Public Meeting Bank of America Corporation and Countrywide Financial Corporation
Held on Monday, April 28, 2008, at the Los Angeles Branch of Federal Reserve Bank of San Francisco
1
THE FEDERAL RESERVE BOARD
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PUBLIC MEETING REGARDING THE NOTICE OF
BANK OF AMERICA CORPORATION
TO ACQUIRE COUNTRYWIDE FINANCIAL CORPORATION
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Monday
April 28, 2008
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The public meeting came to order at 8:30
a.m. in Branch Conference Center, 950 South
Grand Avenue, Los Angeles, California, Sandra
Braunstein, Director, Federal Reserve Board,
presiding.
FEDERAL RESERVE SYSTEM PANEL:
SANDRA F. BRAUNSTEIN, Director,
Federal Reserve Board
PATRICIA ROBINSON, Assistant General Counsel,
Federal Reserve Board
MAC ALFRIEND, Senior Vice President,
Federal Reserve Bank of Richmond
SCOTT TURNER, Director,
Federal Reserve Bank of San Francisco
BANK OF AMERICA CORPORATION PANEL:
LIAM MCGEE, President,
Global Consumer & Small Business Banking
ANDREW PLEPLER, Senior Vice President,
Global Community Impact
JANET LAMKIN, California State President
2
T A B L E O F C O N T E N T S
Welcome
Director Braunstein . . . . . . . . . . .4
Bank of America Corporation Panel
Liam McGee. . . . . . . . . . . . . . . .9
Andrew Plepler. . . . . . . . . . . . . 26
Janet Lamkin. . . . . . . . . . . . . . 33
Panel 1
Congresswoman Maxine Waters . . . . . . 45
Adolfo Bailon . . . . . . . . . . . . . 65
Panel 2
Robyn C. Smith. . . . . . . . . . . . . 69
Butch Wing. . . . . . . . . . . . . . . 76
Panel 3
Roberto Barragan. . . . . . . . . . . . 87
Clarence Williams . . . . . . . . . . . 90
Sharon Kinlaw . . . . . . . . . . . . . 93
Kevin Stein . . . . . . . . . . . . . . 97
Alan Fisher . . . . . . . . . . . . . .107
Panel 4
Michael Rubinger. . . . . . . . . . . .111
Judy Kennedy. . . . . . . . . . . . . .115
Doris Koo . . . . . . . . . . . . . . .122
Carol Galante . . . . . . . . . . . . .129
Panel 5
Orson Aguilar . . . . . . . . . . . . .135
Pastor John Hunter. . . . . . . . . . .140
Denise Hunter . . . . . . . . . . . . .143
Faith Bautista. . . . . . . . . . . . .147
Martha Montoya. . . . . . . . . . . . .150
Steve Figueroa. . . . . . . . . . . . .155
George Dean . . . . . . . . . . . . . .158
Ortensia Lopez. . . . . . . . . . . . .160
Pastor George Thompson. . . . . . . . .163
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T A B L E O F C O N T E N T S (Con't.)
Panel 5 (Continued)
Claudia Viek. . . . . . . . . . . . . .166
Jorge Correlajo . . . . . . . . . . . .168
Larry Ortega. . . . . . . . . . . . . .170
Lynn Dangtu . . . . . . . . . . . . . .173
Joey Quinto . . . . . . . . . . . . . .175
Bob Gnaizda . . . . . . . . . . . . . .177
Panel 6
Lez Trujillo. . . . . . . . . . . . . .181
Angela Sanbrano . . . . . . . . . . . .185
Marvin Andrade. . . . . . . . . . . . .188
Mary Kaiser . . . . . . . . . . . . . .190
Panel 7
Sandra McNeill. . . . . . . . . . . . .197
Allen Baldwin . . . . . . . . . . . . .202
Gail Burks. . . . . . . . . . . . . . .207
Rudy Cavazos. . . . . . . . . . . . . .213
Panel 8
Ty Knolwes. . . . . . . . . . . . . . .220
Diane Knolwes . . . . . . . . . . . . .224
Angelica Rubio. . . . . . . . . . . . .228
David Lizarraga . . . . . . . . . . . .235
Panel 9
Mark Pinsky . . . . . . . . . . . . . .244
Marc Spencer. . . . . . . . . . . . . .255
Villy Wang. . . . . . . . . . . . . . .258
Panel 10
Gail Burks. . . . . . . . . . . . . . .207
Panel 11
Katrina Vizinau . . . . . . . . . . . .284
Gertrude Guillory . . . . . . . . . . .289
Donette Heard . . . . . . . . . . . . .302
Yolanda Clark . . . . . . . . . . . . .297
Adjourn
4
1 P-R-O-C-E-E-D-I-N-G-S
2 (8:34 a.m.)
3 DIRECTOR BRAUNSTEIN: Good morning
4 everybody and I am pleased to welcome you
5 today to this public meeting on the
6 application of Bank of America Corporation to
7 acquire Countrywide Financial Corporation.
8 And first, I will introduce
9 myself. I am Sandra Braunstein, Director of
10 the Division of Consumer and Community Affairs
11 of the Federal Reserve Board in Washington,
12 D.C. I am the presiding officer for this
13 public meeting.
14 Our other panelists are Patricia
15 Robinson, who is an Assistant General Counsel
16 in the Federal Reserve Board's Legal Division.
17 And to her right is Mac Alfriend, who is a
18 Senior Vice President in the Department of
19 Banking Supervision and Regulation from the
20 Federal Reserve Bank of Richmond. To my left
21 is Scott Turner, who is Director of Community
22 Development from the Federal Reserve Bank of
5
1 San Francisco. And Scott is also the
2 Community Affairs Officer.
3 We are here today because Bank of
4 America Corporation from Charlotte, North
5 Carolina, has applied for approval to acquire
6 Countrywide Financial Corporation, Calabasas,
7 California. When the Federal Reserve
8 considers an application, we look at a number
9 of factors under the Bank Holding Company Act.
10 These include financial issues, managerial
11 issues, competitive issues and the views of
12 the communities affected. In doing so, we
13 particularly look at the record of performance
14 of the parties under the Community
15 Reinvestment Act or the CRA. The CRA requires
16 the Board to take into account an
17 institution's record of meeting the credit
18 needs of its entire community.
19 The purpose of the public meeting
20 today is to receive information regarding
21 factors and to clarify factual issues related
22 to the application. We are pleased that so
6
1 many witnesses have come forward to testify at
2 this public meeting. We will have a total of
3 over 120 groups and individuals represented.
4 Let me make a few remarks about
5 the procedures. This is what is called an
6 informal public meeting. Members of the panel
7 may ask questions of those who were
8 testifying. This is not a formal
9 administrative hearing. So, we are not bound
10 by rules regarding evidence, cross-
11 examinations and some of the formal trappings
12 of that kind of a proceeding.
13 Because we have so many witnesses,
14 we need to stick to the schedule so that
15 everyone who has asked to offer testimony will
16 have a chance to do so. We are going to ask
17 the witnesses today and tomorrow to be mindful
18 of the needs of others and to help us stay on
19 schedule. The panels of witnesses will be
20 expected to keep within their allotted times.
21 We have a timekeeper. Melody, can you just
22 raise your hand just so? We have a timekeeper
7
1 up here. The timekeeper is going to give
2 people a signal, a sign when they have two
3 minutes left, and then signal them when their
4 times is up.
5 There may be some individuals who
6 did not have a chance to sign up in advance.
7 And to the extent possible, we want to give
8 them a chance to speak as well. At the end of
9 the meeting today, we will make available to
10 anybody who would like to make a presentation,
11 time permitting, we will have an open mike
12 session, we would ask that those who want to
13 speak at the open mike session sign up. And
14 there is, the registration table is outside.
15 MR. TURNER: Yes, right outside.
16 DIRECTOR BRAUNSTEIN: Right
17 outside the doors.
18 One more comment about the
19 testimony. Witnesses may submit a written
20 supplement to their oral testimony but must do
21 so by next Tuesday, May 6th and then the
22 record will be closed. Any written
8
1 supplements should be directed to Jennifer
2 Johnson, Secretary of the Board of Governors
3 of the Federal Reserve System in Washington,
4 D.C. and they must be received by 5:00 p.m.
5 Eastern Time on May 6th.
6 If you haven't turned in your
7 copies of your written testimony or you have
8 other written statements to put into the
9 record, you can also leave them with the
10 Federal Reserve Stamp at the registration
11 table. And it is very important that we get
12 this material for the record.
13 And there will be a hard copy of a
14 written transcript of these proceedings. We
15 have a court reporter here today and the
16 transcript will be available through the
17 Federal Reserve Bank of San Francisco and the
18 Board sometime next week. In addition it will
19 also be available next week on the Board's
20 public website.
21 And with that, we are going to
22 begin the proceedings. We will ask, as we
9
1 always do that for each speaker, please state
2 your name and your organization for the record
3 before you start giving your remarks.
4 And with that, I will recognize
5 our first panel. Liam McGee, Andrew Plepler
6 and Janet Lamkin. And we can start, Liam,
7 with you first.
8 MR. MCGEE: Thank you. Good
9 morning.
10 Good morning. My name is Liam
11 McGee. I am President of Global Consumer and
12 Small Business Banking for Bank of America.
13 Joining me, as was noted, are Andrew Plepler,
14 who is our Global community Impact Executive
15 and President of the Bank of America
16 Charitable Foundation and Janet Lamkin, who is
17 President of Bank of America, California. We
18 would like to thank the Federal Reserve for
19 the opportunity to discuss the benefits of
20 Bank of America's proposed acquisition of
21 Countrywide Financial Corporation.
22 But first, I am proud to announce
10
1 that late last week the Office of the
2 Comptroller of the Currency notified Bank of
3 America that we received an outstanding rating
4 in our recently completed Community
5 Reinvestment Act Exam. As you know, the
6 Community Reinvestment Act measures the Bank's
7 performance in meeting the needs of every
8 community we serve. This is our sixth
9 consecutive outstanding rating. We think it
10 is an appropriate recognition of our deep
11 commitment and service to the communities in
12 which we do business.
13 Our commitment to the communities
14 is ingrained in the Bank of America Culture
15 that holds all of our associates accountable
16 for doing the right thing for customers,
17 shareholders, communities, and one another.
18 That accountability also applies to the
19 acquisition of Countrywide. We believe the
20 financial strength, security and stability of
21 the combined company will allow us to enable
22 people to buy homes, and stay in homes, and to
11
1 assist many of those affected by the current
2 mortgage troubles.
3 Fundamental changes in the
4 marketplace also mean that we will govern key
5 aspects of the combined mortgage company
6 differently than in the past. What will not
7 change, however, is that our expectation that
8 all of our associates, as well as anyone who
9 does business with us will be held to the
10 highest standards of trust, integrity,
11 accountability, and business excellence. Bank
12 of America's values and business practices
13 will govern how we run the combined mortgage
14 business. So, we will operate under the Bank
15 of America brand. As with all acquisitions,
16 the brand change will not happen overnight,
17 but will be phased in as we integrate the
18 company over time.
19 Now California, in particular,
20 will benefit from this transaction. I am
21 pleased to announce today that Calabasas,
22 California will be the national headquarters
12
1 for the combined mortgage business. This
2 decision highlights the continued importance
3 of the California market to Bank of America
4 and our commitment to maintaining our
5 leadership position here.
6 We are also proud to announce
7 today that we are the first bank to support
8 Governor Schwarzenegger's Bank on California
9 Initiative. This is an ambitious effort to
10 bring under-banked individuals into the
11 financial mainstream. A critical step to
12 enable low income wage earners to begin a
13 banking relationship and build assets. We led
14 the Bank on San Francisco Initiative with the
15 City Treasurer there and learned a great deal.
16 We look forward to helping make the Governor's
17 program a tremendous success.
18 Let me turn now to home lending
19 and our plans for the combined mortgage
20 business. We are unwavering in our mission of
21 helping consumers achieve their dreams of home
22 ownership. Today, millions of Americans who
13
1 otherwise might not have been able to do so in
2 the past, have achieved home ownership because
3 of the efforts of Bank of America and
4 Countrywide. Bank of America will continue to
5 offer home loan products to those who can
6 afford them, while our lending practices will
7 evolve to reflect this dramatically different
8 mortgage environment.
9 We also recognize that some
10 consumers who are experiencing financial
11 challenges but who ultimately have the ability
12 to repay their loans need our help to keep
13 their loans and we are ready to help them. We
14 do so because no one benefits from a
15 foreclosed home. A customer's dreams are
16 shattered, communities are weakened, and it is
17 bad business for banks. So, we continue to
18 reach out to homeowners, community groups,
19 regulators, and legislators to better our
20 understanding of their concerns. And we are
21 listening and we are acting.
22 As America's largest home loan
14
1 provider, we will lead a new era of home
2 lending built on secure, transparent and fair
3 practices, easily understood and available to
4 all who can afford to own a home.
5 To accomplish this, we will
6 improve the mortgage origination process,
7 including products offered, sales and
8 underwriting standards, and channels of
9 distribution. We will reduce the number of
10 foreclosures. We will help the communities
11 hardest hit by foreclosures and continue to
12 make affordable mortgages available to those
13 traditionally under-served, including low and
14 moderate income, and minority households.
15 Customers tell us that they want
16 us to continue offering a broad array of
17 responsible home lending products and employ
18 sound underwriting criteria to ensure that
19 they can get in and stay in their homes. The
20 newly combined mortgage business will offer
21 mass market retail customers the following
22 types of first lien mortgage loans.
15
1 Conforming loans underwritten to
2 standard guidelines of the government and
3 government sponsored enterprises, including
4 expanded approval guidelines and FHA/VA
5 guidelines designed for low and moderate
6 income borrowers.
7 Nonconforming loans with terms
8 expected to produce no greater risk of default
9 than our conforming loans.
10 Interest-only, fixed rate, and
11 adjustable rate mortgage products subject to
12 a ten year minimum interest-only period that
13 removes to the possibility of short-term
14 payment shock. And fixed period ARMs that
15 provide borrowers low initial rates with the
16 security of fixed payments, subject to
17 protections against severe step-ups and
18 payment amounts.
19 Upon completion of the merger,
20 Bank of America will continue our long
21 established policy not to offer subprime
22 mortgage loans. We will not offer certain
16
1 nontraditional mortgages, including so-called
2 Option ARM Loans in which payments may not
3 cover accrued interest and cause negative
4 amortization. And we will significantly
5 curtail come other nontraditional mortgages,
6 such as certain low documentation loans.
7 Most importantly, we remain
8 committed to offering affordable mortgage
9 loans, particularly to low and moderate income
10 and minority households, subject to these
11 prudent lending standards.
12 Bank of America is equally
13 committed to enhanced consumer protection. We
14 wills strive to ensure that borrowers are
15 presented with appropriate product options for
16 which they qualify, understand the product
17 features and are able to make informed
18 choices, and are not deliberately steered to
19 products that are more costly or for
20 refinances that provide no tangible benefits.
21 We will adopt practices with regard to
22 prepayment penalties and escrows that are
17
1 responsive to consumer demands while
2 reflecting prudent risk management.
3 We will offer our customers
4 choices to have loans with or without
5 prepayment fees and we will offer prepayment
6 fees only if the customer receives the
7 benefits of a lower loan rate. Our fees will
8 be transparent and clearly disclosed, so that
9 our customers understand available product
10 options, features, rates, and terms that are
11 consistent with borrowers' qualifications.
12 We have listened to customers
13 share their fear and distress when faced with
14 delinquency and foreclosure. And like any
15 prudent lender, Bank of America avoids
16 customer foreclosures, if reasonably possible.
17 As you know, the industry is
18 experiencing increased foreclosure and
19 foreclosure sales as a consequence of
20 declining home prices but let's put
21 foreclosures in perspective. First, 12.8
22 million or 93 percent of the homeowners whose
18
1 mortgages we will service following the
2 acquisition of Countrywide pay their mortgages
3 on time every month. Of the remaining seven
4 percent, a fraction of those who miss their
5 payments are faced in foreclosure and fewer
6 still actually result in foreclosure sale.
7 These foreclosures are
8 concentrated in subprime borrowers while many
9 others are investors or speculators. In other
10 cases, borrowers simply cannot afford the
11 homes they bought and the current housing
12 slump makes it difficult for them to sell
13 their homes. As we subtract the speculators,
14 that leaves us with the borrowers for whom we
15 are seeking a solution. Those who want to
16 keep their homes and have the financial
17 wherewithal but are facing challenges making
18 their monthly payments. We are focused on
19 doing all we can to help those borrowers.
20 We will continue certain practices
21 already in place, improve these practices, and
22 introduce new efforts to help borrowers avoid
19
1 foreclosures, including robust processes for
2 identifying and contacting borrowers, special
3 strategies for subprime borrowers holding
4 hybrid adjustable rate mortgages, and
5 refinancing, loan modifications, and other
6 restructuring tools that make the borrower's
7 debt affordable. We will devote substantial
8 resources, financial and otherwise to these
9 important tasks. And through focused effort
10 and determination, we expect our combined
11 company over the next two years will
12 successfully modify or work out at least 40
13 billion dollars in troubled mortgage loans,
14 helping at least 265,000 customers remain in
15 their homes.
16 We will tailor our workout
17 strategies to a borrower's particular
18 circumstance. Once we have been able to make
19 customer contact, we work with the distressed
20 borrowers to match the customers' repayment
21 ability with the appropriate loss mitigation
22 option, using tools such as loan
20
1 modifications, forbearances, and repayment
2 plans, lower rates, and possibly principle
3 reductions. We will not assess new late
4 charges for customers in foreclosure and we
5 will waive prepayment or trustee fees, when
6 permitted.
7 In response to the needs of our
8 customers, both companies have already added
9 more staff and improved the experience,
10 quality and training of the professionals
11 dedicated to loss mitigation. Over the past
12 year, the combined loss mitigation staffs have
13 doubled to the current level of over 3,900
14 associates assisting customers. I would like
15 to announce that we will maintain no less than
16 this level for at least one year after the
17 acquisition.
18 We will continue to be proactive
19 in contacting customers with adjustable rate
20 mortgages who are facing significant rate
21 reset to provide assistance before a problem
22 hits and we will continue to educate borrowers
21
1 about risks and options available to them.
2 We will also improve our overall
3 loss mitigation efforts through self-
4 inspection and examination. For example, we
5 will establish at the Bank of America a loss
6 mitigation governance committee within the
7 bank, independent of the loss mitigation area,
8 to review and audit loss mitigation decisions
9 and performance.
10 We believe the key to helping
11 customers is outreach. At Bank of America,
12 collection and loss mitigation associates try,
13 on average, 17 times to reach a customer
14 between the time of delinquency and a
15 foreclosure sale on a first mortgage.
16 Countrywide, after three missed payments in
17 its subprime portfolio, sends an associate to
18 the customer's house to have a face-to-face
19 conversation about home retention options. At
20 both companies, loss mitigation outreach
21 efforts continue until the time of a
22 foreclosure sale. In addition, both companies
22
1 are leveraging industry and government
2 resources to help borrowers. Both are
3 founding members of the Hope Now Coalition and
4 are participants in the Project Lifeline
5 Initiative.
6 Now, while these efforts are
7 important, we recognize there is much more to
8 do. Both Bank of America and Countrywide will
9 continue to partner with community
10 organizations and programs such as NOCA,
11 ACORN, the California Home Ownership
12 Preservation Initiatives, Neighbor Works, and
13 New Vista to promote credit counseling and
14 financial literacy and to assist in home
15 retention and management of vacant properties.
16 We will continue to work with
17 community groups and government agencies to
18 identify new solutions for customers facing
19 foreclosure. Last week, we announced a new 35
20 million dollar Neighborhood Preservation
21 Program. Under this program, the Bank of
22 America Charitable Foundation together with
23
1 Countrywide will make 20 million dollars in
2 grants to national and local community
3 organizations specifically targeting loan
4 counseling, foreclosure prevention, and
5 support for purchase and management of vacant
6 properties.
7 Also, Bank of America will make 15
8 million dollars in program-related investments
9 to support these activities. We recognize
10 that foreclosures can have a ripple effect,
11 including communities with high levels of
12 vacant homes and tenants who lose housing when
13 their landlords default. This can also
14 increase the need for affordable rentable
15 properties. Many of these problems do not
16 have easy solutions. However, in addition to
17 our foreclosure prevention efforts, our
18 combined company will continue Bank of
19 America's policy of permitting tenants to
20 continue living in properties subject to
21 foreclosure for 60 days after the completion
22 of foreclosure proceedings. If the tenant
24
1 voluntarily leaves the property within 30 days
2 of the completion of foreclosure proceedings,
3 they will receive a $2,000 cash for keys
4 payment to help defray moving expenses. This
5 is an important issue and we are also
6 exploring other efforts.
7 Our continuing commitment to
8 community development will not waiver. As you
9 know, in 2004, we raised the bar when we
10 announced our ten year 750 billion dollar
11 community development goal. Today, we are
12 raising that bar. I am proud to announce Bank
13 of America's new and unprecedented ten year
14 goal of one and a half trillion dollars for
15 community development lending and investments.
16 This is the largest community development goal
17 ever by any company in America. In the coming
18 years, this goal is certain to enhance to
19 quality of life for millions of Americans in
20 need by helping finance the construction of
21 affordable housing throughout the country,
22 providing loans and other needed capital to
25
1 small businesses, supplying consumer loans,
2 including housing finance for low and moderate
3 income and minority borrowers, and financing
4 economic development for communities in need.
5 In addition, our charitable
6 foundation is raving its philanthropic giving
7 goal from one and a half billion dollars to
8 two billion dollars over the next ten years.
9 This is the most ambitious long-term corporate
10 philanthropic goal ever announced by any
11 company and we are setting this goal, despite
12 uncertain economic times.
13 We are optimistic about the future
14 prospects of the housing market and the
15 enhanced mortgage services Bank of America
16 will offer after its acquisition of
17 Countrywide. In announcing our new one and a
18 half trillion dollars community development
19 goal, industry leading mortgage loan
20 practices, and new foreclosure mitigation
21 strategies, we ensure that our customers will
22 continue to benefit from Bank of America's
26
1 responsible and principled approach to doing
2 business. We encourage others in the industry
3 to follow our lead.
4 Andrew Plepler will now give more
5 details in our community development and
6 philanthropic efforts.
7 MR. PLEPLER: Thank you, Liam. My
8 name is Andrew Plepler.
9 Bank of America's commitment to
10 strengthening the health and vitality of
11 communities stems from a deeply ingrained
12 philosophy and long tradition of demonstrating
13 corporate citizenship through community
14 development and philanthropy. In particular,
15 by partnering with nonprofits and community
16 leaders, we concentrate on improving the lives
17 of low and moderate income and minority
18 families and neighborhoods. Our record of six
19 consecutive CRA ratings, which Liam just
20 announced, is reflective of our community
21 development focus. In addition, the Bank of
22 America Charitable Foundation is the second
27
1 largest corporate donor in the world. And in
2 keeping with our community development work,
3 in excess of 50 percent of our charitable
4 grants are CRA qualified.
5 For many years, Bank of America
6 has been recognized for its community
7 development work. The vast majority of these
8 activities are the results of our line of
9 business products and services that we provide
10 to customers and communities. In more
11 specific areas of community development, we
12 have leveraged our knowledge and expertise to
13 become a national leader in affordable
14 housing, small business lending, and
15 neighborhood revitalization. And, we are
16 recognized for our results in creating
17 sustainable community and economic development
18 through public-private partnerships and public
19 policy advocacy on related issues.
20 Since 2004, our company has been
21 delivering on an ambitious ten year goal of
22 750 billion dollars for community development
28
1 loans and investments. And as you just heard
2 from Liam, with the completion of our merger
3 with Countrywide, we will double our community
4 development loans and investments.
5 To provide just a few prove
6 points, consider some of our 2007 results.
7 More than 100 billion dollars in community
8 development, loans, and investments to low and
9 moderate income and minority families, small
10 businesses, and communities, financing,
11 developing, and rehabbing nearly 22,000 units
12 of affordable housing; 25.6 billion dollars in
13 small business lending and number one SBA
14 lender for the tenth consecutive year;
15 investing more than 84 million dollars in
16 Community Development Financial Institutions
17 or CDFIs; and a three year cumulative total of
18 more than 273 billion dollars in community
19 development activity.
20 Because we also believe that
21 affordable quality rental housing is critical
22 to our national housing stock, we have been a
29
1 leader in providing financing to both non- and
2 for-profit developers. While others are
3 retrenching or exiting this business, Bank of
4 America remains and strong player in this
5 space and it has expanded its capability to
6 direct low income housing tax credit
7 investments to ensure continuity and capacity
8 in the market.
9 In addition to setting a new
10 community development goal, you also heard
11 Liam refer to our new two billion dollars in
12 philanthropic giving goal to begin in 2009.
13 Since 2004 we have invested more than 550
14 million dollars toward increasing the health
15 and vitality of the neighborhoods throughout
16 our franchise. Through signature programs
17 such as our Neighborhood Excellence
18 Initiative, we are increasing the capacity of
19 community organizations, developing the
20 current and the next generation of community
21 leaders and creating significant impact in the
22 communities we serve. By also supporting
30
1 organizations such as hospitals, universities,
2 and arts institutions, we are helping to
3 create jobs and stimulate economic development
4 to enhance the quality of life in diverse
5 neighborhoods. In addition, our employees
6 provide tremendous support as volunteers in
7 the communities where we live and work. We
8 exceeded more than 200 million dollars in
9 charitable giving in 2007 and our employees
10 contributed more than 650,000 volunteer hours
11 and more than 20 million dollars in charitable
12 foundations to help meet pressing community
13 leads.
14 Our community development and
15 philanthropic commitments begin with
16 engagement in active on-going conversations
17 with community and non-profit leaders at the
18 local, state, and national levels. We do this
19 in order to have an understanding of the needs
20 and priorities unique to each community, so
21 that our investments can be as relevant and
22 impactful as possible.
31
1 For me, personally, one of the
2 most rewarding parts of my role at the bank is
3 engaging in dialogue with these community
4 leaders through community forums and
5 individual meetings. Most recently, I was
6 pleased to participate in meeting with Bob
7 Gnaizda and Orson Aguilar from the Greenlining
8 Institute and Alan Fisher from the California
9 Reinvestment Committee and members of his
10 Board of Directors. These dialogues make us
11 a better company and we look forward to
12 continuing these conversations.
13 I would like to give two other
14 specific instances where Bank of America
15 serves as a good corporate citizen. First, to
16 supplier diversity. Bank of America is
17 committed to fostering diversity in our
18 communities and has incorporated that
19 commitment as a core value in our business
20 practices. We developed an aggressive program
21 of outreach and business development to
22 increase opportunities to support diverse
32
1 suppliers. We are proud that more 16 percent
2 of our companies sourceable spend in 2007 with
3 firms that majority owned by women,
4 minorities, or people with disabilities.
5 Second is the environment. Bank
6 of America is recognized as a leader for our
7 advocacy of efforts to reduce greenhouse gases
8 and support responsible sustainable
9 development. We have dedicated 20 billion
10 dollars over ten years for an environmental
11 initiative to support these efforts. We
12 recently announced that Bank of America has
13 adopted the carbon principles, guidelines for
14 lenders to promote cleaner energy
15 technologies. We are also very proud that our
16 Bank of America tower in New York City has
17 been recognized widely as one of the most
18 environmentally friendly buildings in the
19 world.
20 In short, Bank of America is and
21 will continue to be committed to communities
22 that we serve. By providing local, relevant
33
1 support to neighborhoods, we will continue to
2 create opportunities for our customers,
3 associates, and communities to grow and
4 prosper. We know that we are most effective
5 by partnering with nonprofit organizations and
6 community leaders to identify and address the
7 challenges that together we can overcome.
8 Now, I will turn to Janet Lamkin
9 to give you a local perspective of our
10 community leadership and activities.
11 MS. LAMKIN: Thank you, Andrew. I
12 am Janet Lamkin and I would like to focus on
13 how some of the programs that Liam and Andrew
14 that just mentioned will affect California,
15 specifically.
16 As Liam has announced, California
17 will be the headquarters of our combined
18 mortgage business. That amounts to an
19 extremely significant investment in California
20 and an ongoing commitment by our company to
21 this state.
22 One example of that commitment is
34
1 the increase in our philanthropic goal that
2 Andrew touched on. Here in California, we
3 plan to make 30 million dollars in charitable
4 contributions to nonprofits this year. That
5 is a four million dollar increase over 2007
6 and a doubling of our annual California grant-
7 making budget over the past five years. And
8 I would stress that this is occurring at a
9 time when some other companies are scaling
10 back through charitable contributions in
11 response to the current economic downturn.
12 As the largest provider of
13 financial services to consumers, businesses,
14 and government agencies and the largest
15 provider of SBA loans in California, Bank of
16 America is a key driver of the state's
17 economy. We are a major contributor to the
18 health and well-being of communities
19 throughout the state. And California
20 communities are home to 35,000 Bank of America
21 associates. This is where we live, where we
22 work, and where we rear our families. So like
35
1 all of us here today, we have a significant
2 stake in the economic vitality and the overall
3 quality of life in this state. For example,
4 our associates donated more then three million
5 dollars of their own money to nonprofits in
6 California last year, which was matched dollar
7 for dollar by our foundation. And they spent
8 more than 42,000 volunteer hours to help
9 improve their local communities.
10 In my role as Bank of America's
11 California President, I lead a statewide team
12 of 15 local market presidents. These
13 executives and their local leadership teams
14 routinely engage a cross-section of local
15 business, nonprofit, and government leaders to
16 discuss community needs, to establish
17 priorities, provide thought leadership,
18 identify solutions, and then allocate the
19 resources necessary to implement them.
20 Here are some of the results of
21 our activity in California for 2007. We made
22 more than 16.2 billion dollars in mortgage
36
1 loans to low and moderate income and minority
2 borrowers and borrowers in low tracks. We
3 provided more than 624 million dollars in debt
4 and equity financing for affordable multi-
5 family rental housing. We made 4.6 billion
6 dollars of home-related and other consumer
7 loans to low and moderate income borrowers.
8 We made 5.3 billion dollars in small business
9 loans. We completed the third year of our
10 neighborhood excellence initiative with 18
11 outstanding California nonprofits receiving
12 two hundred thousand dollars of operating
13 grants each, for a three year total of 10.8
14 million dollars. And, we spent 191 million
15 dollars purchasing goods and services for
16 minority and women-owned firms, fully 23
17 percent of the bank's total spending
18 statewide.
19 Now that we have doubled our
20 national community development lending and
21 investing goal and also substantially
22 increased our national philanthropic goal, we
37
1 will be taking a fresh look at our plans and
2 programs here in California so that we can do
3 even more. We will continue to meet with
4 community leaders, as we have in the past to
5 determine where we can be most effective.
6 In this vein, we are going to be
7 stepping up our efforts to support
8 Californians who have been hit by the fallout
9 by the implosion of the mortgage market. Liam
10 has provided a global view of how we will
11 manage that business, with the highest of
12 standards. Our neighborhood preservation
13 program, which Liam announced earlier, will
14 provide 1.5 million dollars in foreclosure
15 mitigation grants and program related
16 vestments to California nonprofits. This will
17 enable us to increase the service capacity of
18 more counseling programs and reduce
19 neighborhood deterioration due to
20 foreclosures. Particularly, those areas that
21 have been hard hit will get the concentration
22 of some of this effort. That will include
38
1 Fresno, Stockton, Oakland, Los Angeles, and
2 the Inland Empire.
3 As we all know, the Inland Empire
4 has proven to be particularly vulnerable to
5 the downturn in the housing market. Situated
6 just east of Los Angeles, where we sit today,
7 the once sparsely populated counties of
8 Riverside and San Bernardino now contain the
9 fastest growing bedroom communities in the
10 state with some of the highest foreclosure
11 rates. Sadly for too many who recently became
12 homeowners, the American dream is diminishing.
13 We want to help those homeowners hold on to
14 their dreams. So, at the suggestion of the
15 Greenlining Coalition, we are exploring
16 concentrated efforts in the Inland Empire to
17 provide a comprehensive solution to this very
18 complex issue.
19 We don't pretend to have all of
20 the answers to all of the problems caused by
21 the current mortgage environment but, as Bank
22 of America has so many times in the past been
39
1 in this state, we are committed to being a
2 leader in finding solutions and forging
3 productive partnerships to address this crisis
4 head-on.
5 Liam.
6 MR. MCGEE: Thank you, Janet and
7 Andrew. In conclusion, we encourage the
8 Federal Reserve Board to act swiftly to
9 approve Bank of America's application. Today,
10 we have outlined how the acquisition will
11 enable Bank of America to make it possible for
12 consumers to buy homes and stay in their home.
13 With approval of the merger, Bank
14 of America's values and business practices
15 will govern the combined mortgage company.
16 Our records demonstrates a strong history of
17 meeting and exceeding both internal and
18 external goals and at improving the
19 communities we serve with the highest
20 standards of trust, integrity, accountability,
21 and business excellence.
22 Thank you again for giving this
40
1 opportunity to speak with you.
2 DIRECTOR BRAUNSTEIN: Thank you
3 for your testimony. Does the panel have any
4 questions?
5 MS. ROBINSON: Yes, I do. We have
6 received comments indicating that the efforts
7 at Countrywide in working with borrowers
8 experiencing problems has experienced its own
9 problems and that there have been overly
10 aggressive collection practices, lack of
11 communication, sending emails to borrowers
12 without having the ability for the borrowers
13 to respond via email. Failure to work with
14 counseling groups who are working with
15 borrowers, taking months and months to even
16 reach a human being at Countrywide.
17 With that said, can you give us
18 more information as to what kind of training
19 efforts you are going to deploy? Because it
20 doesn't sound as though you will be able to
21 rely on the resources at Countrywide for your
22 new loss mitigation. And as well, more
41
1 specifics about the oversight that you are
2 going to put in place to make sure that that
3 process gets off the ground running
4 immediately and there is, you know,
5 verification that it is in fact working well?
6 MR. MCGEE: First all -- thank you
7 for the question. First of all, let me remind
8 everyone that Countrywide is still today an
9 independent company. Our plans are to
10 complete, upon approval of the Federal Reserve
11 and Countrywide shareholders, the transaction
12 in the third quarter.
13 Going forward, I hope I have made
14 it clear that first of all that the new
15 combined mortgage business will be managed
16 with a Bank of America set of values, ethics,
17 both collective and personal accountability in
18 business practices. We will continue to
19 invest the appropriate amount of training and
20 resources to address the perception that you
21 have created.
22 I will just make it very clear
42
1 that our purpose at the Bank of America today
2 and in the new combined mortgage business will
3 be to enable people who can afford it to buy
4 homes and stay in their homes that foreclosure
5 is an awful experience for consumers, for
6 neighborhoods, and for banks as well. And we
7 will do everything in our power as I have
8 described to minimize that as appropriate.
9 DIRECTOR BRAUNSTEIN: Any other
10 questions for this panel? Mr. Alfriend?
11 MR. ALFRIEND: No.
12 DIRECTOR BRAUNSTEIN: No, okay.
13 MR. TURNER: Sure, I have just got
14 one question. Mr. McGee, you spoke early on
15 about your commitment to assisting local
16 communities hit by the foreclosure crisis and
17 then mentioned a 20 million grant program for
18 both foreclosure prevention and something
19 about helping communities acquire vacant
20 properties. I was just curious if you could
21 elaborate a little more on the kinds of
22 programs and initiatives you will be
43
1 supporting them in that area.
2 MR. MCGEE: I would say that
3 Andrew and myself and Janet, as Andrew
4 mentioned in his testimony, spent time with
5 Greenlining and the CRC just a week and a half
6 to two weeks ago. And we were aware of the
7 tenant issue with speculators buying
8 properties and having tenants and some of the
9 unfortunate effects on those tenants if the
10 homes are foreclosed and secondly, and some
11 neighborhoods have a concentration of homes
12 that have been or might be foreclosed upon.
13 And we got a heightened sense of awareness
14 from both of those organizations about that.
15 I alluded to the fact that we know
16 those are issues. I was specific on some of
17 the efforts we are putting into place around
18 tenants. But we will be quite creative around
19 neighborhoods that have unusually high numbers
20 of foreclosed properties to see if there are
21 different things perhaps, that have ever been
22 done to create rental properties and be sure
44
1 those neighborhoods don't fall into a state of
2 disrepair or blight as a result of high levels
3 of foreclosure.
4 MR. PLEPLER: I would just add
5 there was a large meeting about two weeks ago
6 convened by NeighborWorks on this issue in
7 D.C. and they are grappling with what is a
8 very complex issue around the vacant and
9 abandon properties. And they convened LISC
10 and Enterprise, Housing Partnership Network in
11 NeighborWorks. We attended that meeting. We
12 are very anxious to participate in that
13 initiative. It is going to take them a little
14 while to get the planning process in the
15 works. There are a lot of local issues around
16 getting site acquisition and property
17 acquisition that need to be worked through but
18 we are very anxious to support those
19 initiatives.
20 Thanks.
21 DIRECTOR BRAUNSTEIN: Thank you
22 very much.
45
1 MR. MCGEE: Thank you.
2 DIRECTOR BRAUNSTEIN: Will the
3 next panel come forward, please?
4 DIRECTOR BRAUNSTEIN: -- repeat
5 our kind of ground rules here. Could you
6 please at the beginning of your statement,
7 state your name and organization for the
8 record? We have a court reporter and
9 transcript.
10 And we will start with
11 Congresswoman Waters.
12 CONGRESSWOMAN WATERS: Thank you.
13 I am Congresswoman Maxine Waters. I represent
14 the 35th Congressional District in the City of
15 Los Angeles and other surrounding areas.
16 I would first like to thank you
17 for the opportunity to provide testimony on
18 Bank of America's proposed purchase of
19 Countrywide Financial. This transaction
20 stands as one of the most important that the
21 Federal Reserve has reviewed in recent memory.
22 If completed, it will create the nation's
46
1 largest mortgage lender and mortgage servicer
2 and it will do so in the midst of a crisis.
