Building Sustainable Homeownership:
Responsible Lending and Informed Consumer Choice
Federal Reserve Bank of San Francisco
101 Market Street, San Francisco, California 94105
June 16, 2006
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Pages 1-25 | 26-50 | 51-75 | 76-100 | 101-125 | 126-150 | 151-175 | 176-200 | 201-225 | 226-250 | 251-254
| Transcript | Line | Page |
|---|---|---|
| And I would ask that you please talk directly into | 1 | 226 |
| the microphone when you make your remarks for two reasons. | 2 | 226 |
| One is for our reporter, our court reporter, and the second | 3 | 226 |
| reason is because people apparently in the room are having a | 4 | 226 |
| hard time hearing folks unless they're directly into the mic. | 5 | 226 |
| You can start, yes, sir. | 6 | 226 |
| MR. SZEGO: My name is Peter Szego. I'm a volunteer | 7 | 226 |
| with AARP. I'll restrict my comments to two points. First | 8 | 226 |
| is the language issue which has been raised by several other | 9 | 226 |
| speakers. | 10 | 226 |
| I live in San Jose. The City of San Jose, jointly | 11 | 226 |
| with the County of Santa Clara, recently completed a | 12 | 226 |
| professionally-conducted needs assessment for seniors, a | 13 | 226 |
| senior needs assessment. Among other things, this showed | 14 | 226 |
| that 48 percent of the seniors in our area are not fluent in | 15 | 226 |
| English. | 16 | 226 |
| So I think this shows and we know from experience | 17 | 226 |
| that many of the problems that we've encountered with loans | 18 | 226 |
| have to do with language, at least in part have to do with | 19 | 226 |
| language, issues of communication. So I think it becomes | 20 | 226 |
| absolutely essential that not only the question of credit | 21 | 226 |
| instruments but particularly the counseling be conducted in a | 22 | 226 |
| language and cultural fashion to reach the people involved. | 23 | 226 |
| The second thing I want to mention is just sort of a | 24 | 226 |
| report on something. Our local area Agency on Aging, | 25 | 226 |
| together with the Housing Law Project, which was mentioned | 1 | 227 |
| here earlier by another speaker, and with AARP, have recently | 2 | 227 |
| obtained a grant from the Artstone Foundation, the purpose of | 3 | 227 |
| which is to work in our locale on predatory lending issues. | 4 | 227 |
| We're going to do that as a combination of counseling, | 5 | 227 |
| helping people that have gotten into difficulties, that | 6 | 227 |
| aspect of it, and some elements of education. So we're | 7 | 227 |
| hoping this will help our local situation. | 8 | 227 |
| Thank you. | 9 | 227 |
| MS. BRAUNSTEIN: Thank you very much. | 10 | 227 |
| MS. BLANCO: My name is Celia Blanco and I work at | 11 | 227 |
| Sentinel Fair Housing. Sentinel Fair Housing is a nonprofit | 12 | 227 |
| agency based in Oakland and we investigate and assist | 13 | 227 |
| consumers with complaints and other discrimination in | 14 | 227 |
| housing. And that includes discrimination in loans to | 15 | 227 |
| purchase or refinance a home. | 16 | 227 |
| We have recently started to operate with Carol and | 17 | 227 |
| others agencies in Oakland to investigate the complaints from | 18 | 227 |
| some client of other loans. Some of the complaint people | 19 | 227 |
| have made are feeling pressure to close the loan, loan terms, | 20 | 227 |
| or a type of loan that's different than what the lender had | 21 | 227 |
| initially put forth, receiving loan documents written in | 22 | 227 |
| English when the terms of the loan were discussed in another | 23 | 227 |
| language, for instance Spanish, loans with higher payments | 24 | 227 |
| than the borrower said that they could afford, and high | 25 | 227 |
| interest rates. | 1 | 228 |
| This year we hold two educational workshops in March | 2 | 228 |
| and April where we tried to explain to our clients problems | 3 | 228 |
| with predatory loans as well as their rights in connection | 4 | 228 |
| with the loans. All these loans were no document and income | 5 | 228 |
