    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                          HOW INVIDIOUS DISCRIMINATION

                        WORKS AND HURTS: AN EXAMINATION

                         OF LENDING DISCRIMINATION AND

                         ITS LONG-TERM ECONOMIC IMPACTS

                             ON BORROWERS OF COLOR

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

                                VIRTUAL HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON OVERSIGHT
                               AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 24, 2021

                                   __________

           Printed for the use of the Committee on Financial Services

                                Serial No. 117-5

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                ______

                   U.S. GOVERNMENT PUBLISHING OFFICE
     43-992 PDF            WASHINGTON : 2021

                     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             FRANK D. LUCAS, Oklahoma
    GREGORY W. MEEKS, New York           BILL POSEY, Florida
    DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
    AL GREEN, Texas                      BILL HUIZENGA, Michigan
    EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
    ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
    JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
    BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
    JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
    JUAN VARGAS, California              TOM EMMER, Minnesota
    JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
    VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
    AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
    MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
    CINDY AXNE, Iowa                     TED BUDD, North Carolina
    SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
    AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
    RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
    STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
    ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
    RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
    MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
    ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
    JESUS ``CHUY'' GARCIA, Illinois
    SYLVIA GARCIA, Texas
    NIKEMA WILLIAMS, Georgia
    JAKE AUCHINCLOSS, Massachusetts

                       Charla Ouertatani, Staff Director
                  Subcommittee on Oversight and Investigations

                            AL GREEN, Texas Chairman

    EMANUEL CLEAVER, Missouri            ANDY BARR, Kentucky, Ranking
    ALMA ADAMS, North Carolina               Member
    RASHIDA TLAIB, Michigan              BARRY LOUDERMILK, Georgia
    JESUS ``CHUY'' GARCIA, Illinois      ALEXANDER X. MOONEY, West Virginia
    SYLVIA GARCIA, Texas                 DAVID KUSTOFF, Tennessee
    NIKEMA WILLIAMS, Georgia             WILLIAM TIMMONS, South Carolina,
                                             Vice Ranking Member

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        February 24, 2021............................................     1
    Appendix:
        February 24, 2021............................................    31

                                   WITNESSES
                          Wednesday, February 24, 2021

    Cooper, Cheryl R., Analyst, Financial Economics Division,
      Congressional Research Service.................................    12
    Darity, William, Jr., Professor of Public Policy, African and
      African-American Studies, and Economics, Duke University; and
      Director, Samuel DuBois Cook Center on Social Equity...........     5
    Espinoza, Frances, Executive Director, North Texas Fair Housing
      Center.........................................................    10
    Perry, Andre M., Senior Fellow, Metropolitan Policy Program, the
      Brookings Institution..........................................     9
    Rice, Lisa, President and CEO, National Fair Housing Alliance
      (NFHA).........................................................     7

                                    APPENDIX

    Prepared statements:
        Cooper, Cheryl R.............................................    32
        Darity, William, Jr..........................................    44
        Espinoza, Frances............................................    50
        Perry, Andre M...............................................    52
        Rice, Lisa...................................................    60

                  Additional Material Submitted for the Record

    Green, Hon. Al:
        Written statement of the Appraisal Institute.................    77
        Written statement of Engine..................................    79
        ``Financial Resilience Challenges During the Pandemic,''
          Federal Reserve Bank of Atlanta............................   112
        ``Mortgage Prepayment, Race, and Monetary Policy,'' Federal
          Reserve Bank of Boston.....................................   115
        GAO study, ``Fair Lending, Access, and Retirement Security...   196

                          HOW INVIDIOUS DISCRIMINATION

                        WORKS AND HURTS: AN EXAMINATION

                         OF LENDING DISCRIMINATION AND

                         ITS LONG-TERM ECONOMIC IMPACTS

                             ON BORROWERS OF COLOR

                                  ----------

                          Wednesday, February 24, 2021

                 U.S. House of Representatives,
                              Subcommittee on Oversight
                                    and Investigations,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 3:05 p.m., via
    Webex, Hon. Al Green [chairman of the subcommittee] presiding.
        Members present: Representatives Green, Cleaver, Adams,
    Tlaib, Garcia of Illinois, Williams of Georgia; Barr,
    Loudermilk, Mooney, and Taylor.
        Ex officio present: Representative Waters.
        Chairman Green. The Oversight and Investigations
    Subcommittee will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time. Also, without
    objection, members of the full Financial Services Committee who
    are not members of this subcommittee are authorized to
    participate in today's hearing.
        As a reminder, I ask all Members to keep themselves muted
    when they are not being recognized by the Chair to minimize
    disturbances while Members are asking questions of our
    witnesses. The staff has been instructed not to mute Members,
    except when a Member is not being recognized by the Chair and
    there is inadvertent background noise.
        Members are also reminded that all House rules relating to
    order and decorum apply to this remote hearing. And Members may
    only participate in only one remote proceeding at a time. If
    you are participating today, please keep your camera on, and if
    you choose to attend a different remote proceeding, please turn
    your camera off.
        If Members wish to be recognized during the hearing, please
    identify yourself by name to facilitate recognition by the
    Chair.
        The title of today's hearing is, ``How Invidious
    Discrimination Works and Hurts: An Examination of Lending
    Discrimination and Its Long-Term Economic Impacts on Borrowers
    of Color.''
        We will now move to opening statements, and, in so doing, I
    will recognize myself for 4 minutes for an opening statement,
    with the understanding that the Chair of the Full Committee,
    Chairwoman Waters, will be present at some point, and will
    receive 1 minute of the additional time that we have for
    opening statements.
        Friends, lie on a mortgage application to secure a loan,
    and you are likely to get caught and criminally prosecuted for
    mortgage fraud, with jail time as a consequence. Lie as a loan
    originator to deny a loan to a person of color, and you are not
    likely to get caught, and if you do get caught, a civil
    monetary fine is likely the consequence, and little more than
    the cost of doing business.
        H.R. 166, the Fair Lending for All Act, provides the best
    tool available--testing--to catch, prosecute, and deter these
    predatory criminal lenders.
        First, H.R. 166 would provide critical tools for detecting,
    ending, and sanctioning discrimination that would otherwise go
    undetected. It would deter the predatory lending that
    perpetuates race-based differences in wealth, asset
    accumulations, income, and financial security.
        There is no enforcement tool--some things bear repeating--
    there is no enforcement tool with the utility of matched-pair
    testing. This is why H.R. 166 creates a dedicated Federal
    office within the Consumer Financial Protection Bureau (CFPB),
    which would be charged with conducting such testing.
        Second, H.R. 166 would expand the Equal Credit Opportunity
    Act's (ECOA's) terms to expressly prohibit lending
    discrimination against LGBTQ+ persons.
        Finally, H.R. 166 would establish criminal penalties for
    lenders and lending officials who engage in knowing and willful
    discrimination in violation of ECOA.
        This concludes my opening statement.
        At this time, without objection, I would like to place in
    the record the following documents: a GAO report dated February
    24, 2021; a document styled, ``Financial Resilience Challenges
    During the Pandemic,'' which is an article from the Atlanta
    Federal Reserve Bank examining the history of discriminatory
    policies that leave many Black and Hispanic households less
    resilient in the face of economic shock caused by the pandemic;
    and a document styled, ``Mortgage Prepayment, Race, and
    Monetary Policy,'' a working paper from the Boston Federal
    Reserve Bank which finds that Black and Hispanic borrowers pay
    more than 50-basis-points-higher interest rates than White
    borrowers in a large representative sample of loans insured by
    Fannie Mae and Freddie Mac.
        Without objection, it is so ordered.
        Having made my opening statement, it is now my honor to
    yield to the ranking member of the subcommittee, Mr. Barr, for
    5 minutes for his opening statement.
        Mr. Barr. Thank you, Mr. Chairman. I appreciate you
    yielding, and I appreciate you holding today's hearing.
        Thank you also to our witnesses for appearing today.
        Discrimination in lending and other financial services is
    wrong, it is illegal, and it should not be tolerated. There is
    no room for compromise on that point.
        While discrimination is illegal, that does not mean that
    there are not large pockets of the population who continue to
    be left behind by our banking system. It is important that we
    review and address those problems holistically. Our discussion
    on the economic impacts of inequities in the financial system
    should extend to all unbanked and underbanked groups.
        Economic recovery is well under way in the wake of the
    COVID pandemic. Unfortunately, many Americans continue to
    struggle financially. The pandemic has exposed and exacerbated
    certain weaknesses in our financial system, highlighting how
    large portions of the population still have trouble accessing
    credit. Every American should have equal access to our
    financial system regardless of their race or gender, whether
    they live in urban or in rural America, or any other factor.
        One area of particular concern to me is the access to
    capital and other financial services in rural areas. According
    to a recent FDIC study, people in rural areas are more likely
    than their urban and suburban counterparts to visit a bank
    branch in person to do their banking. Unfortunately, the number
    of bank branches across the country continues to decrease, and
    the pace of de novo bank formation has slowed significantly
    compared to pre-financial crisis levels.
        As there has been a movement towards online banking, we
    know the challenges that rural Americans face with respect to
    rural broadband, and that is another impediment.
        There were 181 de novo charters granted in 2007, but
    between 2010 and 2019, an average of fewer than 10 new banks
    opened per year. A recent Federal Reserve study shows that 51
    percent of the 3,114 counties in the United States saw net
    declines in the number of bank branches between 2012 and 2017.
    These declines in bank branches disproportionately hit rural
    communities. A total of 794 rural counties lost a combined
    1,553 bank branches over the 5-year period, a 14-percent
    decline.
        The negative financial impacts on rural counties of branch
    closures are perpetuated by the continuing difficulties due to
    burdensome regulations and other roadblocks of de novo
    community bank formation.
        The Federal Reserve report identified 44 counties
    considered deeply affected by trends in bank closures and
    consolidation, which it defines as counties that had 10 or
    fewer branches in 2012, and lost at least 50 percent of those
    branches by 2017. Eighty-nine percent of the deeply affected
    counties are rural counties, including Nicholas County in my
    district, and counties in the districts of several of my
    colleagues.
        The current framework of Federal, State, and local laws
    prohibits discrimination of any kind in lending. Financial
    regulators have developed robust tools to ensure that regulated
    firms play by those rules. To the extent that firms are failing
    to comply with those rules, or that additional statutory
    authority is needed to combat discrimination, we must act.
        However, we must also be cautious about imposing additional
    restrictions and regulations on lenders that do not accomplish
    a specific goal, and monitor potential impacts of our actions
    on the widespread availability of financing to creditworthy
    borrowers.
        Emerging technology has allowed people previously outside
    the banking system to access financial services and has
    enhanced lenders' ability to tailor their products to the
    specific characteristics of the borrower based on race-blind
    metrics. Meaningful restrictions on risk-based pricing will do
    more harm than good, as creditworthy borrowers pay more for the
    capital they need.
        Promoting across-the-board financial inclusion should be a
    top bipartisan priority for this subcommittee. I appreciate the
    opportunity to discuss ways to ensure that more people,
    including those currently underserved in the market, have easy,
    fair, and safe access to financial services.
        I look forward to working with Chairman Green to ensure
    that discrimination does not occur in lending, and to promote
    policies that expand access to credit and lead to long-term
    economic growth. And, again, the warning is to not do away with
    risk-based pricing, which I think would curtail and restrict
    access to credit for creditworthy borrowers.
        I look forward to hearing from our witnesses today, and I
    yield back the balance of my time.
        Chairman Green. Thank you, Mr. Ranking Member. I appreciate
    your commentary, and I look forward to working with you.
        I am told that the Chair of the Full Committee, Chairwoman
    Waters, has arrived, so I will now yield to Chairwoman Maxine
    Waters for 1 minute.
        Chairwoman Waters. Thank you so very much. Good afternoon,
    Chairman Green.
        The discriminatory lending practices of the 20th Century
    continue to affect minority communities long after they are
    repealed. The effects of decades of government-sanctioned
    discrimination continue to plague our housing and lending
    markets today, ultimately hindering the ability of households
    of color to build equity and accumulate wealth through
    homeownership relative to White households.
        Since home equity is the primary source of wealth for most
    families, disparities in homeownership and home equity are key
    drivers of the racial wealth gap. So, I look forward to hearing
    from our witnesses today about what we can do to remedy the
    continuing economic effects of discrimination.
        Thank you, and I yield back the balance of my time.
        Chairman Green. Thank you, Madam Chairwoman.
        Let me make an announcement, if I may. We will have
    additional votes, and the staff has indicated that we will make
    a great attempt to wait until the first vote has expired, or
    nearly expired. This way, we will be able to cast two votes and
    then come back to the hearing. My hope is that we will get this
    done as expeditiously as possible.
        Today, I would like to welcome each of our witnesses. And I
    am pleased to introduce this panel: William Darity, Jr.,
    professor of public policy, African and African-American
    studies, and economics at Duke University, as well as the
    director of the Samuel DuBois Cook Center on Social Equity;
    Lisa Rice, president and CEO of the National Fair Housing
    Alliance; Andre Perry, senior fellow at the Metropolitan Policy
    Program at the Brookings Institution; Frances Espinoza,
    executive director of the North Texas Fair Housing Center; and
    Cheryl Cooper, an analyst for the Financial Economics Division
    at the Congressional Research Service.
        Witnesses are reminded that your oral testimony will be
    limited to 5 minutes. You should be able to see a timer--and
    this timer should be on your screen--that will indicate how
    much time you have left, and a chime will go off at the end of
    your time. I would ask that you be mindful of the timer, and
    quickly wrap up your testimony if you hear the chime, so that
    we can be respectful of both the witnesses' and the committee
    members' time. And without objection, your written statements
    will be made a part of the record.
        Once the witnesses finish their testimony, each Member will
    have 5 minutes to ask questions. And may I remind Members to
    please get your questions and answers in within that 5-minute
    time period. Let me restate this differently; you should not,
    at the end of your 5 minutes, have multiple questions to be
    answered. Please be mindful of the time of other Members in
    trying to get your time in within the 5 minutes.
        Professor Darity, you are now recognized for 5 minutes to
    give an oral presentation of your testimony.