3 Specifically, meltdown in the mortgage markets
4 that have led to a foreclosure waive unlike
5 any since the great depression, nearly toppled
6 a major investment bank, and resulted in a
7 credit crunch that threatens our entire
8 economy.
9 Therefore, it is absolutely
10 essential that the Federal Reserve get this
11 right. I would be less than candid, however,
12 if I said that I was filled with confidence
13 that it will do so, in light of the
14 institution's lackluster record during the
15 run-up to this crisis. There is plenty of
16 blame to go around the many, perhaps too many
17 federal regulatory agencies with oversight of
18 financial institutions in the subprime lending
19 and mortgage backed securities markets.
20 The Federal Reserve's role in the
21 years prior to the mortgage market meltdown
22 was especially distressing. First, then
47
1 Chairman Greenspan repeatedly underplayed or
2 outright denied the possibility that
3 skyrocketing housing prices. The only reason
4 the lax underwriting standards that pervaded
5 the subprime mortgage did not lead to disaster
6 sooner, might be symptomatic of an asset
7 bubble at risk of bursting. As a member of
8 the House Financial Services Committee for
9 over a decade, I certainly don't recall him
10 issuing forceful warnings of this possibility
11 in his biannual appearances before us as
12 mandated by the Humphrey-Hawkins Act.
13 Secondly, second and more
14 troubling, the Federal Reserve declined to
15 take even minimal steps to curb the deceptive
16 practices and outright fraud taking place in
17 the subprime lending market as it grew from
18 virtual nonexistence a decade ago to a 625
19 billion dollar industry, accounting for a
20 quarter of all mortgages in 2006. Former
21 Chairman Greenspan never pushed subprime
22 lenders for so much as a voluntary industry
48
1 code of conduct, despite a direct plea from
2 the Greenlining Institute and the ongoing
3 effort to elicit one, as it turned out, while
4 another major federal regulator stakeholder,
5 now FDIC Chairwoman Bair, who was in the early
6 years of this administration a senior
7 treasurer official.
8 Most glaringly, the Federal
9 Reserve declined to put into place
10 comprehensive protections for subprime
11 borrowers under the authority conferred upon
12 it under Regulation Z of the Federal Truth In
13 Lending Act and the Home Ownership Equity
14 Protection Act of 1994. While it issued a
15 rule in 2001 that required income
16 documentation for some HOEPA covered loans,
17 additional rule making under its broad
18 authority to regulate unfair, deceptive, and
19 abusive lending practices was not forthcoming
20 over the next seven years, even if so-called
21 no doc loans, exotic mortgage products like
22 2/28 ARMs and fraudulent sell practices
49
1 permeated the subprime lending industry. Not
2 until January of this year did the Federal
3 Reserve propose anything near the sort of
4 comprehensive protections of borrowers in both
5 the home purchase and refinancing context that
6 were clearly needed years ago.
7 So troubling a history compels me
8 to be very direct in stating that the Federal
9 Reserve bears a heavy responsibility to prove
10 its commitment and competence in the review of
11 the Bank of America/Countrywide transaction.
12 This is especially so, given the activist
13 crisis management role the Fed has assumed in
14 recent months under Chairman Bernanke, as well
15 as the prominent Treasury Secretary Paulson
16 gives the institution in the administration's
17 proposed plan for regulating the financial
18 market.
19 Simply put, if the Federal Reserve
20 continues to act as the primary watchdog over
21 financial crises in the contemporary economy,
22 then we must be sure that it will not assume
50
1 a stance of detachment and negligence when
2 mistakes for American consumers are high. We
3 have now learned the high way that failing to
4 vigilantly protect customers inevitably leads
5 to harm to the safety and soundness of
6 financial institutions and the economy as a
7 whole. The traditional realm of the Fed
8 hiding its head in the sand is no longer an
9 option.
10 What does this mean for the Federal
11 Reserve's review of this particular
12 transaction? Taking a page from Secretary
13 Paulson's approach of needing American
14 financial regulation in the direction of so-
15 called principle-based oversight of the
16 financial markets, I suggest that two
17 principles anchor the Federal Reserve's
18 assessment of this acquisition. These
19 principles can be articulated in the form of
20 questions.
21 First, is this transaction safe
22 for the financial markets and the American
51
1 economy? And second, does the acquisition put
2 in place a clear plan to ensure the best
3 possible outcome for the millions of
4 distressed Countrywide borrowers who face
5 possible foreclosure?
6 If the answer to either of these
7 questions is no, then the acquisition must be
8 stopped in its tracks. With respect to the
9 stability of the financial markets, I would
10 quickly observe that the entire course of this
11 crisis has followed a single troubling
12 pattern. Things look bad and then they turn
13 out to be worse than we thought. This has
14 particularly been the case with regard to the
15 exposure of large banks, hedge funds, and
16 other investors to mortgage backed securities
17 and other instruments that have suffered
18 plummeting values as the credit crunch
19 spreads, including leverage loans and
20 collateralized debt obligations or CDOs.
21 While it exited the direct
22 subprime lending market a number of years ago,
52
1 I am told, Bank of America recently reported
2 mortgage backed securities and related trading
3 losses in the first quarter of over 1.3
4 billion dollars and an 80 percent drop in
5 profit, compared to the same period last year.
6 It has now had to reserve six billion dollars
7 to cover potential credit losses and sits on
8 nearly 35 billion dollars in mortgage backed
9 securities, leverage loans to private equity
10 firms and CDOs. Clearly, the Federal Reserve
11 must do a careful analysis to ensure that
12 swallowing Countrywide will not make Bank of
13 America so sick that it soon needs the
14 emergency life support Bear Stearns received
15 a short while ago. The economy simply cannot
16 withstand many such events so close together,
17 especially given the enormous size of the
18 post-acquisition Bank of America, an entity
19 that will have a piece of well over one-third
20 of the mortgages in the United States.
21 I caution the Federal Reserve also
22 to examine very carefully the exposure that
53
1 Bank of America has to civil and even criminal
2 liability resulting from the recent behavior
3 of Countrywide executives. Countrywide CEO,
4 Angelo Mozilo sold in excess of 450 million in
5 stock in the months prior to the subprime
6 implosion, even as he continued to tout
7 Countrywide's subprime loan products to
8 consumers and the markets. He is now leading
9 the company with a golden parachute of 120
10 million, even after a voluntary reduction of
11 37.5 million. In my view, any reasonable
12 analysis of this transaction must focus on the
13 potential liability that Bank of America
14 faces, as potential Countrywide shareholder
15 lawsuits and civil and criminal inquiries are
16 already or may be launched by the SEC,
17 Department of Justice, and other federal or
18 state regulators come to fruition.
19 However, if a consummated
20 acquisition results in a Bank of America that
21 appears financially healthy, the transaction
22 should not be permitted to go forward in the
54
1 absence of a concrete transparent strategy for
2 ensuring that its many distressed Countrywide
3 borrowers will be able to stay in their homes
4 with mortgage payments they can afford for the
5 long-term. Without this, the Countrywide name
6 will be buried forever but the damage
7 inflicted by its employees and the mortgage
8 brokers it allowed to operate with little or
9 no oversight in communities across the state,
10 will continue to be felt far into the future.
11 In terms of evaluating the plan
12 that Bank of America will, I understand expand
13 upon in its testimony today, I would again
14 suggest that the Federal Reserve follow two
15 principles. With respect to the process for
16 executing loan workouts and other loss
17 mitigation activities, the operative question
18 should be, does this plan make it as easy for
19 a distressed borrower to get help from Bank of
20 America resolving problems with their loans,
21 as it was to get the loan from Countrywide in
22 the first place? To date, the answer to this
55
1 question has clearly been no.
2 As a threshold matter, I want to
3 point out that Countrywide is currently the
4 largest servicer of mortgages in the country
5 and its purchase by Bank of America will
6 create by far the largest institution of its
7 kind. I have been focused on mortgage
8 servicers since this beginning of this debacle
9 and it is now clear that within a generally
10 opaque and under-regulated mortgage market,
11 mortgage servicers represent by far the least
12 understood and overseen segment of the
13 industry, with no duty to report on their
14 activities to federal regulators or Congress
15 and no fiduciary obligation whatsoever to the
16 borrowers for whom they are the first and only
17 point of contact. Mortgage servicers have
18 acted in response to this crisis only as much
19 as they voluntarily wish to and total policy
20 holders and the public only as much as their
21 activities as they felt like. This must
22 change.
56
1 The first step is improved
2 outreach. While the industry touts as
3 comprehensive and effective strategies for
4 reaching delinquent and at-risk borrowers, its
5 direct mailings, toll-free Hope Now Alliance
6 phone number, and participation in local home
7 ownership preservation workshops, a different
8 story has been told by witnesses at this and
9 prior public hearings, as well as by
10 investigative journalists and broader gauged
11 analysis like the one recently conducted by
12 the California reinvestment coalition.
13 It is striking to me that while
14 Countrywide, Bank of America, and other
15 lenders who are also major mortgage servicers,
16 have one major television campaign during
17 recent sporting events such as the Super Bowl
18 and NCAA College Basketball tournament
19 encouraging prospective home buyers and
20 existing home buyers to take out new loans or
21 to refinance, no campaign of equal magnitude
22 has been targeted to borrowers seeking help
57
1 with workouts for the existing subprime and
2 other troubled loans. The Federal Reserve
3 must ensure that Bank of America's proposed
4 post-acquisition outreach strategies
5 significantly exceed the standard of more of
6 the same. This holds true as well for the
7 accessibility and authority of loss mitigation
8 personnel at Bank of America after the
9 transaction takes place.
10 In two hearings before my
11 Subcommittee on Housing and Community
12 Opportunity, I heard of the difficulties
13 borrowers and even their trained advocates
14 confronted in getting to an actual human to
15 address their problem, much less on authorized
16 to execute a long-term sustainable solution
17 such as a loan modification. Phone calls go
18 unanswered. Borrower inquiries are not
19 responded to for months. No real loss
20 mitigation offer is made until the borrower is
21 on the verge of foreclosure, if at all, and
22 then only if the borrower forfeits legal
58
1 rights. While Countrywide does not appear to
2 be the worst among servicers, again, it is
3 difficult to know since none of them are
4 providing data subject to outside audits. It
5 is simply not doing a stellar job as witnesses
6 at prior public hearings on this transaction
7 have testified.
8 Notably, like other servicers,
9 even as it has been forced by the magnitude of
10 the crises to expand its servicing operations,
11 Countrywide has tried to cut costs by
12 outsourcing these functions to India and Costa
13 Rica, which seems unlikely to enhance outcomes
14 for borrowers. Meanwhile, no such bell piping
15 seems to have taken place in providing rewards
16 to the mortgage brokers who originate their
17 loans, beneficiaries this year of an all-
18 expense paid trip to Aspen, Colorado. This
19 strikes me, at best, a misalignment of
20 priorities and resources that cannot be
21 permitted to survive this transaction.
22 Finally and most important, the
59
1 Federal Reserve must hold Bank of America
2 accountable for loss mitigation outcomes for
3 the Countrywide borrowers it inherits. Here,
4 the critical questions are will Bank of
5 America prioritize loss mitigation outcomes
6 that keep distressed borrowers in their homes,
7 whenever feasible and when a loan workout is
8 executed that achieves this goal? Does the
9 resulting repayment plan, loan modification,
10 or other strategy put in place a monthly
11 payment plan that is affordable and
12 sustainable for the borrower?
13 I have introduced legislation, the
14 Foreclosure Prevention and Sound Mortgage
15 Servicing Act which would codify this
16 reasonable standard and require servicers to
17 report data demonstrating they are meeting it
18 going forward. I was compelled to do so
19 because policy makers have no access to data
20 to assess definitively whether voluntary
21 industry efforts like the Hope Now Alliance
22 are adhering to it, while the limited data
60
1 disclosed by the industry coupled with the
2 anecdotal reports of counselors, consumer
3 attorneys and borrowers themselves, strongly
4 suggest they are not.
5 To provide two examples, at my
6 subcommittee's hearing on April 16th, Hope Now
7 revealed that fewer than four percent of total
8 loan workouts resulted in rate modifications
9 of five years or longer. Similarly, at the
10 same hearing, Countrywide reported an
11 increased pace of loan workout and
12 modification in comparison to its testimony at
13 a November 2007 subcommittee hearing.
14 Nevertheless, as little as 15 percent of total
15 loan workout in the six months ending March 31
16 consisted of rate reduction modifications of
17 five years or longer. I say as little as
18 because again, the data provided to me was
19 imprecise.
20 Step one in analyzing the proposed
21 outcomes of any strategy Bank of America
22 furnishes to the Federal Reserve then is to
61
1 insist upon a comprehensive audited data on
2 both Countrywide's and Bank of America's loss
3 mitigation activities to date. This minimum
4 standard is something that even Secretary
5 Paulson, no fan of comparing industry behavior
6 so far during this crisis, apparently took the
7 major servicers to task for failing to meeting
8 in a closed door meeting last week.
9 The most fundamental issue,
10 however, extends beyond the question of
11 forbearance versus repayment plans, versus
12 loan modifications, versus other loan workout
13 outcomes. It is the standards of
14 affordability that Bank of America will apply
15 to any workout. The bottom line criterion for
16 evaluating the workout is whether the payment
17 plan that results is affordable to the
18 borrower over the long-term. And neither Hope
19 Now, nor Countrywide, nor Bank of America are
20 willing to be clear about the affordability
21 standards that are being applied to most of
22 the distressed loans they are servicing. This
62
1 cannot be allowed within the plan that Bank of
2 America submits to the Federal Reserve.
3 One of the most striking findings
4 of my Subcommittee's hearings on mortgage
5 servicing, was that large services like
6 Countrywide and Bank of America service
7 mortgages originated subject to guarantees by
8 the VA, FHA, and the GSEs, Fannie Mae and
9 Freddie Mac, as well as large ALTA, that is A-
10 L-T-A and subprime portfolios which is where
11 many of the problems lie. The significant
12 portion of their portfolios subject to these
13 government or quasi-governmental guarantees
14 must adhere to strict loss mitigation guidance
15 issued by the guarantors, which mandate that
16 loss mitigation offers meet certain
17 affordability standards.
18 These standards typically require
19 that the borrower be left with the ratio of
20 debt to income that is not too high to be
21 sustained for the long-term. They also
22 require that after monthly expenses, including
63
1 debt service on the mortgage and all other
2 secured and unsecured debt, such as credit
3 cards and auto loans, are deducted from a
4 borrower's monthly income enough money is left
5 over that the borrower will be able to meet
6 unexpected expenses.
7 For example, Fannie Mae requires
8 that $200 in residual income be available
9 after making the monthly mortgage payment
10 under a proposed loan workout, while Freddie
11 Mac generally adheres to a residual income
12 standards of 20 percent of the borrower's
13 monthly income. In plain English,
14 Countrywide, Bank of America, and most other
15 large servicers are adhering to time-tested
16 affordability standards for a significant
17 portion of their portfolios, which tend to be
18 the safer products they service, due to strict
19 VA, FHA, and GSE underwriting guidelines,
20 while utterly failing to report to the public
21 or policy makers on the affordability
22 standards they are utilizing in serving the
64
1 ALTA subprimes and other riskier portions of
2 their portfolios, much less committing to
3 employing a uniform proven affordability
4 standard when servicing those loans.
5 In my view, the Federal Reserve's
6 assessment of this proposed acquisition must
7 be considered negligent if Bank of America is
8 permitted to implement a loss mitigation plan
9 for the borrowers it currently services and
10 for those it inherits from Countrywide that
11 perpetuates this lack of transparency and
12 uniformity with respect to the affordability
13 standard it applies to loans it services
14 falling outside of the purview of the VA, FHA,
15 and GSEs.
16 I conclude by stating that the
17 American people desperately need for the
18 Federal Reserve's assessment of this massive
19 mortgage market-related transaction to present
20 a triumph of hope over experience, a new
21 chapter in which the Fed ensures that major
22 mergers and acquisitions yield positive
65
1 outcomes for consumers and communities, as
2 well as the institutions involved. And I do
3 thank you for holding this hearing today.
4 DIRECTOR BRAUNSTEIN: Thank you.
5 (Applause.)
6 DIRECTOR BRAUNSTEIN: Thank you.
7 Mr. Bailon.
8 MR. BAILON: Yes, my name is
9 Adolfo Bailon. I am Senior Field
10 Representative for United States Senator
11 Barbara Boxer and I am here to present a
12 statement on her behalf.
13 Thank you for the opportunity to
14 comment on Bank of America's proposed
15 acquisition of Countrywide Financial. This is
16 an important transaction that has the
17 potential to rescue thousands of borrowers at
18 risk of losing of their homes, especially here
19 in California, which has been the epicenter of
20 the foreclosures crisis.
21 In the first quarter of this year
22 alone, the number of homes in California lost
66
1 to the foreclosure grew to an astonishing
2 47,171, more than four times as many as the
3 year earlier. Many of these loans were likely
4 originated by Countrywide, which was one of
5 the largest subprime and option ARM lenders in
6 the state.
7 Before any mergers is approved, I
8 believe Bank of America should present a
9 clear, specific plan on how it will handle
10 borrowers in Countrywide servicing portfolio
11 who are at risk of losing their principal
12 residence. This plan should, at a minimum,
13 include the following components.
14 One, Countrywide's existing loss
15 mitigation staff level must be maintained, if
16 not extended. Caseloads are growing, as is
17 the amount of time it takes to reach a
18 solution. A condition of the merger should be
19 a clear commitment by Bank of America to help
20 all legitimate homeowners who have been caught
21 in this crisis.
22 Two, Bank of America should adopt
67
1 a policy of full and speeding cooperation with
2 housing counselors while working tirelessly
3 with homeowners through the nonprofit sector
4 to award foreclosure.
5 Three, borrowers who can avoid
6 foreclosure through a loan modification should
7 be able to stay in their homes with loans that
8 match the current worth of the home and a
9 fixed rate mortgage they can afford.
10 Four, in the case of a tenant
11 occupancy and foreclosed properties, it is
12 critical not to punish tenants who have paid
13 their rent on time.
14 Thank you again for the
15 opportunity to comment on this important
16 transaction. The foreclosures crisis is
17 having a devastating affect on our families,
18 our communities, our economy, our state, and
19 our country. It will take all of us working
20 together in the months to come to address this
21 crisis. This merger is an opportunity to do
22 so.
68
1 Thank you.
2 DIRECTOR BRAUNSTEIN: Thank you
3 very much. Do the panelists have any
4 questions for --
5 MR. ALFRIEND: No.
6 CONGRESSWOMAN WATERS: Well, I
7 would be happy to take some questions.
8 (Laughter.)
9 DIRECTOR BRAUNSTEIN: I feel like
10 I should ask you a question, since you don't
11 hesitate to ask me questions.
12 (Laughter.)
13 CONGRESSWOMAN WATERS: That's
14 right. You have got me before you now. Thank
15 you very much.
16 DIRECTOR BRAUNSTEIN: Interesting
17 the way we word it.
18 MR. TURNER: Thank you.
19 MR. ALFRIEND: Thank you.
20 MS. ROBINSON: Thank you.
21 DIRECTOR BRAUNSTEIN: Thank you
22 very much. You're welcome.
69
1 Would the next panel come forward,
2 please?
3 Okay, just more ground rules.
4 Please state your name and organization at the
5 beginning of your statement. We will start
6 with Ms. Smith.
7 MS. SMITH: Good morning. My name
8 is Robyn Smith. I am a Deputy Attorney
9 General for the California State Attorney
10 General's Office.
11 Although we are not taking any
12 position on Bank of America's proposed
13 acquisition of Countrywide Financial, we
14 appreciate the opportunity to share a few
15 concerns. As the Chief Law Enforcement
16 Officer of the State of California, the
17 Attorney General is charged with protecting
18 the public interest. The Attorney General's
19 Office, therefore, has a substantial interest
20 in the mortgage lending practices and
21 financial soundness of and healthy competition
22 among the financial institutions that engage
70
1 in mortgage lending in California.
2 Both Countrywide and Bank of
3 America have a significant presence in
4 California, both as employers and as providers
5 of financial services. The financial status
6 of these companies and the outcome of their
7 merger are, therefore, of great consequence to
8 Californians and the communities in which they
9 live. The need to carefully examine both the
10 competitive impact of the proposed merger, as
11 well as the soundness of the mortgage lending
12 practices engaged in by the financial
13 institutions involved has never been more
14 acute. Just last week, DataQuick reported
15 that for the first quarter of 2008, the number
16 of California homeowners in default on their
17 mortgages was up 39.4 percent from the first
18 quarter of 2007. Even worse, the number of
19 actual foreclosures in California surged 327
20 percent from the first quarter of 2007,
21 reaching an average of over 500 foreclosures
22 per day.
71
1 DataQuick also reported that most
2 of these loans were originated between August
3 of 2005 and October 2006. This is not
4 surprising. During this time period, numerous
5 financial institutions engaged in unsound
6 underwriting and business practices that
7 greatly increased the risk that thousands of
8 families would lose their homes. The most
9 prevalent of these practices involved subprime
10 mortgage loans, hybrid adjustable rate
11 mortgage loans and non-traditional mortgage
12 loans, which the Board has defined as loans
13 that allowed the deferral of the payment of
14 interest, principal, or both. All such loans
15 are at great risk of default when lenders fail
16 to document the borrower's ability to repay
17 the loan. The likelihood that such loans will
18 end up in foreclosure is further compounded
19 when they carry hefty prepayment penalties and
20 high loan to valuations which effectively
21 prevent more and more families from
22 refinancing into affordable loans as the
72
1 housing values in California fall.
2 Such unsound business practices
3 engaged in by many financial institutions have
4 led to the current foreclosure crises. While
5 we do not suggest that there has been any
6 wrongdoing by any of the parties to this
7 proceeding, we urge the Board to carefully
8 consider the underwriting and lending
9 practices of the parties to this proceeding
10 and whether any potential ongoing, unsound
11 business practices outweigh any public benefit
12 that may result from the merger.
13 If the proposed acquisition is
14 approved, Bank of America will inherit a large
15 number of mortgage loans which are in or are
16 headed for foreclosure. According to publicly
17 available data, in the third and fourth
18 quarters of 2007, Countrywide reported
19 combined net losses of 1.6 billion dollars.
20 Such losses are not likely to abate. An
21 increasing number of adjustable rate mortgage
22 loans and home equity loans will reset in 2008
73
1 and 2009. And Countrywide has disclosed that
2 as recent as December 2007, the number of
3 foreclosures and late payments on its loans
4 rose to the highest on record.
5 The merger, therefore, raises
6 significant concerns regarding the
7 concentration of risk that will result from
8 the transfer of financial liabilities relating
9 to mortgage loans at-risk of default from
10 Countrywide to Bank of America. Bank of
11 America will also inherit the mortgage lending
12 practices that led to many of these high risk
13 loans. Again, we do not suggest that there
14 has been any wrong-doing by any of the parties
15 involved in the present proceeding. We hope,
16 however, in coming to a decision, the Board
17 considers such practices and is careful not to
18 impair or compromise the ability of borrowers
19 to assert their legal rights or the ability of
20 state law enforcement agencies or regulators
21 to address past or ongoing misconduct, if any.
22 Not only will the proposed merger
74
1 concentrate the risk of mortgage loan
2 foreclosures, it will also have a significant
3 impact on the mortgage loan options available
4 to California. According to a recent report
5 from the Housing and Economics Rights
6 Advocates and the California Reinvestment
7 Coalition, in 2004 and 2005, Countrywide
8 ranked number one in terms of its total share
9 of the California mortgage loan market.
10 According to the same report, Bank
11 of America ranked fourth in 2004 and fifth in
12 2005. The combined market shares of these
13 lenders was 11.85 percent in 2004 and 10.66
14 percent in 2005. These combined shares are
15 nearly twice the share of the nearest
16 competitor. In light of these statistics, we
17 are concerned that the merger of two of the
18 largest mortgage lenders in California will
19 reduce competition in the California mortgage
20 loan market and, therefore, reduce affordable
21 options available to borrowers.
22 Finally, because Bank of America
75
1 will inherit Countrywide's at-risk mortgage
2 loans, in the event the merger is approved, we
3 urge the Board to exercise its authority to
4 impose conditions in order to stem the rising
5 tide of foreclosures. The Board should
6 consider the effect of the merger on
7 foreclosure activity and the possibility of
8 requiring the parties to substantially
9 restructure loans, so that borrowers in
10 distress have a reasonable prospect of
11 modified home loans with affordable payments.
12 Conditioning the merger on loan modifications
13 would be particularly appropriate for home
14 loans made on terms that the Board itself
15 proposes to prohibit as unfair and deceptive
16 under the Board's pending rule-making
17 proceeding to revise Regulation Z.
18 Thank you for considering our
19 concerns and for the opportunity to testify at
20 today's hearing.
21 DIRECTOR BRAUNSTEIN: Thank you
22 very much. Mr. Wing?
76
1 MR. WING: Yes, my name is Butch
2 Wing. I am the California Coordinator for the
3 RainbowPUSH Coalition and I am testifying on
4 behalf of Reverend Jessie Jackson and
5 RainbowPUSH today. I want to applaud the
6 Federal Reserve Board for seeing to it to
7 request to hold these public hearings
8 concerning the proposed acquisition of
9 Countrywide by Bank of America.
10 Earlier this month, April 4th, the
11 nation and the world celebrated and
12 commemorated the 40th anniversary of the
13 martyrdom of Dr. King. The cameras of the
14 nation and the world were in Memphis. The
15 spotlight was on. The nation took hold of the
16 legacy of Dr. King.
17 A week later, April 11th, with the
18 40th anniversary of the signing of the Fair
19 Housing Act, the last significant civil rights
20 legislation of that era but unfortunately, the
21 cameras were off. The focus of a week earlier
22 had dissipated and we were left to evaluate
77
1 the legacy of Dr. King in a different light.
2 Forty years later, there is much
3 unfinished business that is left before us.
4 And what we are witnessing as a result of the
5 subprime and the subprime mortgage crisis is
6 a pattern of lack of funding, of civil rights
7 laws in the Fair Housing Act in particular,
8 lack of rules and regulation, lack of
9 oversight, or no oversight at all, and a
10 pattern of neglect and ignorance that has left
11 that legacy of Dr. King one that we must pick
12 up on today and challenge our government and
13 its agencies and the private sector to do
14 more. Solutions so far have focused on
15 bailing out the private sector but leaving the
16 victims without a parachute, without a
17 lifeline, and without adequate solutions.
18 Ken Lewis, the CEO of Bank of
19 America is a leader of distinction. We grew
20 up with him over the years and know him to be
21 a man of integrity. And so we appeal to him
22 and Bank of America today to help lead
78
1 America's families out of this crisis and to
2 meaningfully address the compelling challenges
3 that come with this proposed merger with
4 Countrywide. For all eyes of the world, they
5 are not just focusing on this merger, but on
6 the future of the financial services industry
7 and an economy that is collapsing before our
8 eyes not just here in the United States, but
9 worldwide and worldwide as witnessed just a
10 week ago when the Bank of England had to
11 universally announce guidelines to help bail
12 out all of England's banks. So, we know the
13 proportions of this crisis are not just
14 domestic but worldwide and quite obviously,
15 the worst is yet to come.
16 The proposed merger is well
17 documented. Bank of America is the nation's
18 biggest bank by market value and its proposed
19 acquisition of Countrywide will make it the
20 nation's largest mortgage lender. Countrywide
21 was once a high-flying corporation, the
22 nation's largest mortgage lender and servicer
79
1 but it is now the corporate symbol of all that
2 has gone wrong with Wall Street's financial
3 services firms that selfishly engaged in
4 predatory, in discriminatory lending practices
5 and the steering of subprime loans to minority
6 homeowners to maximize enormous and immediate
7 profits.
8 Countrywide is now the subject of
9 civil and criminal investigations and lawsuits
10 brought by homeowners by state attorneys
11 general, by federal agencies. Bank of America
12 then, by acquiring Countrywide, assumes these
13 enormous liabilities and exposure, financial,
14 legal and moral. How will it rectify the
15 legacy of Countrywide which, through its
16 practices, is synonymous with the nation's
17 whole foreclosure crisis? And the spillover
18 effect has wreaked havoc on the budgets of
19 states, counties and cities that depend on
20 property taxes, resulting in profound cutbacks
21 in social services and education for the
22 people. California, for example, now faces a
80
1 14 billion dollar shortfall and all of America
2 is hurting.
3 Bank of America's proposed
4 acquisition of Countrywide stands at this
5 crossroads a profound housing and overall
6 economic crisis. So we comment today not in
7 support of or in opposition to the proposed
8 merger, but to challenge the Federal Reserve
9 and Bank of America on how it will address the
10 myriad of liabilities that come with its
11 acquisition of Countrywide. How you handle
12 this Countrywide merger and Countrywide's
13 mortgage portfolio and its enormous
14 liabilities is critical.
15 But in every crisis there is
16 opportunity. And if bold leadership and
17 comprehensive solutions are sought, we have
18 the opportunity to provide relief for millions
19 of previously harmed homeowners around the
20 nation. Bank of America has the capability to
21 restore integrity and credibility to the
22 financial services industry and do its part in
81
1 riding the nation's economic ship. While
2 Countrywide's lending practices are turning
3 America's dreams into nightmare, Bank of
4 America has the challenging task of setting a
5 new path for the potential newly merged
6 company.
7 Our first recommendation is that
8 Bank of America place an immediate freeze on
9 all foreclosures pertaining to military
10 families. An article just recently published
11 in the USA Today has indicated an enormous
12 rise and increase in foreclosures and in debt
13 of our servicemen. Every Saturday and Sunday
14 in Chicago we do a home foreclosures seminar.
15 We met recently with a serviceman who is now
16 on his third tour going back to Iraq. And as
17 he was departing, he was hit with a home
18 foreclosure notice. This is not right and we
19 call on Bank of America to fulfill its duty to
20 the country to immediately announce a freeze
21 on foreclosures relating to military families.
22 As the nation's largest bank,
82
1 serving more than 59 million consumers and
2 small businesses, I believe they have the
3 responsibility to help lead the nation out of
4 the present mortgage crisis. Countrywide, up
5 to this point, has not set a stellar example
6 with regard to working out modifications and
7 other accommodations for homeowners in crisis.
8 While albeit they have adopted a relatively
9 constructive posture toward homeowners facing
10 foreclosure, Countrywide has been among the
11 most obstinate in refusing to come to terms
12 with its customers.
13 After the merger, the question is,
14 which philosophy will prevail? The fact that
15 David Sambol, Countrywide's President and
16 Chief Operating Officer will lead the combined
17 consumer mortgage business, once Bank of
18 America's planned purchase of Countrywide is
19 completed, is not reassuring in this regard.
20 The efforts of individual banks to
21 address the mortgage crisis are, right now,
22 leading to inconsistent results. Bank of
83
1 America and Countrywide should support
2 systemic industry changes, such as permitting
3 consumers who qualify to modify their
4 mortgages in bankruptcy, that will lead to
5 predictability and equal treatment of
6 homeowners facing foreclosure.
7 As it now stands, the
8 constitutionally guaranteed right to a fresh
9 financial start does most homeowners facing
10 foreclosure no good. We also call on Bank of
11 America and Countrywide to deploy and
12 compensate the armies of lawyers who represent
13 them in foreclosure proceedings to first offer
14 modification and other foreclosure prevention
15 measures as a matter of course.
16 The nation's attitude toward
17 foreclosure has changed over the past year as
18 American people have slowly and painfully
19 become aware of the size and scope of the
20 problem. More assistance is available today
21 than it was a year ago. We call on Bank of
22 America to establish a 50 million dollar fund
84
1 to reintegrate in the mainstream economy those
2 whose homes were lost in foreclosure. Without
3 targeted support, many of these former
4 homeowners will fade into the shadows and
5 never again become homeowners. It is
6 ludicrous that we can afford a $7,000 tax
7 credit for those who purchase foreclosed homes
8 but do very little for those who, in many
9 cases, were the victims of overzealous,
10 unregulated mortgage brokers and speculators.
11 We support the legislation that
12 Maxine Waters spoke about. We support the
13 Hope for Homeowners Act proposed by Barney
14 Frank and Senator Dodd. We reject the premise
15 that it is impossible to distinguish between
16 so-called deserving homeowners and profiteers
17 who should suffer when markets collapse, just
18 as they rode the crest to record real estate
19 values.
20 DIRECTOR BRAUNSTEIN: Mr. Wing?
21 MR. WING: Yes.
22 DIRECTOR BRAUNSTEIN: I'm sorry.
85
1 Your time is up. Can you wrap up quickly?
2 MR. WING: One more paragraph.
3 DIRECTOR BRAUNSTEIN: Okay.
4 MR. WING: An industry
5 sophisticated to devise no document loans,
6 negative amortization and adjustable rate
7 mortgages can surely divide standards to
8 separate the wheat from the tares now.
9 My last point is this. The one-
10 on-one approach to foreclosure prevention is
11 not enough. To call homeowners to do door
12 knocking one-on-one is insignificant relative
13 to the scope of the problem. The same amount
14 of advertising, marketing, and outreach that
15 is going into market new loans and refinancing
16 should go into home foreclosure prevention on
17 a comprehensive holistic basis. The one-on-
18 one approach is not good enough. We need
19 broader solutions. Bank of America stands at
20 this cross roads and the challenge is before
21 you in the Federal Reserve to make America's
22 homeowners safe and protected.
86
1 Thank you very much.
2 DIRECTOR BRAUNSTEIN: Thank you.
3 Have you any questions for this panel? No.
4 Okay. Could the next panel please
5 come forward?
6 Welcome to this panel. And just a
7 few housekeeping notes. For one thing, if you
8 have a BlackBerry on you, could you please
9 turn it off? Because I think we are getting
10 some feedback on the microphones from that.
11 And secondly, we have a timekeeper
12 here, Melody, do you want to just -- and she
13 will have signs telling you when you have two
14 minutes left and when your time is up. So,
15 kind of keep an eye out for her. And please
16 open your statement with your name and your
17 organization so that we can get it on the
18 record.
19 And, Kevin are you starting?
20 MR. STEIN: I think Roberto.
21 DIRECTOR BRAUNSTEIN: Oh, Roberto.
22 Okay. Mr. Barragan?
87
1 MR. BARRAGAN: Good morning. On
2 behalf of the California Reinvestment
3 Coalition and being Chairman of the Coalition,
4 I want to thank the Reserve for allowing these
5 hearings to proceed.
6 My name is Roberto Barragan. I am
7 President of Valley Economic Development
8 Center. We are the largest economic
9 development organization in the greater San
10 Fernando Valley, which includes Calabasas and
11 Simi Valley, headquarters for facilities of
12 Countrywide.
13 We serve over 7,000 business
14 annually, employing over 70,000 residents in
15 this area, over half of which are B of A
16 customers and many are Countrywide mortgage
17 holders.
18 VEDC is in support of Bank of
19 America's acquisition of Countrywide. VEDC
20 has been on record over the past six years of
21 being concerned regarding Countrywide's
22 lending and banking practices. By some
88
1 estimates, Countrywide has originated over 25
2 percent of first held mortgages in the San
3 Fernando Valley.
4 At the same time, VEDC enjoys a
5 long and productive relationship with Bank of
6 America. We have shared an outcome oriented
7 customer focused and needs-based program for
8 serving small businesses. VEDC supports the
9 B of A's acquisition with just that approach
10 in mind.
11 We support your approval with one
12 chief request, that the merger take place with
13 a clear and specific plan for Countrywide
14 borrowers that builds on what we have seen so
15 far and today B of A's proposed plan.
16 Countrywide is the biggest subprime lender
17 option ARM lender in the greater San Fernando
18 Valley. Foreclosures in the Valley are the
19 biggest in the LA basin and require that a B
20 of A plan include what we believe is important
21 that borrower residents, and I say borrower
22 residents to differentiate borrower
89
1 speculators, that borrower residents of all
2 Countrywide mortgages should be allowed to
3 stay in their homes at fixed mortgages that
4 they can afford. In addition, we ask that
5 adjustable rate mortgages should be fixed at
6 current rates and future resets canceled to
7 avoid continuing foreclosures.
8 Finally, I urge Bank of America to
9 take all steps possible to mitigate the
10 eventual layoffs to affect thousands of
11 Countrywide workers in Calabasas and Simi
12 Valley. While a weak sales market
13 necessitates a decrease in sales staff, we
14 believe that customer services teams and
15 counseling require even more staff over the
16 next two years and steps should be taken to
17 mitigate the impact of layoffs on employees as
18 well as San Fernando Valley communities that
19 they live in.
20 Thank you very much.
21 DIRECTOR BRAUNSTEIN: Thank you.
22 Mr. Williams?
90
1 MR. WILLIAMS: Good morning. My
2 name is Clarence Williams and I am President
3 of California Capital Financial Development
4 Corporation located in Sacramento, California
5 and a member of the California Reinvestment
6 Coalition Board of Directors.
7 For 25 years, California Capital,
8 an independent nonprofit corporation has
9 served 23 counties throughout northern
10 California providing financial literacy
11 education, business technical assistance,
12 micro loans and loan guarantees for small
13 businesses and residents within predominately
14 low and moderate income communities. In
15 addition, we have provided these services in
16 nine languages for our region's growing number
17 of immigrants and limited non-English speaking
18 individuals and business owners.
19 Nonprofit organizations like
20 California Capital exist because of historical
21 failures within the financial services
22 industry to meet the credit needs of our
91
1 constituent communities and their residents.
2 Although we, like many others, have been the
3 recipient of funding by Bank of America, much
4 of the positive impact of this funding is
5 being stripped away by the devastating affects
6 of foreclosures in the communities we serve.
