Building Sustainable Homeownership:
Responsible Lending and Informed Consumer Choice
Federal Reserve Bank of Chicago
230 South LaSalle Street, Chicago, Illinois 60604
June 7, 2006
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Pages 1-25 | 26-50 | 51-75 | 76-100 | 101-125 | 126-150 | 151-175 | 176-200 | 201-225 | 226-250 | 251-267
| Transcript | Line | Page |
|---|---|---|
| things. Both of those examples. And also, vendors | 1 | 226 |
| sometimes don't report when you pay on time, but | 2 | 226 |
| when you are late they do report. And we find many | 3 | 226 |
| more of those kinds of vendors in the | 4 | 226 |
| African-American community. | 5 | 226 |
| What happens with those same people | 6 | 226 |
| with undocumented income or lower credit scores go | 7 | 226 |
| to a mortgage broker? In most cases they are going | 8 | 226 |
| to end up with a subprime loan. And if it's | 9 | 226 |
| undocumented income, they are likely to be put into | 10 | 226 |
| a stated income loan. And if they have credit | 11 | 226 |
| problems, they are likely to be put into a 228 327 | 12 | 226 |
| loans since that is the bread and butter of most | 13 | 226 |
| subprime lenders. | 14 | 226 |
| And as Bruce alluded to earlier, we | 15 | 226 |
| are facing a real crisis now. Particularly in | 16 | 226 |
| California. Our friends at the Center for | 17 | 226 |
| Responsible Lending says there is six million loans | 18 | 226 |
| that are going to repost with interest rates over | 19 | 226 |
| 10 percent between now and the end of the year. | 20 | 226 |
| One million of those in California along. | 21 | 226 |
| Our counseling offices in California, | 22 | 226 |
| Miami, some on the East Coast, high cost markets | 23 | 226 |
| are increasingly seeing people come in now with | 24 | 226 |
| 327/228 that are repost and there is no way they | 1 | 227 |
| can afford it when they repost. So now they have | 2 | 227 |
| to refinance out or else they are going to be down | 3 | 227 |
| that road to foreclosure. | 4 | 227 |
| Now, if they come in our program, | 5 | 227 |
| they would have gotten a fixed rate mortgage, they | 6 | 227 |
| would have gotten counseling. If they ever get | 7 | 227 |
| below on their mortgage, behind on their mortgage, | 8 | 227 |
| we're notified of that fact and we aggressively | 9 | 227 |
| pursue those borrowers to help them. | 10 | 227 |
| MS. BRAUNSTEIN: I have a question about -- | 11 | 227 |
| this has come up from time to time, it even came up | 12 | 227 |
| the last time we did these hearings and still comes | 13 | 227 |
| up over the years. We get asked why in your HOEPA | 14 | 227 |
| rules did you not require that anybody who gets | 15 | 227 |
| HOEPA loans has to have housing counseling when | 16 | 227 |
| they get those loans. And I know that HOEPA loans | 17 | 227 |
| are a really small part of the population. So I'm | 18 | 227 |
| thinking theoretically here. | 19 | 227 |
| So suppose it somehow expanded to | 20 | 227 |
| higher cost loans or complex loans, if there was | 21 | 227 |
| some way that we would or that the government could | 22 | 227 |
| require people to have counseling that are going to | 23 | 227 |
| take out these complex products. | 24 | 227 |
| And one of the issues that we've | 1 | 228 |
| always struggled with about that is that there is | 2 | 228 |
| counseling, and then there is a counseling. And | 3 | 228 |
| that was brought up by this panel. There is a big | 4 | 228 |
| difference between spending two hours on the | 5 | 228 |
| telephone with somebody getting housing counseling, | 6 | 228 |
| and having comprehensive housing counseling as it | 7 | 228 |
| was called in -- I think was it you, Mike, that | 8 | 228 |
| used that term or somebody here used that term | 9 | 228 |
| comprehensive housing counseling, where it's | 10 | 228 |
| usually over some period of time and it's much | 11 | 228 |
| more, much better quality. | 12 | 228 |
| And, you know, controlling for | 13 | 228 |
| quality and quantity and how do you stop, frankly, | 14 | 228 |
| predatory lenders from printing up business cards | 15 | 228 |
| that say "housing counselor" and handing them out | 16 | 228 |
| to their clients and saying, well, the law requires | 17 | 228 |
| you have housing counseling, so I can do that too. | 18 | 228 |
| Or my friends John over here does that and he can | 19 | 228 |
| do that. | 20 | 228 |
| I just wonder this issue keeps coming | 21 | 228 |
