter's ashes. She 
finds out the house was in foreclosure and they sold it to her. 
Do you think Fannie Mae is trying to work with that lady? Do 
you think they are trying to say, ``You know what? You put 
$9,000 down. You are paying $1,400 a month, which is above what 
you contracted for in escrow, just to try not to be homeless.'' 
No. They are trying to throw her out on the street.
    And as a side note, just so we can get a little true 
understanding of the role of Fannie Mae and Freddie Mac, 
between January 2014 and August 2017, there were about 109 
eviction cases in the 36th District Court filed. Fannie Mae and 
Freddie Mac actually represent the two biggest entities 
engaging in evictions at 36th District Court, the court here in 
Detroit.
    So, at the end of the day, we are looking at a scenario 
where, if we do not go back and correct this whole role of the 
banks and the financial institutions, doing something on the 
back end is not going to help. Now, you are talking about 
solutions. There is a lot of talk now about reparations, things 
of that nature. Make these banks give some reparations to the 
City of Detroit. Make them give some money back to the 
community--for all the property wealth that they have taken out 
of the community. That is something that needs to be looked at, 
and it needs to be given to the community, not to the 
municipalities. It needs to be given to grassroots 
organizations, so you can make sure it is channeled within the 
community, not siphoned off through some political process and 
not given to pseudo-investors to gentrify out the areas.
    At the end of the day, we must look at everything, the 
totality of the circumstances--we can't just look at things in 
a vacuum--to truly get an understanding and create some 
solutions that will be viable for the City of Detroit.
    [The prepared statement of Ms. Fluker can be found on page 
38 of the appendix.]
    Chairman Green. Thank you for your testimony, Ms. Fluker.
    We will now hear from Ms. Mason for 5 minutes.

STATEMENT OF LAUREN MASON, MEMBER AND HOUSING COMMITTEE CHAIR, 
                         DETROIT ACTION

    Ms. Mason. Thank you for allowing me to be here and to 
speak. My name is Lauren Mason, and I am a life-long resident 
of Detroit, Michigan. I reside in the 13th Congressional 
District. I am a member of Detroit Action, where I am a member 
and the Chair of our Housing Committee. I would like to tell 
you a story, which is my story, of how the effects of the 
foreclosure crisis still play out in unique ways, here in 
Detroit.
    My fight for affordable housing is what led me to Detroit 
Action, where we fight for economic and social justice for our 
neighborhoods. I also work at the United Community Housing 
Coalition (UCHC) where I am on the tax prevention team, working 
hard to keep people in their homes. I do this work with Detroit 
Action and UCHC because I have experienced this pain firsthand.
    My grandparents bought our home in Detroit in 1968. My 
family owned and occupied 1714 Seyburn for 46 years. Our home 
was passed down through 3 generations, with 6 generations 
growing up in our home. Always knowing this to be home, it was 
our legacy, my family's wealth, and a piece of what is called 
the American Dream.
    I was working part-time when I noticed a hike in our 
property taxes in 2008, but by 2012, I noticed a larger hike. 
My home was assessed at $70,000, which meant it was worth 
$140,000. I was taxed over $900 for the year. At the time, I 
was unaware that my property had been illegally and unfairly 
assessed by Wayne County and the City of Detroit.
    Home assessments, on which taxes are based, had little 
relationship to the market value of our home after 2008, which 
significantly increased taxes and led to the waves of tax 
foreclosures that we have seen. As a result, nearly 100,000 
homes were foreclosed on since 2011, with almost 10,000 
foreclosed on last year. Nearly all of the people who were at 
risk of losing their homes were working-class Detroiters, like 
me.
    At the time, I asked for my property to be reassessed. It 
never happened. I applied for the tax exemption, which is the 
home tax application. I even applied for Step Forward and State 
emergency relief (SER), but I was denied everywhere I went, 
even though I qualified. There was no help for me.
    I felt the weight of the universe and it was breaking me 
down. I was my mother's caregiver for 9 years until she died in 
2009, then I had to care for my nephew, who was like a son to 
me, until he died in 2012. I also was sick, constantly having 
surgeries at the time, and working a part-time job that I 
couldn't afford to take the time off to care for myself.
    In 2014, my house was sold to an investor in a tax auction.
    The pain of losing my home still stings to this day, 
because I still go through the trauma of just being locked out 
of my own home and not having it. I was in North Carolina for a 
healing trip and was unaware of the foreclosure process, like 
most Detroiters are. The process began to take place.
    I came back working, hoping to catch up on the property 
taxes, but one night, basically in the middle of the night, I 
came home from work and was locked out. My gold color locks 
were now silver. I had nowhere to go at 4:00 in the morning. I 
would sleep in my car and couch-hop from friends and family for 
years. I would leave notes for whoever had bought my home, to 
see if I could get my things. I watched my mail pile up in the 
door, and I never got a response from them.
    After the county sold my home to the buyer, and I was 
illegally evicted and my possessions were thrown out without 
proper notice, I lost everything--my siblings, my husband, as 
she stated, my child's ashes that I can never get back. All of 
my family heirlooms. These are the things that can never be 
replaced. There was no restitution or retribution for people 
like me whose house was taken for profit.
    Just recently, I have found housing for myself, even though 
I have always been employed. In Detroit, it seems impossible to 
find adequate affordable housing.
    In Detroit, we see homes like my family home bought at a 
low rate. My taxes were only $6,000. My house was sold for over 
$40,000.
    The speculators have changed the face of our neighborhoods 
for the worse. There must be something done locally and 
nationally to keep families from falling prey to these 
vultures, just like we know there needs to be something done to 
keep families from falling prey to the same type of subprime 
loans that caused our housing collapse.
    There is more that Congress can do at the Federal level to 
fight for working-class Detroiters and people in other cities. 
My organization, Detroit Action, endorses a broad set of 
policies. We need more investment from HUD in affordable 
housing for people like me to improve home ownership. There is 
also a lack of affordable housing for middle- and low-income 
residents and without that investment, Detroiters like myself 
will continue to be displaced,
    There is about $500 billion that is needed to be invested 
in affordable housing and home ownership for the type of 
housing that middle- and low-income Americans will need. 
Legislation like the American Housing and Mobility Act will 
help people like me stay in our homes and have the freedom to 
thrive in our communities.
    Chairman Green. Thank you for your testimony, Ms. Mason.
    We will now hear from Mr. George for 5 minutes.

  STATEMENT OF TAZ GEORGE, SENIOR RESEARCH ANALYST, COMMUNITY 
 DEVELOPMENT AND POLICY STUDIES DIVISION, FEDERAL RESERVE BANK 
                           OF CHICAGO

    Mr. George. Thank you. I am a senior research analyst in 
the Federal Reserve Bank of Chicago's Community Development and 
Policy Studies Division. This division works to promote fair 
access to credit and financial services, and conducts policy-
oriented research on the economic resilience and mobility of 
low- and moderate-income households. All views and comments 
related to my testimony are my own and not those of the Federal 
Reserve Bank of Chicago or the Federal Reserve System.
    Today, I will discuss research I conducted with colleagues 
from the Urban Institute, a nonpartisan policy research 
organization in Washington, on the challenges of financing the 
purchase of lower-cost, single-family homes. In our study, 
these are properties valued under $70,000, which is about the 
lowest 15 percent of home sales nationwide. Our research 
suggests that this segment of the housing market is not well 
served by existing mortgage financing products, in part due to 
profit, liquidity, and risk constraints associated with small 
loans. Lower-income homebuyers and homebuyers in low-cost 
areas, are particularly at risk of facing challenges obtaining 
financing.
    Here are some of the high-level findings from our study.
    In many parts of the country, including here in Wayne 
County, lower-priced homes are a significant share of the 
housing market. In 2015, about 45 percent of sales in this 
county involved homes with values below $70,000. Low-cost sales 
are far less likely to be financed by a mortgage and are, 
instead, more likely to be financed with cash or other means. 
