[Congressional Record Volume 153, Number 66 (Tuesday, April 24, 2007)]
[House]
[Pages H4028-H4030]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           PREDATORY LENDING

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Ohio (Mr. Kucinich) is recognized for 5 minutes.
  Mr. KUCINICH. Mr. Speaker, American families are hardworking, good 
people and deserve financial security. American families do not deserve 
to have their physical, emotional and financial security compromised by 
predatory lending practices engaged in by the subprime mortgage 
industry.
  Subprime mortgage lending includes a wide range of loan products. 
What these loans have in common is they are marketed to hardworking 
people made vulnerable by credit scores that disqualify them from 
traditional loans, or who have limited credit history, thereby limiting 
their borrowing power.
  Subprime lending is associated with significantly higher levels of 
foreclosure than prime lending. Subprime lenders make excessive 
mortgage loans of up to $1 million, and often the borrower can obtain 
``cash out'' refinancing. Additionally, subprime lenders offer 100 
percent financing to those with poor or limited credit.
  Subprime lenders are known for their forceful marketing techniques 
which have included ``stated income'' loans in which the borrower is 
not required to provide documentation. This places American families in 
danger of borrowing a substantially greater amount that what is 
reasonably affordable and places them in danger of being unable to meet 
their mortgage payments.
  These predatory lending practices are forcing large numbers of 
American families into foreclosure. Said another way, American families 
are losing their homes, homes they worked hard for. They are enduring 
undue stress and emotional instability when confronted with this 
prospect.
  In 2002, approximately 2.2 million American families who had borrowed 
money from a subprime lender had either lost their home to foreclosure 
or were thought to be in danger of foreclosure. The Center for 
Responsible Lending conducted a study in which they found that millions 
of American households will lose their homes and as much as $164 
billion due to foreclosures in the subprime market.
  In Ohio, my home State, Ohio leads the Nation in the rate of 
foreclosure.

[[Page H4029]]