| up, the importance of this education, the | 22 | 228 |
| importance of having somebody like even Bruce at | 23 | 228 |
| the table with you. Is there a way around these | 24 | 228 |
| issues? What are your thoughts about this kind of | 1 | 229 |
| thing and how could it be done in a way to control | 2 | 229 |
| for quality and substance so that it's meaningful? | 3 | 229 |
| So that there are there aren't a lot of loopholes | 4 | 229 |
| and that basically it really isn't very | 5 | 229 |
| meaningful. | 6 | 229 |
| MR. GOTTSCHALL: There are just a couple of | 7 | 229 |
| things. It is a critical question right now. | 8 | 229 |
| Freddie some years ago did a study showing the | 9 | 229 |
| value of counseling as compared to the more limited | 10 | 229 |
| counseling activity and demonstrated the value. It | 11 | 229 |
| was very difficult to get anybody to really | 12 | 229 |
| economically quantify that and recognize that | 13 | 229 |
| within the system in terms of paying for it, but it | 14 | 229 |
| was there. | 15 | 229 |
| Now, changing situations on my | 16 | 229 |
| comments on the lending and the getting to "yes" | 17 | 229 |
| and people saying yes to just about anybody, and | 18 | 229 |
| now I think one of the secondary market groups is | 19 | 229 |
| saying counsel may not be necessary anymore for | 20 | 229 |
| some of their products. | 21 | 229 |
| We have a situation where the | 22 | 229 |
| counseling, you know, question is going to be a | 23 | 229 |
| critical one. My sense is the transparency | 24 | 229 |
| question, and a lot of people talk about | 1 | 230 |
| transparency and how to do that, it seems to me | 2 | 230 |
| even with a third-party kind of advisor or an | 3 | 230 |
| extremely public and transparent situation that you | 4 | 230 |
| can combat some of this. Because I agree with you, | 5 | 230 |
| how do you certify counseling. Neighbor Works of | 6 | 230 |
| America is doing that, and that is increasing the | 7 | 230 |
| number of good counselors. But there is still a | 8 | 230 |
| lots of opportunities for problems. | 9 | 230 |
| So transparency, and then how do you | 10 | 230 |
| publicly create that transparency. And then | 11 | 230 |
| managing the brokers who are actually making the | 12 | 230 |
| bad loans and keeping that in front of everybody so | 13 | 230 |
| that people are not doing business with the broker | 14 | 230 |
| who has taken advantage of people and has a high | 15 | 230 |
| early default, foreclosure record. How do you keep | 16 | 230 |
| track of those brokers who are causing the problems | 17 | 230 |
| so they are held accountable on those situations | 18 | 230 |
| and you can't get financing for the people that are | 19 | 230 |
| not making -- providing good advice and really | 20 | 230 |
| working with them. | 21 | 230 |
| So that doesn't really an the | 22 | 230 |
| question, because I don't know how you certify to | 23 | 230 |
| the point of getting only this six to eight hours | 24 | 230 |
| of counseling by a certified counselor recognized | 1 | 231 |
| and really done in a broad case. But on a more | 2 | 231 |
| limited transparency and public record of some kind | 3 | 231 |
| that creates more awareness of who is doing good | 4 | 231 |
| and who is not doing good. | 5 | 231 |
| MR. SHEA: There needs to be more study done on | 6 | 231 |
| this question. But the Bizar (phonetic) study said | 7 | 231 |
| and I think what our lending partners would agree | 8 | 231 |
| with us, most effective is one-on-one counseling. | 9 | 231 |
| You can't beat that. Next is phone counseling, the | 10 | 231 |
| last is going to a class. And below that is | 11 | 231 |
| reading a booklet and taking a test. That is the | 12 | 231 |
| hierarchy of effectiveness. | 13 | 231 |
| This is not rocket science. People | 14 | 231 |
| know this. Bruce's operation is an incredible | 15 | 231 |
| operation. NTIC has very good operations. They | 16 | 231 |
| provide quality counseling, put people in houses | 17 | 231 |
| and keep them there. We do the same thing. I | 18 | 231 |
| think people know how to do this. | 19 | 231 |
| The problem is there is not a funding | 20 | 231 |
| source or stream or plan to build a nationwide | 21 | 231 |
| housing counseling system. We work all over the | 22 | 231 |
| country, and when you say make it mandatory, I have | 23 | 231 |
| to scratch my head and say, gee, what if I live out | 24 | 231 |