This means that low-income buyers must either save more or 
pursue alternative financing products that do not offer the 
same consumer protections of a mortgage.
    In cases where buyers of low-cost homes were able to obtain 
loans, we found, in our research, that these loans stayed 
disproportionately on the originating bank's balance sheet. 
This suggests that access to the secondary market, which is a 
key source of liquidity for lenders, is more limited for these 
smaller mortgages, compared to larger loans.
    If buyers of low-cost homes cannot obtain a mortgage and 
are unable to pay in cash, they may turn to sellers for 
financing, in what we have discussed today as land contracts or 
contract for deed. Under these contracts, buyers may have no 
means of accruing equity in their home, and they have few of 
the consumer protections of a mortgage or a rental contract. 
The combination of limited access to credit and the prevalence 
of these contract for deed transactions compounds the risk of 
homebuying for low-income households, including those in Wayne 
County.
    Now, I would like to discuss some of the factors impacting 
the supply of small-dollar mortgage credit that makes these 
smaller loans so difficult to obtain.
    The structure of mortgage lending, in terms of the 
compensations and incentives for lenders, works to the 
disadvantage of small-dollar loans, as these loans are 
typically less profitable for lenders to originate. Smaller 
loans generate lower revenues, yet the costs borne by the 
lender for appraisals, underwriting, and administrative 
procedures could be similar to those of larger loan amounts.
    Another factor inhibiting the flow of credit for these 
properties is that they may need repairs to meet code 
requirements before a lender can underwrite a loan on the home. 
Finally, prospective low-cost homebuyers may experience greater 
challenges with qualifying for a mortgage due to their credit 
scores, income, and ability to finance a down payment on a 
property.
    Today there are organizations that may help address some of 
these challenges, like the ones represented on this panel 
today. For example, community development financial 
institutions can help households build credit to obtain home 
ownership. To address challenges with housing stock condition, 
mission-driven lenders and other organizations may combine 
purchase and rehabilitation loans so that buyers can acquire 
and repair homes in poor condition.
    Other organizations promote land banking and other 
rehabilitation strategies, which have helped to stabilize 
housing markets and support affordable home ownership.
    Thank you again for the opportunity to testify today, and I 
look forward to discussing this further.
    [The prepared statement of Mr. George can be found on page 
48 of the appendix.]
    Chairman Green. Thank you, Mr. George, for your testimony. 
Now, we will hear from the Congresspersons.
    First, Ms. Tlaib is recognized for 5 minutes to ask 
questions.
    Ms. Tlaib. Thank you, Mr. Chairman. As we all know, across 
our district, across the 13th Congressional District, and the 
State of Michigan, we are seeing more and more families renting 
instead of owning their own homes. From Redford Township to 
Inkster, all the way to Wayne, Michigan, I have seen the 
economic instability it is causing for our residents and 
communities, especially when I saw 56.8 percent of our 
households in the 13th Congressional District pay more than 30 
percent of their income for housing.
    Just last year, a series of reports released by the Urban 
Institute showed that Michigan suffered the steepest decline in 
Black home ownership. While there are a number of contributing 
factors, one thing is certain, and I truly believe this, that 
provisions in the Fair Housing Act of 1968 had cracks and 
flaws, and simply did not go far enough to protect our 
communities in the time of corporate-driven economics that put 
profits before people.
    And so with that, I wanted to ask the professor specific 
questions. One of the things that we talked about, even during 
the tour, was the assessment and the flaws, and the fact that 
basically, we were not provided our constitutional right to the 
assessment. What can we do, and is this not only a Detroit 
issue but is this a Wayne County-wide issue?
    Ms. Atuahene. Thank you. Yes, absolutely. First, in the 
study I had mentioned, we looked at each of the municipalities 
in Wayne County, and we found that the three municipalities 
with a super majority of African Americans, which is Detroit, 
Inkster, and Highland Park, were far more likely to experience 
these property tax foreclosures and these unconstitutional tax 
assessments than the counties that had a super majority of 
whites. So, this is a Wayne County issue, for sure, but it is 
also a racialized issue.
    Second, it is not only in Wayne County or in Michigan. This 
is a national issue of this racialized property tax 
administration. I mentioned the problem in Chicago, brought to 
light by the Chicago Tribune, and also the study my co-author 
is doing of the seven most populated cities.
    So this is a Detroit problem, this is a Michigan problem, 
and this is a national problem. And as far as what we can do 
about it, in the Detroit context--you have been a huge 
supporter of the Coalition to End Unconstitutional Tax 
Foreclosures, and we have three solutions.
    The first solution is we want to stop these 
unconstitutional tax assessments. At the top of 2017, the City 
finally did a parcel-by-parcel reassessment of all the 
properties. We redid our study after that and found that there 
was lots of improvement, which is the good news, but the 
lowest-valued homes are still being over-assessed. And we are 
calling on Assessor Alvin Horhn to do an across-the-board cut 
of those low-valued homes, to get it right. And again, it is 
not that these are evil people. It is just, as many people 
mentioned, a home worth $500 is hard to value. And so, there is 
some of that going on.
    The second solution is we want to have zero owner-occupied 
homes going into the tax foreclosure auction. We cannot have 
this empirically proven, unconstitutional tax assessment and 
continue to foreclose on people as if the problem is they don't 
want to pay. I did several interviews and I asked one Detroit 
official--I won't mention his name here--``Why do you think we 
are having this property tax foreclosure crisis?'' And he said, 
``Professor, when people have a choice between buying a purse 
and paying their taxes, unfortunately, they buy the purse.'' It 
is these narratives that put the blame on the individual. And I 
need you to understand these narratives as strategic 
narratives, because the work that they are doing is moving our 
gaze from the structural injustice, which are these 
unconstitutional property tax assessments, into the failure of 
personal responsibility of individuals, and we need to resist 
that.
    Ms. Tlaib. Thank you so much, Professor.
    Mr. Phillips, as you know, my office has been working--
actually, I have spoken to Chairwoman Maxine Waters about the 
issue of land contracts, or land installments, processes that I 
know have been impacted all throughout Wayne County. Can you 
talk and take a deeper dive into what are some of the changes 
that you want to see? You talked specifically about values, but 
there are other protections that we need to see, because a lot 
of folks think that you have the same protections with a land 
contract as you would with the mortgage foreclosure process.
    Mr. Phillips. Right, and you don't, because very often in 
these situations the person is--with a mortgage, you are going 
to have the mortgage company there, you are probably going to 
have a title company there, you may have an attorney or two 
there to protect your interests. In many of these you are going 
to have the seller and you are going to have the buyer, who 
maybe is buying a home for the first time, and is believing 
whatever he or she is told.
    So certainly requiring that there be inspections done 
before a purchase can be had, it would be very beneficial, at 
least to put the buyer on notice. Requiring that there be 
complete disclosure. We very often see homes in tax foreclosure 
that are sold in late March--those are usually cash sales, not 
usually land contract sales--but sold in late March. The 
significance of that is that April 1st is the deadline for the 
redemption of properties when they are going into tax 
foreclosure. So, the requirement that there be full disclosure 
on those kinds of things.
    Certainly, in terms of the hybrid ones, that we eliminate 
them by saying that any agreement that has certain features to 
it, such as requiring the buyer, whether you call the buyer a 
tenant or a buyer, the tax is a super down payment that is 
above and beyond the security deposit limits in the State of 
Michigan, that requires them to rehab--not repair, but rehab--
property, is what these are often defined as. Those kinds of 
things, it should be clear that those are clearly land 
contracts.
    And where that becomes a problem--it is not so much of a 
problem when you can have an attorney representing somebody in 
court when those cases come up, but again, very few people have 
an attorney, and judges will tend to look at, well, it says it 
is a lease, so regardless of what it says in this lease, that 
is what it is.
    I think there are other reforms that could be made as well. 