     STATEMENT OF WILLIAM DARITY, JR., PROFESSOR OF PUBLIC POLICY,
       AFRICAN AND AFRICAN-AMERICAN STUDIES, AND ECONOMICS, DUKE
     UNIVERSITY; AND DIRECTOR, SAMUEL DUBOIS COOK CENTER ON SOCIAL
                                 EQUITY

        Mr. Darity. Thank you, Chairman Green, Ranking Member Barr,
    and members of the subcommittee.
        Discrimination in access to credit and the terms of credit
    is an important barrier to Black wealth accumulation.
    Elimination of this barrier, albeit wholly desirable, will not
    eliminate the gaping chasm in wealth between Black and White
    Americans.
        The fundamental reason for Black-White differences in
    wealth is not high Black indebtedness. The fundamental reason
    is low Black asset holdings.
        A Prosperity Now study in 2019 reported that median Black
    household liabilities were $30,800, while the median White
    household liabilities were more than twice as large, at
    $73,800. However, White households had a median level of assets
    valued in excess of $260,000, in contrast with the median Black
    households' assets, valued at $55,900.
        The median Black household had 40 percent of the debt of
    the median White household but only 20 percent of the assets.
    Correspondingly, the ratio of assets to debts for Black
    households was 1.6, versus 2.8 for White households, both
    measured at the median.
        The magnitude of the racial wealth gap, driven
    predominantly by a racial difference in asset ownership, is
    staggering. The 2019 Survey of Consumer Finances indicates that
    the Black-White wealth gap at the median was $164,000, and at
    the mean, it was substantially larger, at $840,900.
        Assuming an average household size of 3 persons, the median
    gap per person was $52,500 and the mean gap was $280,000. These
    are conservative estimates of per-capita differentials because
    the average White household size is actually less than 3
    people.
        Many observers treat the median gap as the target for
    closing the racial wealth gap in the United States. In this
    context, it may be more appropriate to set the more demanding
    target at the mean.
        Wealth is so densely concentrated in the United States that
    90 percent of the wealth held by White Americans is in the
    possession of White households with a net worth above the White
    median. Close to 99 percent of White household wealth is held
    by those with a net worth above the national median,
    approximately $100,000. Twenty-five percent of White households
    have a net worth in excessive of $1 million, in contrast with
    only 4 percent of Black households.
        The limitations of an exclusive focus on debt reduction
    rather than asset building comes into stark relief when
    considering a policy of student loan relief. Whether one
    eliminates student debt by trying to erase the difference at
    the median or the mean, there will be at best an incremental
    effect on the racial wealth differential.
        The net reduction in the gap will be $1,856 after we adjust
    for the enrollment rates that are different between the two
    communities. And, therefore, the reduction amounts to only 3
    percent of the total median gap of $52,500. It amounts to less
    than 1 percent at the mean gap of $280,000.
        Indeed, the key to understanding the sources of the racial
    wealth gap is government policy that supported the
    underdevelopment of asset accumulation in the Black community.
        In January 1865, General William T. Sherman, after
    Secretary of War Edwin Stanton and he held a consultation with
    a group of Black leaders in Savannah, Georgia, issued Special
    Order No. 15. His directive assigned 5.3 million acres of land,
    stretching from the Sea Islands of South Carolina to the
    portion of northern Florida bordered by the St. Johns River, as
    a site for settlement and property for the newly emancipated.
        Here was an intended preliminary phase of a substantial
    land reform on behalf of the formerly enslaved that would have
    amounted to at least 40 million acres of land for the 4 million
    persons released from bondage.
        Ultimately, only 40,000 persons settled on 400,000 acres,
    but even that small allotment was lost by the end of the year.
    Andrew Johnson, Lincoln's successor, ended the land allocation
    program and restored the properties to the former slaveholders.
    The promise of 40-acre land grants remained unfulfilled.
        Simultaneously, the Federal Government, under the auspices
    of the Homestead Act of 1862, was distributing 160-acre tracts
    of lands to upwards of 1.5 million White families in the
    western territories. This huge asset-building policy resulted
    in benefits carrying over to a conservative estimate of 45
    million White living descendants of Homestead Act patents.
        The racial wealth gap in the United States originates with
    the failure to give the formerly enslaved 40 acres, while White
    Americans, including new immigrants, were given 160 acres of
    land.
        Conditions worsened with wave upon wave of White massacres
    that took place between the end of the Civil War and World War
    II. In the Red Summer of 1919, upwards of 35 White terrorist
    actions took place across the country in locations ranging from
    Chicago, Illinois; to Omaha, Nebraska; to Washington, D.C.; to
    Elaine, Arkansas.
        The most famous of these--
        Chairman Green. Professor, I am going to have to ask that
    you summarize quickly, please.
        Mr. Darity. Okay--took place in Tulsa, Oklahoma, in 1921.
        I would add that the destruction of Black property and the
    appropriation of Black property that was lost in that period of
    time was compounded by the policies in the 20th Century that
    discriminatorily provided support for asset building in the
    form of homeownership.
        Indeed, the effects of these disparities transmitted across
    generations resulted in the contemporary Black-White wealth
    gap. And the disproportionate growth in Black debt matters in
    explaining America's racial wealth gap, but the
    disproportionate deprivation of Black assets matters far more.
        By all means, we should take steps to make the credit
    market more racially equitable, but if our goal is to eliminate
    the Black-White difference in wealth, the focus must be placed
    on building Black assets to a level consistent with White asset
    ownership.
        [The prepared statement of Mr. Darity can be found on page
    44 of the appendix.]
        Chairman Green. Thank you, Professor.
        Ms. Rice, you are now recognized for 5 minutes to give your
    oral presentation.