7 I have testified at and participated in a
8 number of public hearings held by the Federal
9 Reserve Bank. I have testified enough times
10 that it has become a blinding glimpse of the
11 obvious, that the elegance of simplicity of a
12 recommendation to support or oppose fails to
13 take advantage of the opportunity that is
14 before this body in regard to the planned
15 purchase of Countrywide Financial Corporation
16 by Bank of America.
17 With all due respect, the
18 likelihood of Bank of America's petition to
19 acquire Countrywide will be granted is a
20 foregone conclusion. Notwithstanding, I am
21 compelled to urge the Federal Reserve Bank to
22 deny this application unless clear conditions
92
1 and a specific plan is agreed upon to mitigate
2 and prevent the further erosion of our
3 community's ability to build wealth and
4 assets. To protect Countrywide borrowers from
5 impending foreclosures, it is incumbent upon
6 the Federal Reserve Bank to be sure that this
7 agreement and the plan to execute the strategy
8 takes place prior to the approval of this
9 petition, not after the close of purchase and
10 oversight that guarantees transparency of Bank
11 of America's execution of its promised
12 commitment.
13 As a regulator, it should be the
14 responsibility of the Federal Reserve Bank to
15 see that financial institutions meet their
16 obligations to be responsible lenders. This
17 petition for merger represents an opportunity
18 to mitigate Countrywide's contribution to our
19 nation's devastating credit and foreclosure
20 crisis and provides us with lessons learned to
21 prevent this from ever happening again.
22 As a condition to the approval of
93
1 this application, I urge the Federal Reserve
2 Bank to include recommendations made by the
3 California reinvestment coalition, which will
4 be offered by Alan Fisher, CEO of CRC. Thank
5 you.
6 DIRECTOR BRAUNSTEIN: Ms. Kinlaw?
7 MS. KINLAW: My name is Sharon
8 Kinlaw. I am the Associate Director of the
9 Fair Housing Counsel of the San Fernando
10 Valley and a Board Member of the California
11 Reinvestment Committee. The Counsel is a 49
12 year old organization, a nonprofit whose
13 primary goal is to investigate and eradicate
14 all forms of illegal housing and lending
15 discrimination. I am here today to discuss
16 the plight of tenants in the unfolding
17 foreclosure fiasco.
18 Tenants are the collateral damage
19 in the foreclosure crisis and very little is
20 being done to emphasize or solve the
21 unintended quagmire that tenants find
22 themselves in through no fault of their own.
94
1 An estimated 20 to 25 percent of the
2 foreclosures that take place in California
3 involve properties that are not owner
4 occupied. Those numbers are exceeding higher
5 in some markets and lead to the instability of
6 families and communities. The tenants that
7 call our agency are mostly low income single
8 mothers with children, seniors, and persons
9 with disabilities who have few options. This
10 acquisition gives us an opportunity to work
11 together to aid families and individuals who
12 are caught in the crossfire of banks,
13 borrowers, and investors, unarmed, unprepared,
14 and mostly forgotten.
15 Tenants are harmed in a number of
16 ways. Many are thrust into homelessness after
17 having paid their rent timely. Many lose
18 thousands of dollars in the non-return of
19 security deposits. Some find themselves in
20 the dark with no electricity or running water
21 after the utilities are turned off. Some find
22 themselves in court facing eviction, which
95
1 damages their rental history for the next
2 seven years and makes it virtually impossible
3 for them to find safe and habitable housing.
4 And with landlords struggling to hold on to
5 their properties, some tenants oftentimes find
6 themselves with whopping rent increases
7 anywhere from $400 to $1,000 per month to
8 remain in their homes, only to pay it and then
9 to eventually find themselves on the street,
10 as a result of the property being foreclosed
11 on.
12 There are few proposed solutions
13 and we would ask that with this merger being
14 taken into account, the Federal Reserve would
15 look to Bank of America for specific
16 solutions. One would be to create an entity
17 or partner with a nonprofit to manage
18 foreclosed properties that are tenant occupied
19 enter into a short-term rental agreements with
20 tenants who are unable to move because of
21 disabilities, cash flow, or other mitigating
22 factors; refer tenants who may be able to
96
1 purchase housing to counseling agencies for
2 assistance with purchase; implement a lease to
3 own program for tenants which will provide a
4 credit towards the down payment for their
5 security deposits; voluntarily agree to give
6 tenants a 90 day notice and for disabled and
7 senior tenants, extend the notice to 120 days.
8 Sixty days is not enough in this market.
9 Provide grants to nonprofits to help tenants
10 relocate and also provide grants to nonprofits
11 to help tenants with relocation expenses;
12 lobby congress to grant a tax credit to
13 financial institutions that create innovative
14 programs such as lease to own or nonprofit
15 receivership as well as to owners of property
16 who will agree to rent to homeowners and/or
17 tenants; and honor existing leases.
18 And finally, with regard to
19 predatory and unfair lending practice, the
20 Federal Reserve should require that, as a
21 condition of this merger, the institutions
22 undertake a review or an audit of all at-risk
97
1 loans to determine if any fraud, steering, or
2 unfair lending practices occurred. For those
3 brokers whose names that show up frequently,
4 a host of scrutiny should be paid to their
5 portfolio and proper referrals to regulatory
6 and law enforcement agencies should be made so
7 that those individuals are not left to prey on
8 unsophisticated and unsuspecting borrowers.
9 Thank you.
10 DIRECTOR BRAUNSTEIN: Thank you.
11 Mr. Stein?
12 MR. STEIN: Good morning. My name
13 is Kevin Stein and I am with the California
14 Reinvestment Coalition. We are an advocacy
15 coalition of 250 community based organizations
16 throughout California. We believe the
17 proposed merger should not be approved without
18 substantial conditions. To do otherwise would
19 not produce benefits to the public that
20 outweigh possible adverse impacts and we do
21 not believe that the two institutions are
22 currently adequately meeting the community's
98
1 credit needs.
2 There are three main issues I want
3 to quickly address. One is fair lending
4 concerns at Countrywide Financial. Secondly,
5 Bank of America's offering and financing of
6 predatory mortgage loans. And third,
7 inadequate servicing practices that will not
8 guarantee that borrowers remain in their
9 homes.
10 On the first, on the fair lending
11 issues, a couple of years ago, the New York
12 Attorney General's Office looked at Home
13 Mortgage Disclosure Act data and saw that
14 Countrywide was roughly two times as likely to
15 be making subprime loans to Latino and African
16 American borrowers in that state and proceeded
17 with a fair lending examination investigation
18 and case that ultimately resulted in a
19 settlement agreement, at which time he said
20 they couldn't fully explain all of the
21 disparities.
22 Well, in California, we see the
99
1 same, if not worse, disparities. And so we
2 would urge the Fed to look closely at those
3 fair lending disparities with African
4 Americans and Latinos roughly two times as
5 likely to be getting high cost subprime loans
6 as compared to whites.
7 And I think there is a precedent
8 in looking back at the Fed's review of the
9 Citigroup Cal Fed Merger after Citigroup had
10 bought the associate's portfolio. And the Fed
11 looked at not only did Citi have a plan in
12 place to ensure that borrowers got the best
13 product for which they qualified, the lowest
14 product that they qualified for, but also that
15 the existing customers at those institutions
16 were put into loans that they deserved in the
17 first place. And we would urge the Fed to do
18 that.
19 Secondly, on the issue of
20 financing and offering of subprime loans at
21 Bank of America, Bank of America asserts that
22 they have been out of the subprime business
100
1 for a long time and we disagree with that. Up
2 until a few years ago, Bank of America had for
3 Fed purposes, according to the Federal
4 Reserve, had a controlling interest in large
5 subprime mortgage lender Ownit Mortgage
6 Solutions, one of the largest subprime lenders
7 in California, to the point of when we asked
8 for HMDA data, they would give us the Ownit
9 Mortgage Solutions data.
10 Ownit Mortgage Solutions was one
11 of the first subprime lenders to go out of
12 business over a year ago for making too many
13 bad subprime loans for too many loans that
14 went into default. So Ownit is no longer
15 around. But guess what? All of the loans
16 that it made are still sitting out there in
17 our communities and Bank of America has its
18 fingerprints on those loans.
19 Further, Bank of America continues
20 to securitize problematic subprime loans.
21 Last year, Bank of America was reported in
22 industry publications as being the tenth
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1 largest underwriter of mortgaged backed
2 securities. Just to give one example, this
3 comes from Asset Backed Funding Corporation,
4 Asset Backed certificate series 2006 HE1.
5 This was a deal of a large number of subprime
6 loans where Bank of America and affiliates
7 were the sponsor and the depositor for the
8 deal. The loans were made not by Bank of
9 America, you know, as they assert, were made
10 instead by Ameriquest, NC Capital, which I
11 think is New Century, Option One WMC. These
12 subprime lenders are all out of business for,
13 in large part, making too many bad loans.
14 Twenty-five percent of the loans
15 in that pool were in California. This is why
16 we care. Seventy-two of them were ARM loans.
17 Forty-one percent of the loans were balloons.
18 Twenty-two percent had simultaneous second
19 lien loans, so putting borrowers at risk.
20 Seventy-five percent have prepayment penalties
21 and some of those prepayment penalty
22 provisions lasted for five years, which is
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1 probably longer than the initial interest
2 rate, which is contrary to current Federal
3 Reserve guidelines.
4 Interest rates on some of the
5 loans began at 13 percent with maximum
6 interest rates going up to 20 percent. And 40
7 percent of the loans, roughly, were less than
8 full documentation. So, Bank of America is
9 not making these loans but the borrowers who
10 got these loans who were going into
11 foreclosure don't particularly care that the
12 loan was made by Ameriquest if it was financed
13 by Bank of America.
14 Bank of America needs to establish
15 some standards, as we urged them to do years
16 ago, so they are not involved in financing
17 predatory mortgage loans. This is not help
18 that community credit needs.
19 Lastly, on the issue of servicing.
20 In think, Ms. Robinson, in your question, you
21 raised concerns that the existing Countrywide
22 practices around keeping borrowers in their
103
1 homes are not sufficient. And the response is
2 well, we are going to have the Bank of America
3 values. I'm not really sure how that plays
4 itself out. Bank of America is not servicing
5 subprime loans. I assume all of the people
6 who were -- a lot of the people who are
7 servicing the loans now at Countrywide would
8 be the people who would continue to service
9 the loans going forward. So, it would seem
10 that a substantial and clear transparent
11 commitment of resources would need to be made
12 to ensure that practices are better going
13 forward.
14 I would like to just reflect some
15 of the comments from counseling agencies who
16 we surveyed in the State of California about
17 whether lenders were keeping borrowers in
18 their homes.
19 Just another minute. Would that
20 be okay?
21 DIRECTOR BRAUNSTEIN: One minute.
22 MR. STEIN: Great, thanks.
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1 So, we asked the question, who are
2 the hardest servicers to work with and
3 Countrywide came up a few times and here were
4 some of the quotes.
5 Countrywide is not willing to
6 modify any of their rates in my experience.
7 Countrywide has been exceptionally hard to
8 work with. Countrywide takes too long to
9 resolve the problem. Countrywide is the
10 worst. They have the most loans of our
11 customers. They seem to only want to modify
12 the loan to another neg-am loan, the only
13 difference being a lower initial rate to begin
14 with. And they only try to attempt
15 modification on rare instances.
16 In B of A's presentation, they
17 discussed their plan for dealing with the
18 problem. They put a dollar figure and they
19 identify some number of customers. And it
20 seems that that is really just an attempt to
21 put a fence around a problem and say this is
22 what we are prepared to do. And the one thing
105
1 that has been clear over the last year and a
2 half is that no one really has a good
3 understanding, including Bank of America, of
4 how bad the problem is. And so I think to put
5 a dollar figure and say that this is what we
6 are going to do is not necessarily a solution
7 to the problem, especially in California where
8 we have folks who have the largest loan sizes.
9 We have probably the largest number of option
10 ARM borrowers. And there really needs to be
11 a plan for the option ARM borrowers.
12 They report over a billion dollars
13 in loans where already the loans have a
14 negative amortizing component to them. And I
15 don't believe that those folks are going to be
16 part of the plan. It was mentioned earlier,
17 who are the speculators that are kind of
18 walled outside of this plan for relief? Are
19 they the mom and pops of some of our members?
20 Does this small homeowners who were induced by
21 predatory brokers to buy properties and then
22 so they are going to be owners and investors
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1 and now they have two properties, except both
2 of the loans go bad and now they are looking
3 at foreclosure? Are those the folks who are
4 out of business? Are they folks who can
5 afford to pay? They are only going to help
6 folks who can afford to pay. Are those not
7 option ARM borrowers who really got so
8 victimized during the loan that they never
9 should have been in? So they are going to be
10 left to their own devices. There needs to be
11 a plan.
12 DIRECTOR BRAUNSTEIN: Mr. Stein --
13 MR. STEIN: And I guess in
14 conclusion, I would just urge, you know, Bank
15 of America would like this to go quickly,
16 would like you to move quickly. We urge you
17 to think very seriously about all of these
18 issues, to be deliberate in light of the new
19 information that was presented by Bank of
20 America today. We would formally ask that
21 there be an extension of the comment period,
22 which the Fed has done in the past, so that we
107
1 could review that plan and provide some
2 thoughtful comments to you.
3 Thank you very much.
4 DIRECTOR BRAUNSTEIN: Mr. Fisher.
5 MR. FISHER: Yes. I will try to
6 be short. I know we were a little bit large
7 on the panel but we wanted to give well-
8 rounded presentation. Thank you for the
9 opportunity. Thank you for holding hearings
10 on this so that there is a chance to speak
11 about it.
12 I think that what B of A has
13 presented is a good broad brush discussion but
14 without specifics that really matter. For
15 example, 40 billion dollars for 165,000
16 borrowers. That is 150,000 per home. In
17 California, that is half, one-third of the
18 price of a home. So how much is that going to
19 get out?
20 I think that we think that 75
21 percent of subprime borrowers could be okay
22 with their loans if the loans were set at the
108
1 real value now, which we would say was what is
2 at auction, 50 or 60 percent in a fixed rate
3 loan that is affordable. And then those
4 neighborhoods would not be damaged by the
5 foreclosure of that and the bank the wouldn't
6 be damaged by losing another 50,000 because
7 that is all the money they are going to get
8 out of it in the beginning and 50,000 to
9 foreclose.
10 We think that those people's whose
11 homes are going to be foreclosed need a soft
12 landing because they can't rent a home for
13 their family if their credit is ruined. So,
14 we have concerns about homelessness with that.
15 I think that with tenants, that it
16 is a good beginning what B of A talked a bout.
17 But I don't think 60 days may be long enough,
18 given the rental climate that we have in
19 California.
20 We think that as the major
21 investor and packager of subprime mortgage
22 backed securities, that B of A should have a
109
1 plan for those inside of those mortgaged
2 backed security pools for what is going to
3 happen to them. This is another place. And
4 we think this needs to happen now. B of A
5 have said that they don't own Countrywide yet,
6 but anytime you buy something, there are terms
7 of purchase. Terms of purchase should include
8 this because people are losing their homes, I
9 think in LA every half hour or so. Half a
10 minute? Half hour. So, there is a great
11 danger.
12 And the other thing is for us, we
13 are very disturbed that this purchase because
14 of the OTS regulation of Countrywide allows
15 the breach of the antimonopoly standard of ten
16 percent of deposits, taking it to 11.8.
17 There are other things I will put
18 into written testimony. But I thank you. I
19 think this merger is emblematic of the entire
20 mortgage crisis and that we hope that you will
21 take upon yourselves responsibility to be sure
22 that you set a standard for the rest of the
110
1 mortgage industry in this. And we hope that
2 Bank of America, now being the biggest, after
3 the approval which we again assume probably
4 will happen, being the biggest bank, the
5 biggest mortgage lender will take on that
6 responsibility too, in a specific way.
7 Thank you.
8 DIRECTOR BRAUNSTEIN: Thank you
9 very much. Any questions for this panel?
10 MS. ROBINSON: No.
11 DIRECTOR BRAUNSTEIN: Thank you.
12 Please bring the next panel forward.
13 Welcome. A few housekeeping
14 notes. There is a timekeeper. Everybody has
15 five minutes for their statement. The
16 timekeeper will signal you when you have two
17 minutes left and then tell you when your time
18 is up. We would ask that you start your
19 statement by clearly saying your name and
20 organization so that we can get it on the
21 record.
22 And with that, Mr. Rubinger, would
111
1 you like you to start?
2 MR. RUBINGER: Thank you very
3 much. Good morning. My name is Michael
4 Rubinger and I am the President and CEO of
5 LISC, the Local Initiative Support
6 Corporation. We greatly value our partnership
7 with the Bank of America and I am pleased to
8 be here to support the company's proposed
9 acquisition of Countrywide Financial
10 Corporation.
11 In our experience, Bank of America
12 has been a leader in working to revitalize low
13 income communities throughout the United
14 States. By expanding their market footprint
15 through Countrywide, we expect that this
16 dedication to community improvement will
17 extend to even more low income families.
18 I base this judgment on LISC's
19 extensive engagement with the Bank of America
20 and on its leadership and long commitment to
21 our work in low income communities. LISC is
22 one of the nation's largest nonprofit
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1 community development support organizations.
2 Since 1980 we have invested over 8.6 billion
3 dollars in low income urban neighborhoods and
4 rural areas. This investment has leveraged an
5 additional 25 billion dollars, leading to the
6 construction and rehabilitation of over
7 230,000 affordable homes and 32 million square
8 feet of economic development facilities,
9 employing over 91,000 individuals. We have
10 helped to finance daycare centers, health
11 clinics, schools, and community centers, all
12 serving lower income inner city and rural
13 residents.
14 Over the years, Bank of America
15 has provided LISC with 27 million dollars in
16 grants, 75 million dollars in below market
17 loans, and nearly 750 million dollars in
18 equity investments, all in furtherance of our
19 mission to revitalize low income neighborhoods
20 and serve the residents of these communities.
21 Clearly, an enormous and impressive commitment
22 by any standard.
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1 In virtually every innovative new
2 program we have launched, Bank of America has
3 been at the forefront, willing to take risks
4 in the interest of progress. In the early
5 1980s, for example, Bank of America approved
6 our very first bank loan. That expression of
7 confidence and support opened the door to
8 other financial institutions and to our
9 subsequent growth. Later, Bank of America was
10 one of the first corporations to invest in
11 federal low income housing tax credits and
12 remains one of our top five housing credit
13 investors. Bank of America also helped us to
14 create and implement each of the following, a
15 secondary market for community development
16 loans, an equity investment fund for intercity
17 supermarkets, the nation's first real estate
18 investment trust dedicated to community
19 development, training and technical assistance
20 programs to strengthen the organizational
21 capacity of neighborhood based CDCs, and a
22 partnership to help public housing authorities
114
1 access private financing.
2 In 1995 when LISC made the
3 decision to expand our program into low income
4 rural communities, Bank of America was one of
5 the first financial institutions to join us in
6 that undertaking, recognizing that affordable
7 housing, job creation and the other benefits
8 of community development are just as vitally
9 needed in rural areas as in our cities.
10 In our work in low income
11 communities, it is LISC's role to provide the
12 early stage and high risk capital that most
13 community development projects need. But our
14 efforts can succeed only if banks are willing
15 to provide direct conventional financing as
16 well. Bank of America has been in important
17 source of construction and permanent financing
18 for these projects, even in some of the
19 toughest high risk markets. And more often
20 than not, their involvement is also
21 characterized by innovation and creativity in
22 the interest of community improvement.
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1 If time permitted, I could site
2 numerous examples from all over the country
3 and I have included some of these in my
4 written testimony. But for now, suffice it to
5 say that Bank of America has been a vital and
6 productive partner for LISC in our community
7 revitalization efforts on behalf of lower
8 income families and individuals nationwide.
9 If the acquisition before you is
10 approved, we firmly believe that that
11 partnership and those efforts will be deepened
12 and broadened and that communities all across
13 the country will benefit enormously as Bank of
14 America brings its unique blend of
15 professionalism, commitment, and community
16 sensitivity to Countrywide's market footprint
17 and operations.
18 Thank you.
19 DIRECTOR BRAUNSTEIN: Thank you
20 very much. Ms. Kennedy?
21 MS. KENNEDY: My name is Judith
22 Kennedy. I am President and CEO of the
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1 National Association of Affordable Housing
2 Lenders that are known as NAAHL. NAAHL
3 represents America's leaders in moving private
4 capital to those in need, 200 organizations
5 committed to low and moderate income
6 communities. The who is who of private sector
7 lenders and investors in affordable and
8 community development; banks, thrifts, loan
9 consortia, local and national nonprofits,
10 mortgage companies, foundations and pension
11 funds.
12 Our experienced practitioners of
13 the community investment has 30 years of
14 experience now in making private capital
15 available in underserved areas but they
16 realize that the lending is only part of the
17 job. Building communities and decent housing
18 affordable to low and moderate income
19 households is not only about providing capital
20 and bricks and mortar, it also involves
21 policy. It involves mastering regulations
22 about initiatives like the New Markets Tax
117
1 Credit. It involves educating policy makers
2 about the partnerships between banks and local
3 nonprofits to meet community's needs and
4 leverage scarce federal funds. It is about
5 helping to preserve needed federal community
6 and economic development programs through
7 advocacy and policy analysis. As always, the
8 devil is in the details and only the most
9 committed practitioners dedicate the resources
10 necessary to master those details, advocate
11 for the policies, basically, show up and do
12 the job.
13 Bank of America directly and
14 through NAAHL consistently provides the
15 necessary resources. Let me share just a few
16 examples. You know that Bank of America has
17 tackled some of the most complex
18 redevelopment, often involving conflicting
19 state and federal regulations and, in places
20 like Harlem and other older neighborhoods, it
21 is paying off. Nothing about this work is
22 easy or glamorous and almost all of it goes
118
1 unnoticed. Woody Allen is credited with
2 saying that 80 percent of success is just
3 showing up. Bank of America consistently
4 shows up wherever policy makers and other
5 practitioners need more knowledge, experience
6 or practical solutions to spur more private
7 capital loans and investments in under served
8 areas.
9 For example, partnering with NAAHL
10 and other advocacy organizations, it was Bank
11 of America that worked persistently in
12 Congress to help create the innovative New
13 Markets Tax Credit, to preserve the Community
14 Development Financial Institutions Program,
15 and the Community Development Block Grant
16 Program. Bank executives testified before
17 Congress, made time for staff briefings, and
18 always are there to provide comments on
19 legislative proposals to ensure the efficient
20 use of federal funds.
21 Even after New Markets Tax Credit
22 have been signed into law, the Internal
119
1 Revenue Service, very unfamiliar with
2 community development, promulgated rules that
3 could have made the credit virtually useless.
4 Bank of America once again showed up,
5 providing professionals in community and
6 economic development for many many hours of
7 meetings over many many months. The bank
8 played such a valuable role in helping to
9 educate the authors of tax rules on how to fix
10 the proposed regulations consistent not only
11 with federal tax policy, but also with
12 community development challenges.
13 In early as 2001, and then again
14 in 2004, Bank of America helped NAAHL to hold
15 the first symposia on practical solutions to
16 predatory lending, featuring the late Federal
17 Reserve Governor Edward Gramlich and our
18 reports of those symposia are known as the
19 Bibles on Capital Hill.
20 When HUD proposed eliminating the
21 Hope VI program that has revitalized so many
22 communities, Bank of America was willing to
120
1 show up once again, testifying in support of
2 the program before Congress and spending
3 countless hours with members and their staff,
4 working collegiately on ways to improve the
5 program so that Congress could preserve Hope
6 VI and it did.
7 When HUD proposed eliminating
8 Section 8 housing subsidies, Bank of America's
9 opposition was very important to the
10 Republican majority in Congress.
11 Bank of America has also brought
12 to the federal policy arena its experience
13 from a very unique partnership with public
14 housing authorities throughout our nation.
15 The bank provides private capital financing
16 technical assistance and just moral support on
17 ways that public housing authorities can
18 increase their operational efficiency and
19 financing sources.
20 When other insured institutions or
21 policy makers are looking for innovative ways
22 to help bring un-banked individuals into the
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1 financial mainstream, Bank of America always
2 responds. The Bank's Sesame Street for Adults
3 video helps break the ice at financial
4 literacy training and is much in demand in
5 Washington and everywhere else, as are
6 customer documents in languages like Farsi and
7 Bosnian.
8 When California lenders, both
9 banks and nonprofits, were having trouble
10 qualifying for New Markets Tax Credits, still
11 a very brain damaging initiative, Bank of
12 America willingly sent staff to Washington,
13 D.C. to San Francisco to teach others in
14 California how to compete successfully and on
15 a federal holiday, at that.
16 Communities throughout the country
17 are benefiting from Bank of America's
18 leadership, knowledge, experience and
19 advocacy. We support the proposed
20 acquisition.
21 DIRECTOR BRAUNSTEIN: Thank you.
22 Ms. Koo?
122
1 MS. KOO: Good morning. My name
2 is Doris Koo. I am President and CEO of
3 Enterprise Community Partners. I appreciate
4 the opportunity to testify today in support of
5 the proposed merger of Bank of America
6 Corporation and Countrywide Financial
7 Corporation.
8 Enterprise was founded in 1982 by
9 the late developer, Jim Rouse, who believed
10 that all low income families should have
11 access to safe and affordable housing as the
12 first step in overcoming poverty.
13 With support from long-standing
14 partners, including the Bank of America,
15 Enterprise is now providing a billion dollars
16 a year investment in low income communities
17 and over the last 25 years, have raised and
18 invested nine billion dollars in equity grants
19 and loans to support the creation of over
20 240,000 affordable homes.
21 We did not do this by ourselves.
22 Throughout our history, Bank of America has
123
1 been one of Enterprises leading financial
2 institution partners. As of 2008, the total
3 investment made by the Bank of America through
4 Enterprise to support low and moderate income
5 communities well exceeded one billion dollars.
6 This long-term partnership has created and
7 preserves more than 26,000 affordable homes
8 and brought critical investments to low and
9 moderate income communities throughout the
10 nation. More than 60 percent of the houses
11 produced with assistance from Bank of America
12 in 2007 are affordable to households earning
13 less than 50 percent of annual median income.
14 Bank of America has demonstrated
15 its community investment commitment over and
16 over again by being a major provider of equity
17 investment in low income housing tax credits
18 and New Market Tax Credit programs by
19 providing below market rate loans to
20 communities and by providing more than 13
21 million dollars through enterprise to support
22 a wide variety of programs, as well as
124
1 community development partners. Bank of
2 America also has been an instrumental partner
3 in the National Community Development
4 Initiative known as living cities, which work
5 with major philanthropic foundations,
6 corporations, financial institutions and HUD
7 to invest in and stimulate the capacity of
8 community development corporations to build,
9 promote, and sustain healthy communities in
10 urban centers.
11 I am not going to go in the detail
12 of Bank of America's investment. They are
13 contained in my written testimony. We do
14 commend this wide-ranging and crucial support
15 from Bank of America which has helped
16 enterprise innovate and take community
17 development models to scale. We believe that
18 with the merger, Bank of America can and will
19 pay an even greater role in key issues
20 affecting low and very low income communities.
21 As you consider the request for
22 approval on this merger, we believe that it is
125
1 appropriate to expect and insist on a high
2 level of commitment to serve current and
3 future customers, especially those from low,
4 very low, and extremely low communities, as
5 well as the very communities in which they
6 live. We feel that B of A will step up to the
7 challenge.
8 I want to highlight three issues
9 for our discussion this morning. One is the
10 home foreclosure crisis an the need to
11 stabilize communities hardest hit by the wave
12 of foreclosures and high cost mortgage
13 lending. We support and are part of the
14 alliance to help millions of homeowners who
15 are facing foreclosures and loss of their
16 homes. But in addition to helping these
17 homeowners in every way we can, we must also
18 consider the impacts of the foreclosure crisis
19 on low, moderate, very low, and extremely low
20 income neighborhoods. We must do more and we
21 believe that Bank of America will again take
22 leadership in this area.
126
1 There are many foreclosed
2 properties known as real estate owned
3 properties or REOs that can further trigger
4 cycles of disinvestment and abandonment in
5 communities hardest hit by the crisis. We
6 have seen these in intercity communities from
7 Cleveland to Detroit and here in Los Angeles.
8 Enterprise is working closely with
9 national and local partners to develop
10 effective REO disposition programs. In order
11 for these programs to work, we need support
12 and leadership from important financial
13 institutions, such as Bank of America. Bank
14 of America can and should invest in these
15 efforts by providing key initial capital to
16 help leverage other public and philanthropic
17 foundation support.
18 Furthermore, Bank of America's
19 banking regulator, the Office of the
20 Comptroller of Currency, should encourage Bank
21 of America's REO disposition effort by
22 providing appropriate credits through its
127
1 community reinvestment act examinations, if
2 they bank would be willing to bundle some of
3 these foreclosed properties that are impacting
4 loans in moderate income communities into
5 properties that nonprofit community partners
6 can take on to revitalize those very
7 communities.
8 We also want to encourage
9 financial institutions to go beyond just the
10 foreclosure crisis and the focus on the
11 foreclosure crisis. As we said, neighborhood
12 stabilization has been the mainstay of our
13 work. We also see that building healthier,
14 energy efficient and sustainable communities
15 will be the solution for the future. Bank of
16 America has been the leading supporter of
17 Enterprise's Green Communities Initiatives.
18 And we expect and would welcome continuing
19 leadership from Bank of America to address one
20 of the greatest challenges faced by our
21 country in an equitable and systemic way.
22 Green investment is good community investment.
128
1 Finally, as we fight to preserve
2 communities, we have to also fight to preserve
3 the nation's affordable housing rentals,
4 rental housing stock that are at risk of
5 conversion or disposition. For the last ten
6 years, this nation has lost more than 300,000
7 affordable and subsidized apartments through
8 physical deterioration or conversion to market
9 rate housing. During the next five, we will
10 anticipate more than one million Section 8
11 units to expire, presenting a huge challenge
12 to organizations committed to preserving this
13 valuable housing stock for low, moderate
14 income, and very low income residents. As a
15 leading investor in affordable rental housing,
16 we encourage the Bank of America to step up
17 and finance the preservation of these
18 affordable units, so that we can preserve them
19 for generations of low income residents to
20 come.
21 In conclusion, we appreciate Bank
22 of America's leadership in the community
129
1 development work around the country. We
2 expect that they will continue this leadership
3 after the successful merger with Countrywide
4 Financial.
5 Thank you.
6 DIRECTOR BRAUNSTEIN: Thank you.
7 Ms. Galante?
8 MS. GALANTE: Yes, good morning.
9 Thank you for the opportunity to be here. My
10 name is Carol Galante. I am the President and
11 CO of Bridge Housing Corporation. Bridge is
12 the largest developer of affordable housing
13 and community development efforts in
14 California. We are headquartered in San
15 Francisco and also have offices in San Diego
16 and Los Angeles. We have developed about
17 13,000 homes and apartments affordable to low
18 and moderate income individuals.
19 I am here today to speak to the
20 credibility and commitment of Bank of America
21 to community development. And I want to focus
22 on four areas, credit, investment, mortgage
130
1 lending, and industry leadership.
2 Bank of America has a very strong
3 ongoing commitment to Bridge and organizations
4 like ours to construction lending and perm
5 lending throughout California. They have
6 continually demonstrated to have the most
7 innovative pricing and products available in
8 the marketplace. And I will give you two
9 examples. We currently have a 30 million
10 dollar construction loan on affordable
11 condominiums in the Bayview-Hunter's Point
12 neighborhood of San Francisco. And we also
13 have an acquisition and construction to perm
14 loan with them on a very challenging property
15 in Stockton, California, where as part of a
16 neighborhood stabilization strategy, we agreed
17 to take on the worst apartment complex in the
18 city of Stockton with the highest number of
19 police calls and convert that into an ongoing
20 asset to the community. And Bank of America
21 has stepped up to help us in that effort.
22 Even more impressive, I think, is
131
1 their commitment to investment and I want to
2 mention two examples of this. I think their
3 purchase of low income housing tax credits,
4 particularly in today's market and I think
5 everybody knows that we are in a very
6 challenging time with respect to investors in
7 low income housing tax credits. Many
8 investors are now sitting on the sidelines.
9 Pricing has plummeted for developers who very
10 much need this equity investment to enable our
11 affordable housing developments to continue.
12 Bank of America has always been a
13 leader but even in these challenging times,
14 they have been incredibly aggressive and
15 available to us. We currently have seven
16 developments that we are bidding for equity
17 and I can tell you that Bank of America is in
18 play on every one of those investments in a
19 number of different markets in California.
20 So, this is of very critical importance to us
21 in the investment area.
22 They have also invested in Bridge
132
1 as an organization, lending us at very low
2 interest rates money for us to put out the
3 most riskiest capital, the early pre-
4 development capital. This is money totally at
5 Bridge's discretion and they are relying on
6 our judgment to make good judgments and we
7 very much appreciate that commitment to us.
8 And that kind of investment is as important a
9 the direct project investments that Bank of
10 America makes.
11 On mortgage lending, Bank of
12 America is our go-to bank for single family
13 mortgage lending. The Acorn product that they
14 make available to first time home buyers is
15 the best in the country and I hope and expect
16 that we will continue to see that type of
17 product, even in this challenging mortgage
18 environment. There are low income home owners
19 out there who need mortgage product
20 availability and this has been, as I said, our
21 go-to product on our for sale affordable
22 developments.
133
1 Last but not least, I do want to
2 mention Bank of America has taken a true
3 leadership position in California in assisting
4 the nonprofit development community in
5 advocating for and raising public resources.
6 Bank of America was the first lending
7 institution to step up. I think it was about
8 $150,000 grant to help groups like ourselves
9 and California Housing Consortium get a two
10 billion dollar affordable housing bond measure
11 on State of California's ballot. That was
12 approved and is now actively out participating
13 in development activity. And if it weren't
14 for Bank of America stepping up, I don't think
15 some of the other lenders would have followed
16 suit. And that money was of critical
17 importance to leveraging the public resources.
18 So, those are just a sampling of
19 the commitment that we see the Bank of America
20 having to community development. And for that
21 reason, we expect that to continue with the
22 merger with Countrywide and we are supportive
134
1 of that effort. Thank you.
2 DIRECTOR BRAUNSTEIN: Thank you
3 very much. Any questions fro this panel? No.
4 Well then, thank you very much for your
5 testimony.
6 We are going to take a short
7 break. We will reconvene at 11:00.
8 (Whereupon, the hearing went off
9 the record at 10:45 a.m. and went back on the
10 record at 11:03 a.m.)
11 DIRECTOR BRAUNSTEIN: Okay. We
12 are reconvening. And I do have one
13 announcement to make for the members of the
14 public who are here is that the Federal
15 Reserve Bank of Los Angeles, the branch has
16 graciously offered to allow the members of
17 the public who want lunch to use their
18 cafeteria. So, it will be open, I don't know,
19 starting at -- where is John -- what time, do
20 you know?
21 MR. TURNER: It probably opens
22 early like 11:30 or something.
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1 DIRECTOR BRAUNSTEIN: Okay. And
2 we will have a lunch break but you are welcome
3 to use the cafeteria to buy lunch as opposed
4 to having to go outside the building.
5 Okay. We are going to start with
6 this panel. We have a total of 45 minutes for
7 this panel, divided up among however many
8 people you can get in during that 45 minutes.
9 So with that, we will get started.
10 Mr. Aguilar?
11 MR. AGUILAR: Thank you, Sandy.
12 Once again, my name is Orson Aguilar. I am
13 the Executive Director designee of the
14 Greenling Institute. First I want to say
15 thank you to the Federal Reserve for holding
16 this hearing in my hometown, LA. I grew up
17 real close to here in Boyle Heights. And I
18 also want to thank the B of A in our
19 leadership and willingness to engage in a
20 dialogue that we share will really lead to a
21 really fruitful engagement and partnership
22 over the next ten years.
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1 We are here during a major crisis,
2 as we all know. Many people say that perhaps
3 this a crisis that could have been averted by
4 the Federal Reserve. And we are also here
5 because the company being acquired is
6 considered to be mostly responsible for the
7 crisis we are seeing here in California. And
8 I want to say that this is much larger than
9 just a foreclosure crisis. This is a
10 community crisis and I want to make sure that
11 we don't overlook that because this is not
12 just about homes and mortgages. This is about
13 entire communities. The community where I
14 currently live in East Oakland, you basically
15 see a parallel. I'm sure the Federal Reserve
16 put its research to look at the incidents of
17 crime and homicides. I am sure that they are
18 almost synonymous and parallel those of the
19 homicide rates and other community indicators.
20 so this is a very serious issue that can't be
21 taken lightly. And I think that when people
22 seem to be upset and angered at some of the
137
1 things we have heard today it is because it is
2 a very serious issue that I see first hand on
3 my home from work and driving to work.
4 I first want to applaud B of A. I
5 know that it seems like the applause hasn't
6 really been there because there is a huge
7 issue but 1.5 trillion commitment is huge. It
8 is the biggest ever done. We are quite
9 confident that based on B of A's previous
10 record that they will exceed this commitment,
11 as they have their prior commitments. It is
12 also a great step during a time when most
13 banks seem to be pulling back. There are no
14 other banks that I know of that are actually
15 putting in more philanthropic dollars, that
16 are doing more as the way B of A is. So, I
17 really want to commend the B of A for going in
18 this positive direction and announcing this
19 today.
20 One of the things that when I
21 think of this one and a half trillion
22 commitment, I think this is great for the
138
1 long-term success and sustainability of the
2 communities that I come from. But one of the
3 things that seems to kind of concern and worry
4 me is what we are doing about the short term.
5 And there appears to be some contradictory
6 marks about the short term. For example, I
7 heard the phrase we will continue to do this,
8 we will continue to this, referring to the
9 loss mitigation strategies that have, for the
10 most part, failed our communities. And then
11 I heard something a little more positive that
12 perhaps a little more details could make me
13 not so concerned and worried. And that was in
14 the Q and A when Andrew Plepler and Janet and
15 Liam McGee stated that they wanted to be the
16 most creative in this effort. And rather than
17 stay on the negative, I am going to latch onto
18 the positive of the creativity part because
19 this is what we really need.