| in Uma, Arizona and is no housing counseling agency | 1 | 232 |
| out there, what do you do? That is the big | 2 | 232 |
| problem. We don't have a national housing | 3 | 232 |
| counseling industry. I really strongly feel it's | 4 | 232 |
| partly your responsibility to upgrade that. | 5 | 232 |
| GOVERNOR OLSON: We have come back to our | 6 | 232 |
| lenders now, too, on this issue of counseling at | 7 | 232 |
| the front end of the mortgage application process, | 8 | 232 |
| especially for the HOEPA-type borrowers, not | 9 | 232 |
| necessarily the HOEPA, the HOEPA-type. | 10 | 232 |
| MS. ABRAMS: Two things. On the front end of | 11 | 232 |
| the process we work with a number of organizations | 12 | 232 |
| who do this and who do this. And we have products | 13 | 232 |
| that are our CRA products that are designed for the | 14 | 232 |
| markets. So the people are being counseled all the | 15 | 232 |
| along while they are saving for that first down | 16 | 232 |
| payment, and that first down payment is sort of | 17 | 232 |
| assisted and matched for a particular product. | 18 | 232 |
| So you have a record of these people | 19 | 232 |
| coming to a training or a homeownership preparation | 20 | 232 |
| class over a period of about six months. It's been | 21 | 232 |
| shown that those loans do perform better. People | 22 | 232 |
| know exactly what the process is going to be like. | 23 | 232 |
| They fully accept homeownership and they agree it's | 24 | 232 |
| right for them. They know that they are in a | 1 | 233 |
| product that is affordable and they know how to | 2 | 233 |
| stay in the home. | 3 | 233 |
| On the other side of the coin, we | 4 | 233 |
| have really good experience with our consumer | 5 | 233 |
| rescue loan program. And that is a program that we | 6 | 233 |
| fund with NCRC where we rescue consumers and | 7 | 233 |
| basically put them in a loan that gives them a | 8 | 233 |
| fresh start when they have had problems and they're | 9 | 233 |
| facing foreclosure due to loan problems or | 10 | 233 |
| servicing problems of that kind. That process | 11 | 233 |
| requires some ongoing counseling, two or three | 12 | 233 |
| hours of counseling before the, quote, rescue | 13 | 233 |
| happens and before they get a fresh start. | 14 | 233 |
| And we find that we have pretty good | 15 | 233 |
| results with that, but we could use more | 16 | 233 |
| counseling. I think I agree with Mike. It's not a | 17 | 233 |
| one or two hour type session. It's going to take | 18 | 233 |
| some a long time. Particularly if people don't | 19 | 233 |
| have -- if it's for many times they are first | 20 | 233 |
| homeowners in their family and there is not a | 21 | 233 |
| homeowner legacy and there is not lot of | 22 | 233 |
| experience. So the whole process is mysterious and | 23 | 233 |
| new. So it's going to take longer for some | 24 | 233 |
| borrowers when they face of these issues, and it's | 1 | 234 |
| generational and cultural and a lot needs to be | 2 | 234 |
| addressed and I agree it needs a lot more study. | 3 | 234 |
| MS. COPPOLA: I think we focused on this for | 4 | 234 |
| several years now, but we are just at the point | 5 | 234 |
| where we try to focus it on the point of view from | 6 | 234 |
| gaining empirical data so we can use this | 7 | 234 |
| information. But I do think you have three | 8 | 234 |
| preeminent financial counselors here and the city | 9 | 234 |
| has relationships with all three of these | 10 | 234 |
| organizations and I believe there's tremendous | 11 | 234 |
| value to that. | 12 | 234 |
| But in order to really understand how | 13 | 234 |
| it has to be structured going forward, I think we | 14 | 234 |
| need to be able to look at this in more detail and | 15 | 234 |
| statistically. I don't know if there is all | 16 | 234 |
| begging your question, if you're asking about the | 17 | 234 |
| legal consequences of imposing mandatory | 18 | 234 |
| requirements. Because in terms of a community | 19 | 234 |
| relations, I don't think we are necessarily the | 20 | 234 |
| right people to address that and I think it has | 21 | 234 |
| been addressed or try to. I think there have been | 22 | 234 |
| legislative efforts that have been filed in this | 23 | 234 |
| respect for reasons I think that we have stated. | 24 | 234 |
| But I think it's proof that there is | 1 | 235 |