| stated loans, where the borrowers were not usually asked to | 6 | 228 |
| provide any income information or verification. | 7 | 228 |
| Of the borrowers we've seen so far, all are either | 8 | 228 |
| Spanish-speaking, Latino, or African-American homeowners who | 9 | 228 |
| used brokers. And it's important that these type of loan be | 10 | 228 |
| regulated and covered under federal law. And so written | 11 | 228 |
| disclosures in Spanish or the language they were discussed | 12 | 228 |
| would have made a difference. | 13 | 228 |
| That's all. | 14 | 228 |
| MS. BRAUNSTEIN: Thank you very much. | 15 | 228 |
| MR. DIAZ: Good afternoon. My name is Moses Diaz | 16 | 228 |
| and I'm a staff attorney at the Fair Housing Law Project of | 17 | 228 |
| the Law Foundation of Silicon Valley. And I thank you today | 18 | 228 |
| for the opportunity to give you my comments. | 19 | 228 |
| First of all, I'd like to state that I think HOEPA | 20 | 228 |
| is a great statute. The protections against certain | 21 | 228 |
| prepayment penalties, balloon payments, and asset based | 22 | 228 |
| lending for residential real property is great, but -- the | 23 | 228 |
| statute has a lot of potential but not a lot of teeth at this | 24 | 228 |
| point in time, and it's primarily because of the triggers. | 25 | 228 |
| In 2006 the trigger was either the greater of $528 | 1 | 229 |
| or eight percent of the loan. While the homes in the greater | 2 | 229 |
| Bay Area, eight percent of the loan is going -- is going to | 3 | 229 |
| be a lot of money. And what tends to happen is there's no | 4 | 229 |
| coverage. And yet we have some of the most vulnerable | 5 | 229 |
| borrowers here in this area. | 6 | 229 |
| One of the problems here, HOEPA applies to refinance | 7 | 229 |
| transactions. And what usually happens is when you | 8 | 229 |
| refinance, you refinance for a higher principal amount. And | 9 | 229 |
| the loan after the interest only period, the borrower -- | 10 | 229 |
| because typically the subprime loans are interest only loans. | 11 | 229 |
| After that interest only loan, the borrower has to start to | 12 | 229 |
| pay the principal. And usually they can't afford to pay both | 13 | 229 |
| interest and principal, so they have to refinance again and | 14 | 229 |
| it starts a vicious cycle. | 15 | 229 |
| Where does the cycle end? Who knows? But what are | 16 | 229 |
| the results? The ramifications are increase in inflation, | 17 | 229 |
| because every time they refinance every few years, it's going | 18 | 229 |
| to drive up the cost of the home. And every time they | 19 | 229 |
| refinance, the principal amount of the loan is going to go | 20 | 229 |
| up. | 21 | 229 |
| The borrower is never going to truly own their home. | 22 | 229 |
| They're always going to be refinancing before that interest | 23 | 229 |
| only period ends and they're never going to pay off the | 24 | 229 |
| principal. The principal is just going to keep increasing | 25 | 229 |
| and increasing and increasing. And they're really just a | 1 | 230 |
| glorified renter because, in the end, they're never going to | 2 | 230 |
| own that property. | 3 | 230 |
| I have a HUD1 here in my hand from one of the | 4 | 230 |
| transactions that I analyzed. And the origination fee was | 5 | 230 |
| five points, or $21,600, on a $432,000 loan. HOEPA couldn't | 6 | 230 |
| help this person here. So that's one of the greatest areas | 7 | 230 |
| where I think the Board of Governors can really make a | 8 | 230 |
| difference. | 9 | 230 |
| And we've heard a lot -- you've heard a lot of other | 10 | 230 |
| suggestions. And I also recommend that you increase the | 11 | 230 |
| limitation period from one year to two years as well. | 12 | 230 |
| Secondly, I just want to touch briefly on the | 13 | 230 |
| translation requirement because I have a lot of clients that | 14 | 230 |
| come into me with these kind of issues. And they never know | 15 | 230 |
| what the terms of the loan are. Even if the -- they don't -- | 16 | 230 |