I do think that there is a need for not eliminating land 
contracts, because they do, in some instances, work. We use 
land contracts for some of the 4,000 homes that we are able to 
sell. It is a convenient tool and there are some individuals 
for whom that is the only--they may have been in their home for 
40 years and legitimately want to sell it, but the buyer can't 
get a mortgage anywhere. So how do you deal with those kinds of 
things?
    So, there is a need for keeping them, to some degree, but 
there certainly are a lot of reforms that need to be made to 
make them fair.
    Ms. Tlaib. Thank you so much, and if I may, Mr. Chairman, I 
do want to recognize a number--not individually, but a number 
of our elected officials, local elected officials who are here. 
We do appreciate their presence.
    Chairman Green. Thank you very much. We may have an 
opportunity for you to ask some additional questions, Ms. 
Tlaib.
    At this time, we will now yield to Ms. Garcia, from Texas, 
for 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you 
to all the witnesses for being here.
    I was really struck this morning, during the tour, by the 
number of what appeared to be abandoned homes, and I was very 
curious about that, so I googled you all, just like every time 
we have a question and we don't have an encyclopedia, those of 
you who still remember encyclopedias, and it says here, ``Is 
Detroit an abandoned city?'' An abandoned city. It says, ``A 
significant percentage of housing parcels in the City are 
vacant, with abandoned lots making up more than half of total 
residential lots in large portions of the City. With at least 
70,000 abandoned buildings, 31,000 empty houses, and 90,000 
vacant lots, Detroit has become notorious for its urban 
blight.''
    Now, urban blight is a difficult problem to solve. I don't 
know that Congress has an answer, and I don't know that we will 
come up with an answer today. But I wanted to ask the professor 
and Ms. Fluker the question--give us a recommendation, at least 
one, of what you think Congress can do to help solve that, so 
that when we Google Detroit, we don't come up with this 
abandoned City, because I am sure that is not what you all 
want. So, help us get there. What are your recommendations? 
Just one or two.
    Ms. Atuahene. Let me give you my main recommendation--
    Ms. Garcia of Texas. One would be good.
    Ms. Atuahene. --which is, again, you have to understand the 
scourge of unconstitutional tax assessments as the latest 
chapter in a larger history of racialized--
    Ms. Garcia of Texas. Right. You have talked about that.
    Ms. Atuahene. --housing. That is exactly right. And so to 
stop--the reason why we are going to have another chapter, and 
another chapter, and another chapter until people are held to 
account, right?
    So, the real solution here is to provide some compensation. 
You can't have this empirically proven instance of these 
unconstitutional tax assessments and people then get their 
houses foreclosed upon, and you say, ``Oops, I'm sorry.'' There 
is no ``oops'' here. We need compensation. And providing 
compensation is the only way that we can ensure people are held 
to account so that there will not be yet another chapter, 
another chapter of this kind of--
    Ms. Garcia of Texas. But is that the role of your State 
Government or the role of the Federal Government?
    Ms. Atuahene. We need both. To really provide compensation, 
we are going to need Federal dollars and State dollars. The 
City of Detroit doesn't have money, and so we are going to need 
the Feds to come in and we are going to need the State of 
Michigan to come in. We need all hands on deck in order to 
provide compensation.
    Ms. Garcia of Texas. Okay. Ms. Fluker?
    Ms. Fluker. Yes. Thank you very much for the question. I 
appreciate that. Everything I am citing is attached to my 
testimony. I attached a data sheet.
    And it is very important that we understand that prior to 
the housing crisis, the housing bubble, statistics have shown 
that 78 percent of the foreclosed homes in Detroit were 
predatory subprime loans. The reason that becomes very, very 
significant is because now we have a scenario, after the 
bailout, after Fannie Mae and Freddie Mac, ``sheared the toxic 
loans'', that they are a large percentage of the owners of the 
abandoned property. And, in fact, according to the 2015 study, 
Fannie Mae had about 46 percent of the abandoned housing and 58 
percent of the housing owned by Fannie and Freddie was 
abandoned here in Detroit. I find that extremely--
    Ms. Garcia of Texas. But what can we do to change it, 
Fannie Mae and Freddie Mac? What is your recommendation there?
    Ms. Fluker. Stop throwing people--
    Ms. Garcia of Texas. I only have only 5 minutes, and I am 
trying to get you to answer my question.
    Ms. Fluker. Yes. Stop throwing people out on the street. 
Allow them to purchase these homes. Particularly when the 
mortgage was subprime, things of that nature, give them an 
alternative to purchase the homes. Or in the case of my lady 
who did the contract, the deed was defrauded, why are you 
throwing somebody out when they are willing to pay a reasonable 
price and they are trying to purchase a home?
    And it is sad because so many of my clients that we are not 
successful on for mortgage foreclosures, things like that, they 
go back to their house 5 years later, or 7 years later, and the 
house is sitting there abandoned, when no one will work with 
them to allow them to pay a reasonable amount, when they knew 
the mortgage was subprime. That hasn't gone away. We still have 
those mortgages. Most of those were 30-year mortgages and it 
hasn't been 30 years, but we still have a consistent 
foreclosure process going on in Detroit, and it is feeding into 
this abandonment. And if we just allow people to stay in their 
homes, pay for the homes, rather than just letting them sit 
there and be abandoned, particularly government-owned property.
    Ms. Garcia of Texas. All right. Thank you.
    And my question now is for Mr. George. I listened to your 
testimony and you were talking about the low-cost homes and the 
high foreclosure rate. What can we do to work with the Federal 
Reserve Bank, in terms of some of our mandates to regulation, 
to improve that situation and also to make changes and reform 
and modernize the Community Reinvestment Act (CRA), to get the 
banks to work with the community? It shouldn't be the other way 
around. You are the regulator up there. What could we be doing?
    Mr. George. I think that is a really important question. It 
is beyond the scope of the research that I have presented 
today. I think that there may be others within the Federal 
Reserve that are working on those issues.
    When I think about potential solutions to address the lack 
of credit flowing to these communities, I think of the 
organizations that are active there today and what they are 
doing, in particular, community development financial 
institutions (CDFIs). They may not face the same profitability 
pressures of a private lender, where, for a smaller mortgage 
that is going to have a thinner profit margin or maybe not be 
profitable, a private bank may have a minimum loan size or 
incentives that discourage their loan officers from being 
active in that segment of the market, whereas a CDFI, if it 
aligns with their mission to serve the needs of their 
community, they are going to be more motivated to try and 
address those kinds of credit gaps.
    So I can't speak to the regulatory matters you mentioned, 
but I can think of what organizations--
    Ms. Garcia of Texas. But did any of the studies that you 
cited make recommendations as to what we can do to make the 
banks more accountable under the CRA?
    Mr. George. Under CRA? I would have to think about that 
question more and get back to you.
    Ms. Garcia of Texas. All right. I yield back. Thank you, 
Mr. Chairman.
    Chairman Green. Thank you. Without objection, we will have 
a second round of questioning, and Ms. Tlaib, we will yield to 
you for an additional 5 minutes.
    Ms. Tlaib. Thank you. So right now, I know about 65,000 
foreclosures--this is for you, Ted--65,000 properties in 
foreclosure in 2019. Twenty-one percent of them didn't even 
know that it was in foreclosure. I think, what, back in 2018, 
they were saying there was a high percentage that didn't even 
know.
    But the one issue that came up during the tour, Ted, is 
specifically around this move for community groups, who are so 
tired of trying to deal with the banks or trying to get the 
Federal Government to do something, that they are now creating 
community trust funds, basically saying that we are going to go 
on the auction, we are going to buy these homes back for our 
neighbors, and we are going to help them stay in their homes.
    And they were saying how the Wayne County tax foreclosure 
process now, and that it is online during the auction. The one 
that I have--always, my colleagues, even, were kind of taken 
aback by that process. Can you talk a little bit about that, 
because it is not very accessible? People think that somebody 
in the audience right now can just go online and try to buy 
their home back, that there is this process that you can get it 
back for $500. There are a lot of misconceptions out there.