| still value. We are all at the table trying to | 2 | 235 |
| figure out how to get the product out in best form | 3 | 235 |
| possible as broadly as possible. | 4 | 235 |
| MS. BRAUNSTEIN: There was a strong attempt at | 5 | 235 |
| that with the creation the HECCI year ago, a | 6 | 235 |
| national organization, and yet that went down the | 7 | 235 |
| tubes and I don't know what that tells us. If that | 8 | 235 |
| was just an isolated incident. | 9 | 235 |
| But that was I think people had some | 10 | 235 |
| fairly high hopes for that. Creating, as you | 11 | 235 |
| talked about, Mike, a national industry where | 12 | 235 |
| people would be certified, there would be a | 13 | 235 |
| national certification of housing counselors and it | 14 | 235 |
| failed. | 15 | 235 |
| MR. GOTTSCHALL: I think Neighbor Works America | 16 | 235 |
| is working to continue that kind of thing. But | 17 | 235 |
| you're right, the method and idea that, hey, this | 18 | 235 |
| is going to be a national network I think got into | 19 | 235 |
| the fact that some people, and probably those | 20 | 235 |
| around the table now, would then you have the other | 21 | 235 |
| computation who is not going to do it in someone is | 22 | 235 |
| not doing it, they have an advantage. So you have | 23 | 235 |
| the whole timing problem in terms of what the level | 24 | 235 |
| the requirement is on some people and not on | 1 | 236 |
| others. So that creates the dynamic of, | 2 | 236 |
| unfortunately, lowest common denominator in some | 3 | 236 |
| cases dictates what happens in the marketplace and | 4 | 236 |
| that's the problem. | 5 | 236 |
| MR. CHANIN: Let me ask a question to the | 6 | 236 |
| lenders. It's been suggested, questioned a little | 7 | 236 |
| bit, but suggested there may be some consumer push | 8 | 236 |
| back at least in certain circumstances to | 9 | 236 |
| counseling, and let me lay out the fact pattern. | 10 | 236 |
| A consumer is approached by a broker | 11 | 236 |
| or lender and they look at their watch and say in | 12 | 236 |
| two hours I can get you a loan. So that is one | 13 | 236 |
| choice, as oppose to going through multiple hours | 14 | 236 |
| of counseling, classes, whatever else it is, to | 15 | 236 |
| find if you have a suitable product for a consumer | 16 | 236 |
| which may be one that has a lower rate and can fix | 17 | 236 |
| credit score problems those kinds of things. | 18 | 236 |
| Is that something you have seen? Is | 19 | 236 |
| there any validity to that concern, to that | 20 | 236 |
| argument or -- | 21 | 236 |
| MS. ABRAMS: I think that consumers are | 22 | 236 |
| motivated by different things. The ones that are | 23 | 236 |
| in the workshops, that are coming voluntarily to | 24 | 236 |
| homeownership counseling, want to be there. Want | 1 | 237 |
| to be educated, want to be involved in the | 2 | 237 |
| process. | 3 | 237 |
| But I see just as many others that go | 4 | 237 |
| I don't need, that it's not right for me, I'm not | 5 | 237 |
| going to do that. Or you're trying to provide | 6 | 237 |
| people with information and they go, no. So again, | 7 | 237 |
| we are still looking at it and still looking hard | 8 | 237 |
| at it. | 9 | 237 |
| MS. COPPOLA: But the incentive for many of the | 10 | 237 |
| consumers who go through financial education | 11 | 237 |
| through City-sponsored education is a better priced | 12 | 237 |
| loan. So I think there is truly a character that | 13 | 237 |
| keeps people like that. | 14 | 237 |
| MS. WILLIAMS: I just had one other question. | 15 | 237 |
| You know, as I listen to the | 16 | 237 |
| different types of counseling, and we talked about | 17 | 237 |
| there is some a couple of hours, there is some that | 18 | 237 |
| is a little more comprehensive, and comprehensive | 19 | 237 |
| being very important in the process. And then this | 20 | 237 |
| thing that we hear sometimes even though you have | 21 | 237 |
| training, it doesn't necessarily change your | 22 | 237 |
| behavior, but you can still get in a bind. | 23 | 237 |
| And we have a lot of, you know, you | 24 | 237 |
| get inundated with a lot of paper, even when you | 1 | 238 |
| just go through the process in and of itself. And | 2 | 238 |
| it's pretty frightening I'm sure for many people. | 3 | 238 |
| It was frightening for me my first time through | 4 | 238 |
| it. And it's something that Heidi said that kind | 5 | 238 |