20 I think this is the perfect time
21 for creativity. The Federal Reserve knows
22 well about creativity. They have done things
139
1 they have never done. They have used tax
2 dollars to bail out large corporations and
3 Wall Street companies that haven't
4 participated in CRA activities. And we think
5 the same type of spirit of creativity fostered
6 by the Federal Reserve could lead to some very
7 meaningful things for our community.
8 I think we really need to think
9 much bigger than what Countrywide is doing.
10 And nobody here has any hope whatsoever in
11 Countrywide's practices. Those practices just
12 need to be stopped and we need something new.
13 The 20 million dollars is a good first step
14 but it is only a beginning. Angelo Mozilo was
15 very creative. You know, he made out like a
16 bandit with 450 million right before this
17 thing crashed. So we need, you know, we are
18 not asking for everything that he took. You
19 know, we are simply going to ask that you put
20 in half, 250 million to save some of these
21 communities in the short term.
22 Now, one of the things you are
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1 going to be hearing from today is a very
2 diverse multi-ethnic, multi-issue panel that
3 we think can help you work towards this
4 creativity. And one of the things we are
5 urging and recommending is a meeting very
6 soon, within the next 15 days with key
7 community leaders in California to work on the
8 details of what your B of A creativity plan
9 will be.
10 To my right is Pastor John Hunter
11 who perhaps has one of the most creative
12 programs that, with adequate philanthropy,
13 with a small portion of the 250 million we
14 hope you will commit, can really do some
15 things to save the communities from some of
16 the things I see. Thank you very much.
17 MR. HUNTER: Thank you. I am John
18 Hunter. I am the Senior Pastor and the Chief
19 Executive Officer of First African Methodist
20 Episcopal Church here in Los Angeles. It is
21 the oldest congregation established by African
22 Americans in the city. We have 13
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1 corporations and to my right is the President
2 of our corporations.
3 Rather than condemning past
4 practices, I think it has been well documented
5 the failures of financial institutions such as
6 Countrywide and even some of the shortcomings
7 of Bank of America. We realize that we are at
8 a critical moment and now that Bank of America
9 will be taking an unprecedented leadership
10 role as a mortgage banker granter, equally
11 they must take a leadership role in solving
12 the problem in being proactive. Under whom
13 much is given, much is required. And
14 certainly, much is going to be given with the
15 new status that I think almost all of us
16 assume that the merger will be approved by
17 this Board.
18 And so we look at how we address
19 the issues that are confronting our nation and
20 our community. In the 1960s, we hade the
21 civil rights era. There was advocacy. There
22 was litigation. There was agitation,
142
1 marching, etcetera for civil rights. The
2 frontier for civil rights now is in the
3 banking world and in the economic development
4 sphere where there is still great disparity.
5 It has been stated several times that a number
6 disproportionately of these subprime loans
7 were given to African Americans and Latinos,
8 many of whom qualify for regular loans. And
9 so we find now disproportionately this is
10 adversely affecting minority communities. It
11 is of great concern and we want Bank of
12 America to be very specific about how it is
13 going to address these issues. We are
14 encouraged to hear the figures that have been
15 laid out in front of us today but we need to
16 make sure because now always have we found
17 that Bank of America has been, in comparison
18 to their competitors, a leader in
19 philanthropic enterprises within the African
20 American Community and has not always stepped
21 up to the plate has been requested or needed
22 when it comes to economic development within
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1 the African American Community.
2 So, clearly, we have a window of
3 opportunity to take advantage of what can come
4 out of the merger and Bank of America
5 certainly has the opportunity to emerge as an
6 industry leader, setting a standard, a tone,
7 and an atmosphere for other institutions to
8 emulate. But clearly, it must be specific.
9 We are here to engage and to work with the
10 bank as we are with other institutions to
11 specifically mold and shape programs that will
12 help solve this problem.
13 And so we say this to the Federal
14 Reserve Board that with conditions and with
15 this understanding of the new opportunity and
16 responsibility that will fall on the shoulders
17 of Bank of America with this merger, we would
18 state our concern and express it in this
19 manner.
20 MS. HUNTER: Thank you for this
21 opportunity. My name is Denise Hunter and I
22 am the President and COO of FAME Corporations.
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1 Annually, we at FAME Corporations provide
2 services to more than one million California
3 residents in the area of housing, health
4 services, transportation, business development
5 and environmental protection. I come to you
6 today as a voice of those one million.
7 FAME Corporation offers its
8 conditional support of the Bank of America
9 acquisition of Countrywide. Conditional
10 support because of its far reaching affect on
11 the minority communities and conditional
12 because of Bank of America's marginal
13 philanthropic efforts in the minority
14 community.
15 As we find ourselves in the midst
16 of a crisis whose affects will be felt for
17 generations to come, it is imperative that
18 measures be immediately instituted to help
19 those persons who have been victimized by
20 Countrywide's questionable lending practices
21 and their overall lack of concern for the
22 welfare of their customers. While I
145
1 appreciate Bank of America's CRA commitment of
2 1.5 trillion and their philanthropic
3 commitment of 2.0 billion and also their
4 equally wonderful commitment to creative and
5 innovative programs to address the foreclosure
6 crisis. My concern is how this commitment
7 will translate to substantive and meaningful
8 programs and whether any of these dollars will
9 ever reach those who need them most.
10 My request is that B of A make a
11 quantitative and qualitative commitment to
12 work with faith based and community based
13 organizations to provide funding for programs
14 currently in place, programs such as FAME's
15 Project Save Our Homes, which was endorsed by
16 the editorial board of the LA Times as a
17 viable option in addressing the foreclosure
18 crisis.
19 Project Save Our Homes is an
20 effort to provide support for those homeowners
21 who are not on any other financial
22 institution's radars. Those whose voices have
146
1 gone unheard and whose cries have gone
2 unnoticed. My request is that Bank of America
3 will make clear and specific commitments to
4 support shoe of us who each and every day
5 provide services to those who have been turned
6 away by Countrywide, those who are left
7 without options after losing their most
8 valuable asset. This crisis for so many has
9 meant complete devastation of their lives.
10 Those business owners who have used their
11 homes as collateral for their small business
12 loans now find themselves homeless and without
13 businesses. These losses are real. Not just
14 for the homeowners, but for all of us who live
15 in this country. Their loss if our loss. My
16 hope is that Bank of America will recognize
17 and address the pain and devastation and
18 mistrust left by the questionable lending
19 practices of Countrywide, recognize that if
20 this acquisition is approved, that
21 Countrywide's devastation becomes Bank of
22 America's devastation, and recognize that that
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1 responsibility must be taken seriously as we
2 call work together to rebuild our communities.
3 Thank you.
4 MS. BAUTISTA: I am Faith
5 Bautista, Executive Director of Mabuhay
6 Alliance and part of The Greenlining
7 Institute. I am going to talk about what is
8 going on in the street.
9 When a homeowner comes to our
10 office and asks for help, I immediately tell
11 them, it is not your fault. First, Allen
12 Greenspan allowed subprime when he in fact did
13 not believe in subprime. He wants certainty.
14 The bankers give subprime loan even half of
15 those people were qualified for prime loans
16 and now, you are the victim.
17 What I am asking the Federal
18 Reserve is do approve it soon but Bank of
19 America do everything they can to help the
20 homeowners. It is too late now, actually, for
21 a lot of people. They own homes and still
22 foreclose but there are still so many homes
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1 that we can save.
2 Bankers doesn't want to help
3 people unless they are already in trouble. I
4 myself cannot be helped because I am still not
5 delinquent in my loans. Do I have to wait for
6 that? Loss mitigation, counseling. It is
7 beyond counseling. Financial literacy has to
8 be in place. Not just savings, not just
9 balancing the checkbook. It is really
10 creating a literacy that it will not happen
11 this problem again. If we had a good
12 financial literacy, a basic one, starting when
13 they are in fifth grade, probably we would
14 have not this much of a problem.
15 I am asking Countrywide can only
16 do so much. As you know, there are so many,
17 half a million. Counselor can only counsel
18 two people at a time. There are so many
19 people in line. 1-800-995-HOPE. I call that
20 1-800-995-HOPE or Hope Now. It is nothing.
21 It is months, in fact years before they can
22 even be helped. I would say the regulators,
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1 OTS, we met with OTS. Countrywide has to do
2 more now even without this merger. Bank of
3 America has to step on the plate right now.
4 Don't even wait for that one.
5 We are post a massive counseling
6 that can really do loan modification. One
7 counselor, home counseling in San Diego have
8 600 files. I asked them, out of your 600
9 files, how many have you really modified?
10 People are losing hope with the regulators,
11 with the banks, with community leaders. We
12 can counsel as much as we can, but the buck
13 stops with Bank of America or Countrywide.
14 They have to do something on that loan
15 modification. They have to realize that
16 talking is not good enough. Put more teeth on
17 that. People don't care anymore. They need
18 their home.
19 It is affecting so much of their
20 emotional, their character, the kids. Like my
21 daughter asked me, are we going to lose a
22 home? I said no, I am going to fight until we
150
1 can keep this home. And there are so many
2 people, like Andrew is saying, are qualified
3 to stay in their home but not being modified.
4 So, I am asking Countrywide, Bank
5 of America, and the regulators to put the
6 solution today, not even tomorrow. Thank you.
7 MS. MONTOYA: Good morning. My
8 name is Martha Montoya and I am the Southern
9 Region Chair Board Member for the California
10 Hispanic Chamber of Commerce. More
11 important, I am the chair statewide for the
12 Access to Business Capital.
13 CHCC, California Hispanic Chamber
14 of Commerce, represents over 65 chambers with
15 over 475,000 business owners. Myu job today
16 is to bring awareness to you, as I did to
17 Senator John Kerry on a couple of issues that
18 are happening.
19 The collapse of subprime mortgage
20 and market affects business. That collapse
21 caused lenders and investors to go back from
22 the credit and debit market which drive
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1 business expansion. To this you can add slow
2 payment on our company's receivables starting
3 to create a cash flow crunch. I will present
4 the best we have compiled so far because it is
5 really brand new throughout this research.
6 Then they get the ripple affect on
7 small business, minority and Hispanic in
8 particular, which are the livelihood of this
9 American economy are caused by subprime
10 mortgage. It continues and not only the
11 prices are climbing on oil, but the going
12 green, it is also putting pressure on the
13 small business, overwhelming them.
14 Credit access, cash flow, payment
15 and credit lines on time, expansion and other
16 financial elements are now at the forefront of
17 many small business's firms. And Hispanics
18 who have learned to work and trust financial
19 institutions for their businesses by now see
20 the doors closing on them. Bankers estimate
21 that at least 90 percent of first time
22 business owners use their homes as collateral
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1 on small business loans. This statistic is
2 not so surprising when you consider that a new
3 business often does not have enough assets to
4 serve as collateral for the entire loan. But
5 what happens if the business fails?
6 Generally, both private banks and the U.S.
7 Small Business Administration with banks
8 billions in loans, with repayment guarantees
9 to the banks, try to negotiate payment plans
10 that allow the former business owner to repay
11 the debt gradually without being thrown out of
12 his home. When the VA or a bank accepts a
13 home as collateral on a business loan, they
14 put a lien on the home for the value of the
15 entire debt, even if the debt is more than the
16 owner's equity. The thinking is that the
17 equity will increase through continued
18 mortgage payments and appreciation of the home
19 during the life of the loan. Any such lien
20 holder's claim would be secondary to that of
21 a primary mortgage holder.
22 The Committee of Small Business
153
1 and Entrepreneurship hearing headed by Senator
2 John Kerry a week ago in Washington, D.C., we
3 have started to compile information that will
4 give you a landscape of small business but not
5 yet on minority owned business. These become
6 an ongoing research for the California
7 Hispanic Chamber of Commerce, who have seen
8 more companies downsizing or closing.
9 Collapse of subprime mortgages market affect
10 business. The ripple affects on the mortgage
11 crisis are a threat to America's small
12 business, since approximately 30 percent of
13 all business owners rely on home equity to
14 finance their small business operations or to
15 expand lines of credits. This, in general,
16 across the board.
17 The Federal Reserve Board of
18 Governors Member Frederick Mishkin testified
19 that credit standards have tightened for small
20 business, making it more expensive and harder
21 for small business owners to obtain loans.
22 Theoretically, the SBA's program should play
154
1 a key role in filling the gaps left by a
2 tightened credit market. However, this hasn't
3 occurred this time around. SBA loan activity
4 is down program-wise. Activity at the SBA
5 7(a) Loan Program, the largest single source
6 of long-term capital for small businesses
7 appears to be in freefall. The number of 7(a)
8 loans approved by SBA lenders, has increased
9 by about 18 percent compared with the same
10 period last year. In terms of dollars, the
11 7(a) program is down by over 641 million
12 dollars. John Graham, a professor of finance
13 at Duke University and CFO Magazine, do a test
14 continuously and they say that companies, one-
15 third of them have credit problems throughout.
16 NFIB, National Federation Business
17 have said that they do an optimism small
18 business survey and have sold 3.3 per month
19 for the last three months.
20 In conclusion, as a business
21 leader and speaking on behalf of others in our
22 chambers, I would like to see clear programs
155
1 and long-term commitments, I am talking three
2 to five years, to one, embrace new business
3 owners because Congresswoman Nydia Velasquez
4 said more employed people will open more
5 businesses. Sustainable program for existing
6 programs such as procurement. Mr. Assemblyman
7 Arambula says there are enough contracts by
8 government, state and federal that we can
9 apply for. So we need procurement programs
10 and the emerging domestic market investment
11 into smaller funds, so we can fund the small
12 companies. This will give our business owners
13 the tools to survive and keep a roof over them
14 and their employees. Thank you.
15 DIRECTOR BRAUNSTEIN: Thank you.
16 MR. FIGUEROA: My name is Steve
17 Figueroa. I am with the Inland Empire Latino
18 Coalition. It is a coalition of 40
19 organizations in the Inland Empire, San
20 Bernardino Riverside areas.
21 And as I understand, Bank of
22 America has made some commitments to meet in
156
1 the Inland Empire within 15 days. We would
2 expect you to live up to your words not only
3 to being there but to have the plan in place
4 within 30 days. In some of our neighborhoods,
5 the Inland Empire is the heart of the
6 foreclosure depression. Let's not call it a
7 crisis. It is a depression. Let's call it
8 what it is. Okay?
9 There are four or five homes on
10 every block. Brand new homes. Even as they
11 build new homes right around the block. And
12 we see homes that once sold for $600,000 now
13 selling for $300,000. I myself and my wife
14 are victims of this foreclosure crisis. And
15 we are seeing victims -- now, I am not a
16 victim type person. Okay? We expect Bank of
17 America to fix their Humpty Dumpty they just
18 bought. And if they can put all the shells
19 back together, that would be really cool
20 because they need to step up to the plate.
21 They bought the eggshell. Now, it is time to
22 repair the eggshell and all the damage that it
157
1 has done. I kind of feel like I am here
2 before Solomon and you are making a decision.
3 And any decision that you are making in
4 dividing this baby, I ask that you hold Bank
5 of America and the other lending institutions
6 accountable with sanctions to say if you don't
7 live up to your commitments, these are the
8 sanctions. You will make these buyer's homes.
9 If you can do it for Bear Stearns, you can do
10 it for the taxpayer who bailed out Bear
11 Stearns. It is only fair. It is only
12 reasonable that you give us what you gave Bear
13 Stearns, after all, we are going to end up
14 paying the bill.
15 And as far as Bank of America, you
16 know, their philanthropy in the Inland Empire
17 really needs to improve because I work with a
18 number of nonprofits that have come to Bank of
19 America only to have the doors shut on them.
20 They walk -- they don't walk what they talk.
21 Bottom line.
22 So, any commitment, what they live
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1 up to, we would like to see them with
2 sanctions of they cannot walk what they talk.
3 That is what is missing. Many of us would
4 have better off going to the Mafia with our
5 loans. At least then, we would have had
6 someone we could go to for a final outcome.
7 But in this particular case, we get phone
8 calls. You get, a month later you get a call.
9 They are still advising you to go into
10 foreclosure.
11 Thank you.
12 MR. DEAN: Good morning. I am
13 George Dean and I am testifying as President
14 of the Greater Phoenix Urban League in Phoenix
15 Arizona, as well as I serve as co-chair of the
16 Greenlining Coalition.
17 Bank of America is a major player
18 in the Arizona marketplace and has potential.
19 It has the potential if it develops specific
20 programs with the Arizona minority community
21 to both prevent massive foreclosures and to
22 help close the minority home ownership gap in
159
1 Arizona.
2 As the nation's largest bank, we
3 expect Bank of America under condition for
4 Federal Reserve approval to set the highest
5 standards for not only Arizona but for
6 America.
7 For more than 30 years, I have
8 been a part of urging Bank of America, as well
9 as other banks to do business with America's
10 five million minority owned business. The B
11 of A, at one time, has promised to be number
12 one. In the past the B of A has promised to
13 be number one, but this is still an
14 unfulfilled promise. And we at the Urban
15 League hope and expect that CEO Ken Lewis
16 saying Bank of America to be number one in
17 Arizona and the nation by next year.
18 In conclusion, we would like to
19 have Ken Lewis to fly from Charlotte to
20 Phoenix to fully understand the plight of
21 Arizonan's who live from paycheck to paycheck.
22 I said to someone earlier that B of A is
160
1 acquiring, is attempting to acquire the devil.
2 And they are going to have to do a lot to make
3 up for the kinds of devastation that has been
4 caused in this country and especially here in
5 Arizona and we urge, I urge you to strongly
6 consider all of those merits and conditions
7 before giving final approval to this
8 particular merger.
9 DIRECTOR BRAUNSTEIN: Thank you.
10 MS. LOPEZ: Good morning. My name
11 is Ortensia Lopez. I am executive Director of
12 El Concilio of San Mateo County, also co-chair
13 of the Greenlining Institute. And I want
14 thank you first for the opportunity to be here
15 to speak. And secondly, I also wanted to
16 acknowledge B of A for the leadership that
17 they have played to date on some. And this
18 probably presents a very good opportunity to
19 go from good to great in terms of a leadership
20 institution.
21 And having said that, I wanted to
22 share just some observations and perhaps some
161
1 recommendations that should be considered
2 before this acquisition goes through. But I
3 first want to echo all of my colleagues'
4 comments. I think you can all see it is also
5 very emotional for us. We see people every
6 day. I want to put a picture to one of those
7 people we see. It is a couple probably in
8 their mid-60s, ready to retire, had a home
9 involved in this debacle that happened, lost
10 the home now, and one of the partners has a
11 chronic disease like diabetes which requires
12 extra resources to maintain and caretaking.
13 Now they don't have a home. They don't have
14 resources, they don't know how the caretaking
15 is going to be handled. They now have to go
16 back to their children who have a home that
17 they are now potentially losing. So the
18 impact on that debacle goes down the line to
19 the other children.
20 So I think that is a picture of
21 what we are looking at and I think that is
22 what we are all getting very emotional about
162
1 because we see it every day in our
2 communities. We have seen a 25 percent
3 increase in the number of people that are in
4 the situation of foreclosure.
5 So, it is impacting our
6 communities. I think that you can see that.
7 It happens that California has the minority
8 being the majority now. So everybody says it
9 is the minorities that have create this. No,
10 it is not because there are minorities that
11 have decent jobs, decent jobs and can afford
12 to maintain their homes, given the opportunity
13 and a fair rate.
14 So, we would like you to consider
15 that in this acquisition. I think that to
16 date, there has been very little aggressive
17 and intervention from financial institutions
18 and the Feds to help address this big 800
19 pound gorilla is what I am calling it for lack
20 of a better term. And I think that we ought
21 to look at B of A working with communities to
22 develop short term and long term strategies to
163
1 address this together. I think we have a
2 community that is committed. I think we have
3 an institution that has the leadership, and
4 the capability and resources. And so I think
5 if this acquisition is considered that the
6 strategies that have been suggested be
7 considered at the same time.
8 And I think the last thing I want
9 to say is that historically we have found and
10 when acquisitions and mergers are happening,
11 there are a lot of promises made but it is
12 always the follow through that has to be
13 followed, the promises have to be kept.
14 Thank you.
15 MR. THOMPSON: Good morning. I am
16 Pastor George Thompson with Faithful Central
17 Bible Church. And we started teaching
18 financial seminars when we acquired the forum,
19 just around the forum, and now we teach them
20 nationwide, hundreds of seminars. I say that
21 because I am a front line person, someone that
22 deals with individuals that have financial
164
1 issues. The problems have already been talked
2 about with the teaser rates, the ARMs, the
3 negative amortized, which is one of the most
4 difficult areas that we deal with. But most
5 importantly, what I wanted to talk about,
6 which is the biggest I think hasn't been
7 talked about today is the psychological affect
8 that that is having on our economy. The stock
9 market is down, the bond market is down, and
10 the real estate market is down because there
11 is people on pause right now because as they
12 see gas prices rising, they are saying where
13 am I going to live or what am I going to do
14 now?
15 And I think there are certain
16 things that need to be done before this goes
17 forward. And the first is education. I think
18 people are not educated about their loans and
19 the way that they should be working. We
20 should start with the ones that are people
21 that are in foreclosures. But then also, even
22 when people first time acquire a home, that
165
1 that should be also something that is taught
2 at Bank of America and with this merger. And
3 these are things that should be taught in all
4 areas, not just bank of America. Other
5 lenders should be doing this as well.
6 And the second thing is the loan
7 mitigations. There should be something where
8 when we are talking to someone about their
9 loan, there should be some level of
10 accountability, where after we do this, that
11 they have an advocate for them. If someone
12 went to the court of law right now, they would
13 have someone to help defend them. That many
14 times, the nonprofits, also the faith based
15 organizations, having an advocate on their
16 side to help them to negotiate the loan, which
17 leads me to my third point.
18 Us having a phone number that we
19 can call to mitigate that loan. One person
20 that we are dealing with or one department, as
21 opposed to just calling into customer service
22 because that is now working right now.
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1 And then last, is to let banks
2 start lending again, meaning there are people
3 that could have qualified for loans two years
4 ago and now we can't even talk about those
5 type of loans. So one of the things that we
6 need to do is make sure that they have the
7 same, some lending requirements or some
8 programs that are available for them right now
9 to let them stay in their homes and be able to
10 keep them.
11 Thank you.
12 MS. VIEK: Good morning. My name
13 is Claudia Viek and I am the CEO OF THE
14 California Association for Microenterprise
15 Opportunity, also known as CAMEO. And I am
16 going to be talking about the impact on small
17 and microbusinesses of under fie employees and
18 the self-employed.
19 At CAMEO, our mission is to
20 promote economic opportunity through
21 microenterprise development. Our 130 members
22 are a voice for an estimated two million lower
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1 income entrepreneurs throughout California.
2 I want to applaud Bank of America
3 for being the best SBA lender and bringing
4 support to a lot of start ups. However,
5 Countrywide, we know there are a lot of small
6 and microbusiness owners who have home equity
7 loans. I myself, personally, have 20 years
8 experience working with women, minority owned
9 businesses and self employed and startup
10 businesses. And I know that when those
11 businesses, little businesses begin to turn a
12 profit, pretty much the first purchase that is
13 made is a home. And these businesses finance
14 their business growth through their home
15 equity lines. There is, therefore, enormous
16 risk for what you might even say a foreclosure
17 on microbusiness due to the current situation.
18 And we really don't have a lot of
19 data. I think Martha Montoya was very helpful
20 in some of the data she gave. And I would
21 like the Federal Reserve and also Bank of
22 America to take a look at the home equity
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1 lines because as these neighborhoods, as you
2 so eloquently said, are beginning to, you
3 know, we lose our resolve and the values go
4 lower, people's home values are going lower,
5 their lines are being canceled or are
6 retreating and that means a very negative
7 impact on our small business growth. And you
8 know, 88 percent of business in California are
9 under five employees.
10 As a result of this, I would like
11 to invite B of A and I am glad Andrew has been
12 here, to meet with CAMEO and our board to talk
13 about some remedies for the home equity issue.
14 Thank you.
15 MR. CORRELAJO: Good morning. My
16 name is Jorge Correlajo. I am a business
17 owners and have been a member of chambers of
18 commerce for the past 25 years, mostly serving
19 as a board member. I am currently
20 incorporating a new Latino chamber in the City
21 of Los Angeles and we expect to be the home
22 for hundreds of businesses in the very near
169
1 future.
2 I have got to say that I am very
3 delighted that Bank of America is taking
4 control of Countrywide Mortgage because we are
5 very familiar with the damage that has been
6 done, particularly by Countrywide Mortgage.
7 As has been stated already, you
8 are well aware that Latinos, as well as other
9 ethnic minorities very often utilize home
10 equity as a basis for business capital. Fair
11 and competitive products must be a part of the
12 formula for success of all parties, including
13 families, small businesses, and mortgage
14 holders. Of great significance today is the
15 fact that Bank of America is taking the
16 leadership position that it should as it
17 becomes the country's largest mortgage lender
18 in this nation. We are pleased that B of A
19 had determined that they will provide for
20 modified mortgages into affordable fixed rate
21 loans in this foreclosure crisis and stay out
22 of the subprime loans altogether. There is no
170
1 doubt, in my mind, that they will set the
2 standard to responsible home lending
3 mortgages/business products in the future.
4 Congratulations to Bank of America
5 on this important acquisition. We look
6 forward to working with them specifically on
7 the details and as small business issues as
8 well. Thank you very much.
9 MR. ORTEGA: Hi, my name is Larry
10 Ortega. I am President and CEO of Community
11 Union. We are a nonprofit organization based
12 out in Los Angeles and we have training
13 centers throughout Los Angeles and San
14 Bernardino Counties. We currently have an
15 alumni of over 14,000 constituents that we
16 have served over the last 15 years.
17 I am here to talk about the lack
18 of recognition that neither the Federal
19 Reserve Board or Bank of America has
20 acknowledged with regard to the return on
21 investment. I think there needs to be a
22 better -- the vision needs to be crystallized
171
1 as to what actually that is. I know that Bank
2 of America has made a statement that they are
3 going to do X amount of dollars more in
4 philanthropic activities but they haven't
5 really articulated clearly what that means as
6 it relates to return on investment. And that
7 is disappointing because it makes it seems as
8 though it is charity and it is not charity.
9 It is an investment that needs to be looked
10 at.
11 And I would strongly recommend to
12 the Federal Reserve Board that because there
13 are so many of us that are stipulating
14 contingencies and conditional support on the
15 merger, that there be a creation of a
16 committee that holds the Bank of America
17 accountable to each and every contingency that
18 has been stipulated here by all of the members
19 that are speaking today, so that we can ensure
20 that this, the partnership and it is a win-win
21 for not only community based organizations and
22 not only the home owners that are losing their
172
1 homes that are in foreclosures, not only for
2 the churches but for the bank itself.
3 This is no secret. Bank of
4 America is going to get a windfall of
5 clientele, a windfall of depositors. And they
6 have a lot to gain. They are making a huge,
7 huge gain here. And they are, in my opinion,
8 my humble opinion, no knight in shining armor
9 because they are talking over Countrywide. It
10 is a very strategic, it is a very business
11 oriented decision. There is no philanthropic
12 charity vision that is part of this whole
13 decision that they have made to take over
14 Countrywide. It is very strategic. It is
15 very business oriented.
16 And as such, because there is so
17 many concerns on the side of nonprofit,
18 churches, communities, etcetera, I strongly
19 recommend to the Federal Reserve Board that
20 there be a committee be put in place so that
21 we can watch this transition go through, that
22 we watch this step-by-step and that you allow
173
1 us to be heard on a continuous basis to ensure
2 that Bank of America actually does implement
3 and follow through with all of their
4 commitments, as they have said that they have
5 done. And if not, as was suggested, that
6 there be some stipulation by this Board that
7 says okay, here are the consequences Bank of
8 America and you didn't do one or two of these
9 things, here are the consequences and that be
10 specifically laid out. We leave too much to
11 chance in these mergers and I think it is
12 important that we be specific. Thank you.
13 MS. DANGTU: Ladies and gentlemen,
14 my name is Lynn Dangtu, founder, President and
15 CEO of Economic Business Development, a
16 nonprofit organization designated to serve
17 more than 500,000 Vietnamese and 5,000 small
18 businesses in southern California, an area
19 known as Little Saigon, the largest Vietnamese
20 population outside of Vietnam.
21 I am also a community leader who
22 has been advocating for my community for the
174
1 past, for more than a decade. My community
2 comprises mostly the first generation
3 immigrants who are still experiencing cultural
4 and language barriers but work very hard to
5 earn their living by running small businesses.
6 These are the ones that are mostly affected by
7 the mortgage crisis and are also former
8 customers of Countrywide who have a very large
9 office in the heart of Little Saigon. Small
10 businesses are affected by the mortgage crisis
11 as well because they often use their homes as
12 collateral to borrow money for their
13 businesses.
14 On behalf of my community, the
15 Vietnamese community, I would like to
16 conditionally support the B of A's takeover of
17 Countrywide but ask B of A to have a far more
18 effective loss mitigation program by working
19 with Vietnamese community based organizations
20 to reach the Vietnamese homeowner and dedicate
21 a larger philanthropy budget to nonprofit
22 organizations to enable them to have the 5,000
175
1 Vietnamese business owners in Little Saigon
2 survive during and after the mortgage crisis.
3 I also hope that Janet Lamkin, B
4 of A California President will visit our
5 community within the next 15 days. Thank you.
6 MR. QUINTO: Good morning. I am
7 Joey Quinto, publisher of California Journal
8 for Filipino Americans and also a member of
9 the Greenlining Coalition.
10 For so many years, Filipinos
11 became invisible to the radar screen of Bank
12 of America and Countrywide. My community
13 almost got nothing from both giant companies.
14 This may be a problem right now but I am sure
15 that Bank of America is always a problem
16 solver and will solve the problem.
17 I am hoping that when the two
18 giant companies will merge, that they will
19 recognize the Filipino Americans who also want
20 to participate in their philanthropic and
21 marketing dollars and supply diversity. There
22 are about five million Filipinos nationwide
176
1 and also participate in the small business
2 loans.
3 Filipino Americans are qualified
4 for any promotions. There are very few
5 Filipinos in your giant companies who could
6 climb the corporate ladder. We hope that you
7 could help Filipinos climb the corporate
8 ladder. We are not looking for handouts.
9 They are highly qualified to do any task.
10 When Bank of America becomes a larger player
11 in the banking and mortgage market, we are
12 hoping that they will be there to serve all of
13 the communities. Do not make Filipinos an
14 invisible market. Do not make your loan
15 products as a best kept secret. Let the
16 Filipino Americans that you have a great loan
17 product. Do work with the homeowners who are
18 in foreclosure and also in default. More
19 foreclosure will mean lowering the home prices
20 in those neighborhoods. If this trend will
21 continue, even the good paying mortgage
22 borrowers will start to walk about because
177
1 they will no longer have the equity in their
2 homes.
3 After the merger, B of A will not
4 profit from any foreclosure. You will be at
5 loss. B of A should take the leadership to
6 work with everyone in this foreclosure crisis.
7 In closure, we appeal to Bank of
8 America, who will be the largest home lender
9 to give solutions to the homeowners who will
10 be in any type of assistance. We appeal to
11 the Federal Reserve to have the conditional
12 merger approval to commit to help the
13 community needs and also to have an oversight
14 committee to monitor if their commitments are
15 being met. Thank you.
16 MR. GNAIZDA: -- Elaine
17 Braithwaite. As you have heard from the 15
18 members of Greenlining, they support this
19 acquisition but believe there must be more
20 specificity and it must be developed quickly,
21 including the input of Ken Lewis. As Liam
22 McGee said, there is much more to do. We
178
1 concur. And as he responded to a Federal
2 Reserve question, we are going to have to do
3 it with more creativity.
4 B of A cannot be Countrywide.
5 There is no support for Countrywide anywhere
6 in this state. The B of A has taken on a
7 pariah. As one member said, a devil. We are
8 expecting that the B of A will set the highest
9 standards immediately. It must lead not just
10 countrywide. It must lead all banks in the
11 same way that Countrywide led all banks
12 negatively with the worst subprime. The B of
13 A standards should be very simple. Would you
14 make this loan to your mother? That is all we
15 ask.
16 The highest standard should be
17 consistent with what presidential candidates
18 Obama and Clinton have raised, what Maxine
19 Waters has so eloquently raised this morning,
20 and Jessie Jackson's representative has raised
21 and what CRC has raised.
22 The 1.5 trillion is to be
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1 commended, as Orson Aguilar stated. It is by
2 far the largest. And the two billion in
3 philanthropy is to be commended. It is by far
4 the largest. But, all of us know that the B
5 of A is going to dominate the home
6 originations. It will immediately be 25
7 percent. Within two to three years, it will
8 be 35 to 40 and within five years, 50 percent
9 of the market. We, in California, expect one-
10 third of that 1.5 trillion to go to California
11 groups and B of A's loss mitigation is not
12 acceptable. Twenty million is a drop in the
13 bucket. As Orson Aguilar stated, we assume
14 that there will be a 250 million dollar fund,
15 or what is half of what Mozilo has taken from
16 us.
17 Lastly, Ken Lewis must visit
18 California, much as he must visit Arizona.
19 And within the next 15 days, all of us expect
20 that the B of A's top team, some of whom are
21 represented here will be in the Inland Empire,
22 meeting on the worse foreclosure crisis in the
180
1 country and within 30 days have a solution in
2 the Inland Empire that will be a model for
3 every crisis area in California, if not the
4 nation.
5 And for the Federal Reserve, we
6 say the following. Act quickly as the B of A
7 wishes, but act wisely. Act with vision and
8 compel the highest standard. Would you make
9 that loan to your mother?
10 On behalf of Greenlining, we thank
11 you all.
12 DIRECTOR BRAUNSTEIN: Thank you
13 for your testimony today. Could you please
14 bring forward the next panel?
15 Okay, good morning and thank you
16 for joining us. Just to restate some
17 housekeeping, we have a timekeeper, you each
18 have five minutes and you will be signaled
19 when you have two minutes left and then when
20 your time is up. So, kind of keep an eye out
21 for that. And also, we ask that you begin
22 each of your statements by clearly stating
181
1 your name and organization so that we can get
2 it on the record.
3 Thank you and you can begin, Ms.
4 Trujillo.
5 MS. TRUJILLO: Sure. I am Lez
6 Trujillo, Field Director of ACORN Housing
7 Corporation, which is a HUD housing counseling
8 national intermediary. ACORN housing has
9 worked with Bank of America since 1990. We
10 have closed over 90,000 mortgages valued over
11 12 billion with Bank of America. We can
12 safely say that this is the kind of community
13 reinvestment lending that needed to be done.
14 Fixed interest rates, no teaser rates, no high
15 fees, no negative amortization, no balloons,
16 no prepayment penalties. And even though many
17 of the borrowers had a small down payment,
18 nontraditional income, low credit scores and
19 risk, these Bank of America loans coming
20 through the ACORN Housing Program, have none
21 of the problems of the subprime market.
22 For this reason, ACORN is speaking
182
1 in favor of the Bank of America acquisition of
2 Countrywide Home Loans. Bank of America has
3 been an industry leader and an excellent
4 partner in delivering needed loan products to
5 under served communities. We have complete
6 confidence in the loss mitigation team of Bank
7 of America.
8 While hundreds of thousands of
9 homeowners are at risk of foreclosure with
10 Countrywide Loans, our experience with the
11 Bank of America's team is that they are
12 prepared to rework the loans into affordable
13 and sustainable resolution. And they are much
14 better than most mortgage servicers.
15 However, we must say that the
16 Federal Reserve has not gone far enough in
17 addressing the failure of the mortgage
18 servicing industry in the investors to address
19 this foreclosure crisis. Instead of letting
20 each foreclosure workout drag on for months,
21 the industry needs to adopt a simple
22 streamline affordability formula, based on
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1 the incoming expenses of the homeowners to
2 quickly establish a sustainable house payment
3 for the family. And then, if the investor
4 does not lose money when compared to
5 foreclosure, modify the mortgage for the
6 remaining life of the loan.
7 The carrying costs of the current
8 case-by-case system is a major drag on the
9 investor and has serious consequences
10 emotionally and financially to the stranded
11 homeowner. Our program with HSBC with an
12 affordability formula gets resolutions in two
13 weeks, not the three months we are seeing with
14 other servicers.
15 The next wave of problems will be
16 from the pay option ARM which were sold to
17 people with good credit. The Federal Reserve
18 needs to call for principal reduction, fixed
19 interest rate and a ban on selling
20 inappropriate loans to unsuspecting
21 homeowners. These homeowners did not deserve
22 to get these complex loans with negative
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1 amortization and no possibility of refinance.
2 The current move to require lower loan to
3 value ratios in what are labeled as declining
4 value communities, has set a standard of
5 requiring higher down payments in communities
6 which are disproportionately urban and
7 minority. This represents a new version of
8 red lining. It is far better to rely on more
9 accurate appraisals than it is to penalize new
10 buyers.
11 Going forward, the Federal Reserve
12 needs to make sure that the bad products
13 peddled by the subprime industry do not define
14 community reinvestment lending. We have
15 already seen mortgage lenders stop lending to
16 people with credit scores below 620 and to
17 price community reinvestment loans higher,
18 even though they perform well. This is just
19 perpetrating all of the problems of red lining
20 in the lower levels of home ownership for
21 African American and Hispanic households.
22 Our program with Bank of America
185
1 has shown that providing housing counseling,
2 appropriate underwriting, and fixed interest
3 rate loans will create thousands of well
4 performing loans. The high-risking mortgage
5 lender, however, is under regulated mortgage
6 market where mortgage brokers can sell
7 adjustable rate loans, teaser rates, high
8 fees, and prepayment penalties. The Federal
9 Reserve needs to embrace underwriting
10 flexibilities tied to housing counseling,
11 pricing discounts for well-counseled
12 nontraditional loans in lender-community
13 partnerships.