    I know the Wayne County tax foreclosure process online, the 
auction, is broken. It is so lenient and easier for investors, 
and out-of-State investors, specifically, to buy people's homes 
versus nonprofit organizations and others who are trying to get 
folks to stay in their homes.
    Mr. Phillips. Well, there are a lot of impediments, 
certainly, and it has gotten much more difficult.
    Ms. Tlaib. Can you go through the process?
    Mr. Phillips. Yes. Basically, you have to register, you 
have to have money to register, a deposit to put down.
    Ms. Tlaib. How much?
    Mr. Phillips. At least $2,000, I think. In the September 
auction, you have to be prepared to bid all of the back taxes. 
A lot of investors don't do that. For the October auction, a 
month later, the minimum bid is $500, so it is a little bit 
easier. But you also have to do it online. It is a quick 
process. They list all the homes. There are like 15-minute 
increments they do closings on. It can get somewhat cumbersome.
    What has been the biggest problem of the last couple of 
years has been that there has been a rebound in some property 
values. Last year, we were able to get 520 homes through the 
process we have worked out with the City of Detroit, through 
using their right to take property before the auction. We were 
able to get those homes for generally between $2,000 and 
$5,000, and give the people a year to pay back what we paid.
    When we participated last year in the October auction, we 
got 3 properties. Five years ago, we had as many as 300 
properties we were able to get through that process. Five years 
ago, $500, $600, $1,000.
    Ms. Tlaib. Why only 3? Why now only 3?
    Mr. Phillips. There are fewer properties. That was one 
thing. But the other thing is that there is much more 
competition for the properties that are left, and it is a much 
more difficult process to get them. Notwithstanding that, 
still, for investors to pay, instead of $500, $5,000 for a 
property is not that big of a deal, and they are still buying 
properties for $5,000 and letting them sit there and rot, or 
flipping them on bad land contracts and basically doing the 
equivalent when they get it back after one or two or three, and 
let it rot. So we are still having that kind of problem.
    But it is not easy for an individual. We, for a number of 
years--and we still--offer to bid, on behalf of people, to be 
able to get the home that they are in.
    There also was legislation passed in Michigan banning the 
former homeowner from bidding, which was a huge mistake. It was 
supposedly to keep investors from buying back the properties 
that they weren't paying taxes on. They simply changed their 
name. They are bad as Smith Corporation 1, so the next year 
they are Smith Corporation 2, and there is a number like that. 
One of them is up to 16, and they are that blatant, but yet 
they get away with it. Same people, different name, so they are 
considered a different company and they are allowed to do it. 
But individual homeowners who lose are not allowed to bid in 
the October auction.
    So there is a lot of cumbersome--and it is online. If you 
are not used to doing that, it can be very difficult to do.
    Ms. Tlaib. And the last--one of the things, and, Ms. 
Fluker, if you can--what have you seen in regards to how this 
movement around foreclosure has been so aggressive, especially 
in Wayne County, how that is connected to what is happening 
with water shutoffs, how that is all interconnected? Because I 
know that people's water bills were somehow attached to their 
tax bills and all of that, and trying to unpackage that and 
understanding how that really fed into the crisis that we have.
    Ms. Fluker. It is very significant, particularly--there are 
actually two or three layers and I am going to try to do it as 
quickly as I can.
    Layer one is, if you have a water bill and it is converted 
onto your taxes, if you have a mortgage, that can actually 
accelerate that mortgage, because now you are in breach, 
encumbered to property and property with taxes, things of that 
nature. So it can be problematic from that perspective.
    It is also problematic from the perspective of many times, 
people who may have owned their home outright, have a water 
problem, and suddenly it becomes a tax bill, collecting 25 
percent interest, I might add. So if you don't have that 
immediately, in a year's time it is just going to be out of 
control. And without the ability--obviously, if you couldn't 
pay it initially, a year later, 25--
    Ms. Tlaib. Ms. Fluker, we didn't always have that as an 
issue. They didn't put it on your tax bill before, correct?
    Ms. Fluker. That is correct. That is a tool that is being 
used to gentrify our property. They are doing it a lot with 
churches, particularly Black churches. In fact, they are doing 
it with Black churches who don't have outstanding water bills. 
I represent a pastor right now. It is the third time. The same 
investor has allegedly bought his property at a tax sale, but 
it is a tax-exempt church and it has been for about 40 years, 
because certain areas, I guess, are designated to be, certain 
development areas, whatever the case may be.
    So, actually, water bills are being used as a tool to 
create an encumbrance, to take property. So it is all 
interrelated, not to mention the ancillary health issues, 
things of that nature.
    Ms. Tlaib. Thank you, Mr. Chairman.
    Chairman Green. Thank you. We will again hear from 
Congresswoman Garcia for an additional 5 minutes.
    Ms. Garcia of Texas. I am just sitting here, almost 
shocked. You are telling me they are using the water bill to 
add it to the tax bill?
    Ms. Fluker. At 25 percent interest.
    Ms. Garcia of Texas. So that is a State law that allows 
them to do that? Well, you all need to go in and change that. 
That is just outrageous. No, that is not a Federal law. And I 
just can't believe, because I know during the tour they 
mentioned the water bills being so high. Because I am one of 
those who pays things per quarter because I am in Washington 
and I don't have to worry about the bills, right? If I send 
$100 to the water company in Houston, that does me good for 
like 3 months, and I don't have to worry about paying another 
bill.
    I am sitting here just sort of in shock. And you are 
talking to someone whose first job out of law school was a 
Legal Aid lawyer, and my favorite tee-shirt said, ``Housing for 
people, not for profits.'' To me, it sounds like you are giving 
me a perfect example of the kind of case I used to love to have 
when I was in Legal Aid, because that sounds like it is purely 
for profits, and to take over the homes.
    So I am just aghast and certainly will work with your 
Congresswoman to see if there is anything we can do at the 
Federal level. But it sounds to me that this needs to be done 
at the State level, to go in and repeal that law.
    But like I said, I didn't come here to tell you how to do 
things the Texas way, but it is just shocking. You live next to 
the water. Why is your water bill so high?
    It should be easier. But I will move on, Mr. Chairman. I do 
have a question for Mr. Hernandez.
    I listened to your numbers about the number of mortgages. 
You said only 416?
    Mr. Hernandez. On average.
    Ms. Garcia of Texas. On average. So is that traditional 
financing or is it also any secondary financing?
    Mr. Hernandez. Correct. It is traditional.
    Ms. Garcia of Texas. Traditional financing. So what is it 
that we can do with Fannie Mae and Freddie Mac and other 
lenders to hold them accountable, give them incentives, make 
them be fair, and provide home financing to increase home 
ownership in this City?
    Mr. Hernandez. So fundamentally, strengthening CRA. Right 
now, it is under attack, right? They are trying to weaken it, 
trying to aggregate data so that you are not tracking it 
specifically in LMI areas. And then, even more specifically, 
who was actually the borrower?
    So putting some teeth into the CRA, strengthening it, not 
weakening it, helping ensure that--
    Ms. Garcia of Texas. But how, specifically, do you want us 
to strengthen it? I asked Mr. George and he told me I need to 
talk to the regulators. So tell us how to do that. What is it 
that you recommend we do?
    Mr. Hernandez. Well, if you look at the reviews that the 
regulators perform, they kind of skim over a lot of things and 
they don't really--they don't put the hammer down when they 
can. And so if they are not enforcing the way they should and 
can, because CRA is a really powerful tool.
    When a bank gets a ding on your CRA, they are meeting with 
local community groups and listening, and incorporating 
feedback to generate a community benefits plan and strategy on 
how to rectify that challenge. We have done it successfully 
with a couple of local banks, and in a couple of instances that 
I have been involved in CRA negotiations, where the banks 
either had a challenge with a merger or a CRA--we were 
negotiating with, I think, Fifth Third, I think, like $30 
billion.
    And it is an investment, for sure. They didn't have to, but 
they were willing to because it is a sound business strategy to 
partner with a couple hundred community groups, to rectify and 
enhance their business model, to ensure that they are meeting 
goals and lending in LMI communities.