| of made me think that in addition to going through | 6 | 238 |
| all the training that you go through to sort of | 7 | 238 |
| maintain your home, that is there a way that in | 8 | 238 |
| addition to all the papers that you get, that you | 9 | 238 |
| can have, like, I don't know, the four key things | 10 | 238 |
| that you just must keep in your mind in addition to | 11 | 238 |
| everything else that will kind of help you through | 12 | 238 |
| the process? | 13 | 238 |
| And I heard you talk about, well, you | 14 | 238 |
| know you should make sure that you shop. You | 15 | 238 |
| should make sure that you know you have options. | 16 | 238 |
| There are people that you can trust. So they | 17 | 238 |
| always say that if you repeat the same four basic | 18 | 238 |
| messages over and over and they are getting it from | 19 | 238 |
| various locales, and I'm not sure that systemically | 20 | 238 |
| we do that. I mean, do you think that would help | 21 | 238 |
| in the process like that? | 22 | 238 |
| MS. COPPOLA: You know, it's interesting. I | 23 | 238 |
| come from a securities law background, and rather | 24 | 238 |
| the Miranda warnings, when banks got into the | 1 | 239 |
| securities business and behind every retail broker | 2 | 239 |
| in a bank branch you had to have three or four | 3 | 239 |
| points of disclosure. Past performance is not | 4 | 239 |
| indicative of future performance. Your security | 5 | 239 |
| deposits are not insured. You remember all these? | 6 | 239 |
| They are very valid points and we built them into | 7 | 239 |
| our curriculum as black letter. This pages starts | 8 | 239 |
| with this heading and then it's repeated | 9 | 239 |
| consistently throughout. | 10 | 239 |
| I think it's an interesting idea. | 11 | 239 |
| Again, in the securities context we used to add | 12 | 239 |
| disclosures to the confirm, right, until you filled | 13 | 239 |
| out the front page and you filled out the back | 14 | 239 |
| page, and then nobody writes it anymore because | 15 | 239 |
| it's too much, right. | 16 | 239 |
| Mortgage documentation, if I don't | 17 | 239 |
| read it and I'm a securities lawyer and education | 18 | 239 |
| and background, if I am not reading that because | 19 | 239 |
| it's too much, you know that people are generally | 20 | 239 |
| not reading that. | 21 | 239 |
| So I think that there is something to | 22 | 239 |
| some kind of bullet point. I don't think it's the | 23 | 239 |
| cure all, but I think if you can boil it down to | 24 | 239 |
| something like that that gets repeated, people will | 1 | 240 |
| ask questions about it and begin to understand it. | 2 | 240 |
| GOVERNOR OLSON: One of the points that hasn't | 3 | 240 |
| come out and would have been a good question, had I | 4 | 240 |
| thought of it, with the prior panel, but let me | 5 | 240 |
| just test it here as well. | 6 | 240 |
| There is an underlying presumption in | 7 | 240 |
| all of the regulations that we have with respect to | 8 | 240 |
| mortgages that there is enormous societal value to | 9 | 240 |
| homeownership and you often hear statistics or you | 10 | 240 |
| hear statements made. In fact, I think that I know | 11 | 240 |
| at the Fed we have recited those statistics, that | 12 | 240 |
| homeownership correlates with other values. Like | 13 | 240 |
| the tendency of a nuclear family to stay together, | 14 | 240 |
| perhaps to be involved in the school system or | 15 | 240 |
| participate more broadly as a voter. | 16 | 240 |
| I frankly have not seen the empirical | 17 | 240 |
| support for that. I suspect it's there, but I | 18 | 240 |
| haven't seen it. But I would be interested in your | 19 | 240 |
| real life experience. If you can detect that there | 20 | 240 |
| is in fact that sort of societal value of | 21 | 240 |
| homeownership, any of you? | 22 | 240 |
| MR. GOTTSCHALL: Well, we clearly have many, | 23 | 240 |
| many, many examples of people who we assisted in | 24 | 240 |
| buying homes that bought on the block that was a | 1 | 241 |
| problem block where they and one or two other | 2 | 241 |
| homeowners got together and worked on getting the | 3 | 241 |
| gang off the corner, worked on improving the | 4 | 241 |
| school, getting involved in the school, beginning a | 5 | 241 |
| block club. So clearly those anecdotal pieces are | 6 | 241 |
| there. I think there is empirical information | 7 | 241 |
| around that. | 8 | 241 |