14 In the current environment, the
15 exact opposite has happened and the home
16 owners we know could succeed are being priced
17 and underwritten out of the market.
18 MS. SANBRANO: Good morning. My
19 name is Angela Sanbrano. I am the former
20 Executive Director of the Central American
21 Resource Center, CARECEN, which is located at
22 2845 West 7th Street in Los Angeles.
186
1 I had the privilege of working
2 closely with the staff of Bank of America
3 during my 12 year tenure at CARECEN. And
4 CARECEN was founded 25 years ago by Central
5 American refugees who were forced to leave
6 their country due to the civil war. CARECEN
7 has moved from a small storefront to owning a
8 30,000 square foot building in the Pico Union/
9 West Lake area, four miles west of downtown
10 Los Angeles. And last year CARECEN served
11 over 75,000 low income immigrant families.
12 Bank of America has been a strong
13 pillar in support of CARECEN's becoming the
14 largest Central American Community Center in
15 the United States. CARECEN in the community
16 we serve has benefited from Bank of America's
17 involvement and long-term commitment to
18 community development in West Lake. Seven
19 years ago when the bank first interviewed the
20 block-by-block program, CARECEN was selected
21 as one of the five local community-based
22 agencies to offer community referrals among
187
1 the community-based organizations and
2 educational institutions with quality
3 employment opportunities. This program
4 strengthened the networking among CEOs in the
5 West Lake/Pico Union area offering a variety
6 of services to the community.
7 In 2005, CARECEN was selected as a
8 neighborhood builder award recipient. This
9 support was critical investment in the
10 organization's capacity building strategic
11 planning and leadership development of
12 emerging leaders. Marvin Andrade, CARECEN's
13 new Executive Director, is an example of the
14 success of the emerging leaders' project
15 supported by Bank of America.
16 We also have worked with
17 Countrywide Home Loans. Many of the families
18 we served at CARECEN, including several of
19 CARECEN's staff, received home loans through
20 the Countrywide program. And Countrywide also
21 helped many of the families in our area to
22 become first time home owners. Owning a home
188
1 is a most important asset in the Latino
2 community and I trust that with a track record
3 of Bank of America focusing on the financial
4 needs of the community and the bank's
5 involvement in strategic partnership, they
6 help the development of our communities and
7 the many families that need support in
8 avoiding foreclosure of the mortgages, which
9 is one of the most critical financial
10 challenges facing our community.
11 We trust and we believe that a
12 merger of Bank of America and Countrywide will
13 be a positive step forward for our community.
14 And I think you very much for your
15 consideration. Thank you.
16 DIRECTOR BRAUNSTEIN: Thank you.
17 Mr. Andrade?
18 MR. ANDRADE: Good morning. My
19 name is Marvin Andrade. I am the Executive
20 Director at the Central American Resource
21 Center CARECEN in Los Angeles.
22 My organization serves low income
189
1 immigrant Latinos with legal services,
2 education and technology, civic participation
3 and employment for day laborers. We are
4 located in Pico Union/West Lake, a
5 neighborhood referred as a primary portal for
6 Latino immigrants throughout Latin America.
7 In addition to the enduring
8 relationship with Bank of America, CARECEN has
9 also had a long-standing relationship with
10 Countrywide Financial. Together, we have
11 assisted new immigrants to become home owners
12 through the new immigrant loan program. Both
13 Countrywide and Bank of America have had
14 booths at our annual community fair in order
15 to educate our community over the many
16 opportunities both companies have to offer.
17 Owning a home is the single
18 largest asset for Latino families and, like
19 many others, it defines having a piece of the
20 American dream. We find it very positive and
21 encouraging that Bank of America is willing
22 and able to work with Countrywide and find
190
1 ways to assist the thousands of families in
2 need, helping the community retain its assets
3 and help them grow economically shows great
4 corporate leadership and responsibility.
5 And so this is why we support this
6 acquisition. Thank you.
7 DIRECTOR BRAUNSTEIN: Thank you
8 very much. Ms. Kaiser?
9 MS. KAISER: Thank you. My name
10 is Mary Kaiser and I am the President of the
11 California Community Reinvestment Corporation.
12 I am here this morning also to testify in
13 favor of the Bank of America-Countrywide
14 merger.
15 CCRC is a nonprofit lending
16 consortia made up of banks in the State of
17 California created in 1989 to finance what was
18 then the lack of permanent financing for
19 affordable rental housing in California. This
20 innovative financial model, which was spurred
21 by the creation for the low income housing tax
22 credit created some 19 years ago to provide
191
1 access to capital to low and moderate income
2 communities and now has become a model across
3 the country. And Bank of America was at the
4 table from the very inception.
5 B of A, along with the Federal
6 Reserve Bank of San Francisco was part of the
7 original task force providing the leadership
8 for 56 other banks in California to join the
9 membership and we formed our first loan pool,
10 which became a replicable model throughout the
11 country. They continue to be at the table
12 today, leading by example, encouraging banks
13 to participate by providing representation on
14 our Board and all of our loan committees.
15 Their current Western Region
16 Market Executive, Gail Lannoy just finished
17 her third year as Board Chair and we have
18 always had someone from Bank of America both
19 on our board and all of our lending
20 committees. Even when B of A had their own
21 community development bank and we, on any
22 given day, competed with them, they offered
192
1 many of the same products we provided, they
2 continued to support and provide that
3 leadership and leading by example for other
4 banks to stay in the consortia and leveraged
5 over 400 million dollars in credit lines that
6 we have today.
7 B of A provides CCRC a 72 million
8 dollar credit line for the funding of taxable
9 mortgages. They are a 23 percent participant
10 in every loan that we make. Since inception,
11 we have funded over 554 million dollars in
12 permanent loans, providing over 19,000
13 affordable rental units to families and
14 seniors earning 60 percent or less of the area
15 median income.
16 In addition, many of these housing
17 units are created by using the private
18 activity bond in California and Bank of
19 America is a 33 percent participant in each of
20 the bonds that we source. They provide CCRC
21 a 35 million dollar credit facility for those
22 transactions. That 100 million dollars that
193
1 they have provided has now been revolved over
2 the last 19 years, as we amass product and
3 sell it into the secondary market.
4 In addition, today CCRC has over
5 184 million dollars in forward commitments,
6 commitments we have made to provide permanent
7 mortgages on products that are currently under
8 construction and Bank of America is bound to
9 participate in those as well.
10 It is clear from their level of
11 activity and our level of production that
12 without their leadership, we would have had a
13 very difficult time then, let alone now,
14 finding that hundred million dollar credit
15 facility.
16 I would also like to emphasize
17 that the credit quality of this affordable
18 housing mortgage portfolio, which we have
19 amassed under their leadership is a testimony
20 to the ability to provide safe, sound lending
21 products on products that serve such a
22 critical market. Three years ago, we launched
194
1 an equity product for the developers of for-
2 sale affordable housing in California, the
3 CCRC Workforce Housing Fund. B of A committed
4 three million dollars to that fund as well,
5 which would have been ten percent of the total
6 fund. While this innovative product has
7 fallen victim to the current real estate
8 collapse, Bank of America was there for us, as
9 well as for the fledgling developers who
10 proved to be too fledgling for the market but
11 they were there to weather the storm. We
12 still try to provide the financial tools to
13 make for-sale affordable and available to the
14 income levels that we serve.
15 While CCRC's lending activities
16 are confined strictly to California, I serve
17 on a variety of boards throughout the country
18 and I have yet to sit on one board where Bank
19 of America hasn't provided leadership, as well
20 as financial support. Many of those
21 organizations are here today.
22 I applaud the bank's willingness
195
1 to take on the unknown risks associated with
2 the acquisition of Countrywide. Given what we
3 now know to be the depth of the subprime
4 implosion, I quite honestly am surprised that
5 anyone would want to take on this acquisition,
6 especially given the distractions in their own
7 financial institution for the financial woes
8 and the real estate woes across the country.
9 Clearly, they have both reputational and
10 financial risk at stake.
11 I am clearly not a fan of the
12 evolution of the underwriting practices that
13 got us all to this point, having been a banker
14 for 35 years of my career. But if they are
15 willing to pledge their balance sheet and
16 evaluate what can and cannot be fixed, how
17 people can stay in their homes, how
18 neighborhoods can be stabilized, I support
19 them and our organization stands ready to
20 participate in whatever ways it can to join
21 the team in stabilizing our financial markets
22 in California and our neighborhoods and the
196
1 families that they support.
2 I trust that the regulatory
3 environment which has certainly stepped up in
4 this current day, will provide the oversight
5 to ensure transparency through the transition
6 and I support many of the detailed programs
7 that have been presented here today to put
8 specificity on their plans.
9 As a very astute Federal Reserve
10 person said to me a few weeks ago, mistakes
11 were made by all. We didn't get here
12 overnight and we won't get out of it
13 overnight. I support the acquisition and
14 encourage others to give this organization
15 proven to be committed to improving the
16 communities they serve their support as well.
17 I can't figure out who else would be strong
18 enough to take this on. Thank you.
19 DIRECTOR BRAUNSTEIN: Thank you,
20 very much. Thank you for your testimony.
21 Next panel. Okay, just to restate
22 some housekeeping, we have a timekeeper. You
197
1 each have five minutes. You will get a sign
2 when two minutes left and then when your time
3 is up. And I would ask that you start your
4 statements by stating your name and your
5 organization at the top. And I gather, Ms.
6 McNeil, you are substituting for Gilda Haas?
7 You may start.
8 MS. MCNEILL: Hi. My name is
9 Sandra McNeill. I am with the Figueroa
10 Corridor Community Land Trust. Our land trust
11 is based in the neighborhoods to the south of
12 this building, which stretch three miles from
13 the Staple's Center into south LA. We
14 established the land trust as a response to
15 the building boom in downtown LA and around
16 the University of Southern California, which
17 has driven property values up dramatically
18 since 2000.
19 In these past years, we have seen
20 many hundreds of families who have been long-
21 term renters forced out of their homes and
22 subsequently out of our neighborhoods by way
198
1 of development, which has brought soaring
2 investment income to some but economic and
3 social devastation to so many local families.
4 We continue to be a neighborhood of renters
5 with 86 percent of folks who live in our
6 neighborhoods not owning their homes. Incomes
7 are low, at half of the median income, which
8 means that a family of four living on under
9 $2,500 a month.
10 We established our land trust as
11 an effort to remove land from the speculative
12 market, to steward that land in perpetuity and
13 make it available to build housing that is
14 affordable to local families. It is our
15 effort to stabilize property values, so at
16 least some local families are not at the mercy
17 of our real estate market, which is bucking
18 wildly out of control.
19 I tell you this because in the
20 month of February alone, Countrywide
21 foreclosed on 29 homes in our neighborhood, 29
22 families who had represented stability for our
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1 community which for decades has been ravaged
2 by the dynamics of absentee ownership. Those
3 families lost their homes. Twenty-nine may
4 seem like a small number in the scope of this
5 national crisis, but for us these foreclosures
6 mean that the Carcamo family, along with the
7 Hortons, the Medranos and the Sabirs, the
8 Dellatores, the Garcias, the Randolphs, the
9 Walcotts, the Estradas, and 18 other families
10 will no longer be sweeping up the sidewalk in
11 front of their homes, no longer attending the
12 community meeting about the new school to be
13 built on the adjacent block, no longer
14 shopping at the corner store, or perhaps no
15 longer renting their home to another family
16 who plays just those types of roles in the
17 community.
18 Our neighborhoods cannot handle
19 another wave of speculators sweeping through
20 and feasting on the carrion left by this
21 particular disaster. We already have such
22 startling levels of absentee ownership in our
200
1 neighborhoods because of a long history of
2 failed policies and unjust practices, race
3 restricted housing covenants which were
4 followed by decades of redlining, the city's
5 lack of investment over decades in services
6 and infrastructure in our working class
7 communities which have left our streets frayed
8 and tattered and right for the picking.
9 Salaries which are still held down at inhumane
10 levels because of immigration policies that
11 won't allow some of our neighbors who have
12 been working and paying taxes in our country
13 for over a decade to obtain legal status.
14 Every foreclosed property picked
15 up by speculators will further aggravate our
16 own economic crisis locally. We want an
17 intelligent response to this situation. A
18 creative response as offered by Mr. McGee
19 earlier. First and foremost, as those who
20 have spoken before me have said, every effort
21 must be made to avert foreclosure and keep
22 people in their homes with affordable
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1 mortgages. By revaluing and restructuring a
2 defaulted mortgage based on the auction price
3 of a home, Bank of America would be working to
4 keep those families in their homes and
5 communities and to keep that property out of
6 the hands of speculators.
7 In the unfortunate situation where
8 a mortgage proceeds, we do expect Bank of
9 America to facilitate the transfer of those
10 properties to a nonprofit affordable housing
11 developer or a land trust. This means that we
12 need those properties bundled and discounted
13 and we need to be given time to work with our
14 local government agencies to arrange the
15 funding. This will not happen at the speed of
16 an auction but we absolutely need the bank to
17 collaborate with us again to keep these
18 properties out of the hands of speculators and
19 instead to house community residents at
20 affordable rents and mortgages.
21 In the case that there are renters
22 in the property, as with over 35,000 of
202
1 Countrywide's mortgages in California, we must
2 work to keep those renting families in their
3 homes. Our housing market and economy simply
4 cannot handle additional evictions on top of
5 the 80,000 eviction notices already filed in
6 the County of LA every year.
7 Coming into possession of hundreds
8 of loans in our neighborhoods means that Bank
9 of America will be in a position to create yet
10 more instability in our community or to work
11 collaboratively with us to increase the
12 stability of our neighborhoods. We expect the
13 latter and ask the Federal Reserve to support
14 that aim by laying necessary conditions on
15 this merger. Thank you.
16 DIRECTOR BRAUNSTEIN: Thank you.
17 Mr. Baldwin?
18 MR. BALDWIN: Good afternoon. I
19 am Allen Baldwin, Executive Director, Orange
20 County Community Housing Corporation.
21 In Orange County, Countrywide Home
22 Loans was under one in Orange County for home
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1 loans and this was in 2006 and B of A number
2 three. Countrywide Bank was number five for
3 home purchase loans. The Federal Reserve Bank
4 can correct bad lending practice and
5 foreclosure practice for the majority of those
6 in default danger in my county of Orange.
7 I am here to encourage the Federal
8 Reserve to use this seemingly necessary
9 acquisition to correct fatal errors in the
10 mortgage lending system in the United States.
11 If not with this acquisition and if not now,
12 it will never be done and the once revered
13 Federal Reserve Bank will suffer to the point
14 that even reorganization will not save it from
15 the scrap heap of failed bureaucracies.
16 Thank you for considering our
17 request for this public hearing. We believe
18 that your willingness to open this hearing
19 will result in actions by one of this nation's
20 largest financial institutions that will
21 create community reinvestment relationships
22 that are important to the restoration and
204
1 vitality for home ownership, neighborhoods,
2 communities and the banking confidence.
3 As a 30 year major customer of the
4 Bank of America, as well as a charity with a
5 mission of transitioning extremely low income
6 families to greater self-sufficiency, we and
7 our clients have a life-sustaining interest in
8 this merger, resulting in better banking for
9 low income persons in low income
10 neighborhoods. As a borrower and a grantee of
11 the Bank of America, we have an ongoing
12 interest in seeing this merger strengthen our
13 neighborhoods and our families. As an
14 educator of families in financial planning, we
15 have an interest in working more closely with
16 the merged institutions which will engage the
17 community in substantive measured agreements,
18 to provide grants, counsel, and products to
19 low income persons and communities.
20 Providers of housing for low
21 income families have had waiting lists that
22 provide little hope for those looking for
205
1 affordable housing. There is no room at the
2 inn for families that are being displaced by
3 lenders, especially by those such as
4 Countrywide, who provide most of the subprime
5 and ARM mortgages in the United States. There
6 is no room for those displaced by the Bank of
7 America, once a major subprime lender and,
8 until recently, they have been one of the
9 major packagers of subprime loans in a
10 mortgage backed securities. The Federal
11 Reserve now has an opportunity to provide
12 leadership that will result in the restoration
13 of these families to debt products that will
14 restore their banking relationships, our
15 neighborhoods, and this nation.
16 The mortgagees who live in these
17 foreclosed properties and the tenants who rent
18 properties in foreclosure are not the problem.
19 They are the customers of a restored mortgage
20 industry in this nation. The Federal Reserve
21 Bank has its foot on this nation's recovery
22 throttle. If you don't use the opportunity of
206
1 this merger to speed up recovery of the
2 banking industry through the creation of a
3 better more able mortgagee, you will never
4 again have such an opportunity. The combined
5 strength of Countrywide and Bank of America
6 can take regulatory steps at this time that
7 can get this nation's borrowers and savers
8 back on their feet, so as to get this nation's
9 banking industry back on its feet.
10 Just one comment and I just got an
11 email from one of the major packagers of tax
12 credits, in the event, he says, that Bank of
13 America is able to shelter significantly their
14 tax liability as a result of the acquisition
15 through attendant losses post-merger, there
16 could be a dramatic adverse impact on the
17 bank's low income tax credit investment and
18 the future development of low income housing
19 in the nation. So, one of the questions I
20 would ask that the Federal Reserve to do is to
21 ask with that, how much of that tax liability
22 is going to be sheltered and where will the
207
1 bank be on tax credit investments post-merger.
2 Thank you.
3 DIRECTOR BRAUNSTEIN: Thank you
4 very much. Ms. Burks?
5 MS. BURKS: Thank you. For the
6 record, my name is Gail Burks. I am President
7 and CEO with Nevada Fair Housing Center in Los
8 Vegas, Nevada. Our program serves the state,
9 as well as three sister states, Washington
10 state, Arizona, and Utah.
11 I would like to talk a little bit
12 about the economic impact of the foreclosure
13 in terms of the Nevada perspective and then go
14 to what we have been working through in our
15 state with respect to potential solutions,
16 some of which I think could be addressed
17 today.
18 In Nevada in 2006, we had 4,731
19 foreclosures. As of October 2007, that number
20 rose to 28,655. Forty-seven percent of those
21 properties are vacant. According to data that
22 was submitted to the Nevada legislative
208
1 interim subcommittee on mortgage lending from
2 2006 to 2007, the total number of foreclosures
3 start rose from 2.8 percent to 4.1 percent.
4 Now, although this is below the national
5 average, we continue to see this rise to the
6 point that today we were at about 1.57 percent
7 per quarter.
8 I would like to make a distinction
9 between what we consider to be clients that
10 are just in need of counseling, versus clients
11 that truly are in need of foreclosure
12 prevention. And for the record, I would like
13 to say in our community as of last month, Bank
14 of America had less than 20 foreclosures,
15 which is a very, very, very minute number
16 compared to other lenders in the area.
17 Of those clients seeking
18 assistance, we consider clients that need
19 delinquency counseling are those clients that
20 are dated 30 days late or less on their
21 mortgage. Those that are in default, the ones
22 that we call foreclosure starts, are those
209
1 clients who are 31 days plus past due, meaning
2 an actual public notice has been filed with
3 the County Recorder. The others that are in
4 foreclosure, means they have a sale date
5 pending. And typically, an examination of
6 actual files shows that most of these
7 consumers, if we had the ability and we could
8 stabilize the housing market, could actually
9 be refinanced because they could afford the
10 loan, if it were a different product and if
11 the loan to values were there.
12 In my written testimony, I
13 provided on pages three and four a list of zip
14 codes hardest hit by the foreclosures that I
15 have talked about. Only 32 percent of the
16 homes in foreclosure in Nevada are what we
17 call investor loans. We begin to see those in
18 2007 and today, we are seeing mostly owner
19 occupied loans.
20 The general concern, as one of our
21 state senators put it, is that Wall Street
22 investors and corporate builders that have a
210
1 significant influence on the mortgage lending
2 industry assume no responsibility to the
3 communities that are affected. This comment
4 was made in looking at what we are seeing in
5 Nevada, a phenomenon that we call home rage.
6 This that we helped in conjunction with Power
7 House Realty sheltered the media on the 23rd
8 of this month are consumers who are not
9 typically connected to a nonprofit that are
10 literally destroying the homes, causing
11 financial damage to common interest
12 communities and to lenders because of their
13 frustration. We believe if we could connect
14 more consumers with assistance, we could sort
15 of overcome some of this rage and clear some
16 of the vacant inventory in our community.
17 Now, in developing a plan, why
18 should the local economic conditions play a
19 factor? Well, in Nevada, for example, the
20 2007-2008 taxable value of single family
21 residential development was worth 148 billion
22 dollars, according to applied analysis report
211
1 to our state legislative subcommittee. As we
2 lose property through foreclosure, a near one
3 percent decline in value results in greater
4 than a one billion dollar impact on
5 residential homeowners. So we are concerned
6 that whatever we come up with, it helps
7 stabilize our market.
8 We have a couple of
9 recommendations that we believe would be
10 specific and we know that there is a tendency
11 to come up with national initiatives that are
12 supposed to trickle down. Bank of America has
13 been a good partner in our community before
14 with respect to first time home buyers and
15 with respect to community development. And if
16 I could just run through those real quick, if
17 I may.
18 First, the development of a
19 market-specific product that would address the
20 issues germane to Nevada. We are still a
21 vibrant growing community. Unlike some
22 communities, we do have an increased growth
212
1 rate. The renter notification policy, we have
2 a high incidence of renters that are adversely
3 affected. We have worked together with such
4 agencies as United Way and the American Red
5 Cross to provide temporary housing, to provide
6 debit cards for things like clothing and food
7 when they are evicted by the constable. And
8 in our state, an eviction can occur three days
9 after the foreclosure, which technically means
10 you can be locked out in four days.
11 We are looking for a market-
12 specific plan to reduce the inventory,
13 although we had started some of these
14 discussions prior to the announcement of the
15 merger with Countrywide, we have not yet
16 developed anything specific for the community
17 and so we look forward to doing that. We
18 believe perhaps a temporary CRA type credit
19 for dilapidated properties that are really
20 impacting the value of the community. If they
21 are given to the community, to local
22 government, or to nonprofits through REO
213
1 gifting could be offered. We also believe in
2 incentive or potential investment credit for
3 the principal reduction of the principal
4 balance of clients that cannot be refinanced
5 would also be helpful. Again, many of these
6 clients do have good credit and we could
7 refinance the loans, but the loan to value is
8 not there.
9 And finally, we think we need to
10 track the success of servicer modifications.
11 We negotiate our cases in bulk. We do the
12 actual negotiation with the lender versus
13 telling them to call a lender. We believe
14 that is a more successful model than referring
15 people to just a toll free number. Thank you.
16 DIRECTOR BRAUNSTEIN: Thank you.
17 Mr. Cavazos?
18 MR. CAVAZOS: Yes, good afternoon.
19 My name is Rudy Cavazos and I am the Regional
20 Director of Development for Money Management
21 International. I also sit as chairman of the
22 Asset Building Committee with the Alliance for
214
1 Economic Inclusion.
2 Again, thank you for providing me
3 with the opportunity to address this panel
4 about our organization's long-term partnership
5 with Bank of America. For over 50 years,
6 Money Management International and its family
7 of consumer credit counseling services
8 agencies have worked to support clients with
9 one-on-one budget and debt counseling and
10 education. Since 2004, Bank of America has
11 supported these efforts by providing
12 contributions to fund some of the free or low-
13 cost educational services we offer.
14 In 2007, MMI reached over 80,000
15 consumers with our community education and
16 outreach programs. This education ensures
17 that individuals and families are equipped to
18 navigate today's increasingly complex
19 financial world. Bank of America has created
20 a seamless relationship between business,
21 community, consumers, and financial education.
22 To demonstrate why Bank of America's
215
1 commitment to education fits so well within
2 out mission, I will provide a brief overview
3 of Money Management International.
4 Money Management International and
5 its family of consumer credit counseling
6 service agencies is the largest nonprofit
7 credit counseling agency and educational
8 organization in the country. Our goal is to
9 assist consumers and families who are
10 experiencing financial difficulties and
11 educate them about their healthier financial
12 habits, provide proactive and confidential
13 financial counseling and education. We are
14 proud to be the member of three of the
15 industry's trade associations, the National
16 Foundation of Credit Counseling, the
17 Association of Independent Consumer Credit
18 Counseling Agencies and the American
19 Association of Debt Management Organizations.
20 In addition, Money Management International
21 has gone through a stringent third-party
22 accreditation process with the Counsel on
216
1 Accreditation.
2 Last year, we provided free
3 counseling services to more than 217,000
4 financially stressed consumers, including
5 100,000 free housing counseling sessions. In
6 fact the need for housing-related services has
7 grown tremendously in the past few years. We
8 provide foreclosure prevention and loss
9 mitigation with counseling services to
10 thousands of home owners through the
11 nationally endorsed Hope Hotline and our own
12 housing counseling department. Above all, our
13 mission is to improve lives through financial
14 education.
15 Bank of America is a great example
16 of a corporation that is truly dedicated to
17 improving financial literacy. And since 2004,
18 Bank of America has been a key supporter of
19 our educational initiatives through the Bank
20 of America Charitable Foundation. The
21 Foundation provides funding for community-
22 based financial education in Arizona, New
217
1 Mexico, Rhode Island, and Texas. Local Bank
2 of America managers work closely with our
3 education teams in each state to carry out
4 programs designed to meet community needs,
5 especially to low to moderate income consumers
6 and households. These programs have helped
7 more than 5,000 consumers and their families
8 build a strong financial foundation.
9 Our partnership has grown and last
10 fall, Bank of America invited us to conduct a
11 financial literacy campaign, bringing out
12 understanding money and credit workshops to
13 seven states, Arkansas, Arizona, Illinois,
14 Kansas, Missouri, and Texas. The UMC
15 workshops are designed to provide low to
16 moderate income consumers with financial
17 empowerment and self-sufficiency to cover five
18 basic steps, assessing financial situations,
19 setting financial goals, creating spending
20 plans that work, using credit wisely, and
21 committing to savings plans.
22 Our organization also partners
218
1 with Bank of America Credit Counseling Grant
2 Advisory Board. Since its inception in 2005,
3 the Board has provided funding for special
4 projects designed to address financial
5 education needs nationwide.
6 For example, in 2006 MMI received
7 funding to develop and launch online financial
8 education in two formats, live web seminars
9 and on-demand webcasts. In 2007, MMI received
10 funding to expand our Certified Money
11 Management Volunteer Program, increasing our
12 capacity to meet growing demand for in-person
13 community based education. Our volunteer
14 program now incorporates advances in best
15 practices, volunteer engagement in online
16 communication, allowing us to attract more
17 community volunteers, from baby boomers,
18 leaving a workforce to financial service
19 professionals.
20 Therefore, I believe that our
21 partnership demonstrates Bank of America's
22 dedication to building the financial well-
219
1 being of its customers and low to moderate
2 income consumers in the communities they serve
3 nationwide. We are proud of our partnership,
4 what it has accomplished in communities across
5 America and are excited about the potential of
6 working with Bank of America and future
7 financial educational initiatives.
8 Thank you.
9 DIRECTOR BRAUNSTEIN: Thank you
10 very much. Thank you to this panel.
11 And could the next panel please
12 come forward?
13 Okay, welcome.
14 UNIDENTIFIED SPEAKER: Welcome.
15 DIRECTOR BRAUNSTEIN: Just to go
16 over housekeeping notes, you have five minutes
17 for your testimony and there is a timekeeper
18 that will show you a sign when you have two
19 minutes left and then when your time is up.
20 Kind of keep an eye over there. And then
21 please start each statement by stating your
22 name and organization, so that we can get it
220
1 on the record.
2 Okay, thank you and you can go
3 first, Mr. Lizarraga. Oh, no, I'm sorry. Mr.
4 Knowles.
5 MR. KNOWLES: Hello, my name is Ty
6 Knowles and I am a home owner in Southern
7 California and I represent a lot of the issues
8 that you have heard here, foreclosures. And
9 I am proud to be able to speak my piece and
10 represent as a person who has dealt with a
11 foreclosure.
12 I have been dealing with
13 Countrywide now. So my attempt here today
14 will be to give you a synopsis and timeline of
15 what has happened. I have been dealing with
16 Countrywide now for over two years.
17 Initially, my problem with Countrywide did not
18 begin until June 2007. I contacted
19 Countrywide last June to request a loan
20 modification on a loan to get a fixed rate.
21 We were falling one month behind in our
22 mortgage and I immediately contacted them and
221
1 notified them of the problem. They requested
2 I write a hardship letter and submit my
3 financials, along with check stubs. The
4 letter and documents were faxed to them on
5 July 19th of 2007. I have a copy of the
6 letter with me today.
7 I got a call a couple of days
8 later from a very rude and arrogant person
9 telling me she was my workout agent and did
10 not qualify for loan modification but they
11 would put us on a repayment plan. I asked if
12 there were any other options. She explained
13 that that was the only option. Initially, I
14 was skeptical but she explained to me that
15 these payments had to be made through Western
16 Union and I could not pay on line or mail my
17 payments. I should note this was in addition
18 to my normal payments of my house mortgage of
19 over $500 extra per month.
20 During the time I was on the
21 repayment plan, I ran our credit to see if we
22 could get a home loan, away from being with
222
1 Countrywide. We then noticed our credit
2 scores had started to plummet significantly.
3 I called Countrywide and was told my workout
4 agent had changed. I left a message to have
5 my workout agent call. I kept calling and got
6 no response, got no phone call. I asked for
7 the supervisor and manager but still not
8 response. I continued to pay on the repayment
9 plan.
10 Then toward the end of October of
11 '07, I saw a commercial or advertisement
12 announcing the New Hope Team at Countrywide.
13 I thought, finally, help. I knew the team was
14 put in place to help people which were really
15 in trouble such as ourselves, but I thought
16 maybe they could help. Again, I start leaving
17 messages for my workout agent. I spoke to a
18 loan consultant at Countrywide who said he
19 would relay the information to the workout
20 agent and he gave him a call. He looked at
21 the notes in my file and said I would not
22 qualify for a loan modification because I was
223
1 current with my loan and I would have to be in
2 default before they could help us. He told me
3 to stop my payments, then I would qualify in
4 need of help. That was at the end of October.
5 He said the process should take seven to ten
6 business days to process.
7 I waited and waited. No letter.
8 No call. I called and spoke to another rep
9 who told me that the paperwork was in process
10 and someone should call me in three business
11 days. I asked to be transferred to my workout
12 agent. I was told the system does not work
13 that way. I leave a message and the workout
14 agent will call me.
15 Out of frustration, I called and
16 kept pushing numbers in the hopes of getting
17 someone live. Nothing. I finally tried
18 dialing different numbers and I got a person
19 in another area who was very helpful and tried
20 to help me. She said she sent an email and
21 message to her supervisor. She gave me her
22 direct number, if no one called back.
224
1 Finally, someone who cares at Countrywide.
2 Days would go by. Calls made to
3 Countrywide, different reps would give me
4 different waiting periods. Three business
5 days, five business days. I'm thinking it has
6 to be some type of nightmare. Why don't they
7 call us back? Each time I called, the loan
8 consultant service rep reviews my file and
9 tells me that someone will call back.
10 MS. KNOWLES: Hi, my name is Diane
11 Knowles. I just wanted to share with everyone
12 what actually happened that sort of was the
13 breaking point for us in our home. We had
14 been in our home for 20 years. We can afford
15 our mortgage. That is not the issue. The
16 issue is how Countrywide is actually dealing
17 with their customers. I mean, we have made
18 tons of calls to them. No one has called us
19 at all. I am leaving messages to have a new
20 workout agent call me. They are going to send
21 that person an email. They send the
22 supervisor an email. No one calls at all.
225
1 We were home one Saturday and it
2 just broke me down completely to see someone
3 come up to your house and take a picture of
4 your house. You are like what is going on?
5 We can afford our mortgage. Why are they not
6 calling us back? And so that day, that
7 Saturday, I was like in tears and I called
8 Countrywide again and found out like on the
9 weekends, Saturday and Sundays, the calls are
10 routed to India.
11 A person came on the phone and
12 said basically not to worry. And I was like
13 you have no idea what I am experiencing on my
14 end. I appreciate you saying that but you
15 don't understand. Someone just took a picture
16 of our home. And so he looked in the system,
17 looked in the system. He ended up getting the
18 home telephone number to our workout agent.
19 Me not knowing that that was her home number,
20 I called and thought I would leave a message.
21 Hopefully the person would call me on Monday.
22 So, I called, she answered the
226
1 phone and she was like why are you calling?
2 This is my home. Who are you? And I said I
3 am a Countrywide customer. I gave her the
4 name and number of the person in India who
5 gave me her number. And she was like well how
6 did he get my home number? And I am like I
7 don't know but can you help us? Like, I am
8 desperate at this point. So, she takes all
9 the information, our loan number, everything
10 and says she promises to call on Monday.
11 And so she does call and she is
12 like can you submit your financials again?
13 Now, she told me she has anywhere from 1,000
14 to 1,500 cases, each of the reps in their
15 office and that she will definitely put mine
16 ahead of all the other files once she gets in.
17 She is new in the department and she will see
18 what is going on.
19 I just feel like I am so
20 frustrated. We can afford our mortgage. Why
21 are we grouped in this pile of like, this
22 black hole and no one is trying to help us?
227
1 And we are reaching out to them and they are
2 not responding to us. And I am just like
3 fearful what is going to happen when Bank of
4 America comes. Like, what is going to happen
5 to us?
6 MR. KNOWLES: The issue here is
7 that our mortgage, we were not in the recent
8 subprime rate issues.
9 MS. KNOWLES: It was an interest
10 only.
11 MR. KNOWLES: It was not an
12 interest only loan. Our mortgage was sold to
13 Countrywide from another competitor. And once
14 we were told to stop paying our mortgage, we
15 did what we could to quality for this Hope
16 Program. We then end up being in default. We
17 then see our foreclosure notice on our home.
18 You know what that means with your FICA score.
19 Okay? So, we cannot qualify for even the
20 amount of money to get out of this hole. Yet,
21 we had an April 15th sales date. By the
22 grace, we were told this person postponed it
228
1 and now it is May 15th. So at this very
2 moment, at this very minute, we have a May
3 15th sales date on our house in which we can
4 pay the mortgage. We have no problem with
5 that. But we cannot, we are unable to get
6 anyone at Countrywide to establish a
7 modification plan or any plan for us to pay
8 back our mortgage.
9 We are homeowners. We are
10 Americans and we pay our taxes. And I just
11 think that is an atrocity to a lot of people
12 that this is happening to all across the
13 country.
14 Thank you.
15 DIRECTOR BRAUNSTEIN: Thank you.
16 Ms. Rubio?
17 MS. RUBIO: Okay. Hello and good
18 afternoon. My name is Angelica Rubio and I am
19 the Director of the East LA Community
20 Corporation's First Time Home Buyer and
21 Financial Literacy Department and a former
22 housing counselor for a foreclosure prevention
229
1 program. I would like to thank the Federal
2 Reserve for allowing me to speak today on
3 behalf of our clients.
4 As advocates, East LA Community
5 Corporation asks that the merger between Bank
6 of America and Countrywide be halted until
7 Bank of America builds and establishes an
8 infrastructure that can effectively respond to
9 the subprime foreclosure crisis. A merger
10 should be contingent on making this happen.
11 Since 2006, East LA Community
12 Corporation's housing counselors have been
13 answering calls from homeowners facing
14 foreclosure throughout Southern California.
15 These calls, steadily increasing over time in
16 the early months of 2007, were the beginning
17 of a tidal wave of foreclosures that has
18 destroyed the American dreams of millions of
19 homeowners. This waive prompted us to launch
20 our foreclosure prevention program and to
21 build the infrastructure necessary to conduct
22 face-to-face counseling and advocate to
230
1 lenders on behalf of our clients.
2 Since June 2007, we have served
3 over 200 families. Thirty percent of those
4 clients have held subprime loan products from
5 Countrywide. For many families who purchased
6 their home in 2005 through 2006, their
7 interest rates have begun to reset and it is
8 almost impossible to keep monthly payments
9 affordable. The resulting losses of homes are
10 putting families out in an extremely tight
11 rental market. In this situation,
12 homelessness is a very real risk.
13 It is East LA Community
14 Corporation's position that neither
15 Countrywide nor Bank of America has equipped
16 themselves to effectively deal with this
17 situation. During the time in which we have
18 been working with families on loss litigation,
19 Countrywide has been the most difficult
20 mortgage company to work with. Not one loan
21 modification or loan workout that is both
22 logical and realistic has been granted by
231
1 Countrywide.
2 In the beginning, we understood
3 the limited capacity and/or the challenges
4 that they faced, not having prepared for the
5 initial wave of foreclosures in 2007, and
6 thus, had no formal institutionalized
7 structure to deal with the sudden increase in
8 defaults. As advocates, we were patient and
9 worked diligently to support countrywide,
10 understanding that it was difficult to handle
11 the influx of calls coming into the servicing
12 centers all over the country. We were told
13 that a structure was being implemented and we
14 hoped for the best in the coming months.
15 However, more than a year has
16 passed and nothing has changed. Countrywide
17 has yet to implement a cohesive infrastructure
18 and an overall consistent protocol which would
19 facilitate loss mitigation. If Countrywide
20 would develop procedures and protocols to
21 assist families facing foreclosures, more
22 families could stay in their homes.
232
1 While Countrywide's marketing
2 implores their customers to call them
3 immediately, stating that if the customer does
4 not take the first step, nothing can be done,
5 we at ELAC happen to believe that this is
6 false advertising. On numerous occasions, we
7 have seen the client take the first step to
8 call and Countrywide does nothing. Instead,
9 we are met with challenges. The loss of
10 third-party authorization forms. The constant
11 re-faxing of documents. Spending close to an
12 hour on hold before being able to speak to
13 someone. And when we finally do get through,
14 we are transferred to someone that might be
15 able to help.