    Ms. Garcia of Texas. Thank you. I yield back, Mr. Chairman.
    Chairman Green. Thank you. Without objection, I am going to 
give Ms. Mason some additional time. We did interrupt your 
statement, Ms. Mason. Do you have anything else you would like 
to say before I ask my questions?
    Ms. Mason. Well, yes, I do have something I would like to 
say. I do believe that this is unjust, unfair, and 
unconstitutional, the evictions, the foreclosures. It is just 
not right. We have DTE as well as water connected to the 
properties that are foreclosed upon, and it makes it hard for 
people to become homeowners as well as stay in their homes, 
even if they get them.
    So we need laws, we need policies, most definitely, because 
this all is intentional. It is strategically intentional. And I 
lost my home, that I watched my grandparents buy for me and my 
family to stay in. My mother struggled, along with me helping 
her, to make sure that the home was bought and paid for, only 
for us to lose it to illegally assessed taxes.
    Chairman Green. At this time--thank you for your 
testimony--I am going to yield myself 5 minutes for some 
questions. Let's start with Mr. Phillips.
    Mr. Phillips, you indicated that you have an instrument 
called a lease-to-purchase contract. With the lease-to-purchase 
contract, is that regulated by the State in some way?
    Mr. Phillips. Not really. What we argue legally is that it 
they are effectively our land contracts, and when we argue 
under the State land contract law to try to get greater 
benefits. So if they are a tenant, for example, if they miss a 
payment, they are in court, in a short period of time they have 
a judgment to pay in 10 days, and they win the right to 
continue to pay rent. If they have a land contract, they get a 
longer period to redeem. If they pay off the land contract, 
they get ownership.
    So the problem is that many of the lease purchase 
agreements are written in a way that the person is called a 
tenant, they are treated as a tenant, but everything in the 
agreement reeks of land contracts.
    Chairman Green. Would it be beneficial, Mr. Phillips, to 
have lease-to-purchase contracts, land contracts, contracts for 
deed, all of them to be identified as a single entity, such 
that clever people won't be able to call it something else in 
an effort to get around the law? Would it be helpful to have 
all of these things identified in a such a way?
    Mr. Phillips. And the criteria for them, yes.
    Chairman Green. Yes.
    Mr. Phillips. I think it absolutely would be.
    Chairman Green. And let's move to the bidding. It is my 
understanding, from the testimony, that the owner is prohibited 
from bidding on the property. Is that correct?
    Mr. Phillips. They can bid at the September auction where 
all the taxes have to be paid, but other than that, they cannot 
bid.
    Chairman Green. They cannot bid. Would it be appropriate to 
have the owner given the opportunity to have the right to 
purchase the property at the bid price, and if not, then the 
person who actually prevails with the bid can purchase the 
property at that price? Are you following me?
    Mr. Phillips. Yes, and that would be very helpful for 
persons who did not owe a lot of taxes. The practical problem 
at that point, by September, is that very often, low-income 
people don't have $3,000, $4,000, or $5,000 in their pocket. 
But for those amounts, those are the kinds of ones that we try 
to buy--have the City intervene on in July and August.
    Chairman Green. This would be somewhat of a last-chance 
opportunity for an owner to continue to have ownership of the 
property?
    I read one case where a person's home was taken at an 
auction for $500. Attorney Fluker, you mentioned $1. If that is 
the bid price, and the owner has paid thousands of dollars to 
purchase, giving the owner that one last opportunity to 
purchase the home now for the $500, or, in your case, the $1 
purchase price, it seems to me that might be beneficial, if the 
law allowed that.
    Your thoughts, Ms. Fluker?
    Ms. Fluker. I think it would be beneficial to permit the 
owner to purchase at the bid price before the bid price is 
finalized. I think that owner should have every opportunity to 
retain home ownership, particularly in light of the owner's 
process, the excess not just taxes but the excessive interest 
and fees. So many times--you know, you can start off with a 
basic bill. Okay, yes, $500--let's use a hypothetical--but at 
25 percent interest, it doesn't take long for that to spiral 
out of control, particularly if you are working with limited 
means.
    So, if they have an opportunity at that bid to be able to 
almost go back to square one for that last chance, I do believe 
that would be helpful, for sure.
    Chairman Green. Thank you. Ms. Mason, a quick question for 
you, please. I have another Member here and will be yielding to 
her in just a moment. But do you recall what the bid price was 
for your property?
    Ms. Mason. I don't know how much it started off at, but it 
did sell for like $44,000 to $46,000.
    Chairman Green. That is what your home ultimately sold for?
    Ms. Mason. Yes.
    Chairman Green. But you don't know what it was purchased 
for at auction?
    Ms. Mason. $44,000 to $46,000.
    Chairman Green. Okay.
    Ms. Mason. I think.
    Chairman Green. We will now have a final round, without 
objection, and we will start with the Member who is here, 
Congresswoman Lawrence of Michigan, and we welcome you.
    Mrs. Lawrence. Thank you.
    Chairman Green. We are grateful that you were able to make 
it. We didn't know that you were coming. And Congresswoman, you 
hail from the 14th Congressional District?
    Mrs. Lawrence. Yes.
    Chairman Green. All right. You are recognized for 5 
minutes.
    Mrs. Lawrence. I want to thank the chairman and my esteemed 
colleague, Congresswoman Tlaib, from the neighboring 13th 
District, for convening this important hearing. Minorities have 
always faced historic patterns of discrimination when it comes 
to home ownership, and if you look at the numbers on a national 
level, the number of minorities, African Americans, home 
ownership is dropping in America.
    Black, Hispanic, and Asian households face neighborhood 
segregation, and in 2008, the financial crisis devastated 
homeowners all across this country, but it significantly 
decimated the Black community, where home ownership is a larger 
part of the overall wealth in our communities.
    I have a question, and this is going to those of you who 
have the opportunity to provide loans. Can you describe what 
funds--Federal, State, local, or private--your organization 
relies on to fight discrimination in housing, and to have 
affordable and adequate housing? I need to know, as I sit on 
the Appropriations Committee, and so my job is funding. I want 
to know what funds you are relying upon to help us in this 
fight?
    Mr. Phillips. Well, we have developed a very small pool of 
money that we have built up over the years. We started buying 
properties about 10 years ago. As I mentioned earlier, we have 
bought, I think it is 3,500 properties to date.
    Mrs. Lawrence. Is that private funds?
    Mr. Phillips. It is private funding.
    Mrs. Lawrence. Do you get any Federal, State--
    Mr. Phillips. There is no Federal funding in that 
particular--that was mostly foundation funds, the United Way. 
More recently, the Quicken Community Loan Fund has been a huge 
participant in that. And what we have done is we have provided 
loans to people that they pay back, and then we use that money 
the following year to help people purchase homes.
    Mrs. Lawrence. If I could, is there anyone on this panel 
who knows that they can use Federal dollars to fight 
discrimination or to help in housing for people in poor and 
underrepresented communities? I am getting a ``no.''
    So, this is a very powerful statement to say. Yes, did you 
have a statement?
    Ms. Atuahene. Are you talking about the Fair Housing Act, 
money through the Fair Housing Act?
    Mrs. Lawrence. Yes.
    Ms. Atuahene. Okay.
    Mrs. Lawrence. So tell me about that. What are you getting 
and how is it being used?
    Ms. Atuahene. No.
    Mrs. Lawrence. You don't get any?
    Ms. Atuahene. No.
    Mr. Phillips. I think the Detroit Fair Housing Center would 
be who would get that, and none of us are directly connected to 
them.
    Mrs. Lawrence. Why aren't you connected?
    Mr. Phillips. We work with them, but we are not--our 
division of labor is that generally we represent tenants and 
others facing eviction and they will handle discrimination 
cases.
    Mr. Hernandez. Our organization does receive counseling 
funding through HUD.
    Mrs. Lawrence. Counseling funding?