       STATEMENT OF LISA RICE, PRESIDENT AND CEO, NATIONAL FAIR
                        HOUSING ALLIANCE (NFHA)

        Ms. Rice. Chairwoman Waters, Subcommittee Chair Green,
    Subcommittee Ranking Member Barr, and other members of the
    subcommittee, I want to first thank you for inviting me to talk
    about this really important issue.
        Housing and lending discrimination have been a part of the
    United States since its inception, and have helped create the
    racial wealth and homeownership gaps that Professor Darity has
    just spoken about.
        Due to government-sanctioned discriminatory policies as
    well as private-market practices, underserved groups have been
    systemically excluded from wealth-building opportunities such
    as homeownership.
        These groups still experience high levels of
    discrimination. There are over 4 million instances of housing
    discrimination each year. Redlining, which persists in various
    forms today, real estate sales discrimination, appraisal bias,
    lending discrimination, and tech bias are significant barriers
    that keep the dream of homeownership from becoming a reality
    for many people, and contribute to the racial wealth gap.
        Moreover, structural barriers, such as the dual credit
    market, segregation, and restrictive zoning ordinances, create
    systemic impediments which significantly prohibit the ability
    of people of color to access fair housing and fair lending
    opportunities and perpetuates the racial wealth and
    homeownership gaps.
        The segregation of people based on race, coupled with the
    segregation of resources, drives many of the disparities in
    health, education, wealth, and many other areas. And these
    structural barriers, these structural inequities are a reason
    that Blacks, Latinos, and Native Americans are contracting and
    dying from the COVID virus at disproportionately higher rates
    than their White counterparts.
        Segregation is also a driver of the racial homeownership
    gaps. The homeownership rate for Black Americans, for example,
    is where it was when the Fair Housing Act was passed in 1968.
    And the homeownership gap between Blacks and Whites is as wide
    today as it was in 1890.
        There are many ways that invidious discrimination harms
    communities. For example, many of the technologies used in the
    housing and financial services space are biased, and
    discriminate against consumers of color. Tenant screening
    selection tools, automated underwriting systems, credit scoring
    models, risk-based pricing systems, and digital marketing
    platforms all have discriminatory outcomes and lock people out
    of housing opportunities.
        Too many people experience discrimination when they seek to
    access housing and housing-related opportunities. Newsday
    recently completed an in-depth testing project on Long Island,
    New York, in which they found that 49 percent of African
    Americans, 39 percent of Hispanics, and 19 percent of Asian
    Americans experienced discrimination, including racial
    steering.
        Real estate discrimination can take on myriad forms, and
    our recent lawsuit against Redfin illustrates that: NFHA and
    nine of our member organizations conducted a comprehensive
    investigation of Redfin, one of the nation's largest real
    estate companies. The investigation uncovered disturbing
    practices that suggested really wide-scale discrimination and
    modern-day technology-based real estate redlining. The groups
    found that Redfin offered its best available service at
    significantly higher rates in extremely White communities, and
    offered no service for homes in communities of color at much
    greater rates than in predominantly White areas.
        Appraisal bias and lending discrimination are also still
    too common. Analysis of Home Mortgage Disclosure Act (HMDA)
    data revealed that communities of color are still being
    redlined by mainstream financial institutions.
        One way to overcome discrimination is to increase funds for
    testing programs. And the Supreme Court has stated that testing
    is one of the best mechanisms for ferreting out discrimination.
        This is why the National Fair Housing Alliance supports the
    Fair Lending for All Act, which would help address longstanding
    barriers to fair and equal credit by adding sexual orientation
    and gender identity protections to the Equal Credit Opportunity
    Act, but would also make it illegal to discriminate against
    people based on geographical location, and re-empower the
    Consumer Financial Protection Bureau (CFPB) to address fair-
    lending issues and to test for fair-lending violations.
        And I thank you.
        [The prepared statement of Ms. Rice can be found on page 60
    of the appendix.]
        Chairman Green. Thank you very much, Ms. Rice, for your
    testimony.
        Mr. Perry, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

    STATEMENT OF ANDRE M. PERRY, SENIOR FELLOW, METROPOLITAN POLICY
                   PROGRAM, THE BROOKINGS INSTITUTION

        Mr. Perry. Chairwoman Waters, Chairman Green, Ranking
    Member Barr, Vice Ranking Member Timmons, thank you for
    inviting me to testify today on this extremely important issue
    that affects millions of people across the country.
        ``We are here today because we are tired. We are tired of
    paying more for less.''
        Dr. Martin Luther King, Jr., said those words in 1966, to
    35,000 people in Chicago's Soldier Field, as part of the
    Chicago Freedom Movement, also known as the Chicago Open
    Housing Movement. Dr. King went on to relay housing price
    differences that resulted in Black people paying higher rents
    in Black-majority communities for worse housing than their
    White counterparts.
        ``Now is the time to make real the promises of democracy,''
    Dr. King declared. ``Now is the time to open the doors of
    opportunity to all of God's children.''
        More than half a century later, now is still the time.
    According to the most recent Census figures, the Black
    homeownership rate in America is 46 percent, almost the exact
    same level that it was when Dr. King spoke in 1966. This is
    compared to the White homeownership rate, which is roughly 74
    percent.
        Even as overall U.S. homeownership has grown over the last
    2 decades, there has been a catastrophic loss of homeownership
    in key cities that have large shares of Black residents.
        When people in Black neighborhoods do own homes, we accrue
    less wealth. Homeowners in disproportionately Black and Latino
    neighborhoods are gaining wealth at about half the speed of
    homeowners in predominantly White neighborhoods.
        One of the reasons is that these homes are devalued. In the
    2018 Brookings report, ``The Devaluation of Assets in Black
    Neighborhoods,'' Jonathan Rothwell, David Harshbarger, and I
    found that, even after accounting for structural
    characteristics such as square footage, age, and number of
    bedrooms, as well as neighborhood characteristics such as crime
    and school quality, homes in Black neighborhoods were valued,
    on average, $48,000 less than they would have been if the
    residents of the neighborhood were mostly White. That is a
    cumulative loss of $156 billion nationwide.
        And we witness viral news stories revealing how appraisers
    value Black and White homeowners differently. In Jacksonville,
    Florida, a mixed-race family looking to sell their home in a
    predominantly White neighborhood received an original appraisal
    of $330,000. After presenting a White owner, a second appraisal
    came in $135,000 higher.
        A similar incident occurred in Denver. Again, after the
    family removed indicators of Blackness, the home increased in
    value by $145,000. In San Francisco, a second appraisal
    increased its value by $500,000.
        ``We are here today because we are tired. We are tired of
    paying more for less.''
        These seemingly individual acts of racism are part and
    parcel of a structural problem. The housing market is
    structured to disproportionately exclude Black and Brown
    households.
        For instance, our zoning codes and building practices are
    streamlined to deliver large, single-family homes. My
    colleague, Tracy Loh, and I showed in a recent study that, for
    decades, the very largest houses--four or more bedrooms--have
    grown as a share of all housing inventory, while smaller homes,
    which are more affordable for low-wealth families, have
    stagnated or declined.
        Over 6 million Black and Brown millennials would be
    considered mortgage-ready if there were any attainable homes
    for sale in prime locations.
        Black buyers are subjected to racist steering practices
    when looking for a home. When applying for a loan, Black buyers
    are perceived as higher-risk, leading to more denials and
    higher interest rates.
        Devaluation limits the amount of gain from refinancing. As
    we have heard, bad appraisals also rob families of wealth.
        And all of these housing industry actors blame each other
    for the problem.
        ``We are here today because we are tired. We are tired of
    paying more for less.''
        We made individual racism in the housing market illegal,
    and when it finds its way back in, we make a headline. But
    structural racism rigs the game from the start. The root cause
    for these negative trends is structural racism, which is
    systemic. To unlock the potential of Black neighborhoods and
    their residents, systemic racism must be pulled at its roots,
    rather than trimmed neatly, only to grow again.
        Thank you for my time.
        [The prepared statement of Mr. Perry can be found on page
    52 of the appendix.]
        Chairman Green. Thank you, Mr. Perry.
        Ms. Espinoza, you are now recognized for 5 minutes to give
    an oral presentation of your testimony.