16 This is a daily challenge that is
17 met by thousands of advocates all over the
18 country. If those of us in this line of work
19 who have become very familiar with this
20 process are having a difficult time, imagine
21 how much more difficult it is for the millions
22 of customers losing their homes at this every
233
1 moment.
2 I have been working with the
3 homeowner Leonardo Guzman since late 2007. He
4 is currently a customer of Countrywide who has
5 diligently worked with me to find a solution
6 to his problem. We pursued an FHA secure loan
7 product for Mr. Guzman and we began to work
8 with the Countrywide agent, who informed us
9 that she would be able to help. While the FHA
10 secure is not the best loan product for
11 everyone, for Mr. Guzman, he is one of the
12 lucky few who could be saved by this program.
13 After weeks of working with the
14 Countrywide agent to produce the typical
15 documents needed to close on a refinance, the
16 loan was submitted to underwriting. However,
17 we soon received a call from the agent who had
18 been told that Countrywide was not processing
19 these FHA secure loans and that she would no
20 longer be able to assist us.
21 The FHA secure loan product was
22 created by the federal government to assist
234
1 clients like Mr. Guzman, yet with
2 Countrywide's inability to process this loan
3 and its lack of interest in changing the terms
4 of the current loan, my client will lose his
5 home.
6 Bank of America is no better
7 equipped to handle the millions of loans it
8 will inherit from Countrywide. Case in point,
9 ELAC is currently working with Albert Medina,
10 who is having difficulties making payments on
11 his home, whose interest rate recently
12 adjusted and has done all he can to maintain
13 payments in order to remain in his home.
14 Last month, we contacted Bank of
15 America in hopes to pursue a workout for my
16 client. The response that I was given from
17 Bank of America is that since client is not
18 yet behind on his mortgage payment, they are
19 unable to do any sort of workout until he is
20 at least three months behind.
21 This is an example of how ill-
22 equipped Bank of America is to take on any
235
1 more loans than it can possibly handle.
2 Purchasing Countrywide would result in an
3 incredible disservice to millions of families
4 all over the country.
5 In recent months, Bank of America
6 and Countrywide have been all over the news
7 making promises of helping their customers,
8 giving away millions of dollars to counseling
9 agencies, attempting to prove to us that they
10 are doing all they can to help their
11 customers. However, this money and this
12 marketing ploy is pointless if advocates like
13 myself are unable to have our demands met on
14 the other end of the phone.
15 The struggles of families like Mr.
16 Guzman and Mr. Medina are one of many reasons
17 why East LA Community Corporation is opposed
18 to this merger. Thank you.
19 DIRECTOR BRAUNSTEIN: Thank you
20 very much. Mr. Lizarraga.
21 MR. LIZARRAGA: Good afternoon.
22 My name is David Lizarraga and I represent
236
1 TELACU, one of America's largest, oldest, and
2 most established Community Development
3 Corporations.
4 For the past 40 years, TELACU has
5 fulfilled its mission by creating jobs,
6 providing access to capital, revitalizing
7 communities, empowering young people and
8 veterans seeking an education, and providing
9 affordable housing for families that comprise
10 our workforce, and for senior citizens who
11 have built our society.
12 We accomplish these things through
13 a unique model in which our parent nonprofit
14 CDC is self-sustained by a wholly owned family
15 of companies. It is a specific business of
16 these companies to fulfill our mission.
17 I take a moment to make this
18 introduction because while I echo many of the
19 sentiments you will hear and have heard today
20 concerning Bank of America's acquisition of
21 Countrywide, I would like to share TELACU's
22 unique perspective relative to this very
237
1 acquisition. You see, it very well may be
2 that TELACU is the only community-based
3 organization represented here today having a
4 business relationship with all three of the
5 associated main entities, Bank of America,
6 Countrywide, and even the Federal Reserve.
7 Let me state that TELACU
8 enthusiastically supports Bank of America's
9 acquisition of Countrywide. TELACU has a high
10 level of confidence that Bank of America will
11 be well positioned to find solutions to the
12 housing crisis that our nation now faces.
13 However, much has been said about
14 Countrywide's contributions to creating this
15 crisis.
16 I would like TELACU to he heard in
17 these proceedings in the context of certain
18 things that Countrywide did right in
19 supporting home ownership in our community,
20 things that TELACU asked many other financial
21 institutions to do, including Bank of America,
22 for which Bank of America and other
238
1 institutions either declined or did not have
2 the capacity to do as well as Countrywide.
3 For TELACU, building communities
4 has been synonymous with building homes the
5 working families can afford. We always
6 believed that if we could take a hard working
7 family who has saved up some equity, sell them
8 one of our homes that we had made affordable
9 through write downs and other subsidies, and
10 created an opportunity for them to own a home
11 for little more than they were already paying
12 in rent. Then we would have done a great
13 thing. That strategy has always served our
14 community and TELACU very well.
15 It has never been our strategy for
16 the family we serve to go from, in essence,
17 renting housing to renting money. It has
18 never a part of our strategy to have our home
19 buyers purchase a TELACU home using financing
20 whose cost is artificially reduced or
21 needlessly and surreptitiously overpriced.
22 But as a for-sale home builder in distressed
239
1 communities, TELACU needed a partner to
2 responsibly finance families in our community
3 needing a new home affordable home.
4 Several years ago, TELACU's
5 housing division set out to find a preferred
6 lender, who would work with an provide
7 mortgages for a moderate income buyers. Our
8 criteria was straight forward and included the
9 following. Pre-qualified homeowners based
10 upon verifiable income and credit to purchase
11 our homes, place our buyers into fully
12 amortized fixed rate mortgages whenever
13 possible, having a working relationship and
14 knowledge of special federal, state, and local
15 housing finance programs that would create
16 true affordability for our buyers, provide
17 onsite personnel on weekends to work with
18 TELACU team members to serve and educate our
19 buyers, and most importantly, be responsible
20 to TELACU as a partner in the creation of home
21 ownership opportunities by having a loan
22 processing operation that is responsive,
240
1 transparent and fast.
2 TELACU made this business
3 opportunity available to many of our financial
4 partners, Bank of America included.
5 Countrywide was the only lender, and I repeat,
6 the only lender that committed to provide what
7 we required. Our other partners flat out told
8 us they either couldn't service our needs or
9 wouldn't even want to try. But Countrywide's
10 Builder Division had the products, personnel,
11 systems, and track record already in place to
12 provide what we, as an affordable housing
13 developer needed.
14 I want you to know that not only
15 did Countrywide deliver as promised, but
16 Countrywide has provided a higher standard of
17 service than we have ever received from the
18 mortgage industry. The families that purchase
19 TELACU homes have been empowered and well
20 served by the mortgages financed by
21 Countrywide, in many cases having fixed rate
22 financing that resulted in mortgage payments
241
1 only slightly higher than their previous
2 rental payments. Affordable housing
3 developers like TELACU need more lenders to
4 provide this level of service to developers
5 and homeowners wanting an affordable home in
6 our communities can do business.
7 I don't think the fact that
8 Countrywide did these things more effectively
9 than other lenders should come as a surprise
10 to anyone. It is Bank of America, after all,
11 that is intent on acquiring Countrywide. Bank
12 of America must certainly see that there is
13 something in Countrywide worth owning.
14 If we were to see a resurgence in
15 our communities for families to buy a home in
16 fulfillment of the American dream, financing
17 has once again become available to them so
18 they can do so. And affordable housing
19 developers must rely on capable responsible,
20 financial institutions to partner with us to
21 make those mortgages available to our buyers.
22 My friends at Bank of America have
242
1 demonstrated their ability to exceed our
2 expectations in virtually every area. Bank of
3 America has demonstrated its excellence in
4 being first in small business lending and, to
5 my knowledge, has the only backed foundation
6 that provides a minimum of $200,000 grants to
7 nonprofit community organizations throughout
8 the United States in the millions that can be
9 used for capacity building or for creating
10 investment into businesses that can lead them
11 into a pathway of self-sufficiency.
12 I urge my friends at Bank of
13 America to discover those attributes of the
14 Countrywide Builder Division business platform
15 that continue to make the vital difference in
16 our communities. In doing so, I can remain
17 hopeful that the higher standard of service
18 TELACU families have received from Countrywide
19 will be enhanced by Bank of America's higher
20 standard of commitment to this proposed
21 acquisition.
22 In conclusion, again, I would like
243
1 to state that TELACU enthusiastically supports
2 the acquisition of Countrywide by Bank of
3 America. Thank you.
4 DIRECTOR BRAUNSTEIN: Thank you
5 very much. My thanks to this panel. And Mr.
6 and Mrs. Knowles, could you stay for a second?
7 And thank you very much.
8 We are going to adjourn now for
9 lunch and we will reconvene at 1:30.
10 (Whereupon, at 12:50 p.m., a lunch
11 recess was taken.)
12
13
14
15
16
17
18
19
20
21
22
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1 A F T E R N O O N S E S S I O N
2 (1:40 p.m.)
3 DIRECTOR BRAUNSTEIN: We're going
4 to get started. Just a few housekeeping
5 notes. If anybody's here for the open mike
6 session, could you please go to the
7 registration table and sign up there. Make
8 sure and sign up at the registration table.
9 And also if anybody who's
10 testifying this afternoon, if you are able to
11 give us a written copy of your testimony, it
12 would be helpful, and you could leave that at
13 that registration table with the Fed staff.
14 And with that we'll get started again. We
15 have our timekeeper, here, signs, two minutes
16 left, and then time is up. Please keep an eye
17 out. You have five minutes for your
18 statements, and please begin your statements
19 by stating your name and your organization.
20 And Mr. Pinsky, we'll start with
21 you.
22 MR. PINSKY: Good afternoon. I am
245
1 Mark Pinsky, president and CEO of Opportunity
2 Finance Network, the nation's leading network
3 of Community Development Financial
4 Institutions, or CDFIs. CDFIs lend and invest
5 outside the margins of conventional finance,
6 to help the people and markets we serve enter
7 the economic mainstream, and help mainstream
8 institutions discover these opportunity
9 markets.
10 Our industry has financed more
11 than $25 billion in these opportunity markets
12 over more than 30 years.
13 Our net charge-off rates,
14 cumulatively, are less than one percent,
15 comparable to mainstream financial
16 institutions working in more conventional
17 markets that are commonly assumed to present
18 less risk.
19 In addition, I'm chairman of the
20 Opportunity Mortgage Network, an affiliate of
21 OFN, that is offering responsible mortgage
22 products in the places where CDFIs work.
246
1 I want to make four points today.
2 First, if there is a single lesson the
3 Opportunity Finance Network has learned
4 through our experience and proven through our
5 practice, it is this. It is possible to lend
6 responsibly and profitably in nonconforming
7 and subprime markets. It is a matter of
8 discipline and thought and practice, coupled
9 with a commitment to producing sustainable
10 gains for communities, markets, financial
11 intermediaries, and investors.
12 Second. I am confident that Bank
13 of America's purchase of Countrywide would be
14 a significant, positive step. Bank of
15 America's approach to mortgage lending is
16 fundamentally responsible. Countrywide's
17 approach was not. Bank of America's mortgage
18 business was and is based on sound
19 underwriting credit principles and practices.
20 Countrywide's was not.
21 Bringing the Countrywide mortgage
22 business within Bank of America seems certain
247
1 to result in a much more disciplined and
2 responsible practice of providing mortgage
3 credit.
4 Third. Through a financing
5 partnership centered on California,
6 Opportunity Finance Network has experienced,
7 firsthand, the discipline Bank of America
8 practices in its credit business.
9 In 2006, OFN borrowed $10 million
10 from Bank of America to provide liquidity to
11 some of the financial institutions in our CDFI
12 network who lend to small businesses and
13 microenterprises.
14 Bank of America's underwriting of
15 OFN was thorough and rigorous, its monitoring
16 has been comprehensive and respectful, and its
17 focus on benefiting the low-income and low-
18 wealth people OFN exists to serve has been
19 consistent and unrelenting.
20 This $10 million relationship has
21 been successful. We have so far loaned $9
22 million, almost all of it in California, that
248
1 our network CDFIs have, in turn, reloaned to
2 small businesses and microenterprises.
3 Because of the favorable terms and
4 conditions Bank of America provided, we're
5 able to serve more entrepreneurs over a longer
6 period than we would otherwise have served.
7 Fourth and finally, in my view,
8 Bank of America is proposing to take on with
9 its purchase of Countrywide a special
10 responsibility to look after Countrywide's
11 customers, to improve the well-being of the
12 mortgage market, and to help restore safety
13 and soundness to financial markets.
14 These are deeply troubling times
15 for home owners, mortgage lenders, and
16 financial institutions.
17 The market is looking for
18 direction, and I call on Bank of America to
19 help provide it. If I did not think Bank of
20 America were up to this challenge and
21 committed to meeting a high standard of
22 responsibility, I would not be testifying
249
1 today in support of the proposed purchase.
2 It would not be enough, in my
3 opinion, for Bank of America to simply cease
4 and desist from some of the irresponsible
5 lending activities that led Countrywide to
6 near ruin.
7 Bank of America should make
8 extraordinary efforts to work out loans that
9 are in or near foreclosure, so that home
10 owners can remain home owners; should
11 aggressively support credit counseling agency
12 counselors, not just now but for decades to
13 come; should continue to support on-the-ground
14 community development advocates who provide
15 vital channels to low-income and low-wealth
16 borrowers, and should do everything possible
17 to lead the mainstream financial system in
18 responsible lending.
19 Thank you.
20 DIRECTOR BRAUNSTEIN: Thank you
21 very much.
22 Mr. Cole.
250
1 MR. COLE: Good afternoon. I'm
2 Tim Cole. I'm the director of Development and
3 Community Relations at Co-Opportunity in
4 Hartford, Connecticut. Thank you for allowing
5 me to speak on behalf of my colleagues at Co-
6 Opportunity. Donna Taglianetti, our executive
7 director, sends her regrets that she is not
8 able to share with you today, Co-Opportunity's
9 deep appreciation for the strong, positive
10 relationship we have with Bank of America, a
11 relationship that has grown deeper and
12 stronger since Bank of America entered the
13 Connecticut market upon acquiring Fleet Bank.
14 Co-Opportunity is a community-
15 based organization whose mission is to create
16 neighborhood stability and economic prosperity
17 by increasing earnings and wealth of residents
18 of the Greater Harford Region.
19 We accomplish this by providing
20 services in the areas of financial education
21 and counseling, asset building, including home
22 ownership and workforce development. We are
251
1 the lead agency for the Hartford Asset
2 Building Collaborative, a consortium of
3 nonprofits, funders and financial
4 institutions.
5 Asset building financial literacy
6 and home buyer education make up roughly half
7 of our business. Our work in these areas
8 relies on effective and robust partnerships
9 with a wide range of stakeholders.
10 These includes faith and
11 community-based organizations, leading
12 regional and national foundations, local,
13 state and federal agencies, and most
14 especially, private sector financial services
15 companies.
16 Asset building strategies are
17 specifically designed to help low-income
18 working people enter the financial mainstream
19 by becoming investors and stakeholders in
20 their own financial futures.
21 We help them learn how mainstream
22 financial institutions and practices work, and
252
1 become comfortable building relationships
2 based on mutual trust with banks and lenders.
3 For this to happen, sound,
4 engaged, creative and dedicated adaptive
5 partnerships with financial institutions are
6 essential.
7 When Co-Opportunity entered the
8 asset building field in 2001, Fleet Bank, now
9 a key part of the Bank of America in the
10 Northeast, immediately became our most
11 consistent, strongest, and most reliable
12 partner. That legacy continued after the
13 merger with Bank of America.
14 It goes without saying, that we
15 are grateful for the substantial financial
16 investments Bank of America has made in our
17 programs, particularly our individual
18 development accounts, the annual EITC campaign
19 we run, and most recently, the new year-round
20 financial resource center we launched this
21 year.
22 Just as important, however, Bank
253
1 of America has been a great friend by
2 providing us with access to research on trends
3 in philanthropy in the nonprofit sector,
4 technical assistance and professional
5 development.
6 We, at Co-Opportunity, and I,
7 personally, really owe Bank of America a debt
8 of gratitude for two reasons.
9 First, as the person responsible
10 for launching our asset building programs, I
11 admit, I was apprehensive about what would
12 happen when Bank of America acquired Fleet,
13 which was, as I indicated, our most engaged
14 private sector supporter at the time.
15 Indeed, I shared such concerns
16 with Connecticut state treasurer and attorney
17 general at a hearing much like this one.
18 I'm pleased to report that Bank of
19 America took up the Fleet legacy, did the work
20 necessary to build the systems required to run
21 IDA programs, assigned dedicated staff and has
22 continued to build on that legacy with energy
254
1 and enthusiasm.
2 The bank's conduct in this matter
3 is one reason I am optimistic the proposed
4 acquisition of Countrywide will work out well
5 for all concerned.
6 The second source of gratitude is
7 the fact we were selected in 2006 for one of
8 Bank of America's Neighborhood Builders
9 Awards. While the award is intended to give
10 recognition to outstanding community
11 development organizations, I think it
12 demonstrates that the bank has created one of
13 the most outstanding programs in the world of
14 corporate philanthropy.
15 With this program, the bank is
16 showing true leadership in urging real
17 rethinking and reworking of how our sector
18 works and how it is resourced.
19 I just want to say something about
20 Hartford, which is sixth poorest city in the
21 United States. It has always been tough for
22 our clients to reach the goal of home
255
1 ownership. Now more than ever, due to the
2 subprime lending crisis and the shock going
3 through our mortgage, through the mortgage and
4 credit industry, our counsels are now spending
5 more hours loss mitigation than on looking for
6 sound mortgage products.
7 Bank of America's proposed
8 acquisition of Countrywide, to solve this
9 crisis singlehandedly, is not something that
10 I expect, but it gives me a measure of hope to
11 know that Bank of America, a company that has
12 demonstrated its willing to put its resources,
13 imagination, and commitment to work in hurting
14 communities like Hartford, is now willing to
15 assume a leading role in the daunting effort
16 to rebuild the nation's economic foundations,
17 and with them, the world's.
18 Thank you for your attention.
19 DIRECTOR BRAUNSTEIN: Thank you
20 very much.
21 Mr. Spencer.
22 MR. SPENCER: Good afternoon. My
256
1 name is Marc Spencer. I'm the executive
2 director of JUMA Ventures. I'm neither in
3 support or against the acquisition but here to
4 state how Bank of America has supported the
5 nonprofit I direct, and has been a local
6 leader in community development in the Bay
7 Area.
8 JUMA Ventures recently was awarded
9 a $200,000 grant from Bank of America through
10 the Neighborhood Builders Award. JUMA
11 Ventures is a national nonprofit organization
12 that serves low-income teens from inner cities
13 in San Francisco, Oakland, San Diego and now,
14 in Washington, D.C.
15 With B of A support, we have been
16 to increase the operations of our social
17 enterprises which are double-bottom lined
18 businesses, where we employ disadvantaged
19 youth in our sports stadium concession and
20 vending businesses.
21 We have 220 youth employees who
22 work part time and are saving wages to pay for
257
1 the cost of higher education.
2 Historically, JUMA has employed
3 over 2,500 youth in our enterprises. In
4 addition, Bank of America funds support our
5 California statewide financial literacy and
6 asset building program. We're building the
7 capacity of seven other community-based
8 organizations to offer financial education and
9 asset building programming.
10 JUMA is known as a pioneer in
11 youth individual development accounts that
12 have incentivized saving opportunities for
13 youth, to have their deposits matched two to
14 one.
15 We have opened over 600 accounts
16 and will open 150 new accounts this year, some
17 of which is supported by the grant that B of
18 A awarded us. Youths have saved over $500,000
19 in the IDA program and have invested over
20 $600,000 in asset purchases. The vast
21 majority for covering the costs of higher
22 education.
258
1 Lastly, Bank of America funds are
2 supporting our national expansion to scale our
3 social enterprise and youth development model
4 to cities across the U.S. and they have
5 provided us with professional leadership
6 development opportunities for myself and
7 senior staff.
8 JUMA is grateful for the support
9 of Bank of America. The Neighborhood
10 Builders Award has significantly impacted
11 JUMA's ability to deliver high quality
12 services and achieve our mission of
13 permanently graduating low-income youth out of
14 poverty.
15 DIRECTOR BRAUNSTEIN: Thank you
16 very much.
17 Ms. Wang.
18 MS. WANG: Good afternoon. My
19 name is Villy Wang. I am co-founder,
20 president and CEO of BayCAT, Bayview Hunters
21 Point Center of Arts and Technology in San
22 Francisco. I appreciate the opportunity to
259
1 speak to you today on the strength of Bank of
2 America as a major stakeholder in our
3 communities today, and its impact to the
4 proposed merger. BayCAT is a nonprofit
5 501(c)(3) social enterprise. We educate,
6 empower and employ youth and adults in
7 underresourced communities in San Francisco
8 and the Bay Area in the digital media arts.
9 Over these last three years, we've
10 served over a thousand students from these
11 kinds of communities where poverty levels of
12 these families, they make less than $20,000
13 for households of a family of four.
14 Ironically, these are also areas
15 where there are the largest percentage of home
16 ownership populations. We also have a
17 professional studio with clients like Yahoo
18 and Union Bank and Citibank. Every day, we
19 witness the gaps, the deep gaps between the
20 haves and the have-nots.
21 Although we've been funded by
22 every bank in the Bay Area, Bank of America
260
1 has stood out as a model to other
2 organizations and corporations. Its
3 philosophic programs are signature. Over the
4 last two years, we've been the recipient of
5 the National Excellence Initiative, very much
6 so like JUMA Ventures, my colleague here.
7 This program is a example of B of
8 A strategically investing in underserved
9 communities in a signature way. They've
10 identified and addressed two of the most
11 challenging issues in community, that is,
12 helping organization like ours, A, get access
13 to unrestricted funding, and B, building a
14 need for professionalism.
15 It is this level of thoughtfulness
16 and risk-taking which is ultimately the kind
17 of investment that needs to happen to serve
18 our community better.
19 Now I understand, although the
20 seriousness of the foreclosure climate in our
21 communities is unprecedented, actually deeper
22 and symptomatic of issues that are plaguing
261
1 our communities.
2 So just as Bank of America has
3 been successful in creating a strategic
4 program to become a very deep stakeholder in
5 our community, I believe that Bank of America
6 has the capability of keeping and leveraging
7 its stake in the community through this
8 merger.
9 The philanthropic program that
10 they have has a snowball effect which reaches
11 our individuals in our community. So, for
12 example, because of the strength of this
13 program, and they way they have funded our
14 program to reach thousands of families in our
15 community, now our community members have a
16 way to recognize who Bank of America is,
17 through branches, through faces, and just as
18 I personally, I happen to have bought a house
19 in San Francisco from my mom, my mortgage
20 happens to be with Countrywide.
21 Because of the strength of Bank of
22 America's commitment to community, I know I
262
1 have a face to go to in the community as well
2 as in the corporate sector of Bank of America.
3 It is that kind of leverage that they have
4 created within the community. Their foresight
5 in investing in communities in the deepest and
6 hardest ways, that foreclosure is just one
7 aspect that I know through the strategies that
8 they've had already committed to communities,
9 that they will be able to succeed in.
10 Thank you for your time.
11 DIRECTOR BRAUNSTEIN: Thank you
12 very much. Thank you to the panel.
13 Could the next panel come forward,
14 please.
15 Okay. Thank you for coming today.
16 Just a few housekeeping measures. There is a
17 timekeeper right there who will show you a
18 significant when you have two minutes left,
19 and then when your time is up, and you have
20 five minutes each for your testimony and
21 please begin your statement by stating your
22 name and your organization so we can make sure
263
1 we get it in the record.
2 And we'll start with Mr. Bivens.
3 MR. BIVENS: Good afternoon. My
4 name is Robert "Bobby" Bivens, and I'm the
5 economic development chairperson for the
6 California State Conference of Branches, and
7 president of the Stockton Branch, NAACP.
8 The NAACP is our nation's oldest,
9 largest, and most widely recognized grassroots
10 civil rights organization in the United
11 States.
12 The State Conference is the
13 official representative for the NAACP. We
14 currently have more than 50 units in
15 California and over 2,200 membership units in
16 every state of this country.
17 The NAACP firmly believes that
18 there is much the Federal Reserve Board can do
19 and should do to address the current
20 foreclosure crisis as it relates to Bank of
21 America's proposed purchase of Countrywide due
22 to B of A's history of redlining high interest
264
1 for African Americans and other minorities.
2 B of A has not been consumer-
3 friendly in the African American community
4 with home loans, business loans, or credit
5 card fees, or interest rates. If you live
6 anywhere other than in major metropolitan
7 areas, charitable contributions do not exist,
8 the CRA requirements have not been adhered to,
9 and most bank managers don't want to freely
10 discuss their poor performance.
11 We feel it is incumbent upon the
12 Federal Reserve Board to help families facing
13 foreclosure to be able to stay in their homes.
14 Home ownership makes neighborhoods safer,
15 encourages community investment, provides
16 financial security, and improves the lives of
17 families by helping to provide a safe, secure
18 and stable home.
19 It is essential for the Federal
20 Reserve Board to ensure and guarantee,
21 refinance sustainable and affordable
22 mortgages, assure the home owners as well as
265
1 the American public that families are more
2 important to regulators as is the large
3 corporations and financial institutions.
4 In addition to helping consumers,
5 the NAACP also considers the proposal before
6 us a win for the lenders. Although they must,
7 under current proposed legislation, take a
8 diminished return on their properties, they
9 are no longer responsible for foreclosed
10 properties, and are assured of getting some
11 return on their investment.
12 Additionally, an action needs to
13 be proposed that will help California, and
14 also help the national economy which is
15 currently suffering tremendously, largely
16 because of the foreclosure crisis, due to
17 insensitive lending institutions such as B of
18 A and Countrywide.
19 So the thought of the fox owning
20 the henhouse is horrifying.
21 The NAACP believes it is
22 imperative for the Fed to take its role more
266
1 seriously in addressing the current economic
2 crisis faced by our nation, and to initiative
3 more substantive regulatory controls and put
4 an end, once and for all, to predatory
5 lending.
6 As members of this board, you know
7 well that the NAACP has been intimately
8 involved in litigation and legislation to end
9 predatory lending.
10 Specifically, we would like to see
11 legislative regulations that establish higher
12 standards for loan originators and provide
13 stronger penalties and remedies for lenders
14 who break the law.
15 We also need to be assured that
16 any purchase of this nature occurring will be
17 monitored closely by the Federal Reserve Board
18 to ensure protections for consumers at the
19 minimum, and that they will be more aggressive
20 in eliminating predatory lending.
21 While like many, we're
22 disappointed with the final version of some of
267
1 the bills that have passed in the House and
2 the Congress, that we're working hard to see
3 stronger monitoring, we do very much
4 appreciate any initiative that would help
5 eliminate predatory lending.
6 For decades, predatory lenders
7 have targeted African Americans and other
8 racial and ethnic minorities through steering,
9 and through other immoral practices, with
10 dubious products that contain prepayment
11 penalties, the so-called exploding ARMs, and
12 the list goes on.
13 In fact, according to the Center
14 For Responsible Lending, more than 52 percent
15 of home purchase loans made to African
16 Americans in 2006 were subprime.
17 Let's consider the facts for a
18 moment. Among subprime loans made in 2005,
19 and sold to investors, 55 percent went to
20 people with credit scores high enough to also
21 qualify for conventional loans with far better
22 terms. By the end of 2006, the share of
268
1 overpriced loans rose to 61 percent.
2 Okay. I will submit the rest of
3 my statement. The bottom line is we're in
4 opposition to the purchase.
5 DIRECTOR BRAUNSTEIN: Thank you
6 very much.
7 Ms. Molina.
8 MS. MOLINA: Hi. Good afternoon.
9 My name is Liliana Molina. I'm with the
10 California Reinvestment Coalition and I'm
11 reading the comments of Matthew Lee, the
12 executive director of Inner City Press, their
13 finance watch, opposing the proposal by Bank
14 of America to acquire Countrywide.
15 While the grounds include not only
16 lending disparities but also predatory credit
17 card practices, enabling of payday lenders,
18 presumptive violation of the 10 percent
19 deposit cap and money laundering, since this
20 is in California, consider that in the first
21 study of the just-released 2007 mortgage
22 lending data, Inner City Press, their finance
269
1 watch, has identified worsening disparities by
2 race and ethnicity in the higher-cost lending
3 of Countrywide and Bank of America.
4 Combining these two would only
5 make things worse. In the State of California
6 in 2007, Countrywide confined African
7 Americans to higher-cost loans 1.43 times more
8 frequently than whites.
9 If combined with Bank of America,
10 North America, the disparity for African
11 Americans grows to 1.54. Meanwhile, in the
12 past week, Bank of America has announced a 77
13 percent drop in earnings calling into question
14 even the safety and soundness rationale for
15 allowing the second largest U.S. bank to buy
16 a troublesome subprime mortgage lender.
17 The impunity factor has risen.
18 With the news that Countrywide's Angelo
19 Mozilla made 121 million in 2007 alone,
20 exercising Countrywide stock options, while
21 promoting predatory lending and foreclosures
22 all over the country.
270
1 The U.S. Federal Reserve Board,
2 while still trying to avoid any public comment
3 on or review of the controversial Bear
4 Stearns/JPMorganChase bailout, has agreed to
5 hold these public hearings following on in
6 Chicago on April 22nd.
7 In Illinois, in 2007, Countrywide
8 confined African Americans to higher-cost
9 loans 1.87 times more frequently than whites.
10 If combined with Bank of America,
11 and LaSalle, the disparity for African
12 Americans grows to 1.96. The disparity for
13 Latinos, combining Countrywide and Bank of
14 America would also increase, from 1.31 to
15 1.36. And see Chicago Tribune, April 23rd:
16 "Countrywide Ripped At Hearing. Bank of
17 America Told Change Is Needed." End quote.
18 Reporting on request to Bank of
19 America that they respond to the disparities
20 demonstrated by Fair Finance Watch.
21 To date, we have not seen any
22 substantive response by Bank of America. And
271
1 why no opportunity on the East Coast where
2 Bank of America is headquartered?
3 In Delaware, in 2007, Countrywide
4 confined African Americans to higher-cost
5 loans 1.84 times more frequently than whites.
6 If combined with Bank of America, the
7 disparity for African Americans grows to 1.94.
8 The disparity for Latinos would
9 also increase from 1.29 to 1.32.
10 Nationwide and hearing are needed
11 across the nation. Bank of America, in 2007,
12 confined African Americans to higher-cost
13 loans 1.88 times more frequently than whites,
14 and denied the applications of Latinos 1.62
15 times more frequently than whites.
16 Meanwhile, the large and troubled
17 Countrywide Financial, which Bank of America
18 has applied to buy, confined African Americans
19 to higher-cost loans 1.95 times more
20 frequently than whites and denied applications
21 of Latinos 1.53 times more frequently than
22 whites.
272
1 Bank of America continues
2 supporting payday lender, Advance America Cash
3 Advance. See, for example, South Carolina
4 state of June 8th, 2007. In July 2004, Bank
5 of America Corporation arranged a $265 million
6 credit line for Advance America. Documents
7 Advance America filed with the Securities and
8 Exchange Commission indicate Bank of America
9 administered the credit line.
10 Not long after, Advance America
11 announced an IPO that raised 195 million. In
12 2004, filing to the SEC, Advance America,
13 which is headquartered in Spartanburg, and is
14 the nation's largest payday lender,
15 essentially said it wouldn't be as big or as
16 successful at corralling borrowers without
17 banks.
18 Quote. "We depend on loans from
19 banks to operate our business. If banks
20 decide to stop making loans to companies and
21 the payday cash advance services industry, it
22 could have a material adverse effect on our
273
1 business." Results of operations on financial
2 condition the company states in the SEC
3 document.
4 In late September of 06, Bank of
5 America acknowledged that its lax operations
6 allowed South American money launderers to
7 illegal move 3 billion through a single
8 midtown Manhattan branch.
9 Bank of America said, quote: "it
10 takes seriously it's anti-money laundering
11 obligations and it never knowingly does
12 business with persons, organizations, or
13 businesses engaged in illegal activities," and
14 did not in this case.
15 Most of the funds came from Brazil
16 via a licensed money transmitter in Uruguay
17 and then to the Bank of America which allowed
18 funds to reach licensed money transfer firms
19 in this area.
20 Bank of America, with the Federal
21 Reserve's complicity, has been making a
22 mockery of the 10 percent deposit cap, which
274
1 is one of the few consumer protections enacted
2 along with the Interstate Banking Act of 1994.
3 Bank of America is now arguing the
4 10 percent deposit cap would not prevent its
5 proposed acquisition of Countrywide, since
6 Countrywide holds its deposits in a savings
7 and loan.
8 But then the 10 percent deposit
9 cap means nothing. An institution could just
10 shift deposits into a savings and loan, and
11 keep on buying up other institutions.
12 May I just finish? Would that be
13 okay?
14 DIRECTOR BRAUNSTEIN: Quickly.
15 MS. MOLINA: Okay; cool.
16 Countrywide's Angelo Mozilla has
17 pocketed 410 million in salary, bonuses and
18 stock option gains since 1999, according to
19 the executive compensation company, Equliar.
20 Now he stands to cash in with
21 severance if Bank of America by Countrywide.
22 Consider this from Fox News of August 23rd,
275
1 2007.
2 Okay. "The press -- well, it's
3 just quoting the interview, so you can read
4 it.
5 DIRECTOR BRAUNSTEIN: Okay. Thank
6 you very much.
7 MS. MOLINA: You're welcome.
8 DIRECTOR BRAUNSTEIN: Ms. Ceaser.
9 MS. CEASER: Good afternoon. My
10 name is Angela Ceaser and I am the home buyer
11 services manager at HomeSight, a nonprofit
12 community development corporation in Seattle,
13 Washington.
14 I'm here today to speak to you in
15 support of the proposed acquisition of
16 Countrywide Financial by Bank of America.
17 HomeSight was founded in 1990 with
18 the mission of building a strong, vibrant
19 communities through home ownership, economic
20 development and neighborhood revitalization.
21 In 2000, we received a charter
22 membership from Neighborworks America. We are
276
1 certified by the U.S. Treasury as a community
2 development financial institution, and we are
3 a HUD-certified counseling agency.
4 Over the years, we have built
5 close to 400 units of single family homes and
6 condominiums. We have originated over 700
7 loans to low-income, first-time home buyers,
8 and we have created over 1300 low-income,
9 first-time home owners in the Seattle area.
10 More importantly, over 90 percent
11 of those who've purchased homes built by
12 HomeSight continue to own and occupy them.
13 HomeSight strongly supports the
14 merger of Bank of America and Countrywide
15 Financial because it is an opportunity to
16 strengthen two of our nation's largest lenders
17 during these very troubled times.
18 Bank of America has been a steady
19 partner of HomeSight's, in many ways, over the
20 years. First, Bank of America has been the
21 strongest bank partner of our Home Buyer
22 Counseling and Education program, at a time
277
1 when most national institutions eliminated
2 home buyer education requirements for first-
3 time buyers, Bank of America remained
4 steadfast and retained its commitment, by
5 requiring the highest education and counseling
6 standards in the industry.
7 In fact, Bank of America loan
8 officers have provided more direct referrals
9 to the HomeSight home buyer education program
10 than any other lender.
11 Second. HomeSight is proud to
12 have been selected as an inaugural recipient
13 of the Bank of America Neighborhood Excellence
14 Award in 2004. This two year award provided
15 unrestricted core operating support for us to
16 enhance our capacity in many ways, including
17 a year-long strategic planning process that
18 engaged our community-based board at a very
19 new level.
20 In addition, through volunteer
21 service, Bank of America employees have
22 provided expertise to HomeSight's board of
278
1 directors and board committees with an ongoing
2 and genuine commitment of their personal time.
3 Another example of Bank of
4 America's commitment to community development
5 is the construction loan the bank provided for
6 our recently completed and totally sold out 19
7 unit Cocafi Condominium project. Throughout
8 the construction loan process, from
9 origination to closeout, Bank of America
10 proved to be a solution-oriented partner.
11 For the past few years, Bank of
12 America's community commitment loan product
13 provided very competitively-priced loans that
14 HomeSight, as a licensed mortgage broker, was
15 able to originate to our first-time buyers.
16 While Bank of America found it
17 necessary to curtail mortgage broker
18 relationships nationally, in response to
19 recent market conditions, we deeply value the
20 strength this relationship brought to our
21 lending operations.
22 We are continuing to explore
279
1 alternative channels to provide these products
2 to our borrowers. Whether it i sin the near
3 term or not until stability is restored in the
4 national housing market, we look forward to
5 renewing our loan origination relationship
6 with Bank of America. While HomeSight has not
7 had a direct working relationship with
8 Countrywide Financial, we are familiar with
9 them as the servicer for all loans funded by
10 the Washington State Housing Finance
11 Commission, our state's housing finance
12 agency.
13 Unless the past servicer for our
14 state's bond finance loan program, we have
15 never had a complaint from any of our
16 borrowers regarding the loan servicing
17 provided by Countrywide.
18 In conclusion, we believe the
19 proposed acquisition of Countrywide Financial
20 by Bank of America will bring Bank of
21 America's disciplined lending approach to
22 Countrywide's far-reaching lending and
280
1 servicing infrastructure, resulting in a solid
2 financial institution that will help stabilize
3 a currently volatile marketplace.
4 Thank you very much for your time
5 and we appreciate the opportunity to share our
6 experience and views with you today.
7 DIRECTOR BRAUNSTEIN: Thank you
8 very much.