    Mr. Hernandez. Yes, but it's wholly inadequate. And there 
is now a certification requirement. They have expanded the 
requirements to provide counseling. It is very comprehensive. 
Everyone has to be licensed by August 1st of next year, and 
pass that exam. But the funding is wholly inadequate. I think 
the funding we received last year to provide that, and that 
includes Fair Housing, was $40,000, and we have counseled 300 
people and produced at least 125 homebuyers. And so, we have 
had to supplement that with just lots of fundraising.
    Mrs. Lawrence. This will go into my next question. How can 
the Federal Government do a better job of supporting the 
expansion of affordable housing? Ms. Mason, I understand you 
were a victim. What can the Federal Government--what would you 
recommend we do better? Do you have any recommendations?
    Yes, sir?
    Mr. Phillips. With $47 million appropriated to HUD for 
housing counseling nationwide, and I think Michigan's cut was 
$3 million, and $2 million of that went to one organization 
that is a nationwide organization, it is just not enough. There 
are hundreds, literally hundreds, and probably thousands of 
prospective homebuyers in Detroit who could receive credit-
building counseling, and in 6 to 12 months could be eligible to 
buy a home versus rent, which is what they are doing now, 
because the rental rates typically are higher than what they 
can do if they bought, if they only knew and understood the 
process.
    Mrs. Lawrence. Right.
    Mr. Phillips. Plus, there are hardest-hit funds still out 
there with Michigan, and there is no reason why there shouldn't 
be others. And their limitations on that are ridiculous. The 
fact that you can use the funds to tear down homes, to 
eliminate blight, but you can't use the same damn funds to help 
people stay in their home to prevent blight is ridiculous.
    Mrs. Lawrence. I agree.
    Ms. Atuahene. And I would just say, we really do need--you 
are asking what Congress can do, what you all can do, and I 
said it before and I will say it again. We really do need a 
congressional investigation into this abusive property tax 
administration that is happening not only in Detroit but most 
other Black cities in America. So we really need, as a first 
step, a congressional investigation, and then from that 
investigation is where we can answer your question as to where 
exactly the Federal Government can plug in. But as a first 
matter, order of business, is we need an investigation.
    And I just want to also thank Representative Tlaib who has 
been fighting this fight way before she got into Congress, on 
the property tax foreclosure, fighting with us here in Detroit. 
And thank you so much for bringing Congress here and lifting up 
this issue. But that is exactly what we need from you all, is 
an investigation.
    Mrs. Lawrence. Thank you. I yield back my time.
    Chairman Green. Thank you very much. We will now hear from 
Congresswoman Tlaib for a final 5 minutes.
    Ms. Tlaib. Thank you so much. Mr. Hernandez, we talked 
about the CRA, and I have been really a big critic of just not 
feeling like the enforcement is there. You called it teeth, but 
it is enforcement, and they do skim through it, and they get--
and for folks to know, the Community Reinvestment Act was all 
about forcing the banks to do what they were supposed to do, 
which is to help low- and moderate-income communities.
    The loophole I see now, especially in Wayne County, is they 
are making mortgage loans in low- and moderate-income 
communities, but they are not minority communities, communities 
of color. So the majority of loans are still going to white 
families who are moving into Detroit versus Black families, and 
they are getting credit for that, which wasn't really the true 
intent of the Community Reinvestment Act. It was to 
desegregate. It was to force banks to open up branches in 
communities that lacked access to financial stability and 
access.
    And so in there, what is it--and we talked about this--but 
Hector, what would go wrong if we said it can't be based on 
geography, that it has to be based on the makeup of the family 
who is applying for the mortgage?
    Mr. Hernandez. I think it should be both, and right now 
they are watering it down by taking a larger swath of the 
lending they are doing in certain areas and geographies, and 
not drilling down in specific communities, and then the 
ethnicity, demographics of that bower. That is how they get 
around it right now, and I think we need to strengthen it.
    I also think we need to enhance it by asking or requiring 
your fintech financial institutions and your credit unions to 
also report on the data. I think they are both doing good work 
but you should level that playing field so we know who is 
lending what to whom.
    Ms. Tlaib. And one thing that we talked about--and this is 
for Ted--in regards to land contracts and so forth, you talked 
about the fact that most--I think it is only 4 percent of those 
who end up at 36th District Court have access to legal 
services, even though there were, what, 30,000 cases?
    Mr. Phillips. Right.
    Ms. Tlaib. And you said it would be really great to try to 
find support and funding towards expanding access to free legal 
support at the courts or at that level for specific things 
around land contracts and so forth.
    Where have you seen it done the best? Where have you seen 
for there to be that direct connect? Because I know, when my 
residents go down there, it is like speed dating, literally. 
No, really, it is. They lose their homes within minutes. They 
don't know what happened. They have no idea what exactly was 
going on.
    And, Ms. Fluker knows. She was my first boss chairman. I 
don't know if you know that. That is probably why I turned out 
the way I am.
    [laughter]
    It is all Vanessa's fault.
    But, Mr. Phillips, one of the things that--we talk about 
more money and sometimes I worry about that. I worry about 
throwing more money at something that is already broken. And so 
I am cautious about--when you mentioned it, of course, it is 
something that sounds great, but explain to me how that would 
really look like at the 36th District Court? Would it be 
extended more to organizations like yours? I think there is a 
culture there, because there are so many. We are talking about 
thousands of people who go through there, who lose their homes 
to all kinds of things--land contracts, tenants, you name it, 
it is happening there. If you could talk a little bit more 
about that.
    Mr. Phillips. Currently, there are essentially three 
organizations that provide legal representation: ours, which 
provides the most; Lake Shore Legal Aid, which is the federally 
funded legal services organization in this area, but they cover 
three counties, including Detroit, but three counties; and 
Michigan Legal Services. With our combined resources, we are 
able to do roughly 4 percent of the 30,000 that go through. 
There are 200 to 300 cases a day that are heard by three 
judges. We have the capacity to run a clinic at the court three 
mornings a week. Lake Shore does two other times.
    So, there are just not enough people there. We will very 
often have to cut off intake 15 minutes into getting there, 
because there are just not enough folks to do it. If we had the 
ability to have more, if those three organizations had the 
ability to have more attorneys, like New York and other places 
have had, that are moving to the right-to-counsel concept--
Philadelphia, and a few other places that have gone to that--
they are seeing a dramatic reduction in the number of evictions 
that not only impact land contract situations but people in 
subsidized housing that are massively losing their vouchers, 
losing their housing, becoming homeless because they are, in 
some ways, even more dire because their $50 a month rent--where 
do you go if you are paying $50 a month rent and you lose your 
voucher?
    So, there is a desperate need for more attorneys, but you 
are right, they have to be attorneys who are part of a system 
that works, and not just necessarily turning to the private bar 
or something like that, or allocating the funds to the court. I 
am not advocating allocating the funds to the court. The court 
has been supportive in terms of providing space and working 
cooperatively to let us be there, and that shouldn't be a big 
deal, but it is. There was a time that we couldn't even do 
that.
    But there is a desperate need for more bodies to represent 
people of all types, and certainly one of those types is people 
losing their homes.
    Chairman Green. Thank you. We will now hear from 
Congresswoman Garcia for a final 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and I wanted 
to go back to the call for an investigation, I believe you 
called it. You have said it now twice so I always think that 
the third one is the charm, so I think we are listening. We 
have heard you.
    I just want to be clear on what you think we need to do 
with that, because in your writings you note that unjust 
property tax administration was frequently used to dispossess 
African Americans of their land and other property during the 
Jim Crow era.
    Ms. Atuahene. That is right.
    Ms. Garcia of Texas. Do you believe that the administration 
in Detroit is operating in a similar fashion today? Is this 
just modern redlining? What is it you think we need to 
specifically look at, in terms of the structural challenges 
involved here?
    Ms. Atuahene. I think the investigation needs to look at 
the property tax administration practices in majority Black 
cities. That is basically what I am talking about.