    STATEMENT OF FRANCES ESPINOZA, EXECUTIVE DIRECTOR, NORTH TEXAS
                          FAIR HOUSING CENTER

        Ms. Espinoza. Thank you, Chairman Green, Ranking Member
    Barr, and subcommittee members.
        The North Texas Fair Housing Center is a nonprofit
    organization that provides fair-housing services to residents
    of north Texas. Our services consist of fair-housing
    counseling, intake, and investigation of housing discrimination
    complaints, and fair-housing education.
        It has been 50 years since the Federal Fair Housing Act
    banned racial discrimination in lending, yet African-American
    and Latino applicants continue to be routinely denied
    conventional mortgage loans at rates far higher than their
    White counterparts.
        In 2011, the North Texas Fair Housing Center did an
    analysis of Home Mortgage Disclosure Act data and found that
    African-American and Latino mortgage applicants were denied
    conventional mortgages at much higher rates than Whites in the
    Dallas-Fort Worth market.
        For example, African-American mortgage applicants to Wells
    Fargo Bank were 57 percent less likely to get a home purchase
    loan when compared to White applicants. Latino mortgage
    applicants to Chase Bank were 64 percent less likely to get a
    loan than were White applicants. Home Mortgage Disclosure Act
    data from 2015 and 2016 confirmed the same pattern.
        One of the most valuable tools we use to investigate
    housing discrimination is testing. Testing allows us to compare
    how applicants of color are treated as compared to their White
    counterparts.
        As part of our enforcement program, we use the results of
    testing as evidence in housing discrimination complaints. We
    file both administrative complaints with the U.S. Department of
    Housing and Urban Development and lawsuits in Federal court.
        The most common form of testing we do is rental testing. In
    2011, we conducted rental testing which showed that African
    Americans who were otherwise qualified encountered
    discrimination in 37 percent of their housing searches. This
    means that African Americans face discrimination in two out of
    every five housing searches.
        The testing also showed that Latinos experienced
    discrimination in 33 percent of their housing searches, or at
    least once in every three housing searches.
        In our most recent enforcement initiative in 2019, we
    conducted tests to measure how veterans with Housing Choice
    Vouchers were treated in the housing market in Dallas, Texas.
    We conducted a total of 35 tests, and the results of 32 of them
    showed evidence of discrimination. We filed housing
    discrimination administrative complaints for all 32 tests.
        The next most common form of testing that we do is sales
    testing. These tests measure how real estate agents treat
    buyers of color as compared to their White counterparts. In
    2018, we conducted sales tests which showed that African-
    American testers are still being steered, based on their race,
    to neighborhoods that are predominantly African-American and
    steered away from neighborhoods that are majority-White.
        Unlike rental and sales testing, mortgage lending testing
    is very resource-intensive. One of the challenges is the
    significant amount of time that testers must devote to each
    test. Unlike rental tests, which can be completed rather
    quickly, lending interviews involve several complex financial
    components, even at the pre-application stage. Testers must
    also be knowledgeable about the entire lending process.
        Rental, sales, and lending testing can all be used to
    uncover practices that lead to segregation of neighborhoods.
    However, there is a particular need to devote resources to
    lending testing because it is so resource-intensive.
        There is also a need for enforcement of complaints based on
    lending testing evidence. Because lending testing cases are
    more complex, they sometimes languish in the administrative
    process. There is a need for a strong entity with an expertise
    in lending discrimination that can take the testing evidence
    generated by local fair-housing organizations and move forward
    with enforcement that will thwart illegal practices.
        Thank you for inviting me. My statement is complete.
        [The prepared statement of Ms. Espinoza can be found on
    page 50 of the appendix.]
        Chairman Green. Thank you very much, Ms. Espinoza.
        Ms. Cooper, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