9 Dr. Araque.
10 DR. ARAQUE: Araque. Good
11 afternoon. My name is Juan Carlos Araque,
12 vice president of community investments for
13 Orange County United Way. I am here to
14 express our support to Bank of America
15 employees, corporation, and foundation, and
16 share with you our long-time contribution to
17 social change, and efforts, not only national
18 but in Orange County, California.
19 Orange County United Way is a $23
20 million organization supporting agencies in
21 Orange County, in our 34 cities. We have
22 almost 300,000 people who live under $40,000
281
1 of income every year. Bank of America support
2 has been in three specific areas. Funding,
3 expertise and board members.
4 In terms of funding, we receive
5 over $700,000 a year from the employees, the
6 corporation and the foundation. And these
7 past five years has been a total of over $3
8 million.
9 In terms of expertise, we have Ben
10 prince, who is our current board member for
11 Orange County United Way, as well as Bill
12 Boffer who is a former United Way board
13 member, and Tom Farrell who is a member of our
14 Education Council.
15 Bank of America has supported two
16 specific programs in Orange County. One is
17 the earned income tax credit and the other one
18 is the Latino educational attainment
19 initiative.
20 In terms of the earned income tax
21 credit, the IRS estimates that up to 25
22 percent of individuals eligible for the tax
282
1 credit do not claim it, and this adds up to
2 about $65 million, just in Orange County.
3 Because of United Way, and our
4 contributions, as well as our partnership with
5 Bank of America, two years ago, we started
6 helping people that make less than $39,000 a
7 year to complete their tax returns for free
8 and get their money back within a week.
9 We started with 300 people
10 receiving about $200,000 in one year. This
11 year alone, we have served over 3000 people,
12 receiving over $3 million back. This is
13 earned income, hard work. The people in need
14 need it back.
15 The other key effort has been the
16 Latino educational attainment. This is a
17 partnership with Orange County Business
18 Council, the Orange County Register, the
19 Department of Education and United Way.
20 Half of our students are Latino in
21 Orange County, that's up to 240,000 students,
22 and the majority of them have academic
283
1 trouble. We know that these students, half of
2 them almost do not graduate in four years, and
3 about 70 percent -- we lose 30 percent of them
4 due to dropout rates. These initiatives have
5 helped us, mapping how many low-performing
6 schools in Orange County we have. That adds
7 up to 87 low-performing schools, almost 17
8 percent of all the schools in Orange County
9 Public.
10 And we have created a coalition of
11 parents. We teach them how to navigate a
12 school system and how they work with their
13 children and their educators to improve their
14 children's ability to do well in school.
15 Bank of America is truly a model
16 for other corporations in their social
17 responsibility. They have contributed to us
18 for over five years, and to help families in
19 need in Orange County. I am confident that
20 this acquisition will continue this tradition
21 for many years to come.
22 The United Way appreciates Bank of
284
1 America Employees Corporation and Foundation
2 for all their ongoing support. Thank you very
3 much for your attention.
4 DIRECTOR BRAUNSTEIN: Thank you
5 very much, and thank you to the panel.
6 MR. BIVENS: Where do we submit
7 this for the record at?
8 DIRECTOR BRAUNSTEIN: The desk
9 outside, or you can give it to that gentleman
10 in the glasses. He can take it. For the
11 record, Mr. Bivens spoke.
12 DIRECTOR BRAUNSTEIN: Than you all
13 for coming and just a few housekeeping notes.
14 We have a timekeeper right there who will
15 flash signs when you have two minutes left,
16 and when your time is up. You each have five
17 minutes for your statement and please begin
18 your statement by stating your name and
19 organization for the record. Thank you.
20 Ms. Vizinau.
21 MS. VIZINAU: Hi. My name is
22 Katrina Vizinau and I'm with Community Housing
285
1 Development Corporation in Richmond,
2 California, and we are an affordable housing
3 developer, and a HUD-approved home ownership
4 counseling agency. I work i the capacity of
5 a senior housing counselor, and I've been
6 working with clients who are having problems
7 with their mortgage, for many years now, and
8 since the beginning -- or the end of 2005,
9 beginning of 2006, we went from receiving like
10 three to five default calls a week to over 20
11 calls a week.
12 And it's been very discouraging,
13 these past few months, because we have clients
14 that call every day and they're saying I hear
15 in the news that we're going to get help. The
16 Federal Government says there's been, you
17 know, tons of dollars that are given to the
18 agencies, and now you're able to help us, or
19 they have these different programs, now we can
20 refinance, or we can do a loan modification.
21 And so we have, out of, say, five
22 clients, about four of them are Countrywide
286
1 borrowers, and what I came here today to say
2 is we've been working with Countrywide and I
3 commend them for trying to respond to the
4 thousands of requests that they're probably
5 getting.
6 And currently, the response has
7 not been very good. I know they have a
8 program. I'm here to ask Bank of America to
9 look at the program that they've tried to
10 implement. The concept is good, where they're
11 trying to work with the different counseling
12 agencies, and dedicating a loss mitigation
13 negotiator, so that the process can run
14 smoother.
15 However, in practicality, that has
16 not been the case. Much like the previous
17 home owners who we're talking about, they had
18 called the loss mitigation department and they
19 were transferred from one person to another.
20 That pretty much happens to the
21 housing counselors as well. Unless you have
22 a really active housing counselor, they're
287
1 pretty much going to get the same run-around.
2 It's only been because of my
3 relationships, or the relationships of other
4 counselors with individuals that can make
5 decisions, where decisions have been made to
6 help home owners reach a resolution, and so
7 I'm just here to encourage Bank of America and
8 Countrywide to look at that plan that they
9 have in place and to try and make it more
10 user-friendly.
11 Then I also want to focus on the
12 solution. We're looking for quality, not
13 quantity. We have a lot of -- you get a lot
14 of loan modifications being offered but
15 they're really not affordable, although they
16 say they are, and home owners are pressured
17 into taking these low modification because
18 they feel like if they don't, then they're
19 going to end up losing their homes.
20 The other area that I want to
21 focus on is when a home owner does -- and it's
22 no other choice but they are going into
288
1 foreclosure and losing their homes, then
2 they're being confronted by a local realtor
3 who knocks on their door and says, "you gotta
4 move, you gotta get out," and a lotta times
5 these are monolingual home owners and they
6 don't understand, and they're being told that
7 they have to get out in a couple of days.
8 There's a program, Cash For Keys,
9 relocation, and that needs to have some
10 oversight by the Countrywide, by the REO
11 Department and that's not being done, I don't
12 believe.
13 And lastly, I just want to say
14 that if you can also consider maybe a short-
15 term lease rent-back for home owners that need
16 time to prepare, to be able to move and find
17 a place to relocate to, a lot of times they
18 don't have the money that's necessary to move
19 out. They don't have first and last month's
20 rent, and the average move-out or rental right
21 now is around $2000 in the Contra Costa and
22 Alameida County area.
289
1 So I'm just asking you to please
2 consider the different programs that they
3 have, and tweak them and make them better for
4 the home owners.
5 DIRECTOR BRAUNSTEIN: Thank you
6 very much.
7 Ms. Guillory.
8 MS. GUILLORY: Yes. Hi. My name
9 is Gertrude Guillory and I come here today
10 from Oakland, California, and I too have, and
11 my husband as well, have a Countrywide
12 mortgage.
13 My experience with Countrywide has
14 not been very good. When I first received my
15 loan, which was -- they called it a "hybrid"
16 or a "band aid" loan, cause that's where we
17 qualified at, because I was present with
18 Countrywide but they put us in full spectrum,
19 cause they said they had programs, they could
20 help us.
21 So we get a loan officer that
22 works with us and I was "up front" of what I
290
1 needed. I told him I wanted a loan that I
2 could get out of within 24 months, which means
3 I didn't want any penalties, if I want to pay
4 early. I thought I made that very clear with
5 him.
6 He told me that the loan that we
7 were acquiring was a loan that was for credit,
8 mainly credit only. He said you keep your
9 credit up good, he said Ms. Guillory, you will
10 be able to refinance in 24 months. He did not
11 base this credit on the mortgage crisis or
12 anything with the housing, and I just kind of
13 threw a lot of "What ifs" with him. Well,
14 what if this happens? What if this happens?
15 Would I be able to still refinance?
16 He said you should concentrate on
17 paying your bills on time. Keep your credit
18 up. He said this, what this loan is about,
19 it's about a credit situation and not about a
20 housing situation.
21 So I took that into consideration.
22 We went ahead, we closed, and also the notary
291
1 public that came to my house as well, she was
2 really "up in arms" about it too. She says
3 don't worry about it. She says just pay your
4 bills on time, she says keep your bills
5 current, she says we'll be able to refinance
6 you in 24 months, which February 9th will be
7 24 months.
8 So in 2007, I received a letter
9 from Countrywide stating that they no longer
10 offered these subprime or "band aid" or RM
11 loans, and that I should call in to refinance,
12 and that I may qualify for a half percent off
13 my interest rate.
14 So I do such a thing, I called,
15 come to find out that I still have a little
16 low thing, but -- little low credit, but I'll
17 be able to refinance. Call us back in
18 October.
19 So I called back in October and
20 credit was great, but then it became a loan to
21 value, which then I knew I was sucking the
22 water right then. So I called back to the
292
1 Emoryville office, and I said, hey, I said,
2 when I talked to this gentleman, I said I
3 asked him specifically that I did not want a
4 loan that would hinder me from refinancing
5 early, and I says why didn't he tell me that,
6 up front? And she told me, she says, well, he
7 probably didn't tell you that because the
8 loan, it drops off in 24 months.
9 I'm like, well, that's not a good
10 thing, I says, because I would have not taken
11 this loan if I knew, we would a stopped it
12 right then. And I'm sure there was some
13 oversights, probably on my part.
14 But the thing that I'm trying to
15 go back to, that this gentleman was never
16 honest with me about the loan. He
17 specifically told me that this loan was a
18 thing of credit. He says repair your credit,
19 we will refinance you, without fail. And I
20 did repair my credit. I was not able to get
21 refinanced. I'm noticing now, that around the
22 neighborhoods, that we have a lot of homes
293
1 that are empty, and that it calls a -- for
2 your neighborhood. The neighborhoods are
3 going down, cause when you have vacant homes,
4 you have people that are crowding around those
5 homes. So I'm kind a concerned there, because
6 we don't, we don't have the value that we use
7 to have on our homes.
8 So if I'm to refinance, and my
9 neighborhood's going down, that's never going
10 to bring the value of my house back to the way
11 it is for me even to refinance.
12 So I have been in contact with
13 Countrywide ever since. I called them,
14 actually, I call them monthly cause I like to
15 know what's going on, if they're helping
16 people.
17 I did go through the Retention
18 Department because I was told about five or
19 six different things. I was told you start in
20 six months, you could -- the Retention
21 Department. Then another rep told me, no, you
22 start in four months. Then I had another rep,
294
1 from India, and that's what kind a raised my
2 question. She says, no, you could do it now.
3 So on February 22nd, I started that procedure.
4 But on February 27th, I received a
5 letter from Countrywide telling me that I was
6 too early and that I would have to wait.
7 So I get on the phone with them
8 and I call, I said okay, what is -- cause the
9 letter didn't really say what it's about. I
10 said what does this letter mean?
11 They says, well, you're not -- I
12 haven't defaulted yet. I says, so what are
13 you telling me? I have to default on my home
14 before you would help me?
15 I says I don't want to default on
16 my home. I don't want to be put outta my
17 home. This is our first home, for me and my
18 husband. I said I don't want to do that.
19 So we hung up and I called back
20 again, cause I'm hoping to get another person
21 that's going to tell me some good information,
22 because it seems like everyone who I speak to
295
1 at Countrywide also had a different story of
2 what you can do, when you can do this, and how
3 you can be helped.
4 So finally I did get an individual
5 that I thought was a little knowledgeable, and
6 they told me that in October of this year,
7 October 17th, that Countrywide would be
8 recalculating my interest rate, and that I
9 should wait till then, because then you
10 probably can get your interest frozen and at
11 a better rate, which in return would drop my
12 house note.
13 But then as I hear stories that
14 Countrywide is not even really doing that,
15 they're not helping people, they're not
16 actually returning phone calls to individuals.
17 So I'm saying back here, thinking okay, now
18 what to do? So really to make a long story
19 short, I don't feel that Countrywide was "up
20 front" with me. I did ask all the questions
21 that I thought I should ask of this company,
22 being that I was a home owner and wanted to
296
1 keep my home, but all the answers that I got
2 would be, you know, you're okay, that you'll
3 be okay, you'll be able to refinance, that
4 you'll be okay, just keep your credit up,
5 you'll be able to refinance.
6 But now that is actually not the
7 case. I could go on forever about my story
8 but I'm going to end it right here. But I
9 would like to say if there's anything that can
10 be done, I'm ready to do something today,
11 because I am in a situation where comes
12 February 9th, my loan is going to reset and I
13 won't be able to afford it.
14 Right now I'm fine, we're fine,
15 but August 09, we're not going to be fine. So
16 I'd like for some quick answers, I'd like some
17 real answers from Countrywide, and Bank of
18 America, who is going to acquire Countrywide,
19 on what they're going to do for people like
20 myself that are in this situation, that have
21 been -- and I'm going to say "lied to" about
22 what they can do, and this is not the
297
1 situation.
2 DIRECTOR BRAUNSTEIN: Thank you,
3 Ms. Guillory. We'll try to get somebody to
4 talk to you.
5 Ms. Clark.
6 MS. CLARK: Hello, everyone. My
7 name is Yolanda Clark and I'm president of
8 Multicultural Real Estate Alliance for Urban
9 Change, and I'm also president of Golden Path
10 Real Estate and Home Loans. The following
11 concerns me regarding the merger between
12 Countrywide and Bank of America.
13 The mortgage meltdown has created
14 a large redistribution of wealth. Minorities
15 and senior citizens were targeted at
16 disproportional rates for subprime loans, and
17 this has caused an even larger gap between
18 home owners and the home owner rate. Since
19 Countrywide has had such a large proportion of
20 these loans, we want to know -- what concerns
21 us is what will be their new policy, if the
22 merger goes through?
298
1 What will be the policy to handle
2 the people such as Ms. Guillory and the
3 Knowles, that were here earlier. How will
4 these people be affected, as well as what
5 procedures will be put in place. We think
6 that there should be a written policy, that
7 should have consequences, if not followed,
8 after the merger goes through, if it is
9 approved, for people to have workout programs
10 that are actually workout programs that make
11 sense.
12 As a housing counselor, we get a
13 lotta people from Countrywide who program --
14 who have come up with loss mitigation programs
15 that are actually worse than what they were
16 when they started. An example. If they have
17 an interest rate that is high, they take the
18 amount that was more and add that on to the
19 loan.
20 So if you have a loan payment of
21 $3,000, you're now looking at a payment to
22 repay back at 3500. So if you couldn't afford
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1 3000, how can you afford 3500? So we're very
2 concerned about having a written policy.
3 The second thing is the rebuilding
4 of wealth for those individuals who have
5 already lost their homes, and in the
6 communities that they live in. As Ms.
7 Guillory said earlier, you have so many people
8 that have blocks or communities that have
9 blocks of properties that are now vacant.
10 So what's going to be done for
11 those areas, to rebuild that area, so that the
12 home equity that's in those properties, or
13 that was in those properties are not further
14 deteriorating and further lost.
15 A second concern is the
16 individuals that are in that area, that are
17 working and living in that area. You have a
18 lot of people that are related to home -- to
19 the real estate industry, that have been laid
20 off, that have been, their jobs have been
21 outsourced, which again we've heard that a lot
22 of the mitigation has been outsourced to
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1 India.
2 So what are we doing, or what will
3 be done with the merger to prevent the
4 outsourcing? I feel that a certain amount, or
5 a percentage need a cap on the percentage of
6 outsourcing, if we allow any of that to go
7 through, as far as how many, how much of the
8 business that is now Bank of America and
9 Countrywide should be allowed to be
10 outsourced.
11 That's very important to keep
12 these communities stable and finding work.
13 The people that are working in those
14 industries, in those areas now, also, as i
15 said earlier, have been taken out of job
16 security.
17 So we're losing a lot of jobs in
18 that area. We're losing a lot of homes. So
19 with the merger, I think oversight and
20 regulation should be made to prevent further
21 deterioration and further loss of equity in
22 those areas.
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1 I'm in a very unique position to
2 be able to see both sides from a nonprofit,
3 because I hear people coming in with
4 counseling, and I also see the effect of the
5 businesses that are in the area, on how
6 they're leaving. So now it's not only a
7 situation with mortgage, people not being able
8 to pay their mortgages. It's all because of
9 the rates adjusting, but it's also because of
10 so much job loss in the area as well.
11 So we definitely need to see a
12 stabilization in the area in regards to Bank
13 of America/Countrywide merger, to make it a
14 stronger community for all those that are
15 involved in foreclosing, who actually have the
16 actual foreclosures, for those that are losing
17 work in that area. So realtors should be able
18 to see those properties in their area that
19 have been lost and it should not be
20 outsourced.
21 So those are a lot of the concerns
22 that we have in this area. Thank you.
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1 DIRECTOR BRAUNSTEIN: Thank you
2 very much.
3 Ms. Heard.
4 MS. HEARD: Thank you. Thank you
5 for inviting us to speak today.
6 I am Donette Heard. I am also
7 with the Multicultural Real Estate Alliance
8 for Urban Change. I am a housing counselor,
9 loss mitigation, and I also own my own
10 company, which is High Performance Realty.
11 I'm the broker.
12 I'm the type of person that gets
13 the phone calls. I'm the counselor, one of
14 the counselors, I get those phone calls, and
15 when we first started off getting the phone
16 calls, it was very few.
17 But what we found out, because
18 Multicultural has been around a long time, and
19 we are connected also with CRC, a member,
20 we've gone through a lot of fights, a lot of
21 negotiations, and dealing with the redlining
22 for insurance in our areas.
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1 Also, we work with Don't Borrow
2 Trouble, and you remember all the
3 advertisements, and made a lotta people aware
4 to watch out before you jump into something.
5 We also did a survey on the
6 predatory lenders that were really tapping in
7 on individuals, which kind a slowed that down
8 for a while till we forgot about it, but it
9 was still around.
10 We also had challenges after the
11 civil unrest. In our neighborhoods, the
12 appraisal values were kind a brought down on
13 our side, raised up on the other side. So
14 I've been in this fight a long time. When we
15 saw the idea of coming up, that you had -- you
16 didn't have to quality for a loan, or you
17 could get a 100 percent loan, I said, oh-oh,
18 something's getting ready to pop.
19 But I didn't see any
20 advertisements out there saying, "Hey, don't
21 borrow trouble." Now the ones that was really
22 getting off pretty good was the home owners,
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1 the first-time home buyers, because, see, we
2 had them in our classes, and we're telling
3 them what to watch out for. But we forgot to
4 tell the people that already had their houses
5 20 and 40 years, that don't borrow trouble,
6 because it wasn't advertised anymore.
7 So this is what's happening to
8 people that are 84 years young, living in
9 their places for 40 years. People that been
10 living in their places, like the Knowles, for
11 20 years, 15 years, finding out that they're
12 going to be on the street because we got
13 ambitious people that are out there, telling
14 them that oh, yes, you can get this loan,
15 market's going good, don't worry about it, we
16 can refinance you. And they're believing them
17 because they are the professionals.
18 I think the regulations and
19 everything else "went down the tube," because
20 everything was moving so far, and people
21 getting homes and making their dreams come
22 true, that we forgot to really regulate and
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1 see what was going on.
2 So where we're standing right now
3 is we're getting people that are losing their
4 places and trying to figure out now what are
5 we going to do with these people that are out
6 there on the street, that they have no place
7 to go? So what about if the solution is if
8 they can't afford to pay the house but they
9 can't afford to pay a lease, maybe we better
10 think about leasing back to them until we
11 figure out what we're going to do with all
12 these empty houses. That's one thing.
13 And if we merge with Bank of
14 America, are they going to kick us to the
15 curb, or are they going to give us a situation
16 to let us know -- when they call us, what is
17 Bank of America going to do? We can at least
18 tell them something.
19 So today I stand before you, I
20 guess I'm just kind of off on the run of
21 things, but we do have a challenge ahead of us
22 because there's renters calling on the phone,
306
1 and they're saying to me, I've got my children
2 with me, I'm on the corner, where do I go?
3 You're the counselor in my area. And if I
4 tell them go call Housing Authority, they say
5 they don't have any rooms. So they have to go
6 to the shelter.
7 It's ugly out here, and it's going
8 to get uglier, unless we come up with a
9 solution to help these people. Thank you very
10 much.
11 DIRECTOR BRAUNSTEIN: Thank you
12 very much. Thanks to the panel.
13 Okay. All right. Welcome to the
14 panel and just a few housekeeping measures.
15 We have a timekeeper that will signal you when
16 you have two minutes left, and then, when your
17 time is up. You have five minutes for your
18 statements and we would ask that you begin
19 your statements by stating your name and your
20 organization, so we can get it on the record.
21 Okay. We'll start with Ms.
22 Reynolds.
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1 MS. REYNOLDS: Good afternoon. I
2 am Sue Reynolds. I'm the president and chief
3 executive officer of Community Housing Works.
4 We're San Diego County's most comprehensive
5 nonprofit housing organization. We've
6 developed 30 affordable renting housing
7 complexes. We help hundreds of home owners
8 every year get into their first home, and we
9 provide all these residents with the kind of
10 training and support that lets them use this
11 housing to bust the cycle of poverty and
12 racism, and actually build assets.
13 As a HUD-certified housing
14 counseling agency and a member of
15 NeighborhoodWorks, we've also been a key
16 leader of the foreclosure prevention and
17 counseling efforts in San Diego. So we sit on
18 a lot of sides of this story.
19 We're tickled that the "mortgage
20 might" of Countrywide could be brought back
21 inside the bank regulatory structure that
22 produced stable home ownership for over 60
308
1 years, and we believe as a purchaser, Bank of
2 America has some key community strengths.
3 Community HousingWorks has seen some of the
4 best that Bank of America does as an
5 affirmative community partner, and we'll talk
6 about that first. But we're also clear that
7 approval of this acquisition has to be linked
8 to some key commitments by the bank, because
9 of the challenges that are faced in our
10 current mortgage environment.
11 The community strengths we've
12 witnessed in Bank of America, over time,
13 include an extremely strong commitment to
14 first-time home buyer programs. They've been
15 a standout leader in working with our
16 organization and our down payment loans, to
17 serve first-time home buyers who otherwise
18 wouldn't be served, mostly people of color,
19 and their grant support has been substantive
20 and consistent over many years. It's helped
21 our homeless parents recover their kids, our
22 kids overcome their schools and get to
309
1 college, our community leaders do rebuilding
2 projects in their neighborhoods, and there's
3 strategic grant and pathbreaking philanthropic
4 effort, Neighborhood Excellence, which we're
5 a proud participant in, really invest
6 significant dollars and training in a way that
7 can change organizations. Those are all very
8 proud accomplishments over a good many years.
9 But the acquisition of Countrywide
10 still presents some key challenges that really
11 need focus by both the bank and the
12 regulators, and we organize our concerns about
13 that into a couple of key principles, one of
14 which is the old doctor's maxim, first, do no
15 harm.
16 The delinquent Countrywide
17 borrowers need, and we, in the community, need
18 a clear, specific plan of how the bank is
19 going to address their needs with measurable
20 results before the purchase of this
21 institution is completed, and those standards
22 are those that we talk about in foreclosure
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1 prevention, and all the way up and down the
2 line. Maximizing feasible loan modifications
3 with the fixed rate mortgages that the
4 borrower can actually afford.
5 Protecting consumer credit is a
6 second principle, where foreclosure appears to
7 be the only necessary option, look for short
8 sale, and deed-in-lieu options, so that
9 consumers have their credit protected and
10 aren't made homeless by the credit assault of
11 a foreclosure.
12 More generally, don't increase
13 homelessness. We need standard practices for
14 notice and protections for the tenants and the
15 owners in homes that do become foreclosed.
16 And finally, just procedurally,
17 and I know the bank's focused on this, but we
18 need everyone to set standards for it -- don't
19 drop the ball. In our foreclosure prevention
20 work, Countrywide has been at least
21 accessible, and more likely to respond
22 positively after we persist, than many other
311
1 servicers.
2 In other recent acquisitions we
3 have seen feasible loan modifications lost in
4 the chaos. At the scale of Countrywide's
5 holdings, that would certainly be a disaster
6 and needs to be protected against in a very
7 affirmative fashion.
8 The second general area is using
9 Bank of America's key position as a leader in
10 mortgage-backed securities, and soon to be the
11 largest mortgage lender, to use this unique
12 combination to uniquely lead, to set higher
13 standards for the kinds of loans it will
14 securitize, and higher standards for the way
15 it authorizes loan modifications on the loans
16 within its existing securities.
17 And finally, speaking to our
18 multifamily affordable housing developer side,
19 we miss Bank of America. Under the prior bank
20 structure, they were actually key lenders in
21 some of our hardest projects. They took good,
22 considered risks that made award-winning
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1 projects that served our Somali refugee
2 community, our farm worker communities. Their
3 products have not been competitive in that
4 market for a number of years and we'd like
5 them back.
6 In closing, this is a unique
7 opportunity. The bank's acquisition can be a
8 historic accomplishment. If our regulatory
9 structure and the bank focus us on these key
10 principles, we think mortgages within the
11 banking system have been more sound, precisely
12 because of regulatory leadership that the Fed
13 holds, and we urge you all to use that power
14 well. Thank you.
15 DIRECTOR BRAUNSTEIN: Thank you
16 very much.
17 Ms. Watson.
18 MS. WATSON: My name is Lisa
19 Watson. I'm the executive director of the
20 Downtown Women's Center, and I'm here to speak
21 in favor of Bank of America's purchase of
22 Countrywide.
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1 The Downtown Women's Center is a
2 nonprofit agency serving about 2000 homeless
3 women a year, just down the street, here, in
4 Los Angeles, in the area that's referred to as
5 "skid row."
6 DWC offers direct services such as
7 meals, showers, preemployment training, and
8 permanent support of housing to homeless women
9 that are elderly and suffer from mental or
10 physical illness.
11 Bank of America has been a
12 community partner of Downtown Women's Center
13 over the last seven years, and they have been
14 active in our community, not only in our
15 community but in the community of "skid row."
16 Not only are they offering
17 construction loans at a lower rate than other
18 traditional funders, but have provided
19 volunteers who offer their expertise on our
20 board of directors and directly in our
21 programs.
22 Bank of America has donated over
314
1 $500,000 over the last seven years, and this
2 last year with its Neighborhood Excellence
3 Award, Downtown Women's Center was not only
4 offered professional training but $200,000
5 that was key in helping us to increase our
6 services by developing a new site that will
7 allow us to double our services and nearly
8 double our housing capacity.
9 We are honored to have most of the
10 major banks in downtown LA, as well as many
11 corporations represented on our board of
12 directors, and they have all been major
13 supporters for a long time for our agency.
14 But no corporation has donated and
15 shared their expertise to the same level as
16 Bank of America.
17 We are hoping that with this, the
18 acquisition of Countrywide, that Bank of
19 America, this merger will help in homeless
20 prevention, as especially with women and
21 children being our fastest-growing segment of
22 the homeless population. We would like this
315
1 to continue, to increase, and we believe that
2 the good work that Bank of America is
3 currently doing will truly assist individuals
4 that have been victims of predatory lenders.
5 Thank you so much.
6 DIRECTOR BRAUNSTEIN: Thank you
7 very much.
8 Ms. Lee.
9 MS. LEE: Good afternoon. My name
10 is Sandra Korison Lee and I'm here
11 representing Aim High. We are an educational
12 nonprofit based out of San Francisco. I'm
13 here to read remarks prepared by Alec Lee, our
14 executive director of the nonprofit.
15 Aim High is in support of Bank of
16 America's application recently filed with the
17 Federal Reserve to acquire Countrywide
18 Financial.
19 As a California 1-0 -- 1-0, 501.3
20 nonprofit organization and the recent
21 recipient of a Bank of America neighborhood
22 excellence award, we feel we are well-
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1 positioned to provide insight and a unique
2 perspective on the bank relationships with our
3 community. Bank of America has been a long-
4 standing and trusted partner, providing
5 funding and guidance for the Aim High
6 organization in our multicampus Bay Area
7 summer program.
8 Due to the ongoing support Aim
9 High has received from Bank of America, our
10 summer program has grown from seven campuses
11 to twelve, and the number of students has
12 doubled from 500 to one thousand. They have
13 been leaders in the industry for several years
14 in regards to nonprofit community development,
15 quality growth and sustainability.
16 Their work in the nonprofit
17 community is unique and inspiring. Four years
18 ago, Bank of America launched its neighborhood
19 excellence initiative, a national nonprofit
20 support and development program that is truly
21 one of a kind.
22 Each year, eighty nonprofits are
317
1 chosen from thousands of applications to
2 receive the neighborhood builder's award. The
3 award consists of a $200,000 grant and
4 extensive professional development workshops
5 for the two senior staff of the recipients.
6 Aim High received the award in
7 2007 and the executive director and associate
8 director of Aim High participated in a series
9 of workshops for senior leadership.
10 This was a remarkable and highly-
11 valuable experience, and the impact on our
12 organization has been substantial.
13 There is no other institution in
14 the country that is doing what Bank of America
15 is doing to sustain and develop the nonprofit
16 community. We are hopeful that the Federal
17 Reserve will see the benefit of this
18 acquisition and will allow a smooth transition
19 that all consumers can benefit from. Thank
20 you for your time.
21 DIRECTOR BRAUNSTEIN: Thank you
22 very much.
318
1 Ms. Mount.
2 MS. MOUNT: Jeanne Mount. I'm not
3 going to use polite euphemisms like these
4 other people have been doing. Since the
5 subprime mess, I've learned exactly at what
6 point the Federal Reserve will wake up and
7 start thinking that something may be quite
8 awry out there in the vast reaches of the
9 financial system. It's when one of the Wall
10 Street brokerages loses a minimum of $3
11 billion.
12 It's quite amazing to me, that all
13 the regulators can watch the four top
14 management persons at Countrywide, in
15 apparently concerted action, sell three or 400
16 million of their company's stock, and not
17 realize that something, some kind of "hanky-
18 panky" was going on.
19 It makes one wonder exactly how
20 that three or 400 million was being divvied
21 up.
22 Countrywide had a former Federal
319
1 Reserve bank president on its board. What was
2 he doing when their employees were forging
3 people's signatures on fake loan documents as
4 they did with mine? I'm not opposed to Bank
5 of America's acquisition but I am opposed to
6 their taking any of Countrywide's management
7 with them in it.
8 Countrywide had a sleazy,
9 predatory business model in place, and that
10 model could only have been put in place by
11 sleazy predatory management.
12 If any members of the existing
13 Countrywide management go to Bank of America,
14 their attitudes will spread like a virus
15 through Bank of America. Bank of America will
16 not be able to lift them up. They will drag
17 Bank of America down.
18 I have personally experienced the
19 attitudes and business practices that brought
20 Countrywide down, and I know whereof I speak.
21 I can't even hear their name without wanting
22 to throw up.
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1 I would suggest to the Federal
2 Reserve, and all the other regulators, that
3 they force banks and all other lending
4 institutions to adopt a Google's model, which
5 is "Do no evil." Everybody who works at any
6 lending institution should have a copy of it
7 on their desk. Google has done very well
8 using such a model, and the lending
9 institutions desperately need some kind of
10 decent talisman by which to do business other
11 than their own inclinations.
12 DIRECTOR BRAUNSTEIN: Thank you
13 very much, and thank you to the panel.
14 Okay. Welcome to the panel and
15 just a few housekeeping notes. We have
16 timekeeper right there who will flash you
17 signs. You have five minutes for your
18 statement, flash a sign when you have two
19 minutes left, and then when your time is up.
20 And we would ask that you begin each statement
21 by stating your name and your organization so
22 that we can get it on the record.
321
1 And we'll start with you, Ms.
2 Bliesner.
3 MR. BLIESNER: My name is Jim
4 Bliesner. I'm the director of the San Diego
5 City County Readjustment Task Force, and we're
6 directed by the city council and the county
7 board to monitor lending practices and develop
8 strategies for reinvestment in the San Diego
9 region.
10 We've fulfilled this function
11 since 1977, and has an excellent record of
12 success in creating and maintaining a solid
13 reinvestment infrastructure.
14 Its greatest success has been the
15 long and open communication that's maintained
16 between the community government and the
17 lending community.
18 In interest of full disclosure,
19 the Bank of America sits on the reinvestment
20 task force and does not agree with the
21 statements I'm going to make.
22 No funds from the bank are used
322
1 for RTF funding or its primary functions.
2 The RTF has raised concerns to the
3 Federal Reserve Bank regarding the subprime
4 lending by Countrywide over the past five
5 years. We've monitored the locations of the
6 loans and the resultant foreclosures.
7 Countrywide is a major lender of
8 ARMs throughout the region, about 20 percent.
9 In addition, we've analyzed the lending of
10 Bank of America using home mortgage disclosure
11 data.
12 In many instances, where the bank
13 does not lend, is where the ARMs are.
14 Particularly in middle income areas there's a
15 significant overlap. We have raised the
16 concern that the volume of lending between the
17 two institutions represents a significant
18 market presence in these communities, which in
19 our opinion should be mitigated.
20 We're concerned that the combined
21 bank will monopolize and make the market in
22 these neighborhoods, with possible negative
323
1 environmental impacts -- economic impacts.
2 We ask the Federal Reserve Bank to
3 be aware that the foreclosure environment in
4 San Diego is having a significant impact on
5 the economy as well as the quality of life in
6 some neighborhoods. Vacant properties cause
7 blight. The city attorney's vacant properties
8 division has provided me with some images of
9 properties that they have ticketed and asked
10 that they be boarded up.
11 As you can see, they require a
12 response from the owners. In recent months,
13 these owners are banks, and in many instances
14 it's Countrywide. It's the experience of the
15 city attorney's office that the responses of
16 the lender to request to board vacant
17 properties or repair them, are prolonged and
18 problematic, and have increased crime, in some
19 cases these homes becoming sites of -- in
20 three cases, of rape and significant drug
21 infestation.
22 In addition, the bank is absent
324
1 from loss mitigation efforts which are
2 provided on a regular basis throughout the
3 region. Of course an institution which
4 behaves like this needs to be bought and
5 reengineered to respond to consumer needs.
6 Hence, the B of A acquisition should remedy
7 this situation.
8 We're seeking assurances that that
9 will be the case. Countrywide is in court in
10 many states, and with many accusers of
11 misrepresentation and potential fraud.
12 I sit on grant-making committees
13 at United Way, the San Diego Foundation, who
14 have made significant grants for foreclosure
15 prevention. Reports from these foreclosure
16 assistance programs indicate that high numbers
17 of Countrywide customers need legal
18 assistance, not mitigation.
19 I want to acknowledge all the
20 wonderful agencies participating in these
21 hearings. The nonprofits do great work. They
22 are the front line against this becoming a
325
1 scourge in our urban environments. They're
2 "stopping the wolf" at the door and doing
3 amazing work with the leftovers of this
4 calamity.
5 Bank of America has provided many
6 grants. They're valuable. But providing
7 grants doesn't pay attention to the scale of
8 the problem. The remedies are related to loan
9 policies and practices. The remedies are
10 related to new products and new delivery
11 systems. We're not confident that the Bank of
12 America has the culture or the capacity or the
13 orientation to solving this problem in a
14 responsible way, without being told by the
15 Federal Reserve Board to do it, with very,
16 very clear delineation of the mitigation
17 options that are going to be required.
18 The bank has had an opportunity to
19 lend in our low-income communities for many,
20 many years. For some reason, the products and
21 their approach, or the location of the
22 branches, or the delivery system, or the
326
1 culture of the back doesn't allow them to "hit
2 the ground" in addressing this need.
3 For example, 26 percent of the
4 population in San Diego are Latinos. Most of
5 the borrowers for subprime loans were Latinos.
6 The Bank of America, at the height of the
7 lending crisis, made 187 home loans to
8 Hispanic borrowers in the whole San Diego
9 County.
10 They haven't exhibited a record of
11 understanding what the need is, and without
12 direction from the Federal Reserve Bank in
13 this crisis, we don't think that they will do
14 it. We need you to make the bank provide a
15 specific plan prior to granting the merger.
16 We appreciate very, very much the
17 gesture by the Federal Reserve Bank in holding
18 this hearing and we anxiously await your
19 conclusions.
20 DIRECTOR BRAUNSTEIN: Thank you
21 very much.
22 Ms. Berkland.
327
1 MS. BERKLAND: Hi. I'm Schahrzad
2 Berkland. I'm a real estate analyst with the
3 Berkland Group and a realtor. We got here
4 because the Fed ignored its mandate under the
5 Home Ownership Equity Protection Act, and
6 Congress allowed it. At this point a taxpayer
7 bailout is inevitable, so thus regulation is
8 definitely required.
9 Under this merger, the Fed must
10 require transparency, responsibility, and
11 leadership from Bank of America and from all
12 lenders.
13 House prices in California are
14 still in a bubble, and they are too high in
15 relation to income. This has lowered the
16 demand for housing which is leading to lower
17 prices and foreclosures. Foreclosures are a
18 result of falling prices. Falling prices are
19 inevitable but foreclosures don't have to be.
20 Yet banks seem to prefer foreclosures over
21 doing short sales or loan workouts.
22 We had a lot of people up here
328
1 talking about how banks don't want to do loan
2 workouts. Well, if you're trying to sell your
3 home to get out of a bad loan, and you have
4 negative equity, don't look for relief there
5 because banks are not approving short sales.
6 Out of 19,000 homes for sale on
7 the MLS in San Diego, 4500 are short sales and
8 only 2000 are bank-owned. However, 25 percent
9 of bank-owned homes sell each month. Less
10 than one percent of short sales sell.