    Ms. Garcia of Texas. In Detroit and major cities across 
America?
    Ms. Atuahene. Yes, cities with a substantial number of 
African Americans. Because, again, the empirical work is 
finding that it is these especially vulnerable communities of 
African Americans in urban areas who are being subjected to 
this abusive property tax administration.
    So I would suggest that the investigation start with the 
five most populated cities that have a significant population 
of African Americans, and look into it. Again, we would be more 
than happy to come provide the empirical evidence showing the 
racial disparities, and then starting there and unpacking it 
from there would be my suggestion.
    Ms. Garcia of Texas. What other areas do you think we need 
to look at?
    Ms. Atuahene. Besides abusive property tax administration?
    Ms. Garcia of Texs. Yes.
    Ms. Atuahene. Goodness gracious.
    Ms. Garcia of Texas. Well, the lending practices, I would 
suggest.
    Ms. Atuahene. The whole shebang, actually. Well, yes, 
lending practices have been talked about today. The 
availability of credit. The land contracts. Those people who 
only have access to land contracts versus mortgages and all of 
the disclosure and protections that go along with it would be 
the things I would suggest, so, the abusive property tax 
administration, access to credit, abusive land contract 
practices.
    Ms. Garcia of Texas. Ms. Fluker, do you have any additional 
specific items? I just want to make sure that we leave today on 
a more positive note of where are we going from here.
    Ms. Fluker. I definitely do. I think that we need to 
actually look at the whole judiciary with respect to this and 
how people are treated. As our Representative Tlaib said, you 
go down to the 36th District Court, you can have an attorney 
and they will just throw you under the bus. But if you are just 
there, even trying to ask a basic question, or whatever the 
case may be, you are not going to be--what should I say?--
treated as justly as you should.
    Ms. Garcia of Texas. But do you have meaningful due 
process? The very idea that Ms. Mason came home and found her 
door locked, with everything she owned, including the ashes 
that she had there, is just shocking to me. Is there not due 
process?
    Ms. Fluker. That is why I think it is something that should 
be investigated, because there is due process, in theory. We 
actually have a statutory anti-lockout statute here. But 
getting that enforced and actually being able to get people 
damages for what they have actually experienced is a whole 
other ball game, and the further you go up the food chain, as 
far as the economic status is concerned, versus mom-and-pop, 
versus investor, versus Fannie Mae, Freddie Mac, or the bank, 
determines the type of relief that you are going to get.
    Ms. Garcia of Texas. But did she have due process at the 
beginning, when she was first in arrears of her taxes?
    Ms. Fluker. I can't speak to that because I don't know if 
she got notices.
    Ms. Garcia of Texas. Ms. Mason, did you?
    Ms. Mason. No. I did not.
    Ms. Garcia of Texas. Did they give you a right to challenge 
the amount of taxes, the assessment, and to have a hearing 
before some administrative level before they took you to court?
    Ms. Mason. No. I didn't even get a notice to come to court.
    Ms. Garcia of Texas. You didn't even get a notice to come 
to court?
    Ms. Mason. No, ma'am.
    Ms. Garcia of Texas. So did you have a lawyer?
    Ms. Mason. No.
    Ms. Garcia of Texas. You didn't. Is there a Legal Aid 
office in town?
    Ms. Mason. Yes. I didn't even know that my house was--what 
the process was, of foreclosure. I came home--
    Ms. Garcia of Texas. And your door was locked?
    Ms. Mason. I came home from work, hoping to catch up on my 
taxes. I came home in the middle of the night and my key didn't 
fit, and it took me a couple of minutes to realize the reason 
why my key didn't fit. It was because my locks were changed.
    Ms. Garcia of Texas. Thank you. Mr. Chairman, if you will 
indulge me, I believe Mr. Phillips wanted to respond to part of 
this question, about this issue. I think it is important.
    Chairman Green. We will hear his response, and then--
    Ms. Garcia of Texas. Thank you, Mr. Chairman.
    Chairman Green. --just let me remind all of the Members, if 
I may, I have not had my 5 minutes, but we will have a one-
minute closing for each Member.
    Mr. Phillips. Just really quickly, these are tough cases, 
but if you don't even have an attorney to get off the ground 
level one, you are not going to go anywhere. I wish I had known 
Lauren back in that era, but there just aren't enough attorneys 
to deal with what needs to be done. I talk about 4 percent 
represented. Those are the cases coming to court. And then 
there are the lockouts and there are the utility shutoffs and 
everything else. So there just is a dearth of available 
attorneys to take these cases, and that is the start of it. It 
is not the end of it because there are problems with the 
courts, as well, but that is part of it.
    Ms. Garcia of Texas. But is there is a Legal Aid office in 
town?
    Mr. Phillips. I'm sorry?
    Ms. Garcia of Texas. Is there a Legal Aid office in town?
    Mr. Phillips. Yes, there is a Legal Aid office. There is 
our office dealing with housing issues. None of them have the 
capacity to do what needs to be done
    Ms. Garcia of Texas. Well, because that goes to funding for 
Legal Services. I wanted to get that on the record, because our 
colleague, Representative Lawrence, is here. She is an 
appropriator.
    Mr. Phillips. In that era, there was a different legal 
services organization funded, but yes, there was a legal 
services funded organization in Detroit then.
    Ms. Garcia of Texas. Thank you, Mr. Chairman. I yield back.
    Chairman Green. Thank you. I now yield myself 5 minutes.
    If you believe that discrimination in lending is taking 
place on the panel--this is not for the audience, please 
friends. I know that you have much that you would like to say, 
and I trust that you will believe that we have been generous in 
allowing people to ask question and getting answers. But this 
is for the witnesses only.
    If you believe that discrimination in lending is taking 
place currently here, in your area, will you kindly extend a 
hand into the air--discrimination in lending?
    [show of hands]
    Chairman Green. All right. Let the record reflect that all 
of the members of the panel, all of the witnesses, have 
indicated that they believe it is taking place.
    Now, if you are familiar with a process known as testing, 
where you test to determine whether or not discrimination is 
taking place, and you are on the panel--I can understand that 
some of you may not be, but if you are familiar with it, would 
you kindly extend a hand into the air?
    [show of hands]
    Chairman Green. Okay, good. The persons that I would 
expect, all but Ms. Mason. And Ms. Mason, I wouldn't expect you 
to know.
    Do you believe that testing would be an effective tool to 
determine whether this discrimination is taking place, as with 
testing you can acquire what is called empirical evidence of 
whether or not you are getting fair treatment when you apply 
for a loan?
    So if you believe that testing would be beneficial--and for 
the benefit of the audience, testing would allow maybe three 
persons to go in and apply for a loan. Perhaps two of them 
would be persons of African ancestry and one of another 
ancestry. And let them go in at or near the same time, and they 
would be equally qualified. Sometimes, the person who is of 
African ancestry may be more qualified than the one who is not. 
And then, let's see if the one gets the loan and the two are 
denied. That is called testing.
    If you think that this would be an efficacious tool to 
ascertain whether or not we, in fact, have invidious 
discrimination, would you kindly raise a hand? This is for 
members of the panel.
    [show of hands]
    Chairman Green. Okay. I see two persons did not. Mr. 
George, is it because you didn't quite understand the question 
or do you believe that testing would not be effective?
    Mr. George. I think I understand the question. I would just 
want to look at more evidence to provide a yes or no answer. I 
am not sure, off the top of my head.
    Chairman Green. Okay. Are you familiar with testing, Mr. 
George?
    Mr. George. Yes.
    Chairman Green. Okay.
    I am going to go to the professor.
    Ms. Atuahene. Chairman Green?
    Chairman Green. As briefly as you can now, Professor.
    Ms. Atuahene. I understand the question perfectly. I am an 
empirical researcher, and I don't believe we need testing 
because we have all the empirical evidence already. And I am 
going to say, quickly, in Detroit--
    Chairman Green. No, no, ma'am.