| The other, of course, is the wealth | 9 | 241 |
| building. Many, many examples of people buying, | 10 | 241 |
| being able to finance kids going to college and all | 11 | 241 |
| those other kind of things. That is part of the | 12 | 241 |
| process. | 13 | 241 |
| I think the other one that doesn't | 14 | 241 |
| get touched on quite as much and there is more | 15 | 241 |
| regulation around the homeownership thing, is it | 16 | 241 |
| goes beyond the individual's impact. It's goes to | 17 | 241 |
| you have a foreclosed house, it's different from | 18 | 241 |
| taking the car off the block and putting it away. | 19 | 241 |
| It's an abandoned and vacant building and it's a | 20 | 241 |
| community asset problem. So the broader | 21 | 241 |
| regulations and the broad negative impact of | 22 | 241 |
| homeownership not succeeding because of these kinds | 23 | 241 |
| of problems is much more graphic and much more | 24 | 241 |
| dramatic. | 1 | 242 |
| So you have both the positive and the | 2 | 242 |
| much more negative. So that is why the regulation | 3 | 242 |
| around it and the focus on it and the education is | 4 | 242 |
| so much more critical -- maybe not more critical, | 5 | 242 |
| but much more visible in terms of the impact. | 6 | 242 |
| MR. SHEA: We have an affiliate organization | 7 | 242 |
| called Project Vote, which is one of the largest | 8 | 242 |
| nonprofit voter registration organizations. And in | 9 | 242 |
| our written comments I will give you the exact data | 10 | 242 |
| to include it, but they tell us that homeowners are | 11 | 242 |
| two to one more likely to register to vote and | 12 | 242 |
| three to one more likely to vote. | 13 | 242 |
| GOVERNOR OLSON: All other factors being | 14 | 242 |
| equal? | 15 | 242 |
| MR. SHEA: That's across racial lines. | 16 | 242 |
| GOVERNOR OLSON: So if you correct for all the | 17 | 242 |
| other variables and you can isolate that variable | 18 | 242 |
| alone, interesting. | 19 | 242 |
| MR. ROSE: I think it's true, too, to point out | 20 | 242 |
| that what we are talking about is successful | 21 | 242 |
| homeownership. So what doesn't get counted in the | 22 | 242 |
| homeownership rates, homeownership rate is really a | 23 | 242 |
| net static. It's the net of those people who got | 24 | 242 |
| loans and those people who were successful | 1 | 243 |
| homeowners and those people who lost them. | 2 | 243 |
| So where successful homeownership is | 3 | 243 |
| obviously good for the wealth building of the | 4 | 243 |
| family and good for the stability of the community, | 5 | 243 |
| to push somebody into homeownership before they are | 6 | 243 |
| ready or to sabotage their efforts, that's the down | 7 | 243 |
| side to it. | 8 | 243 |
| GOVERNOR OLSON: I think that's the point that | 9 | 243 |
| Bruce is making, too. That with that upside, there | 10 | 243 |
| is a greater down side potentially. | 11 | 243 |
| MS. ABRAMS: I have to share another static | 12 | 243 |
| that came out of my survey. We felt that | 13 | 243 |
| overwhelmingly people wanted to be homeowners and | 14 | 243 |
| understood the value. Over 70 percent say that is | 15 | 243 |
| one of my goals, to become a homeowner. And they | 16 | 243 |
| spent months looking for just the right house. | 17 | 243 |
| 34 percent of them spend a week or | 18 | 243 |
| less in finding the right mortgage to go with that | 19 | 243 |
| right home. So again, education, and this just | 20 | 243 |
| continues to underscore the need to help people. | 21 | 243 |
| They say they don't understand the | 22 | 243 |
| process. They want to be homeowners, but they | 23 | 243 |
| don't understand the process. | 24 | 243 |
| There are lots of things we can do to | 1 | 244 |
| help with sort of bridging that gap. Lots of | 2 | 244 |
| different ways of getting at that. And we have | 3 | 244 |
| talked about most of them here today. | 4 | 244 |
| GOVERNOR OLSON: Alicia, did you have a | 5 | 244 |
| question? | 6 | 244 |
| MS. WILLIAMS: I might be having a senior | 7 | 244 |
| moment, but I just want to go back to Michael's | 8 | 244 |
| recommendations. And I know you talked a little | 9 | 244 |
| bit about the housing counseling, but I'm not sure | 10 | 244 |
| I heard your view on I think you said suitability | 11 | 244 |
| standards for HMDA, and then -- I'm sorry, HOEPA. | 12 | 244 |
| And then you mentioned preemption and right of | 13 | 244 |
| private action? | 14 | 244 |