      STATEMENT OF CHERYL R. COOPER, ANALYST, FINANCIAL ECONOMICS
                DIVISION, CONGRESSIONAL RESEARCH SERVICE

        Ms. Cooper. Chairman Green, Ranking Member Barr, and
    members of the subcommittee, thank you for the opportunity to
    testify today.
        My name is Cheryl Cooper, and I am an analyst in financial
    economics at the Congressional Research Service (CRS), focusing
    on consumer finance markets and policy issues. For those who
    might be unfamiliar with CRS, our role is to provide objective,
    nonpartisan research and analysis to Congress.
        Any arguments presented in my testimony are for the
    purposes of informing Congress and not to advocate for a
    particular policy outcome.
        My testimony today will focus on disparities in access to
    financial products and services, including racial, ethnic,
    income, age, and geographic disparities. In particular, I will
    focus on discussing disparities in access to banking services
    and disparities in inclusion in the credit reporting system.
    These areas are generally considered foundational for
    households to successfully manage their financial affairs and
    to graduate to wealth-building activities in the future, like
    homeownership.
        Consumers often rely on family or community connections to
    get their first bank account, establish a credit history, and
    gain access to affordable credit. However, research suggests
    that disparities in family wealth or in community relationships
    with financial institutions can potentially persist across
    generations.
        A factor that may be influencing racial disparities is the
    intergenerational effects of discrimination--for example,
    historical mortgage lending practices, redlining practices.
        Moreover, violations in fair-lending laws can cause harm to
    consumers who do not get access to financial services. This is
    important because safe and affordable financial services are an
    important tool for most American households to help them avoid
    financial hardship and build assets over the course of their
    lives.
        According to the FDIC's 2019 survey, over 5 percent of
    households in the United States were unbanked, meaning that
    these households did not have a bank account. In addition, over
    17 percent of households used a nonbank financial transaction
    service, like a money order, a check-cashing, or a bill payment
    service.
        These households are disproportionately of a racial or
    ethnic minority and tend to be lower-income, younger, and have
    less formal education. Urban and rural households are more
    likely to be unbanked, compared to suburban households.
        Unbanked households report that they do not have a bank
    account because they do not have enough money, they don't trust
    banks, they have privacy concerns, and they want to avoid high
    and unpredictable bank fees.
        These disparities in access are significant because some
    research suggests the importance of emergency savings and
    affordable payment transactions. Also, developing a
    relationship with a bank can sometimes lead to access to other
    financial products, helping young consumers develop a credit
    history.
        A limited credit history may serve as a barrier to
    achieving affordable credit, yet consumers also can't develop a
    credit history without access to credit products. This chicken-
    and-egg situation can make it difficult for some people to
    enter the credit reporting system.
        According to the CFPB, credit scores can't be generated for
    approximately 20 percent of the U.S. population due to their
    limited credit histories. Limited credit history is correlated
    with age, income, race, and ethnicity. Many of these consumers
    are young. For example, 40 percent of credit invisibles are
    under 25-years-old. These consumers are disproportionately
    Black or Latino and live in lower-income or rural
    neighborhoods.
        Most young adults transition into the credit reporting
    system in their early twenties. Young adults in lower-income
    and rural neighborhoods tend to make the transition to credit
    visibility at older ages than young adults in higher-income
    areas. And, notably, in lower-income communities, it is less
    common to enter the credit reporting system through what is
    called, ``piggybacking,'' or becoming a joint account holder or
    authorized user on another person's account, such as a parent's
    account.
        The disparities in inclusion to the credit reporting system
    are significant because it is generally a precursor to gain
    access to affordable credit and eventually to homeownership.
        Thank you for your time, and I am happy to answer any
    questions that you have.
        [The prepared statement of Ms. Cooper can be found on page
    32 of the appendix.]
        Chairman Green. Thank you very much, Ms. Cooper.
        The Chair will now recognize Members for questions.
        The gentleman from Missouri, Mr. Cleaver, who is also the
    Chair of our Subcommittee on Housing, Community Development,
    and Insurance, is now recognized for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman. I appreciate this
    opportunity. And I think this is exactly the kind of hearing
    that we need, so thank you.
        Where I would like to center my discussion, my questions,
    is on the fact that the current Federal public policies operate
    to perpetuate or expand the racial wealth gap.
        So, I would like to ask any of the panelists, are there
    Federal public policies that actually contribute to the
    exclusion of African Americans, Brown people, people of color?
    And what impact does it have on the wealth gap? I am talking
    about Federal policies.
        Mr. Perry. I will take a stab at that.
        One of the things I am noticing is that current legislation
    does not address wealth in this country. We measure almost
    everything by income. And by doing so, you essentially abdicate
    responsibilities of dealing with the structures that created
    the gaps in the first place. In many different systems--
    housing, education, and other areas--if you don't address the
    wealth gap, you essentially gloss over the problem.
        In addition, we also have a race and space problem. Because
    racist policies have followed Black people, we see
    discrimination in rural communities, in urban communities, in
    suburbs. And, for my take, it is hard to not have a race and
    place approach to change.
        And so, for me, it is not necessarily what the Federal
    Government is doing; it is what the Federal Government is not
    doing, not measuring, not testing. Because we have ample data
    that shows the impact of our policies, but what we have not
    done is really get at the reasons, the causes for these
    disparities.
        Mr. Cleaver. Yes. I think you are making a case for the
    increase of the minimum wage, and I think that is going to--
    that is a debate we are having right now.
        Ms. Rice. Congressman, if I can add to that, too, there are
    a lot of policies that perpetuate racial disparity. So, in
    terms of Federal policies: the recently promulgated cap rule
    that was promulgated by the Federal Housing Finance Agency; the
    GSE LLPA structure, the loan-level pricing adjustment
    structure, discriminates against communities of color; the
    current Affirmatively Furthering Fair Housing rule that was
    promulgated several months ago by the Department of Housing and
    Urban Development, which really eviscerates our civil rights
    rules; and the current Disparate Impact rule that was
    promulgated by the Department of Housing and Urban Development
    several months ago, which also eviscerates a major civil rights
    tool that we have for addressing discriminatory policies.
        So, there are many, many Federal policies that right now,
    work to perpetuate discriminatory outcomes.
        Mr. Cleaver. Thank you.
        I think my time is running down, so I appreciate both you
    and Mr. Perry for your comments. Thank you.
        Chairman Green. The gentleman yields back.
        The Chair now recognizes the ranking member of the
    subcommittee, Mr. Barr, for 5 minutes.
        Mr. Barr. Thank you, Mr. Chairman.
        Last year, I introduced H.R. 8410, the Promoting Access to
    Capital in Underbanked Communities Act, which is designed to
    spur de novo bank formation and promote banking services in
    underserved areas.
        The bill would ease the up-front burden of opening a bank,
    and provide incentives for banks to open and operate in rural
    areas. The bill is intended to address the problem of deeply
    affected counties that I referenced in my opening statement,
    which have lost a large portion of their bank branches.
        Ms. Cooper, how have bank closures in rural communities
    impacted customers living in those areas? What long-term issues
    will arise if rural communities continue to face an
    unprecedented number of bank closures? And we anticipate that,
    given the trend of bank consolidation. Could a bill like the
    one I just referenced, designed to promote more banking
    activity in rural and otherwise underserved areas, help with
    those problems?
        Ms. Cooper. Thank you so much for your question,
    Congressman.
        As I mentioned in my oral statement, there are geographic
    disparities that exist in terms of access to financial
    products. And as you mentioned and I mentioned, research
    suggests that, for consumers living in rural areas, these
    consumers may be living farther from bank branches or also may
    be less likely to have access to high-speed internet, and both
    of these factors could possibly make it more difficult for
    consumers to access quality banking services.
        We at CRS don't advocate for a particular policy outcome,
    but I would be happy, after this hearing, to look at the bill
    with some of my CRS colleagues.
        Also, in general, around trends in terms of consolidation
    in the banking industry, this has been happening for decades.
    We have seen a reduction in community banks for the past few
    decades, particularly a reduction in bank branch openings in
    the past decade.
        And there are a lot of different factors that are leading
    to this trend. In general, economists would say that you are
    starting to see economies of scale, which basically means that
    big banks are becoming more profitable than smaller banks to
    operate. And that is probably part of the reason why we are
    seeing this consolidation in the banking industry.
        Mr. Barr. Ms. Cooper, I did see, though--and I respect that
    CRS doesn't make policy endorsements, but I did see in your
    testimony, in the, ``Possible Policy Responses'' section,
    ``Bank Regulation Changes,'' that you mentioned the Community
    Reinvestment Act (CRA). And I think, for our friends and
    neighbors in underserved parts of our country in both urban and
    rural areas, this is something that I think would be welcome,
    to give banks more credit for bank account outreach activities
    in those underserved areas.
        Do you have any specifics on that? We saw an effort by the
    OCC, and Lael Brainard at the Federal Reserve, to update the
    CRA, but how can we give incumbent banks and new banks in these
    underserved areas credit for originating loans under the CRA?
        Ms. Cooper. Yes. Thank you so much for that question.
        You are right, one of the things that I mentioned in terms
    of possible policy options for expanding access to credit was
    possible proposed changes to bank regulation. So, this is one
    of the areas where we see proposals on this.
        For example, I know the bank regulators have stated that
    they were considering changes to the Community Reinvestment Act
    to give banks more credit for bank account outreach activities
    in underserved communities. But I think there are trade-offs to
    these type of policies.
        The positive, as you were saying, is that it can encourage
    bank outreach and connect more consumers to banks. But I think
    the flip side to it is, also, it could give credit for what
    some may consider effectively marketing, rather than the
    intention of the law, which was to encourage lending in
    underserved communities.
        Mr. Barr. Thank you.
        Ms. Cooper. This is an area where there--
        Mr. Barr. Thank you.
        And just reclaiming my time, in the final time I have, how
    is compliance under the Equal Credit Opportunity Act currently
    tested? And is there any indication that the testing regime
    needs to be strengthened? Or do regulators currently have
    enough authority to enforce that law?
        And that is again to you, Ms. Cooper.
        Ms. Cooper. Yes. Thank you so much for that question. And
    we are running out of time, so let me get back to you with
    that. I am happy to answer that question with one of my CRS
    colleagues.
        Mr. Barr. Mr. Chairman, my time has expired, and I know
    that is a subject or a topic that is part of your legislation,
    so I invite any or all of the witnesses to comment on that and
    how we can make sure the ECOA is tested.
        With that, I yield back.
        Chairman Green. The gentleman's time has expired. And the
    witness may respond in writing to the gentleman's question.
        The Chair will now recognize Ms. Adams, the gentlelady from
    North Carolina.
        Ms. Adams. Thank you, Mr. Chairman.
        And thank you to our witnesses for your testimony today.
        Mr. Darity and Mr. Perry, you have both have done extensive
    research and writing on economic and racial inequity in the
    United States. In today's hearing, we focus primarily on how
    lending discrimination harms individual borrowers of color, but
    I am curious to hear your thoughts on how the same dynamics,
    primarily racism, also impact institutions of color, such as
    Historically Black Colleges and Universities (HBCUs).
        In December of 2019, a study in the Journal of Financial
    Economics found that HBCUs pay higher underwriting fees to
    issue tax-exempt bonds compared with similar non-HBCUs,
    apparently reflecting higher costs of finding willing buyers.