    Ms. Atuahene. --it is an 80 percent--
    Chairman Green. If you would--
    Ms. Atuahene. --Black City--
    Chairman Green. --if you would, Professor--
    Ms. Atuahene. --but 90 percent--
    Chairman Green. --Professor--
    Ms. Atuahene. --of the loans go to white people.
    Chairman Green. Professor, would you just respect the Chair 
for a moment, please?
    Ms. Atuahene. I'm sorry.
    Chairman Green. Thank you very much. Do you agree that the 
Chair has been very generous with his time? So let me just ask 
you this. Please, now, listen.
    What you are telling me is that you already know that it 
exists. But if I am to act on it, I have to have proof that I 
can use. Testing gives me the proof that I can use. Now I can 
say that I know it exists, intuitively. I can say that it 
exists because I see people being turned away. But when I have 
three people, equally qualified, and two are denied and one is 
not, that gives me some additional evidence.
    I am not saying to you that all of these other things can't 
be litigated, but if I have that evidence it seems that it 
would be beneficial.
    Now I am going to give you a minute to respond.
    Ms. Atuahene. I totally understand what you are saying, but 
what I am saying is we have even stronger evidence than this 
testing evidence, of this racial discrimination, that we 
already have stronger evidence than testing, is what I am 
saying.
    Chairman Green. Okay. Well, let me ask you this: Can we use 
the stronger evidence and not preclude the testing? Is there a 
reason that we should preclude it?
    Ms. Atuahene. No, we don't need to preclude it. But the 
point is we already have sufficient--if the testing came in 
addition, it wouldn't be harmful, but I want to make the point 
that we don't need the testing to move forward.
    Chairman Green. Okay. I believe you do, and I suggest that 
you move forward. Move forward with what you have, but for 
Congress, it may be wise for us to have a law that allows us to 
test, because it is not just your area that I am concerned 
about. I am a United States Congressman, and I care about every 
place in this country. Not every place has the empirical 
evidence. Are you with me?
    Ms. Atuahene. I am.
    Chairman Green. Thank you very much.
    All right, with that said, we will now have each Member 
accorded one additional minute to close, and, Members, we are 
running short on time, so if you would, try to adhere to the 
one-minute timeline. And we will start with Congresswoman 
Lawrence.
    Mrs. Lawrence. Again, I want to thank everyone for being 
here.
    I want you to know I serve on Government Oversight with my 
colleague here, but I also serve on Appropriations, and I serve 
on THUD, which is Transportation and Housing. And one of the 
things we have put into the appropriations for this next 
Congress is funding for programs for disadvantaged homeowners 
and renters. So I hear, clearly, there needs to be an 
investigation in either Oversight or in THUD, on discrimination 
in multiple places, because what we are hearing here we hear in 
Baltimore, we hear it in Seattle, we hear it in all these 
places where normally there are large groups of minorities and 
poorer populations, and it is changing.
    The other thing is that when we allocate funds, we have the 
oversight ability to ensure they are doing what they are 
supposed to do, and what I heard today is that while we put 
funding out for counseling, it is not doing what it needs to be 
done.
    I know for a fact that if you do not know your rights, you 
can't demand them. And so that is a place that I feel, from the 
short time I have been here, that we need to do a better job 
mandating, before you take house from anyone, that they have 
been given the proper notification and knowledge of their 
rights.
    Thank you so much.
    Chairman Green. Congresswoman Tlaib?
    Ms. Tlaib. Thank you so much, and again, I want to uplift 
the phenomenal team, the House Financial Services Committee's 
Oversight Subcommittee staff. Thank you so much for working 
with my staff here on the ground. I also want to uplift 
Detroit's People's Platform, who gave us an incredible tour 
this morning. I think it really made a profound impact on a lot 
of my colleagues to understand the sense of urgency that we 
have.
    This is happening across our country and across the nation, 
but I think many of us know that we feel like we are at the 
front lines of how bad it got and how much work we still have.
    I really appreciate the fact that I am hearing, over and 
over again--and I agree, I think even Chairwoman Waters has 
said the Community Reinvestment Act needs to be looked at and 
it needs to be enforced.
    I also agree that there needs to be more dollars towards 
housing counseling services, and we have to look at that.
    I also agree that we have to really look at this definition 
of rent-to-buy and really lock down some protections for folks 
who are now entering into land contracts.
    I really do appreciate the insight on what is happening in 
the courts and the fact that only 4 percent of over 30,000 
cases going in--I can't imagine what it is across the State--
that don't have legal representation when they get there. Even 
me, as an attorney, I will always be seeking out a Vanessa 
Fluker in my community to try to get me representation if I was 
facing that.
    The tax assessment in our State, that is something that I 
don't care if you are from Detroit or across any other part of 
Wayne County, have felt the burden of the fact that our homes 
were not assessed properly. And so we want to uplift, I think, 
Professor, thank you for bringing that lawsuit forward. I know 
we still have a lot of work to do in regards to that, in at 
least getting people some support.
    I also, lastly, want to uplift those who talked about 
reparations. I think that is really important. This is just one 
element that recently happened in our decade, but we knew 
decades before that, that reparations is something that was 
caused by structuralism, needed because of structural racism 
that continues, of some of the sins of our country. And I think 
this was proof that we still have some really deep-rooted 
racism within our policy that does not lean towards people who 
look like us, that helps people like us but also mostly hurts 
people like us.
    So I want to thank you again, Chairman Green, and thank you 
so much, you and Congresswoman Sylvia Garcia, for taking the 
time. They were there at 7:00 in the morning, and toured with 
us all throughout Detroit and Highland Park, and I want to 
thank them so much for that. And thank you to the community 
organizations who helped put this together.
    Thank you.
    Chairman Green. Thank you. Congresswoman Garcia, you are 
recognized for one minute.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and I, too, 
want to join with Representative Lawrence and Representative 
Tlaib's remarks. I think they pretty much have stated what has 
happened here today, and under your leadership, thank you for 
having us here and making sure that we were here to listen, and 
now perhaps working together, develop some solutions for this 
area.
    I just wanted to underscore the points of due process, 
which are really very important. Perhaps it is because I am an 
old Legal Aid lawyer at heart, and I just cannot believe that 
someone could just come home and be locked out of their own 
home, and can't turn the key. So I think we should really 
address some of those issues, particularly when it comes to any 
more of these remaining Fannie Mae and Freddie Mac, which 
obviously would be under our jurisdiction.
    And to the professor, I heard you loud and clear: 
investigation. You have given us somewhat of a road map, and I 
think we will have to pick up from there and see how we can get 
that done.
    So, thank you again to all the panel for being here, and 
thank you, Detroit, for your hospitality, and for a great tour. 
And I love my little box of chocolates. Thank you all very 
much.
    Chairman Green. This is going to conclude our hearing. I am 
appreciative for many reasons. First of all, I had an 
opportunity to see what I have heard others talk about, and it 
was important for me to see it, because when I go back to 
Congress I can tell my colleague what I have seen in Detroit.
    I am also appreciative because we have had some outstanding 
witnesses give us testimony that we will be able to use when we 
have future hearings. This won't be the last hearing on this 
issue. It is the first field hearing that we are having, and we 
are having it here in your City, but it won't be the last.
    And I want you to know that the Members of Congress have 
not forgotten Detroit. You are not alone. We are going to do 
what we can to be of service to you. And that includes Members 
who are not at this table. We represent some Members who would 
dearly like to be here, but their schedules did not permit it.
    So, I am grateful that you are here, I am grateful to the 
staff, the committee staff, as well as our very own staff. Each 
Member has a staff and we are grateful to them for helping us 
to acquire all of this intelligence today.
    And we will be leaving, but I want you to know that we will 
not be leaving you behind when we leave. With this said, the 
witnesses are greatly appreciated. Your testimony today has 
helped to advance the important work of the Subcommittee on 
Oversight and Investigations.
    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.
    Without objection, the hearing is now adjourned.
    [Whereupon, at 1:59 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             August 2, 2019
                             

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