| MR. SHEA: I'm a reformed sports junky, so | 15 | 244 |
| you're going to have to -- the federal regulators | 16 | 244 |
| should not be the Pistons and the State Attorney's | 17 | 244 |
| job should not be the Heat. You all should be on | 18 | 244 |
| the same team. You really should work together. | 19 | 244 |
| In the last four or five years it | 20 | 244 |
| seems like we read more about federal regulators | 21 | 244 |
| having intramural turf battles amongst each other, | 22 | 244 |
| and a lot of times that results in lowering | 23 | 244 |
| consumer protection standards. We read about | 24 | 244 |
| efforts to preempt state laws, preempt State | 1 | 245 |
| Attorney General action. It makes no sense to us. | 2 | 245 |
| As we look at it over the last four | 3 | 245 |
| or five years, the most effective enforcement has | 4 | 245 |
| been by State Attorney Generals and private class | 5 | 245 |
| action lawsuits. I mean, from where we sit, with | 6 | 245 |
| all due respect, we just don't see the federal | 7 | 245 |
| regulators very active in enforcement of the laws | 8 | 245 |
| that do exist. | 9 | 245 |
| So then when we hear various federal | 10 | 245 |
| regulators saying we have to prevent a patchwork | 11 | 245 |
| quilt of various laws around the country from being | 12 | 245 |
| created, we think, geez, what are their | 13 | 245 |
| priorities? Their priorities should be to stop | 14 | 245 |
| predatory lending and not protect the banks against | 15 | 245 |
| the patchwork quilt of laws from around the | 16 | 245 |
| country. That was what I was referring to. | 17 | 245 |
| GOVERNOR OLSON: I suspect we are done. And at | 18 | 245 |
| 3:00 o'clock -- the reason I say not right this | 19 | 245 |
| minute, but at 3:00 o'clock, because the Chair | 20 | 245 |
| needs a break and I'm going to take it. But we | 21 | 245 |
| will be back here at 3:00 or thereabouts to hear | 22 | 245 |
| from the public for the open mike. | 23 | 245 |
| Thanks to all of our panels. Very, | 24 | 245 |
| very useful, very beneficial, and they contributed | 1 | 246 |
| significantly, each of you. | 2 | 246 |
| (Whereupon, a short break was | 3 | 246 |
| taken.) | 4 | 246 |
| GOVERNOR OLSON: The people who have signed up to | 5 | 246 |
| speak are sitting at the table, and again we will | 6 | 246 |
| take them this clock wise order. | 7 | 246 |
| Brenda Grauer, go ahead. | 8 | 246 |
| MS. GRAUER: Good afternoon. My name is Brenda | 9 | 246 |
| Grauer. I'm the director of technical assistance | 10 | 246 |
| and training for the Affordable Statewide Housing | 11 | 246 |
| Coalition and Housing Action in Illinois. We have | 12 | 246 |
| about 200 members statewide, about 45 of whom are | 13 | 246 |
| nonprofit housing counseling agencies across the | 14 | 246 |
| state. | 15 | 246 |
| I have the pleasure of being a former | 16 | 246 |
| legal services attorney having worked for NHS, | 17 | 246 |
| their profession department, and now in my current | 18 | 246 |
| capacity to have seen this issue from the consumer | 19 | 246 |
| standpoint from the standpoint of education, | 20 | 246 |
| litigation and legislation. I can tell you that | 21 | 246 |
| all three are definitely necessary components to | 22 | 246 |
| regulate this problem, to help resolve this | 23 | 246 |
| problem. | 24 | 246 |
| But most importantly, it's | 1 | 247 |
| legislation. We've seen what has happened as | 2 | 247 |
| Dan Lindsey and Diane Thomas and Tom James talked | 3 | 247 |
| earlier today about the impact that state | 4 | 247 |
| legislation has had in Illinois. What we have been | 5 | 247 |
| able to regulate for, we don't see those | 6 | 247 |
| practices. | 7 | 247 |
| I was talking to a colleague | 8 | 247 |
| recently. We liken it to driver's education. For | 9 | 247 |
| years there has been a requirement for driver's | 10 | 247 |
| education, and during that driver's education | 11 | 247 |
| people are told wear their seat belts. Seat belts | 12 | 247 |
| save lives. They are told the impact if you don't | 13 | 247 |
| wear seat belts, what will happen. | 14 | 247 |
| And yet those warnings and that | 15 | 247 |
| education has not been sufficient. What has been a | 16 | 247 |
| significant change in people wearing seat belts and | 17 | 247 |
| saving their lives has been a rule, has been a law | 18 | 247 |
| that people are required to wear their seat belts | 19 | 247 |