    The effect is 3 times larger in the Deep South, where racial
    animus remains the most severe.
        For example, identical fee differences are observed between
    HBCUs and non-HBCUs with triple-A ratings or when insured by
    the same company, even before the 2007-2009 financial crisis.
    HBCU-issued bonds are also more expensive to trade in secondary
    markets and, when they do, sit in inventory longer.
        So are you familiar with this type of institutional lending
    discrimination? And what policy steps can we take to collect
    more data on the prevalence of this issue and ultimately to
    eradicate this type of harmful discrimination in lending for
    institutions that have been historically underserved and
    undervalued?
        Mr. Darity. It is my impression that this is a serious
    problem, but I think it is compounded or generated by the fact
    that Historically Black Colleges and Universities have such low
    endowment levels that they are then pressured to go into the
    credit market, a discriminatory credit market, to gain
    resources.
        Another way to think about improving their circumstances is
    something that I think is applicable to individual households
    as well, which is, we need to build the wealth position of
    those institutions in such a way that they don't have the same
    type of pressure to seek predatory lending options to try to
    maintain their operations.
        And we should think about how we could go about building
    the endowments of Historically Black Colleges and Universities
    so that they are comparable to the endowment levels that exist
    for White institutions in the United States. That is where we
    have a very glaring and dramatic difference.
        In addition, of course, I think that we do have to confront
    these kinds of discriminatory practices. And it may be
    necessary for the Federal Government to take the step of
    providing public banking services in competition with the
    private sector to offset the types of behavior that we are
    observing that the private sector is undertaking.
        And one final comment in this context. I said that this
    parallels the conditions that we observe for households,
    because the reason why households are pushed into trying to
    seek high levels of credit under very, very difficult
    circumstances, discriminatory circumstances, is, again, because
    their initial levels of wealth are so low. So, again, I would
    say, we have to think about asset building in addition to
    trying to improve credit market conditions.
        Ms. Adams. Thank you, sir.
        Mr. Perry, did you want to comment?
        Mr. Perry. I think Mr. Darity said everything I was going
    to say. In a nutshell, I think Black institutions are treated
    like Black people. And you have school boards and universities
    that, because of their wealth position, have to take
    essentially subprime market products, for all of the reasons
    that Mr. Darity indicated.
        But I will just leave it there.
        Ms. Adams. Okay. Thank you, sir.
        Let me move on quickly. Ms. Rice, Ms. Espinoza, just how
    pervasive is lending discrimination in the United States? Is it
    widescale, or is it just a small problem?
        Ms. Rice?
        Ms. Rice. Sure. I am happy to answer that.
        Yes, it is very widescale, especially when you consider,
    Congresswoman Adams, that almost all of the technologies that
    we use in the lending space--automated underwriting systems,
    risk-based pricing systems and credit scoring systems--
    discriminate against consumers of color and other underserved
    groups.
        So the discrimination is very prevalent, which is why we
    have to really work to de-bias all of these technologies that
    we are using in the housing and financial services space.
        Ms. Adams. Okay. Is the answer--
        Chairman Green. The gentlelady's time has expired.
        Ms. Adams. Okay. Thank you very much, and, Mr. Chairman, I
    yield back.
        Chairman Green. The gentlelady's question can be answered
    in writing.
        Ms. Adams. Great. Thank you.
        Chairman Green. The gentleman from Georgia, Mr. Loudermilk,
    is now recognized for 5 minutes.
        Mr. Loudermilk. Thank you, Mr. Chairman.
        As I was preparing for this hearing, I was trying to think
    of ways that we as policymakers can help the minority
    communities have more access to financial services and wealth
    building. One thing that immediately came to mind, which is
    something that I have been working on for a long time, is
    fintech.
        In recent years, developments in the financial technology
    arena have made enormous strides toward giving minority
    consumers access to the banking system. Let me just go through
    a few of these.
        The first is mobile banking. It makes it easier than ever
    to open a checking account without having to go into a bank
    branch.
        The second is online lending. It uses fintech platforms and
    even incorporates artificial intelligence in underwriting and
    has expanded access to credit to millions of consumers who were
    credit-invisible and didn't qualify for a traditional bank
    loan.
        Prepaid cards are another. They have enabled consumers who
    do not have credit or debit cards to access e-commerce.
        And the list goes on and on.
        And it is not just in consumer finance. A recent study by
    New York University showed that fintech companies are by far
    the number-one source of Paycheck Protection Program (PPP)
    loans for Black-owned small businesses, exceeding Minority
    Depository Institutions (MDIs) and Community Development
    Financial Institutions (CDFIs). Fintechs have also been the
    number-one source of PPP lending to Hispanic-owned businesses.
        As a result of this, I offered an amendment at this
    committee's markup of the stimulus bill that would allow
    fintech companies to participate in the State Small Business
    Credit Initiative (SSBCI). Unfortunately, it was rejected by
    the Majority. I would just say, if my colleagues are interested
    in improving access to financial services for minority
    consumers, I would suggest embracing fintech instead of
    opposing it.
        Ms. Cooper, in your testimony, you said that new technology
    can provide more affordable financial products to consumers.
    Can you discuss how fintech has expanded access to credit for
    minority consumers?
        Ms. Cooper. Thank you so much for that question,
    Congressman.
        So, yes, as you just stated, I think new technology could
    potentially provide more affordable financial products to
    underserved communities, but it also could introduce consumer
    protection risks as well.
        And this is similar to what you were saying. One example of
    this, for example, would be internet-based or mobile financial
    products, which, for example, could lower the cost to provide
    payment services or other types of products, but these types of
    products could have, for example, cybersecurity or privacy
    risks as well.
        So, I think there is always a trade-off there when you are
    thinking about this stuff.
        Mr. Loudermilk. Thank you for that, and I appreciate it.
        On another note, because of these developments and what you
    have laid out, data security and data privacy laws, I think,
    need to be updated, and we need a uniform national standard. Do
    you have any thoughts on that?
        Ms. Cooper. No. In general, I would say that CRS does not
    advocate for any particular policy outcome. And I personally am
    not the one at CRS who covers those issues, but I would be
    happy to put you in touch with the CRS analyst who does, to
    work with you and your staffers.
        Mr. Loudermilk. I appreciate that.
        And as we continue to hopefully promote fintech, since it
    is very beneficial in underserved areas of our nation and
    underserved demographics, we do have to address some
    limitations, which could be the data security, because we are
    looking at more than 50 different standards with which we have
    to deal.
        So, I appreciate the time here, Mr. Chairman, and I yield
    back.
        Chairman Green. The gentleman yields back.
        The Chair now recognizes the gentlelady from Michigan, Ms.
    Tlaib, for 5 minutes.
        Ms. Tlaib. Thank you, Mr. Chairman.
        And thank you all so much for being with us.
        As we all know, despite decades of civil rights laws on the
    books, Black homeownership is plunging across the nation, with
    the worst losses happening right here in Michigan. Detroit has
    seen a dramatic shift from a city of homeowners where Black
    family members could build intergenerational wealth to, now, a
    city of renters. And the predatory lenders on Wall Street who
    crashed the economy in 2007-2008, as we know, got bailed out,
    while many of my residents got foreclosed on by the thousands.
        Redlining never ended in Detroit. In 2019, in a city of
    more than 650,000 people, there were only 1,535 mortgages
    issued. And that is up from 2012, when we only had 244
    mortgages that were reported. When mortgages are issued in
    Detroit, they go towards those who are White borrowers, who are
    a small minority of the population.
        And so, unwillingness of banks to lend in Detroit and other
    majority-Black communities pushes our residents into riskier
    arrangements, like land contracts, which offer opportunities
    but also fewer protections and have been abused by predatory
    sellers.
        Ms. Rice, we know banks aren't drawing red lines on a map
    anymore but that discrimination still persists. Can you
    describe some of the tactics and technology that lenders use
    now to perpetuate racial redlining?
        Ms. Rice. Sure. Thank you so much for that question, and it
    is a critically important issue.
        I am from Toledo, Ohio, and so I am very familiar with the
    Detroit market and other markets like it. One major problem
    that we have in cities like Detroit is that a lot of the
    housing stock is very affordable and is priced under $100,000.
    And, for a variety of reasons, it is extremely difficult in
    today's marketplace for consumers to access mortgage credit in
    the financial mainstream when you are trying to get what we
    call a smaller-dollar loan.
        The qualified mortgage rule, coupled with the LLPAs from
    the GSEs, coupled with other Federal policies, really restrict
    credit access for more affordable loans. So, that is a major
    problem.
        The other problem is the industry's overreliance on credit
    scores. Back when I was underwriting mortgages years ago, two
    of the key things that I relied on to determine a borrower's
    creditworthiness were: What are your current housing payments?
    Have you been paying your rent on time? And if you have been
    paying your current housing bill on time, you are a very good
    candidate. And, also, what is your housing payment shock? So,
    is the new mortgage that you are going to be paying appreciably
    different from the housing payment that you have been used to
    making? And if you have been paying your rent on time, and if
    there is really no housing payment shock, you are a very good
    candidate for getting credit.
        But we don't use those two indicators anymore. Today, we
    overrely on algorithmic-based systems, like credit scores,
    automated underwriting systems, that don't include those kind
    of indicators.
        And you heard one of the other panelists already testify
    that consumers of color are disproportionately credit
    invisible. So, just the systems that we have in place in order
    to give people an entrance into the financial mainstream are
    blocking folks out because those systems do not work for
    underserved communities.
        Ms. Tlaib. Thank you, Ms. Rice.
        I am not sure how much time I have, but I just want folks
    on the panel and just the public to notice that none of this
    discrimination that we are talking about today is explicitly
    spelled out in some sort of company handbook, but it is all
    implicit and cloaked in, like, proxies and codewords and
    misguided assumptions. And its effect, regardless of the
    intent, is to disproportionately deny homeownership
    opportunities to Black and Brown folks.
        We have the tools to fight it. Just last year, though,
    unfortunately, President Trump struck a huge blow to fair-
    housing protection with this disparate impact final rule which
    failed to comply with the Supreme Court's Inclusive Communities
    decision. And we need to address that, Mr. Chairman.
        We also know that, as recently as 2015, the Supreme Court
    recognized the continuing availability of disparate impact
    litigation on the Fair Housing Act. We need to restore these
    protections. They are getting watered down by conservative
    courts and decisions. And so, I just hope our subcommittee can
    proceed and be very intentional about addressing this
    discrimination that leaves a lot of my residents out of
    opportunities for economic stability.
        Thank you, and I yield back.
        Chairman Green. The gentlelady's time has expired.
        We will now hear from Mr. Mooney from West Virginia for 5
    minutes, and then, we will take our break. So if you are after
    Mr. Mooney, you might want to go cast your vote now. And we
    will cast our second vote as well. That is two votes before we
    return.
        So, please, now, Mr. Mooney, you are now recognized for 5
    minutes.
        Mr. Mooney. Thank you, Mr. Chairman.
        My concerns are going to address access to rural banking,
    generally speaking. And I am going to direct a question to Ms.
    Cooper. But I want to highlight some of the concerns related to
    getting my constituents in rural West Virginia, and others,
    access to loans, credit, and banking, any and all banking
    services in general.
        According to a survey by the FDIC, 7.8 percent of West
    Virginia households are unbanked. This puts West Virginia in
    the bottom 10 in the nation in terms of unbanked households.
        Ms. Cooper, what can we do to help rural Americans get
    access to credit and basic financial services?