11 This has to do with the pooling
12 and servicing agreements. But this is
13 something that must be changed. Banks prefer
14 foreclosures over short sales. This is a
15 problem that needs to be addressed.
16 This is not just a subprime
17 problem. We have multimillion dollar homes in
18 foreclosure but they're not making headlines
19 yet because they have seven and ten year
20 interest only and ARM rates.
21 So we're going to be seeing a
22 panel of people, rich people up here in
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1 another two years.
2 The bank merger must include a
3 plan. Countrywide management should return
4 their excessive compensation and put the money
5 into doing true servicing, and Bank of America
6 has an opportunity to transform this sloppy
7 lending and predatory lending and servicing,
8 and doing fair, responsible lending.
9 Specifically, this is what I think
10 they should do. We need transparency.
11 Lenders must talk to borrowers. No more games
12 and running around. Banks need to stop hiding
13 their losses. No more off balance sheet
14 investment accounts. Let's get rid of Level
15 3 assets.
16 Give data on workouts, loan
17 modifications and refis. Explain to people
18 why the PSAs prevent short sales and loan
19 modifications, and why foreclosures are
20 preferable to short sales.
21 We have 6000 bank-owned homes in
22 San Diego according to property tax records
330
1 but only two thousand for sale on the MLS.
2 Where are the other 4000 homes? Transparency.
3 Second. We need responsibility.
4 Banks need to be responsive to borrowers.
5 They need to do more short sales, workouts,
6 loan modifications, and enforce responsible
7 lending guidelines.
8 Third. We need leadership. We
9 need to replace payday lending with bank
10 branches in low- and moderate-income
11 communities. Bank of America has a $250
12 million credit line to payday lenders.
13 Instead, they should use this
14 money to open bank branches. Every loan
15 should be modified, regardless of loan to
16 value, into a 30 year fixed-rate loan.
17 Banks should follow NACA and CLL's
18 model for how to do subprime right. They have
19 less than a 5 percent default rate and they
20 have been doing the subprime lending for
21 decades.
22 You don't have to take advantage
331
1 of people to make money. They need to work
2 with community action groups to get foreclosed
3 homes into the hands of appropriate buyers,
4 and Bank of America needs to do a better job
5 in its direct lending program, because just as
6 hard as it is to get them to modify a loan at
7 Countrywide, it's very difficult, if you're a
8 buyer, to get a loan at Bank of America, and
9 I have a client about to lose his deposit
10 because Bank of America won't even return
11 phone calls.
12 So I'm very concerned about the
13 loss of competition with how they're handling
14 their direct lending. They're very
15 unresponsive. Thank you.
16 DIRECTOR BRAUNSTEIN: Thank you.
17 Mr. Jones.
18 MR. JONES: Thank you. My name is
19 Dean Jones. I'm the CEO of the Southland
20 Partnership Corporation. We're based in
21 Compton, California. I'm also representing
22 here today the National Black Business
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1 Council. I'm a board member.
2 And basically our position is that
3 the Bank of America acquisition should be
4 declined. It should be denied. I think the
5 Federal Reserve Board has an opportunity here
6 to put a stop to something that is considered
7 a growing oligopoly. We have seen it in so
8 many industries, and it's past time for us to
9 stand up and stop the madness of corporations
10 taking money straight from depositors, saving
11 that money, laying off employees to buy other
12 companies.
13 Bank of America has lost jobs
14 intentionally, 20,000 over the last ten years,
15 with all of their acquisitions -- LaSalle,
16 MBNA, and Fleet Boston. 20,000 jobs were
17 eliminated from their labor force in order for
18 them to have enough money to buy these
19 corporations.
20 Now what I am seeing in this
21 situation, particularly, is more of a
22 situation for them to clean up the reputation
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1 of the banking industry.
2 The financial industry, as it
3 stands, could have easily, in a good bank --
4 Bank of America, America's Bank of America
5 could have easily said these adjusted rate
6 mortgages are wrong. Now I have a degree in
7 accounting, it's old now, San Jose State,
8 1975, but when we went through accounting
9 classes, the adjusted rate mortgage definition
10 was this is an onerous commitment,
11 troublesome, burdensome. This is the worst
12 risky loan you could use.
13 So how could a good bank stand
14 idly by and not wave an American flag, and
15 say, Why is my industry allowing this
16 negligent lending to take place? I'm part of
17 the club, financial lending, so this is why
18 you have an opportunity to say "declined,
19 denied." Let's reverse the role because it
20 happens to us.
21 I'll give you a clear example. I
22 spoke to Kenneth Lewis two years ago, right
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1 here in Bunker Hill, and I gave him a specific
2 example. I'm located in Compton. There's a
3 branch in Compton. Prostitutes walk in front
4 of their bank, for years, years, and not one
5 manager of that bank decided that this does
6 not look good upon our bank. This is "the
7 tail wagging the dog," when you have a company
8 that is allowing this kind a decay in their
9 community. They say, well, I'm in Compton.
10 I guess this can happen.
11 This is not acceptable for any
12 sort of institution to think they could go
13 forward and buy another bank. Then I'll give
14 you another story that just happened this
15 week, and my grandmother, who lived to 103
16 years old, passed away in March.
17 I went and got her death
18 certificate to clean up her checking account
19 at a Bank of America branch that she had for
20 40 years, right there on Sierra Avenue. I'd
21 go into the bank. They'd say you have to come
22 in 40 days. That's when we'll take care of
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1 that situation for your grandmother's account.
2 You have to wait 40 days. I said fine.
3 So I go back at 40 days, and
4 checks have been written on her account.
5 Well, the lady's gone. The lady has gone. So
6 I said, well, let me see the copies of the
7 checks that have been written, and the bank
8 officer says this doesn't match the signature
9 card. Well, it was obvious. It wasn't even
10 an attempted forgery.
11 So he says if you want to do
12 something about it, you have to go to our
13 Fraud Department. I'm saying why should I go
14 to a Fraud Department? I should be going to
15 an Incompetency Department. Your bank can see
16 right here that the checks don't match the
17 signature card. That's incompetency. That's
18 not fraud.
19 Why would you have a bank with a
20 40 year member and not be able to entertain --
21 and it was an irregular amount of money on it.
22 Now while we're in the bank the
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1 first time, they should have said look, if
2 your grandmother's gone and this account
3 doesn't have someone that's active with it,
4 that's when they should have alerted the bank
5 to not have any activity on it. Why do they
6 wait like that?
7 And now I have more work to do, to
8 go through their Fraud Department, and they
9 even indicated if the phone asks for some
10 certain numbers just wait for the operator to
11 come on so you can get served. But I have to
12 do the -- I have to do my due diligence to
13 take care of the situation.
14 So with the lost jobs as -- the
15 National Black Business Council -- we want to
16 see a more responsive organization take care
17 of the communities that they're in. Mainly
18 jobs here, and you've heard that a lot of
19 things have been outsourced out of the
20 country, and contracting.
21 We don't have to worry about
22 funding mortgages. If people have sustainable
337
1 jobs and small business owners have access to
2 corporate contracts, the retail activity takes
3 care of itself. But some of these
4 corporations are not opening their doors for
5 access to contracts, and this is what the
6 National Black Business Council's all about.
7 So in closing, I'll leave you with
8 someone, one of your alumni. Andrew Bremer,
9 in the mid '80s, was on the board for Bank of
10 America, when Bank of America was in trouble.
11 Bank of America was on the verge of
12 bankruptcy.
13 Andrew Bremer, from the Federal
14 Reserve Board, took his well-deserved
15 information, a bank that he had created, the
16 Bank of Sudan, and he gave information to the
17 B of A people and turned that bank around.
18 And now they're taking advantage of some of
19 that Federal Reserve information from one of
20 your alumni, and now they're taking advantage
21 of all of these doleful acquisitions, and I
22 think the B of A tagline is going more from
338
1 Bank of America to Bank of Arrogance. I see
2 the A standing for more than just America.
3 So I'll close with that. Again I
4 thank you for your time. If there's any
5 questions, I'll send my written information
6 before I make it. Thank you.
7 DIRECTOR BRAUNSTEIN: Thank you
8 very much.
9 Mr. Sokhom.
10 MR. SOKHOM: Thank you and good
11 afternoon. Thank you for the opportunity to
12 come, be -- for everyone to make this
13 testimony. My name is Nomoch Sokhom. I'm the
14 direct of asset building for Pacific Asian
15 Consulting and Employment, otherwise known as
16 PACE.
17 We are a private nonprofit company
18 that helps people to improve their lives
19 through service such as getting training,
20 better job, housing, start up small business,
21 providing free schools. PACE started 31 years
22 ago and helps 30,000 families a year.
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1 We come here with one purpose, is
2 to bring to attention, to both the Federal
3 Reserve and Bank of America the need for
4 specific targeted program to address the
5 special impacts that mortgage foreclosure
6 crisis is having among the Asia Pacific
7 Islander community in the United States.
8 We know from the past experience
9 that API community is often overlooked. To
10 assure that the resource being directed at
11 this problem reach the API community, we are
12 requesting that specific commitment be made to
13 assure that outreach foreclosure assistance
14 and access to credit to Asian Pacific Islander
15 home owner and business owner.
16 It is only with such public and
17 on-the-record pledge that we can be assured
18 that API community is deliberately included in
19 receiving foreclosure assistance, and to
20 ensure that they will be able to continue to
21 be part of American Dream as home and business
22 owner.
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1 The Center For Responsible Lending
2 estimate that 20 percent of the high-cost
3 loan, $6.4 billion, is going into default, at
4 risk. These are going -- owned by the API
5 community, making it 22,000 API family that
6 are at risk. 27.2 billion or 18.9 percent in
7 high-cost loan are made to API, and since
8 Countrywide is one of the largest provider of
9 subprime and high costs, make Countrywide as
10 one of the provider to API community in
11 mortgage.
12 Now there are many report that API
13 is a model community or model family, but this
14 crisis is different. The Los Angeles Business
15 Journal, during the last few weeks, reported
16 eight out of 19 business bankruptcy belong to
17 the API community. That's 42 percent of
18 bankruptcy in Los Angeles.
19 In my role as a director of asset
20 building, I'm helping both promoting home
21 ownerships and also business ownerships.
22 We have experienced that 18
341
1 percent of the API home owner use their home
2 as collateral for small business. Maybe this
3 is not new but it is very substantial. Due to
4 the facts that because their business had no
5 credit, therefore they used their home, and
6 not able to build the business credit.
7 Now when the price of the home
8 getting reduced, they lose their line of
9 credit. I would want to also say that this is
10 not just a crisis. It should be considered as
11 a disaster.
12 After September 11, 2001, when LAX
13 was closed, federal building and street around
14 them also blockade, businesses that have the
15 revenue go down 30 percent qualify for a
16 disaster loan at the interest rate of 4
17 percent.
18 We have clients with Burger Chef
19 that have their revenue down by 50 percent.
20 Truck delivery owner choose to pack their
21 truck because every time they roll their truck
22 to deliver something, they would lose money.
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1 The home improvement contractor
2 having, laying off the handymen, two or three
3 of them. If this is not a disaster, what
4 would be a disaster? The founding father of
5 Bank of America, A.P. Gianni, was a banker of
6 the "little guy." Facing disaster, he pledged
7 his Bank of Italy, later became Bank of
8 America, as a savior of the community.
9 When the powerful 28 second
10 earthquake hit San Francisco downtown in 1906,
11 while other banks were closed amidst the ruins
12 of building collapse and on fire, Gianni was
13 the first to reopen his bank, lending so
14 people could rebuild.
15 We are now facing a disaster,
16 possibly greater than death of earthquake,
17 greatly ruining family home, business and
18 livelihood.
19 I wish to say that helping
20 community is the tradition of Bank of America,
21 a pioneer in community development, through
22 its neighbor, put excellent initiative,
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1 reaching 80 community annually in Los Angeles
2 and around the nation, with the most
3 unrestricted funding, and through America,
4 block by block, in Los Angeles and other city.
5 We appeal for a public commitment
6 by the Bank of America to reach a new height,
7 and take this crisis on as the opportunity to
8 save our community as the bank acquire and
9 intricate Countrywide Corporation.
10 DIRECTOR BRAUNSTEIN: Thank you
11 very much. Thank you to the panel.
12 Hi. Welcome, and just a few
13 housekeeping notes. We have a timekeeper that
14 will let you know when you have two minutes
15 left, and when your time is up. You have five
16 minutes for your statement and please begin
17 your statement by stating your name and your
18 organization, so we can get it on the record.
19 We'll start with Ms. White.
20 MS. WHITE: Thank you. My name is
21 Michelle White. I am the executive director
22 of Affordable Housing Services in Pasadena
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1 where Countrywide used to have its
2 headquarters. We are a development company
3 that does housing development for low- and no-
4 income individuals, and do both advocacy
5 around affordable and fair housing issues for
6 the same group.
7 We, like many of the speakers
8 today, are very happy at the prospect of
9 Countrywide being brought under the regulatory
10 cloak as a result of the merger, but we
11 believe that it should be conditioned upon a
12 number of things, and I will speak primarily
13 to a fair housing plan that I believe ought to
14 be put into effect to address the effects of
15 past discrimination.
16 While Bank of America's HMDA data
17 is about average, the Countrywide subprime
18 lending practices have had very devastating
19 effects on the basis of fair housing and fair
20 lending. They are individual community and
21 vendor oriented. There are a number of
22 ramifications, and we believe that a plan
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1 needs to be put into place before the merger
2 is agreed to, that will address all of those.
3 The statistics have been
4 forthcoming and we will submit written
5 documentation with regard to additional
6 statistics, but clearly, it is commonly known
7 that African American are twice as likely to
8 be included in the subprime lending mortgage
9 market for Countrywide's loans as white
10 purchasers. So the impacts are there, as well
11 as in the Asian American, as well as the
12 Latino communities, and the studies are also
13 available to show that many of those persons
14 who were included in subprime loans should
15 have been able to receive conventional prime
16 and fixed rate mortgages.
17 We do not have access to the
18 demographics, to show what the foreclosure
19 rate are, and whether there is a disparate
20 impact. But I consult with a number of fair
21 housing groups, and I can tell from the number
22 of people coming in, seeking counseling, that
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1 the anecdotal information is clearly that
2 there is a disparate impact on the basis of
3 race and ethnicity among those persons whose
4 houses are being foreclosed upon, or who were
5 in jeopardy of such.
6 I believe that it's equally true
7 with regard to those who've had prepayments
8 included as part of their terms and
9 conditions.
10 We believe also that the impacts
11 in communities have been well-documented.
12 There is a recent study by Jesus Hernandez, a
13 doctoral student in Sacramento, that depicts
14 exactly the correlation between the subprime
15 lending and the previous redlining and deep
16 restrictions, and other kinds of prohibited
17 practices under the Fair Housing Act.
18 This direct correlation also is
19 clear when we looked at the predatory lending
20 that was going on, and the targeted lending in
21 South Central of elderly African American and
22 Latino families.
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1 So we believe that any merger
2 ought to be conditioned on looking at a
3 stabilization of these communities, so that we
4 don't have empty houses with grocery carts and
5 other kinds of things in newly opened
6 communities. If you look at the Hernandez
7 study, he's got depictions of that.
8 We also are aware that in the
9 past, that African American vendors have not
10 had the same kind of access to the REO
11 listings, and that there needs to be an
12 addressing of that. If there is going to be
13 listings, that equal access needs to be given
14 to those persons who actually are working now
15 in those communities.
16 The Multicultural Alliance has
17 specific information with regard to that.
18 And then finally, with regard to
19 developers who rely so heavily upon tax
20 credits, as does our agency, this was a very,
21 very safe investment. Bank of America made
22 all kinds of investments in tax credits and
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1 now they are pulling out of that market, and
2 this is something that is going to
3 dramatically affect the ability of nonprofit
4 affordable housing developers do to their
5 work.
6 My time is up. Thank you.
7 DIRECTOR BRAUNSTEIN: Thank you
8 very much.
9 Mr. Fernandez.
10 MR. FERNANDEZ: Good afternoon.
11 Thank you for allowing me to speak today. I
12 am here on behalf of Alliance For Home Buyers
13 as well as my community in Buckeye, Arizona.
14 As a result of my community involvement as
15 president of our association, I felt this an
16 excellent opportunity to come and share with
17 the board just how devastating this is in
18 communities around the nation.
19 In 2006, Countrywide KB gave loans
20 to 96 home owners in my community, of which 64
21 of these loans had adjustable interest rates.
22 Of that, 53 of those loans had
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1 second mortgages as well, and we're finding
2 that they're now in a position where they are
3 facing foreclosure, and they're coming forward
4 every day.
5 The Maricopa County assessor's
6 office has reported that the value of these
7 homes have gone down, just in the last year,
8 $50,000, and some of them, over $100,000.
9 There are 311 homes in my
10 community and the average loss in value of
11 equity, according to county assessor's office,
12 is $78,000 per home. This means our community
13 has lost $24.3 million in equity over the last
14 12 months.
15 We're finding that this also
16 affects our community. As foreclosures are
17 taking place, the community also loses
18 revenue, i.e., assessments at $53 a month, and
19 maintaining the properties, because so far
20 what we're seeing is REOs, the properties
21 aren't being maintained.
22 Thus it gives us an undesirable
350
1 neighborhood effect. That results in $123 a
2 month times the potential 80 possible
3 foreclosures that our home owners are facing.
4 It's $11,000 a month. That would put the
5 association out of business.
6 We are presently in support of the
7 Bank of America acquisition. However, myself,
8 the Alliance For Home Buyers, and the
9 community home owners, must be assured that
10 there's going to be a remedy to help these
11 people keep their homes.
12 I'm a 35 year businessman. I've
13 looked at this every way I could. The only
14 thing that I could think that makes perfect
15 sense is whoever, if this acquisition takes
16 place, Bank of America or Countrywide, prior
17 to the execution of this acquisition we would
18 like to hear possible solutions, i.e.,
19 modifications, or converting these loans to
20 fixed interest rate loans, either 30 or 40
21 year, using the FICA scores when they
22 originally bought these subprime loans.
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1 I would further like to add that I
2 would request that the board here to watch
3 this closely, don't let this happen again.
4 This is devastation across the nation. I
5 would also state that the problems that I've
6 described here today are not limited to my
7 town in Buckeye, nor just limited to
8 Countrywide KB, or KB Homes.
9 What I'm finding here is that
10 Countrywide has relationships with other large
11 builders, such as Toll Brothers, NVR, Ryland
12 Homes, Beazer Homes. There's a clear conflict
13 of interest when the same builder that is
14 selling the home is also giving the home owner
15 the mortgage.
16 Bank of America should sever the
17 relationships that Countrywide has with the
18 home builders, if they're going to proceed
19 with this acquisition. Thank you.
20 DIRECTOR BRAUNSTEIN: Thank you
21 very much.
22 Mr. Evans.
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1 Mr. EVANS: My name is Charles
2 Evans. I'm from the Legal Aid Foundation of
3 Los Angeles. We're here because we believe
4 that the merger of Countrywide and Bank of
5 America should not be allowed to go through
6 unless there are certain precautions put in
7 place for the large number of borrowers that
8 are at risk of foreclosure.
9 As of March 31st, 2008, roughly
10 one in every 500 some odd households is in
11 some state of foreclosure across this country.
12 Foreclosures in 2007 were up 75
13 percent from 2006, and those numbers
14 themselves were increased over 50 percent from
15 the foreclosures the year before.
16 This epidemic of foreclosures is
17 highly relevant to this merger, because
18 Countrywide, as holder as one in five subprime
19 loans, and because subprime loans consist of
20 50 percent or more of the foreclosures that
21 happen every year, is a key factor in this
22 epidemic.
353
1 You've heard, over the course of
2 the day, and you'll probably continue to hear
3 tomorrow, of Countrywide's practices. The
4 deceitful practices. The misrepresentations.
5 Sometimes just looking the other way and
6 allowing these loans to go through.
7 These practices have not only
8 allowed the subprime loans that are in their
9 control to reach the foreclosure state that
10 they're in. They're also set the incredibly
11 low standard that permeates the subprime loan
12 industry, in general. Now Bank of America
13 wants to merge with Countrywide and gain
14 control of over one trillion dollars in loan
15 product.
16 If Bank of America wants to assume
17 this sort of position in the loan industry, it
18 needs to be prepared to accept the
19 responsibility that Countrywide has in this
20 current epidemic.
21 Unfortunately, Bank of America has
22 done little to inspire confidence in conduct
354
1 of its own business affairs to allow us to
2 trust it to do this without some sort of
3 outside obligation. This is the same Bank of
4 America that has leveraged its strong presence
5 in our communities to increase the costs of
6 banking with them, despite the attempts at
7 competition by other banks.
8 This is the same Bank of America
9 that has consistently empowered the subprime
10 loan market by being one of the biggest
11 packagers of subprime mortgage-based
12 securities, and doing so without questioning
13 the lending practices behind those loans.
14 When Bank of America acquires
15 Countrywide, if this merger is allowed to go
16 through, its own loan presence in the market,
17 combined with Countrywide's presence in both
18 the prime and subprime markets, will give it
19 an enormous edge over its competitors. It'll
20 have no real competition in the market.
21 When you combine that lack of
22 competition with its own business practices in
355
1 other banking areas, there's no reason to
2 believe that Bank of America will not maximize
3 its returns on its loans that it acquires
4 through its merger with Countrywide.
5 That mitigation is important
6 because as has already been mentioned,
7 foreclosures have far-reaching impacts in our
8 community. It's not simply a matter of
9 families being displaced from their homes.
10 These are families that have
11 difficulty working because of their
12 dislocation from their home. These are homes
13 that when vacant drive down property values
14 around them, attract crime to the
15 neighborhoods and cause blight.
16 What we need is a public and
17 enforceable commitment imposed on Bank of
18 America that will prevent these kinds of
19 unnecessary harms. These steps should
20 include, at the very least, three things.
21 First, Bank of America should
22 declare a temporary moratorium on all
356
1 foreclosures, so those households caught in
2 bad loans under Countrywide's policies can get
3 one last opportunity to work out their loans
4 before facing foreclosure.
5 Second. All adjustable rate loans
6 that it acquires from the merger should be
7 modified to fixed interest loans at reasonable
8 interest rates. Loan holders should receive
9 interest for the loans that they back but not
10 in any degree that prevents families from
11 repaying their loans without having to
12 refinance.
13 Finally, those households which
14 cannot afford their homes should be guaranteed
15 an opportunity to avoid foreclosure through
16 short sale or deeds-in-lieu of foreclosure,
17 without additional negative impact on the
18 borrower's credit.
19 These are the kinds of commitments
20 that we need from Bank of America.
21 Commitments which minimize the harm to
22 everyone involved and not simply those backing
357
1 the loans. We are in the midst of a
2 foreclosure crisis that afflicts not only
3 financial institutions but families and whole
4 communities nationwide.
5 If Countrywide merges with Bank of
6 America, Bank of America will be in a market
7 position sufficiently uncompetitive, that it
8 will not need to mitigate the harms caused by
9 the growing number of foreclosures.
10 We need a commitment from Bank of
11 America before this merger is final, that Bank
12 of America will take the steps necessary to
13 minimize the dislocation of families and the
14 increasing degradation of our neighborhoods.
15 Thank you.
16 DIRECTOR BRAUNSTEIN: Thank you
17 very much.
18 Ms. Gay.
19 MS. GAY: Thank you. Lori Gay,
20 Los Angeles Neighborhood Housing Services. I
21 want to say ditto to all of my panelists'
22 comments and I'll try not to be repetitive.
358
1 I'm intrigued that we're the day
2 before the civil unrest from 1992, and that
3 some of us view what's going on in this
4 country as just that. It's not only a civil
5 unrest but a disaster of economic proportions.
6 So I'm interested in kind of three
7 categories. Help and hope, people and
8 property, marketing and money.
9 Starting with the end, I think the
10 marketing and money got us to the crisis we're
11 in now, that B of A and both Countrywide have
12 to deal with.
13 We also represent the LA County
14 Center for Foreclosure Solutions, which is a
15 broad-based coalition of a number of
16 nonprofits, regulators, and others, who feel
17 that together, maybe we can make a difference.
18 I'm curious about how we get to
19 every 30 to 35 minutes in LA County, someone's
20 losing their home. When we started tracking
21 it, Ms. Braunstein, four years ago, you know,
22 it was very other day or so, there might be a
359
1 foreclosure.
2 So everything sped up. What can B
3 of A and Countrywide do if they come together?
4 I don't need to spend my time, frankly,
5 talking about supporting or not supporting.
6 I think a lot of these deals are made before
7 I get here to talk to you, frankly.
8 But what is of note is what the
9 bank can do as a new entity. Counseling
10 efforts that are happening nationwide to
11 prevent foreclosures were also happening to
12 encourage a bunch of families to get into
13 homes.
14 First-time buyers are down.
15 Losers are up. Six out of ten of the families
16 we counsel, both nationwide and in LA County,
17 are a no, can't help you cause we either don't
18 see modifications happening fast enough to
19 stop the inevitable, or people borrowed so
20 badly, that the gap is too big, two, 300,000
21 dollars, and we can't surpass that.
22 We held an event in conjunction
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1 with the governor's office and the FDIC on
2 Saturday. Nearly 400 families showed up to
3 get their loans modified. Most had two or
4 three loans, and so they had to get in line
5 three times to see their servicer. There were
6 16 servicers on site that day, and I think it
7 was great. Some of the partnerships are
8 starting to happen.
9 But the transparency is difficult,
10 and I know that the servicing industry, the
11 investor industry has not been in this
12 position before. What plans does B of A have
13 as a new entity to figure this stuff out?
14 We've heard we weren't in it as
15 the front-runner. Well, Countrywide was, and
16 whether it was anyone's intent or not, those
17 of us who've met the Countrywide team, I don't
18 generally have anything negative to say about
19 anybody. I think they've been stellar in
20 terms of their willingness to sit down. But
21 what more can be done?
22 And I think that's where most of
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1 us are arrested right now. What's the impact
2 on tenants who are displaced? I believe B of
3 A needs to set up an REO program that's very
4 aggressive. If we're saying no to six out of
5 ten, and so the numbers get better, now it's
6 four or five out of ten, how do they put in
7 patient capital that can be utilized by
8 nonprofits and others to make deals happen?
9 A relocation assistance fund would
10 be really nice out of somebody's check that's
11 going to be made on this merger. Families
12 need help and hope. So if they're going to
13 relocate anyway, how do we help them have
14 first and last, and security deposit?
15 Properties at discounts to nonprofits. Runs
16 about $100,000 a unit for a municipality to
17 deal with an abandoned property. So nobody
18 wins with that.
19 First-time buyers. What's the
20 product? B of A was an A paper lender.
21 Countrywide didn't mind lending to C paper and
22 D paper. Is it a B paper product? We gotta
362
1 figure that out. What are the subsidies? And
2 will the products include rehab. "Never
3 again" needs to be the language we use, not
4 only for preventing foreclosures but saying
5 that this merger'll be different than a bunch
6 of others we've seen in the past. I would
7 make sure this one is tight, beforehand and
8 after.
9 Regional sales managers of color.
10 I've heard from a bunch of folks at
11 Countrywide that there's already layoff talks,
12 not unusual. But looking at the platform of
13 where branches will be closed will be
14 critical. If there's overlap, so what? How
15 much does that really cost? Can we find out?
16 And will families of color have an opportunity
17 to stay?
18 Giving more money to communities
19 that surround those branches is critical. I
20 got a bunch of calls last week -- I'm not mad,
21 everyone was trying to make a pledge before
22 today, and I said to them, don't use our name
363
1 until the hearings are over. If I could get
2 approved that quickly by any lender in America
3 again, I tell you, it would be a great day.
4 And so we're looking at that, not
5 only for the families but our little
6 businesses that have to be run.
7 April 29th, 1992 was a significant
8 day in the history of Los Angeles and many
9 cities across the country. I believe we can
10 avoid it. Fail to plan; plan to fail.
11 I'd love to see us get the
12 planning done so we don't fail again. Thank
13 you.
14 DIRECTOR BRAUNSTEIN: Thank you
15 very much. Thank you to the entire plane.
16 Mr. Dial, it looks like you're all
17 alone.
18 MR. DIAL: I am alone.
19 DIRECTOR BRAUNSTEIN: Okay. I
20 don't know how long you've been here but you
21 know we have a timekeeper here. You have five
22 minutes. They will signal you, and please
364
1 start your statement with your name and
2 organization so we can get it on the record,
3 and with that, please begin.
4 MR. DIAL: Thank you very much.
5 My name is Taylor Dial. I'm the executive
6 director of the Housing Trust of Santa Clara
7 County, and since I'm the only panel member,
8 I thought I should have 20 minutes to speak.
9 DIRECTOR BRAUNSTEIN:
10 Unfortunately, it doesn't work that way.
11 MR. DIAL: The Housing Trust is a
12 501(c)(3) nonprofit organization whose mission
13 is to serve as a catalyst to develop
14 desperately-needed housing in Santa Clara
15 County, California. In that effort, one of
16 our programs is to provide zero and low
17 interest loans to first-time home buyers.
18 We do this through working with a
19 preapproved list of lenders in our community
20 who provide subordinate financing as part of
21 a lending package to low and moderate income
22 families. Bank of America is one of the banks
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1 that we've worked with.
2 Our lending experience with Bank
3 of America has been positive. The local
4 branches with whom we have worked have shown
5 a concern for providing lending packages that
6 are straightforward and affordable to the low-
7 and moderate-income home buyer.
8 We have not seen the use of
9 deceptive lending practices or the use of,
10 quote, subprime loan packages when these
11 lending agents have incorporated our product
12 into their loan packages.
13 We've also had positive
14 experiences in working with specific Bank of
15 America lending agents who promote below
16 market rate housing programs that are publicly
17 subsidized by our local jurisdictions.
18 We consider Bank of America to be
19 one of our most successful lending
20 partnerships when serving the low and moderate
21 income home buying community.
22 Regarding Bank of America's
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1 community development programs, the Housing
2 Trust is a recipient of Bank of America's
3 neighborhood excellence award, which
4 recognizes those community development
5 organizations that provide leadership in and
6 a significant impact on their community.
7 A panel of peer organizations that
8 also includes Bank of America representatives
9 chooses the recipients for that award.
10 That award consists of a $200,000
11 unrestricted grant to the winning
12 organization, us, and relatively extensive
13 executive level training program for the
14 leadership of the winning organizations.
15 My understanding is the bank's
16 invested over $60 million in that program over
17 the past three years.
18 As a recipient of this award, and
19 later as a member of a judging panel for
20 future recipients, I can attest to both the
21 high community value of such a program and to
22 the sincerity and high level of commitment by
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1 the bank to objectively contribute to the
2 community in a meaningful way.
3 By any measure, the dollars
4 invested in this program are meaningful and
5 those unrestricted dollars donated to
6 nonprofits are very meaningful.
7 However, the effort invested in
8 the executive training program is what
9 indicates how committed the bank is to
10 improving our community. I've yet to see
11 another giving program that positively impacts
12 a community benefit organization as well as
13 neighborhood excellence award program.
14 While the Housing Trust is not
15 qualified to submit an opinion on the efficacy
16 of the proposed acquisition of Countrywide
17 Financial Corporation by Bank of America, our
18 experience with the bank, and lending
19 practices, would indicate the likelihood of a
20 positive outcome would be high. Thank you.
21 DIRECTOR BRAUNSTEIN: Thank you
22 very much. With this, we have an open mike
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1 session. I don't know if anybody signed up.
2 Okay. And they can feel free to come forward.
3 Also, I would ask if -- I don't know if
4 there's anybody in the audience that is
5 scheduled to speak tomorrow but would like to
6 speak today. They can also feel free to do
7 so.
8 Could you please state your name
9 very clearly, so that we can get it on the
10 record when you begin your statement
11 MS. HALLEY: My name is Lucinda
12 Halley. H-a-l-l-e-y. I'm a private citizen.
13 I live in Whittier, California.
14 The purpose of these hearings is
15 to assess the record of performance of
16 Countrywide and Bank of America. We have
17 heard testimony supporting Bank of America's
18 charitable giving. We've also heard
19 disturbing testimony about its lending
20 practices.
21 We've heard that it took subprime
22 loans from lenders such as Ameriquest, and
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1 packaged those loans into securities, and sold
2 those securities around the world. We've
3 heard disgusting testimony about Countrywide's
4 lending practices, and that consumer support -
5 - I use that word ironically -- consumer
6 support after lending. It is certain, in my
7 mind, that Countrywide was a major player in
8 creating the current collapsed real estate
9 market through fraudulent loan practices that
10 I, as a private individual, can testify to.
11 Therefore, it is beyond my
12 understanding why Bank of America would take
13 the fox under its cloak by allowing David
14 Sambol to head the new mortgage business. I
15 would request that the Fed stipulate that no
16 executive from Countrywide be involved in the
17 ongoing Bank of America mortgage business.
18 Now as to the point that
19 Countrywide and Bank of America, among other
20 banks, I am certain, created the environment
21 that led to the real estate market collapse we
22 are facing today, I would like to expand just
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1 a little.
2 People who otherwise would not
3 have qualified to be in the market became
4 owners and investors over the past five or six
5 years. They did this through, A, artificially
6 low interest rates which I put at the Fed's
7 door; B, 100 percent lending practices, 80
8 percent conventional loan, 20 percent second
9 trustee.
10 Option ARMS with their attendant
11 negative amortization, and fraudulent loan
12 applications encouraged by the mortgage
13 brokers.
14 With so many people and so much
15 money chasing so few homes, the prices of
16 homes began to escalate. I, in my capacity as
17 a real estate broker, studied price increases
18 and the artificial escalation seems to have
19 begun in 2002.
20 Legitimate home owners purchased
21 in the meantime, not knowing that they were
22 buying into a rigged market. That rigged
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1 market has now entered the dump phase of a
2 huge "pump and dump" scheme. Home owners who
3 have continued to make payments and are
4 current on their loans suffer in this scheme,
5 because their homes have lost value and they
6 are upside-down in their equity, and they
7 cannot be refinanced due to loan-to-value
8 ratios.
9 In recognition of this fact, the
10 LA County tax assessor has begun to reassess
11 homes purchased in 2005 and 2006 for property
12 tax reductions, and I would suggest that Bank
13 of America do no less. I think that the
14 principal of all outstanding mortgages should
15 be reduced to the aforementioned 2002 levels.
16 I also think that fixed interest rates, when
17 they are beneficial to the consumer, they
18 should be offered to the consumer.
19 I also like the idea of a board of
20 consumer advocates, advising Bank of America,
21 and watching them, to make certain that they
22 fulfill the promises that they have made here
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1 today.
2 In conclusion, I would challenge
3 all Americans to begin to do a work-around the
4 banking and finance industry, and become
5 direct lenders to microentrepreneurs and other
6 creditworthy individuals, by way of nonprofits
7 with proven track records. I would also call
8 on the Fed to begin your own dissolution
9 because you have failed in your mandate to
10 provide economic stabilization. Thank you.
11 DIRECTOR BRAUNSTEIN: Thank you
12 very much.
13 Sir.
14 MR. KERRIGAN: Hello. I'm John
15 Cash. Sorry. I just had to say that. I even
16 "walked the line" with this speech as Johnny
17 would. I am with People's Self-Help Housing
18 and it's a nonprofit.
19 DIRECTOR BRAUNSTEIN: Sir, did you
20 actually state your name for the record.
21 MR. KERRIGAN: Sorry. My name is
22 Brian Kerrigan. My real name. I'm with
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1 People's Self-Help Housing, which is a
2 nonprofit counseling agency for people in
3 foreclosure, and first-time buyers, based in
4 San Luis Obispo. Okay. I drove down here.
5 I'm still trying to figure out the street
6 numbers. Am I right? But anyways, I wanted
7 to -- you know, I am actually forbidden from
8 giving you my company, an opinion or anything
9 like that, about the proposed merger.
10 So what I'm going to do in lieu of
11 that is just give you what I think is some
12 reasonable solutions to the kind of crisis
13 we've got going on right now. I've been in --
14 I've seen both sides. I was in the mortgage
15 industry for a couple years, so I was on the
16 sales side. Now I'm on the nonprofit,
17 thankfully, and I'm very happy about that.
18 It's working out a lot better for me.
19 So anyways, one of the things -- I
20 mean, one of the things I see as being the big
21 culprit is the option ARM, option adjustable
22 loans. I feel it's a niche loan that's not
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1 necessarily meant for everybody. It has a
2 minimum payment where you can be paying less
3 than the interest, and it becomes confused
4 somewheres along the process because it
5 doesn't get explained in full, is what I've
6 noticed.
7 So, you know, I was thinking, you
8 know, maybe empower the title companies to
9 explain it. Loan officers -- make more
10 regulation on loan officers and their managers
11 to explain the terms to customers, cause
12 really what we want is a customer that
13 understands all the terms of their mortgage,
14 and I think that, unfortunately, that's, you
15 know, sometimes what we don't see.
16 But, yeah, you know, just as a
17 general rule of thumb, I think that, you know,
18 loan officers could be regulated more, and
19 also, you know, the banks they work for.
20 I know that -- I worked for Chase
21 Home Finance, and they didn't really do many
22 option ARMs and they actually brokered out
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1 just a handful of them. As far as big banks
2 go, i believe they're probably the least
3 number of them, and they actually -- it ended
4 up meaning that they had less foreclosures
5 than the big banks.
6 So, you know, when you take loans
7 that are overly complicated, and you try to
8 "Mickey Mouse" people through the process, I
9 think that becomes a problem. So that's
10 pretty much all I have to say.
11 DIRECTOR BRAUNSTEIN: Thank you
12 both very much. Anyone else?
13 [No response]
14 DIRECTOR BRAUNSTEIN: If not, this
15 hearing is adjourned until tomorrow morning at
16 8:30.
17 (Whereupon, at 3:50 o'clock p.m.,
18 the hearing was adjourned, to reconvene the
19 following day at 8:30 o'clock a.m.)
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