| or they get tickets. I can speak to that because I | 20 | 247 |
| actually got my very first seat belt ticket last | 21 | 247 |
| week, and I now wear my set belt. | 22 | 247 |
| So legislation is an important | 23 | 247 |
| component here. Things that we legislate against | 24 | 247 |
| in our Illinois Homeowner Act, lowering the | 1 | 248 |
| triggers, lump sum credit insurance, common yields | 2 | 248 |
| and set premiums as part of the points and fees. | 3 | 248 |
| Those are all things that we are not seeing as much | 4 | 248 |
| of now. I think it has been effective. | 5 | 248 |
| Some of the panelists this morning, | 6 | 248 |
| Mr. Posner was talking about consumer advocacy | 7 | 248 |
| groups and their efforts and how effective they | 8 | 248 |
| have been in litigation, particularly with | 9 | 248 |
| Household, Providian, Associates. That's after the | 10 | 248 |
| fact. That's after these lenders have been allowed | 11 | 248 |
| to rape our communities with the funding, and they | 12 | 248 |
| have to put some of it back in the form of | 13 | 248 |
| settlement fees. But clearly they are still | 14 | 248 |
| allowed to make a profit, they are still allowed to | 15 | 248 |
| make these loans. | 16 | 248 |
| We need not just the education, which | 17 | 248 |
| is insufficiently funded and not reliable, both in | 18 | 248 |
| terms of changing requirements, Fannie-Mae pulling | 19 | 248 |
| out the requirements for counseling now under their | 20 | 248 |
| My Community mortgage product, which is a first | 21 | 248 |
| time home buyer program. And the reason why | 22 | 248 |
| they're pulling out the housing counseling | 23 | 248 |
| requirements, supposedly, is to be able to compete | 24 | 248 |
| with the subprime market. | 1 | 249 |
| So clearly just the requirement for | 2 | 249 |
| housing counseling and education is not | 3 | 249 |
| sufficient. We need it as a component of the | 4 | 249 |
| tighter restrictions and regulations and | 5 | 249 |
| sustainability standards is really what is required | 6 | 249 |
| here. | 7 | 249 |
| GOVERNOR OLSON: My goodness. I think you are | 8 | 249 |
| the grand champion of having your statement come | 9 | 249 |
| right down to the wire. | 10 | 249 |
| I once had to testify before one the | 11 | 249 |
| house banking committees I think, and I finished my | 12 | 249 |
| statement right on. That was the only thing I was | 13 | 249 |
| congratulated on. | 14 | 249 |
| Brenda, for you and for everybody | 15 | 249 |
| else, just as a reminder, these are very short time | 16 | 249 |
| frames we understand. But each of are you invited | 17 | 249 |
| to submit your written comments. And that is by | 18 | 249 |
| August 15, so you have plenty of time. | 19 | 249 |
| Teresa Lambarry. Did I say that | 20 | 249 |
| correctly? | 21 | 249 |
| MS. LAMBARRY: Yes, you did. | 22 | 249 |
| My name is Theresa Lambarry and I'm | 23 | 249 |
| from Spanish Coalition for Housing. | 24 | 249 |
| GOVERNOR OLSON: That doesn't roll off my | 1 | 250 |
| Minnesota tongue. | 2 | 250 |
| THE WITNESS: And I am the manager, the program | 3 | 250 |
| manager for the Homeownership and Spanish Coalition | 4 | 250 |
| for Housing. We have three different counseling | 5 | 250 |
| agencies. Our main office is on the north side on | 6 | 250 |
| North and Pulaski. We have one on 18th Street, | 7 | 250 |
| 1132 West 18th, and one in southeast Chicago. And | 8 | 250 |
| of course I'm a big advocate of homeownership | 9 | 250 |
| classes, and especially prepurchase. | 10 | 250 |
| But not only prepurchase. It goes | 11 | 250 |
| hand-in-hand with post-purchase counseling and loss | 12 | 250 |
| mitigation training also. Because everything comes | 13 | 250 |
| hand-in-hand. You must start teaching people how | 14 | 250 |
| not to run into default because they're going to | 15 | 250 |
| chose a good lender, they are going to chose a good | 16 | 250 |
| product, a good house, et cetera, et cetera. | 17 | 250 |
| And I just wanted to voice what Bruce | 18 | 250 |
| said. I think it's legislation is wonderful, but | 19 | 250 |
| homeownership counseling is very necessary. A good | 20 | 250 |
| curriculum, a standardized curriculum. | 21 | 250 |
| We went through with HICCE, and after | 22 | 250 |
| HICCE wasn't there, we went through Neighborhood | 23 | 250 |
| Works and Neighbor Works, and we have taken the | 24 | 250 |
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