Ohio's foreclosure rate is roughly three times the national rate, 
according to the Mortgage Bankers Association.
  Cuyahoga County, which includes Cleveland, my hometown, had 11,000 
foreclosures in 2005, more than triple the number a decade earlier. In 
Cleveland in 1995, local depositories held about 60 percent of the 
market share of mortgages. By 2005, that number dropped to 20 percent. 
What has happened to my city in the past decade is a story that is 
reflected nationwide.
  Furthermore, foreclosure has a detrimental effect on the greater 
community. Neighborhoods with foreclosed properties are likely to 
experience declining property values. These lower property values and 
the corresponding decline in owner equity can contribute to additional 
incidents of foreclosure. Foreclosed homes are often left vacant for 
extended periods of time and can subsequently attract crime to 
neighborhoods.
  I began my political career as a representative in the inner city. 
Later I became the mayor of Cleveland, and during my tenure, Cleveland 
became the first city to sign the Community Reinvestment Act agreement 
pursuant to the newly enacted CRA of 1977. The Community Reinvestment 
Act was passed to prevent lending institutions from withholding home 
loans or insurance from communities labeled as economically risky. The 
act was intended to expand credit and depository services to low- and 
middle-income communities.
  The CRA extends and clarifies the longstanding expectation by 
hardworking Americans that financial institutions will serve the 
convenience and needs of their local communities. The CRA established a 
regulatory regime to monitor the lending, investment and services 
offered by banks in low- and moderate-income neighborhoods, and has 
resulted in significant benefits.
  Lenders and community organizations have signed 428 CRA agreements 
totaling $4.1 trillion in reinvestment dollars between the CRA's 
enactment in 1977 and the beginning of 2005. The CRA has also 
facilitated a surge of home loans to low-income and minority 
households.
  Despite these positive gains, significant financial problems continue 
to exist in low- and moderate-income communities.
  When you look at a map of Cleveland, a pattern begins to emerge that 
is not unlike that being experienced by other communities. The pattern 
is this: In geographical areas where the number of subprime mortgage 
loans is the highest, the number of foreclosures for the same 
geographical area will also be high, while the number of prime loans 
made by depository banks will be relatively few.
  Looking at the same geographical area, we find that neighborhoods 
experiencing these trends are predominantly African American 
neighborhoods. Lack of access to prime loans, a high frequency of 
subprime loans and a high rate of foreclosures are by no means specific 
to any racial group, but the pattern certainly carries an overtone of 
America's historic denial of equal rights based on race.
  A recently published report entitled ``Paying More for the American 
Dream'' found that Citigroup, Countrywide, GMAC, HSBC, JP Morgan Chase, 
Washington Mutual and Wells Fargo all originated a substantial volume 
of both higher-cost subprime and lower-cost prime loans.
  Mr. Speaker, this is an issue that I am proud to join my colleagues, 
including my friend and colleague from Cleveland, Mrs. Tubbs Jones, and 
I thank her for the work she has done on this issue.
  American families are hard-working, good people who deserve financial 
security. American families do not deserve to have their physical, 
emotional and financial security compromised by predatory lending 
practices engaged in by the subprime mortgage industry.
  Subprime mortgage lending includes a wide range of loan products; 
what these loans have in common is that they are marketed to 
hardworking people made vulnerable by credit scores that disqualifies 
them from traditional loans or who have a limited credit history 
thereby limiting their borrowing power.
  Subprime lending is associated with significantly higher levels of 
foreclosure than prime lending.
  Subprime lenders make accessible mortgage loans of up to $1 million 
and often the borrower will be able to obtain ``cash out'' refinancing. 
Additionally, subprime lenders offer 100 percent financing to those who 
have poor or limited credit.
  Subprime lenders are known for their forceful marketing techniques 
which include ``stated income'' loans in which the barrower is not 
required to provide documentation supporting claims of income.
  This places American families in danger of borrowing a substantially 
greater amount than what is reasonably affordable and places them in 
danger of being unable to meet their mortgage payments.
  These predatory lending practices are forcing large numbers of 
American families into foreclosure. Said another way--American families 
are loosing their homes; homes that they have worked hard for. They are 
enduring undue stress and emotional instability when confronted with 
this prospect.
  As 2006 came to an end, approximately 2.2 million American families 
who had borrowed money from a subprime lender had either lost their 
home to foreclosure or are thought to be in danger of foreclosure at 
some point in the near future.
  The Center for Responsible Lending conducted a study in which they 
found that ``millions of American households will lose their homes and 
as much as $164 billion due to foreclosures in the subprime mortgage 
market.''
  My home state of Ohio leads the nation in the rate of foreclosure. 
Ohio's foreclosure rate (3.3 percent) is roughly three times the 
national rate, according to the Mortgage Bankers Association.
  Cuyahoga County, which includes Cleveland, my home town, had 11,000 
foreclosures in 2005, more than triple the number a decade earlier.
  In Cleveland in 1995, local depositories held about 60 percent of the 
market share of mortgages. By 2005, that number had dropped to 20 
percent.
  What has happened to my city in the past decade is a story that is 
reflected nationwide.
  Furthermore, foreclosure has a detrimental effect on the greater 
community. Neighborhoods with foreclosed properties are likely to 
experience declining property values. These lower property values and 
the corresponding decline in owner equity can contribute to additional 
incidents of foreclosure in our communities.
  Foreclosed homes are often left vacant for extended periods of time 
and can subsequently attract crime to our neighborhoods which further 
hurts our communities and threatens our families.
  I began my political career as a representative of Slavic Village in 
the Cleveland City Council. Later I became the mayor of Cleveland and 
during my tenure, Cleveland became the first city to sign a Community 
Reinvestment Act Agreement pursuant to the newly enacted Community 
Reinvestment Act of 1977.
  The Community Reinvestment Act, or CRA, was passed to prevent lending 
institutions from withholding home loans or insurance from communities 
labeled as economically risky.
  Additionally the Act was intended to expand credit and depository 
services to low and middle income communities.
  The Community Reinvestment Act both extends and clarifies the long 
standing expectation by hardworking Americans that financial 
institutions will serve the convenience and needs of their local 
communities.
  The CRA established a regulatory regime to monitor the lending, 
investment and services offered by banks in low and moderate income 
neighborhoods and has resulted in significant benefits.
  Lenders and community organizations have signed 428 CRA agreements 
totaling more than $4.1 trillion in reinvestment dollars between the 
CRA's enactment in 1977 and the beginning of 2005.
  The CRA has also facilitated a surge of home loans to low-income and 
minority households.
  Despite these positive gains, significant financial problems continue 
to exist in low and moderate income communities.
  When you look at a map of Cleveland, my home town, a pattern begins 
to emerge that is not unlike what is being experienced by cities around 
the country.
  The pattern is this: In geographical areas where the number of 
subprime mortgage loans is the highest, the number of foreclosures for 
the same geographical area will also be high, while the number of prime 
loans made by depository banks will be relatively few.
  Looking at this same geographical area we find that the neighborhoods 
experiencing these trends are predominately African-American 
neighborhoods.
  Lack of access to prime loans, a high frequency of subprime loans and 
a high rate of foreclosures are by no means specific to any racial 
group, but the pattern certainly carries an overtone of America's 
historic denial of equal rights based on race.

[[Page H4030]]

  A recently published report entitled Paying More for the American 
Dream found that Citigroup, Countrywide, GMAC, HSBC, JP Morgan Chase, 
Washington Mutual and Wells Fargo all originated a substantial volume 
of both higher cost subprime and lower cost prime loans.
  The report also found that for these seven lenders, the percentage of 
total home purchase loans to African Americans that were higher-cost 
was six times greater than the percentage of higher cost home purchase 
loans to whites. (41.1 percents vs. 6.9 percent).
  Loans to Latinos that were higher-cost loans were 4.8 times greater 
than the percentage of higher cost home purchase loans to whites (32.8 
percents vs. 6.9 percent).
  In each of the cities examined, the seven lenders combined showed 
larger African American/white and Latino/white disparities than those 
exhibited in the overall lending market.
  Foreclosure and discrimination in lending practices are serious 
problems for America's cities. We are now on the brink of a massive 
wave of foreclosures in this country.
  Although there are a significant number of individuals and 
organizations working to reverse existing problems in the lending 
system and create viable alternatives to foreclosure and subprime 
mortgages, the tide will not be turned because the magnitude of the 
problem outstrips even the best of their abilities and efforts.
  To turn the tide of foreclosure in America's cities, leadership at 
the federal government level is necessary as well. We must examine the 
problem and the steps that can be taken before it becomes bigger and 
beyond us all.

                          ____________________