| aside from the promissory note -- they don't even get the | 17 | 230 |
| disclosures in Spanish. | 18 | 230 |
| You only have to translate them one time and you can | 19 | 230 |
| use them over and over again. So it's not a big cost. And | 20 | 230 |
| the lending industry is always complaining about that. But | 21 | 230 |
| you know what? If you want their money, translate their | 22 | 230 |
| documents for them. | 23 | 230 |
| MS. BRAUNSTEIN: Thank you very much. | 24 | 230 |
| MR. DeRYAN: Good afternoon. Thanks for allowing me | 25 | 230 |
| to speak. Gerald DeRyan. I'm representing the over one | 1 | 231 |
| million AARP members and Nancy Pelosi and counselor's | 2 | 231 |
| district. And as you can see, there's a great interest in | 3 | 231 |
| AARP around here on what's happening. | 4 | 231 |
| I agree with what the gentleman just said, the same | 5 | 231 |
| thing. The HOEPA -- this idea of eight percent and what it | 6 | 231 |
| means around here and how it's just -- it just escalates | 7 | 231 |
| everything and they never get out of it. | 8 | 231 |
| But I watching C-Span just the other day and the | 9 | 231 |
| counselor from California and Los Angeles were complaining | 10 | 231 |
| that this present administration is telling them to -- | 11 | 231 |
| there's too many defaulted loans out there and sub loans. So | 12 | 231 |
| these ones that are making all the payments and they're | 13 | 231 |
| getting -- and eligible for new loans, they charge them extra | 14 | 231 |
| percents, which is the worst thing possible. | 15 | 231 |
| Here are these people that pay, don't default, and | 16 | 231 |
| you -- and to cover some of that over there, you're going to | 17 | 231 |
| charge these people more. And I thought that was | 18 | 231 |
| unbelievable. And that was right on C-Span. | 19 | 231 |
| But the problem with language, San Jose and L.A., | 20 | 231 |
| San Francisco alone has over 47 foreign language groups in | 21 | 231 |
| our public schools, 47. Just think of that. San Francisco | 22 | 231 |
| we have seniors. We have the Senior Action Network composed | 23 | 231 |
| of over 150 senior action groups in the city, of which AARP | 24 | 231 |
| is a member, and they're all focusing on these things and | 25 | 231 |
| this idea of the language and can't they understand it. | 1 | 232 |
| I'll give you one example, cell phones, which Public | 2 | 232 |
| Utilities Commission is trying to get a bill of rights on | 3 | 232 |
| that. They advertise full-page ads. And they look like | 4 | 232 |
| they're selling you pictures of music. And what is selling | 5 | 232 |
| you minutes? Way down there somewhere and you're paying $25 | 6 | 232 |
| and next month is 200 and on. | 7 | 232 |
| And then the people -- they're lobbying people to -- | 8 | 232 |
| they're not counselors. They're sellers and they're coaxing | 9 | 232 |
| them into getting all these things. But when they get the | 10 | 232 |
| bill, it is in English. They don't understand it. They | 11 | 232 |
| don't get the disclosure. Same thing. | 12 | 232 |
| So these problems are -- so keep -- keep these bills | 13 | 232 |
| up-to-date and listen to what the input is. Because I think | 14 | 232 |
| people are doing a good job, but we have to tighten these | 15 | 232 |
| things. Because -- we have to do it. And the low document | 16 | 232 |
| loans and sub loans, we have to help these people. They're | 17 | 232 |
| doing -- reward them. Don't put a further burden on it. | 18 | 232 |
| Thank you much very. | 19 | 232 |
| MS. BRAUNSTEIN: Thank you very much. | 20 | 232 |
| MS. BALDWIN: Good afternoon. My name is Laura | 21 | 232 |
| Baldwin. I'm with the Monterey County Housing Alliance. I'm | 22 | 232 |
| the executive director. We're located in Salinas, | 23 | 232 |
| California. And we're a housing -- we're the only | 24 | 232 |
| HUD-approved housing counseling agency on the central coast. | 25 | 232 |
| I'm here today to represent the needs of people who | 1 | 233 |