        And just as a quick follow-up to that, after you answer
    that one, how do you feel the COVID-19 pandemic has affected
    efforts to reach the unbanked?
        Ms. Cooper. Thank you so much for your questions,
    Congressman.
        So, yes, in general, I know we have already spoken about
    this, and in my oral and written statements I have mentioned,
    kind of, the geographic disparity, the fact that research
    suggests consumers living in rural areas may be living farther
    from bank branches, and are less likely to have access to high-
    speed internet, and these reasons might make it more difficult
    for them to access quality banking services.
        In general, in my written testimony, I talk about some
    policy options that are often discussed in this space just
    generally to increase access to credit to consumers.
        And there are five broad types of policy approaches in this
    space: first, possible changes to bank regulation to further
    encourage banks to serve underserved communities; second,
    payment system improvements that may make bank products more
    attractive; third, financial technologies to potentially
    increase access to consumers; fourth, the government directly
    providing certain financial products directly to consumers; and
    fifth, financial education programs.
        And I would say, in terms of all of these policy options,
    they all have costs and benefits and potential unintended
    impacts and risks, but they are all things that could be
    potential places to explore in this space if you are interested
    in expanding access to credit.
        Thank you so much. And then your second question was around
    the COVID-19 pandemic? Is that correct?
        Mr. Mooney. That is correct, how you feel that affects
    efforts to reach the unbanked?
        Ms. Cooper. Yes. Thank you so much for that question.
        I am actually not aware of that much data, since the COVID-
    19 pandemic is something that has happened in this past year,
    and the FDIC's survey that they do regularly was most recently
    done in 2019.
        But, yes, I think at least at the beginning of the
    pandemic, there were a lot of reports of more people accessing
    banking services online, given the pandemic. That pattern makes
    sense. So, I do think that is an interesting trend in this
    space.
        Mr. Mooney. Okay.
        Thank you, Mr. Chairman. I yield back.
        Chairman Green. The gentleman yields back.
        At this time, we will stand in recess for the Members to
    cast two votes and then return.
        [brief recess]
        Chairman Green. Thank you, everyone, for your patience,
    especially our witnesses. Thank you so much. It is not unusual
    for Members to have to rush out and vote, and we try to do it
    as expeditiously as possible, because we know that your time is
    very valuable
        Let me just see if Mr. Garcia of Illinois is present.
        Mr. Garcia, are you with us? If so, I will yield 5 minutes
    to you for your questions.
        We will stand in recess for a bit longer. We are awaiting
    the arrival of our ranking member and additional members, so
    please be a little bit patient with us. Thank you so much.
        [brief recess]
        Chairman Green. Friends, just to give you a quick update,
    we are not waiting on Mr. Garcia, so that you won't think that
    we are. We are waiting on our ranking member, Mr. Barr. I
    assume that he will be arriving shortly, so please continue to
    be patient with us while we await his arrival.
        Mr. Garcia of Illinois. And Mr. Garcia is on standby, Mr.
    Chairman.
        Chairman Green. Yes, sir. I have noted that you are here.
    As soon as Mr. Barr arrives, we will come right to you. Thank
    you so much, Mr. Garcia.
        Friends, if I may have your attention, please, the hearing
    will now return to order.
        We will continue with questions. And next in order for
    questions will be Mr. Garcia of Illinois. Mr. Garcia, you are
    recognized for 5 minutes to ask your questions.
        Mr. Garcia of Illinois. Thank you so much, Mr. Chairman,
    for convening this important meeting.
        When we talk about wealth in this country and opportunities
    to build wealth, we have to talk about housing. So when I think
    about the wealth gap, I think about neighborhoods like mine. I
    represent a working class, mostly Latino community in Chicago.
    I have lived here for more than 50 years. Most of my
    constituents are renters, and the housing crisis they are
    facing now under COVID-19 isn't new.
        My neighbors are squeezed. On the one hand, our community
    can't get the investment they need. On the other hand, working-
    class Latino and Black people are being pushed out of their own
    neighborhoods by wealthier White residents who do have access
    to capital. So, I am glad to talk with you today to learn more
    about what is driving that and what we can do to support
    working-class communities and communities of color especially.
    I thank all of the witnesses for being here.
        I would like to ask Ms. Espinoza a question on bank
    mergers. This country had 12,000 banks in 1990, and now it has
    fewer than 5,000. The Fed and the Department of Justice rubber-
    stamped bank merger applications without a second thought, even
    though mergers can often close down local bank branches and
    leave communities underserved.
        Do you find that consolidation in the banking industry has
    a negative impact on marginalized communities, and does it hurt
    access to credit in communities like mine?
        Ms. Espinoza. It does hurt access to credit, and one of the
    things that we have seen here with the bank mergers is that the
    Community Reinvestment Act (CRA) requirements don't change when
    banks merge. Instead of them having to do twice the amount, for
    example, by merging, they are actually having to do less under
    the CRA. So, it is definitely hurting people, and it hurts
    people of color because as they merge, they seem to close down
    branches in minority neighborhoods that are predominantly
    African American and Latino.
        Mr. Garcia of Illinois. Okay. Thank you.
        Mr. Perry, in your testimony, you mentioned recent high-
    profile instances of the appraisal gap, that is, when a
    family's home is appraised at a low value because of racial
    discrimination. This is a huge problem in my City of Chicago.
        Could you talk a little bit more about how the appraisal
    gap hurts communities that have always had a hard time getting
    loans, and what can Congress and housing advocates do to get
    help?
        Mr. Perry. Yes, that is a difficult one, because Congress
    does not authorize appraisals. However, there are some key
    areas that we know are at fault. We know that the price
    comparison model in which homes are compared to other homes in
    similar neighborhoods essentially recycles racism, because if
    you are essentially measuring homes against other homes that
    have been impacted by discrimination, you really never get a
    sense of values.
        The other area that is clear that home improvements are not
    treated the same in Black and Brown communities as they are in
    White communities, and we see that time and time again.
        And there is one other area, and this is the area--the
    Dodd-Frank Act created an arm's-length relationship between
    appraisers and lenders, and it seems that in some communities,
    it is very strict, where lenders and appraisers don't talk at
    all, and it results in loans falling through, where in White
    communities, there seems to be enough communication to come to
    an agreed-upon price. And so those are the three areas where I
    see of some of the biggest problems.
        Mr. Garcia of Illinois. Thank you very much.
        Mr. Chairman, I don't have any more questions at this time.
    I have to go vote.
        Chairman Green. The gentleman yields back. Thank you, Mr.
    Garcia.
        The Chair now recognizes the vice ranking member, Mr.
    Timmons from South Carolina, for 5 minutes.
        Mr. Timmons. Thank you, Mr. Chairman.
        Ms. Cooper, since the 1990s, the median wealth among
    minority families has plateaued, while it has increased roughly
    50 percent for White families. This is a huge problem, as White
    families on average now have 41 times the wealth of Black
    families and 22 times the wealth of Latino families. I think we
    can all agree that that is a major problem.
        A friend of mine, who is Black, explained it to me in a way
    that really stuck with me. He said, imagine a game of monopoly.
    Certain families have been playing for generations. They have
    been passing go, collecting $200. They have been purchasing
    property, building houses, building hotels, buying the
    railroads, and certain families have started much later. And it
    is challenging to play the game, it is challenging to compete,
    it is challenging to have a chance when you are faced with
    those kind of odds.
        So, a racial wealth gap has always been an issue. But why
    has it gotten worse over the last few decades, and does it have
    anything to do with lending practices of financial
    institutions?
        Ms. Cooper. Thanks for that question. As I was saying in my
    oral testimony, as you were describing, research suggests that
    disparities in family wealth or in community relationships with
    financial institutions can potentially persist across
    generations. For example, from parents to children, influencing
    children's financial outcomes, so, for example, children's
    credit history or homeownership status. And in this way, past
    discrimination can cause intergenerational effects, and as I
    described, these disparities exist in terms of access to
    financial products.
        I will say in general, I am not aware of research around
    increases or decreases in some of these disparities. Over time,
    a lot of this research, particularly around intergenerational
    effects, is relatively new. But I would be happy to do some
    more research on that question and get back to you.
        Mr. Timmons. Thank you.
        Mr. Darity. I would like to comment on this, if I may, to
    say that the widening gap that we have observed is in part
    attributable to the adverse effects of the Great Recession, but
    more significantly is due to the cumulative nature of wealth
    accumulation and decumulation across generations. That is to
    say, wealth begets wealth and lack of wealth begets lack of
    wealth.
        And so communities that have been subjected to denial and
    deprivation have less of an opportunity to transfer resources
    across generations and, therefore, we observe a widening gap
    over the course of time. It is a fact that is associated with
    the very way in which people acquire additional assets.
        Mr. Timmons. Sure. And, Mr. Darity, let me follow up on
    that. I appreciate you jumping in.
        Mr. Darity. Yes.
        Mr. Timmons. Would you agree that it is a worthy endeavor
    to try to find ways to give people opportunities, who have not
    had opportunities in the past, without necessarily putting
    people who do not fall into that category at a disadvantage?
        I am in the military. I am in the South Carolina Air
    National Guard, and we talk a lot about these issues, and the
    question becomes, not everyone is in the same box, and if you
    are going to try to give people opportunities who have not had
    opportunities in the past, that is a worthy endeavor, and I
    actually support that. My concern is that there are people who
    would be lumped in with the people who theoretically have had
    opportunities, who really haven't had opportunities.
        So while we look at these statistics, and I agree they are
    actually quite terrible and we need to take steps, the question
    is, if someone is not necessarily in the bucket of, wealth
    begets wealth, they are struggling just like anyone else, how
    do we not disadvantage that person? Does that question make
    sense to you, sir?
        Mr. Darity. It makes sense to me, but I think that we have
    to recognize that those differences in opportunity historically
    have been racialized to the point that Whites who are in the
    bottom 20 percent of the income distribution have a higher
    median level of wealth than all Black Americans taken together.
    And so, I would argue that there is a racial differential that
    needs to be addressed.
        Mr. Timmons. And I will do everything I can to help address
    that, because I do agree with you, in large part.
        And I guess my next question is, would you segment out--
        Chairman Green. The gentleman's time has expired. Excuse
    me. I'm sorry.
        Mr. Timmons. Oh, I will yield back, Mr. Chairman. Thank
    you.
        Chairman Green. Okay. Because we are trying to end before
    this next vote. The gentleman's time has expired.
        And we will move on now to Ms. Garcia of Texas. You are now
    recognized for 5 minutes.
        Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you
    so much for hosting this hearing.
        And thank you to all of the witnesses. And most of all,
    thank you for your patience as we struggle through these votes.
        I want to start with Ms. Rice. Ms. Rice, the Center for
    Investigative Reporting report revealed that out of 31 million
    Home Mortgage Disclosure Act records, that modern-day redlining
    still exists in 61 metro areas in our country. As compared to
    White borrowers, lenders denied African-American borrowers in
    significantly higher rates in 48 cities, Latinos in 25 cities,
    Asian Americans in 9 cities, and Native Americans in 3 cities.
        Still, 98 percent of the banks nationally received a
    passing grade in the Community Reinvestment Act examination.
    What is wrong here? Do you think that we need to redo how we
    grade for the Community Reinvestment Act, and would moving from
    a pass/fail system to a more transparent letter grade be
    better?
        Ms. Rice. Thank you so much, Congresswoman Garcia, for that
    question. One of the challenges that we face with the Community
    Reinvestment Act and the CRA examinations is that it is not
