Congressional Hearing on Predatory Lending
The U.S. House of Representatives’ Financial Services Committee held a hearing Thursday night in Minneapolis on the subject of mortgage foreclosure and predatory lending.
Although the committee membership in attendance consisted entirely of Chairman Barney Frank, D-Mass., and Rep. Keith Ellison, D-Minn., the panel also included Rep. Betty McCollumn, D-Minn., state Attorney General Lori Swanson, St. Paul Mayor Chris Coleman, and Minneapolis City Council President Barb Johnson, all of whom discussed difficult issues with an overflow crowd, which included members of several advocacy groups
Frank noted in his opening remarks that “foreclosures are not occurring in little houses on the prairie — they’re happening in neighborhoods.” He went on to discuss the issue of the unregulated, non-FDIC mortgage market, saying that “if only regulated banks made mortgage loans, we might not have this problem — this is largely a problem in the unregulated segment of the mortgage market.”
Coleman and Johnson discussed the state of affairs in their cities, while Swanson focused on Minnesota issues and legislation related to home mortgage standards.
Many panelists directed pointed questions at Dick Todd of the Minneapolis Federal Reserve. Ellison asked whether the Fed has a role in regulating so-called “exotic” mortgage products, and Todd responded that while the local Fed branch can write rules governing such products, it cannot enforce those rules.
Sharon Glover of Golden Valley told her tale: she made an accident getting into a refinancing deal in which she extracted no equity, never received loan documentation, and her payments increased drastically twice: once when her loan was refinanced and again when her loan was sold to another lender, Ocwen. She said she never missed a payment, but nevertheless was served with a foreclosure notice. “I was planning to sell the house anyway because it had become too much for one person, but I hadn’t planned to lose everything.” She detailed the predatory practices undertaken by the mortgage lender, who was forced to withdraw the sheriff’s sale on her home when her lawyer presented the company with a class action lawsuit.
Her tale was echoed by Dante Rivera of St. Paul, who speaks with a thick accent, but was also taken in by exotic mortgage products, and eventually could not settle his payments.
The hearing ended on a fiery note: Ellison saved some pointed questions for the mortgage professionals on the final panel. Ellison asked several questions of Wayne Abed, president of the Minnesota Mortgage Association, centering on whether Abed thought certain products such as low-documentation or no-documentation loans should be marketed to consumers. Abed explained situations in which he thought such products had a fair application in the market, but Ellison appeared to be less than satisfied by his responses.
Frank ended the event with a small speech in which he linked mortgage and predatory lending regulation to the Interstate 35 bridge disaster, saying that “you cannot say you are for less government and then say you want better regulation in the mortgage industry, more funding for roads and bridges.” Frank pointed to both lending regulation and bridge maintenance as equally proper roles for government.
From start to finish, the event provided a powerful and personal example of the many issues connected to predatory lending practices — race, class, language, corporate exploitation, families under duress, and plenty of discussion on the role of state and federal agencies. There is little doubt that this discussion that will continue for some time in Minnesota and around America.