    automatically a given that if there are fair-lending violations
    at a financial institution, that it will translate into a lower
    score for the financial institution.
        And so, oftentimes, fair-lending violations are not even
    considered in terms of being reflected in the ultimate score
    for the financial institution. And that is why you have seen,
    since 1977, when the Community Reinvestment Act was enacted,
    multiple examples over and over again of financial institutions
    who have been found to violate the Fair Housing Act, they have
    been found to have engaged in discrimination, and received an
    outstanding CRA grade.
        Part of that is because CRA is tied to income. The
    Community Reinvestment Act says that lenders are supposed to be
    meeting the credit needs of their entire delineated community,
    including low-income areas. And it just depends on the guidance
    at the regulatory agencies at the particular time, but for some
    reason, the part that says that the banks are supposed to meet
    the credit needs of their entire community--somehow,
    communities of color don't get picked up in that definition.
        Ms. Garcia of Texas. Should we look at other punishment, if
    you will? Should we look at criminal sanctions for intentional
    discrimination by the landlords, the builders, the mortgage
    companies?
        Ms. Rice. We can certainly look at that, whether or not
    there should be criminal violations. But I think one of the
    first steps that should be taken is we should add race as a
    consideration explicitly in the Community Reinvestment Act, so
    it makes it clear that lenders cannot redline communities of
    color, they cannot avoid serving communities of color in order
    to get the higher grades in the CRA designations.
        And also, lenders should be required to include communities
    of color in their service area. In other words, you shouldn't
    be able to carve out neighborhoods of color when you are
    designating what is your service area.
        Ms. Garcia of Texas. Okay. But as my colleague, Ms. Tlaib,
    mentioned, nobody goes around and says, ``Okay neighborhood A,
    you are being redlined.'' It is a lot more subtle. And with
    algorithms and the technology that is being used now, it is
    hard to find, and it is hard to find the appropriate
    enforcement tool. But thank you for that.
        And I wanted to ask quickly, Ms. Espinoza, because I know I
    am running out of time, you mentioned the three different kinds
    of testing that you all do and look at. I think you said there
    was rental testing, self testing, and mortgage testing. How
    complicated is that, and about how much money do you all need
    for more testing so that we can more easily prove some of these
    cases?
        Ms. Espinoza. Well--
        Chairman Green. If I may, Ms. Espinoza, the gentlelady's
    time has expired, and we are trying to get back for the next
    vote.
        Ms. Espinoza. Oh, okay. I can address that in writing.
        Ms. Garcia of Texas. Thank you, Ms. Espinoza.
        I yield back, Mr. Chairman. I apologize.
        Chairman Green. That is quite all right. We are trying to
    get to everybody.
        We will now go to Ms. Williams from Georgia for 5 minutes.
    And my apologies to everyone, but we do want to finish before
    the next vote.
        Ms. Williams of Georgia. Thank you, Chairman Green, and
    thank you for convening this hearing today.
        In my district and across the country, we see racial wealth
    disparities brought on by barriers like invidious
    discrimination. In 2019, the median wealth in Black households
    was about $24,000, compared to $188,000 for White households,
    with the gaps sure to continue to widen because of the
    disproportionate impact of COVID-19.
        I have an obligation in Congress to work to break down
    these barriers and ensure communities of color have a fair
    chance to buy homes, start their own businesses, and even send
    their kids to college without taking on the massive debt that I
    have had to incur. When fewer of us face barriers to building
    wealth and long-term prosperity, the better off our economy,
    our communities, and our people will be.
        Professor Darity, student debt certainly stands in the way
    of closing the racial wealth gap, but in your testimony, you
    mention that there are some limitations to focusing exclusively
    on debt reduction. What are some next steps that we should
    consider from an asset-building perspective to lessen the
    financial burden of things like going to college for
    communities of color?
        Mr. Darity. Historically, the United States has practiced
    asset-building policies. Representative of these are the 19th
    Century policies that involved land allocation. In the 20th
    Century, the policies were focused primarily on supporting
    homeownership.
        I would argue, though, that since the 1960s, the entire
    emphasis of Federal policy has been on income supports rather
    than wealth building or asset building. And so, if we are
    really concerned about improving opportunities for all
    Americans to engage in the widest range of opportunities, there
    needs to be a shift back towards asset-building opportunities.
        And I would think that if we are thinking about individuals
    having an opportunity to go to college and to leave college on
    a debt-free basis, either we have to eliminate the expense of
    attending college altogether, as some people have advocated
    zero tuition for attending State universities. I think that is
    an idea that should be explored.
        But on the other hand, I think that we tend to think about
    education as driving wealth, but we really should think about
    wealth as driving educational achievement. So, if we could
    alter the foundation for assets that are held by a large number
    of wealth-poor families in the United States, we would create
    greater opportunities for their kids to go further in school
    and not have to do so on the basis of the acquisition of
    extraordinary levels of indebtedness.
        Mr. Perry. And, Representative Williams, I just wanted to
    add that there are a number of innovative products going on
    right now which are enabling people to get a mortgage and
    cancel a student loan debt at the same time, and I think those
    are the kind of products we need to see in communities.
        Ms. Williams of Georgia. Thank you so much.
        And, Professor Darity, I appreciate that.
        Ms. Rice, I do have a quick question for you. As we have
    heard today, we must break down the discriminatory barriers to
    things like owning a home if we really want to close the racial
    wealth gap. In your testimony, you offered some suggestions to
    increase diversity in the real estate industry. Do you have any
    additional recommendations for increasing diversity in other
    parts of the financial services industry that impact how
    communities of color access housing?
        Ms. Rice. Yes, absolutely. One of the first things we have
    to do is break down barriers to credit access and the
    overreliance on things like credit scores. Credit scores are a
    major factor that preclude people of color from being able to
    access financial services. People of color disproportionately
    live in credit deserts. They also disproportionately live in
    communities where there is a hyper concentration of
    nontraditional financial services providers who do not report
    positive behavior to the credit repositories.
        So, that is a huge thing that we need to break down, and we
    can actually use new artificially intelligent tools in order to
    do that. But we do need more support from regulators and
    Congress in order to onboard those new debiasing, tech
    debiasing methodologies so that we can expand opportunities for
    people.
        Ms. Williams of Georgia. Thank you.
        Ms. Cooper. And I will just--
        Ms. Williams of Georgia. We are out of time, because we
    only get 5 minutes, but I appreciate everyone being here today.
    And I look forward to working with everyone on the subcommittee
    as we continue to address these disparities.
        Thank you, Mr. Chairman. I yield back the balance of my
    time.
        Chairman Green. And thank you very much for being a little
    bit conscious of the time. I greatly appreciate it.
        Let me move expeditiously and yield myself 5 minutes, so
    that we may quickly get to the next vote.
        I was here in 2008 when we had the downturn in the economy,
    and one of the questions that we asked quite consistently was,
    would anyone go to jail for the predatory lending that took
    place? The answer to the question is, yes, someone did: one
    person. One person went to jail for that long line of predatory
    lending that took place. In fact, we had one CEO of a major
    bank who settled out of court with the Justice Department, and
    the bank's board of directors gave this CEO a 74 percent raise
    in salary, amounting to about $20 million.
        So, the question becomes this: Do we want to continue to
    allow persons who make loan applications to be punished
    criminally for falsifying information on a loan application
    while the loan originator does not face any charges if the loan
    originator denies a person credit? That is predatory lending,
    by the way. If you intentionally deny a person credit who is
    qualified for that credit, you are engaging in predatory
    lending, which is a crime.
        But the question becomes, how do we deal with it? And
    testing is the means by which we can acquire the empirical
    evidence necessary to prosecute these crimes.
        Let me start with you, Ms. Rice. Would you give me some
    indication as to how efficacious testing is, in your opinion,
    with reference to bringing forth the empirical evidence
    necessary to prosecute?
        Ms. Rice. Testing is extremely efficacious for that
    purpose. And thank you so much, Congressman Green, for that
    question. The Supreme Court actually has stated that testing is
    one of the most verifiable and efficient ways of ferreting out
    discrimination.
        Part of the challenge though, is that we don't have
    sufficient funding to support testing in the United States, and
    it is private fair housing organizations who engage in testing
    in a consistent fashion, as you have heard Frances Espinoza
    already testify to. But the challenge is that, some years we
    have very, very little funding to support testing and in some
    years we have more funding, but we never have sufficient
    funding.
        The other thing that--
        Chairman Green. Let me intercede for just a quick second. I
    am familiar with the Fair Housing Initiatives Program (FHIP)
    and the Fair Housing Assistance Program (FHAP). Here is
    something that is important. In H.R. 166, we provide for, in
    the Consumer Financial Protection Bureau (CFPB), an entity to
    conduct these tests. We want to formalize it to a greater
    degree.
        I still support FHIP and FHAP. That is a great program, so
    I am going to support it. But what I would like to know is, if
    we put this together with the CFPB, does that give you some
    greater degree of belief that we can police and deter those who
    would intentionally deny people loans? Ms. Rice?
        Ms. Rice. Yes, I do. And we vehemently support the bill
    that you referenced, the Fair Lending for All Act. It
    definitely will, and it is important for Congress to include
    protections, guardrails, so that the testing program can be
    ongoing no matter who is in control or who is at the helm of
    the organization.
        Chairman Green. Let me move quickly to Ms. Espinoza. Ms.
    Espinoza, would you agree that testing is an efficacious
    methodology, and would you support H.R. 166 as we propose
    having testing take place through the CFPB?
        Ms. Espinoza. Yes. Testing is the best way to uncover these
    predatory practices in fair housing investigations, so I do
    support--
        Chairman Green. Okay. And let me ask Mr. Perry, would you
    agree as well?
        Mr. Perry. Yes. And, in fact, journalists and individuals
    are doing it.
        Chairman Green. I hate to do this to you, but I am going to
    have to accept your yes, because I am running out of time.
        Mr. Perry. Yes.
        Chairman Green. And I can't be unfair to others by giving
    myself more time.
        Just let me say, Professor, I am very much familiar with
    Andrew Johnson and what happened, especially as it relates to
    him in 1868 when there was an effort to impeach him. I would
    add that he was the bigot of his time, and he denied the newly
    free persons the opportunity to start to amass wealth with the
    land that would have been accorded them. I can only say this, I
    don't pretend to say that this is the silver bullet, but this
    will at least help us with some of the credit issues. I do
    agree with you that the wealth issue is something that is
    paramount for us.
        With that said, my time has expired, friends. I do
    appreciate all of the witnesses for being here today. Your
    being here and being patient with us has meant a lot to us. I
    regret that we had to intercede with votes, but these things
    happen, and we now have another vote that we have to deal with.
    So thank you, all of you.
        The hearing is now adjourned, after I read a statement,
    excuse me. There is a statement that I have to read before we
    can adjourn this hearing, so please be patient as I move to the
    statement.
        I thank the witnesses for their testimony and for devoting
    their time and resources to share their expertise with this
    subcommittee. Their testimony today will help to advance the
    important work of this subcommittee and of Congress in
    addressing lending discrimination and systemic racial
    inequality.
        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.
        This hearing is now adjourned. Thank you so much.
        [Whereupon, at 5:23 p.m., the hearing was adjourned.]

                                A P P E N D I X

                               February 24, 2021

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