| have been victimized by predatory lending practices in | 2 | 233 |
| Monterey county, specifically predatory lending as it relates | 3 | 233 |
| to mortgages. Every day I see the destructive effects of | 4 | 233 |
| abusive mortgage loans and the clients that we serve in | 5 | 233 |
| Monterey county. | 6 | 233 |
| Mr. and Mrs. Sanchez came into my office with their | 7 | 233 |
| 16-year-old daughter several weeks ago. Their daughter had | 8 | 233 |
| translated the loan transaction for her parents, who do speak | 9 | 233 |
| English. They speak middle -- they have minimal speaking | 10 | 233 |
| skills and their primary language is Spanish. They were in | 11 | 233 |
| the -- they're in the low to moderate income levels. | 12 | 233 |
| And just to give you an idea of the characteristics | 13 | 233 |
| of the loan papers that I reviewed, they're first-time home | 14 | 233 |
| buyers. They purchased their home a couple of years ago. | 15 | 233 |
| There was a total of, believe it or not, 13 points associated | 16 | 233 |
| with this loan transaction, prepayment penalties that we | 17 | 233 |
| calculated to in the sum of $12,000. There was a mandatory | 18 | 233 |
| arbitration clause. There were also unnecessary insurance | 19 | 233 |
| products tacked onto the loan product, to the loan papers, in | 20 | 233 |
| excess of about $8,000. | 21 | 233 |
| On top of that, they were met with aggressive | 22 | 233 |
| tactics to sign their papers immediately. When the | 23 | 233 |
| disclosures were being discussed, they were asked only to go | 24 | 233 |
| ahead and initial the boxes and that it would be explained | 25 | 233 |
| later. They were promised copies of their loan payments to | 1 | 234 |
| which they still have not received a copy. | 2 | 234 |
| And upon further assessment of their loan papers, we | 3 | 234 |
| determined that they -- they have very good credit and were | 4 | 234 |
| steered into a subprime or B and C loan when they could have | 5 | 234 |
| qualified for a mainstream loan. | 6 | 234 |
| This is a family that -- where language and literacy | 7 | 234 |
| is an issue. This is a family where, yes, they do speak | 8 | 234 |
| English, but because the whole process of understanding loans | 9 | 234 |
| is very complex and basically understanding the glossary of | 10 | 234 |
| terms that are associated with the loan process is like | 11 | 234 |
| learning a brand-new language. Language and literacy. | 12 | 234 |
| In Salinas, California it's the least affordable | 13 | 234 |
| place to live in the nation. Why? Because it's highly | 14 | 234 |
| desirable to live there. It's a beautiful place to live. | 15 | 234 |
| Competition for homes is fierce. | 16 | 234 |
| And the reason I'm here today is to ask the board to | 17 | 234 |
| please help us level the playing field by creating | 18 | 234 |
| accountability, improved accountability standards, to please | 19 | 234 |
| strengthen the anti-predatory lending and consumer protection | 20 | 234 |
| laws that are in existence right now, and to also invest in | 21 | 234 |
| housing counseling agencies that can be your greatest partner | 22 | 234 |
| in making sure that not only are these predatory lenders | 23 | 234 |
| armed with the tools -- armed with the tools to be able to | 24 | 234 |
| continue in this practice but arm the consumers with the same | 25 | 234 |
| tools and education and knowledge so that they can avoid | 1 | 235 |
| becoming a victim of predatory lending. | 2 | 235 |
| Thank you much very. | 3 | 235 |
| MS. BRAUNSTEIN: Thank you much very. | 4 | 235 |
| MS. ORTON: My name is Eve Orton and I'm a member of | 5 | 235 |
| AARP and a number of other organizations that deal with | 6 | 235 |
| seniors. | 7 | 235 |
| And I would like to see SB 1609 submitted bill | 8 | 235 |
| passed because it has a number of things that will help | 9 | 235 |
| prevent some of the things we're talking about today. | 10 | 235 |
| It isn't -- the house that the person has as they | 11 | 235 |
| get older starts falling apart. My friend, her roof is | 12 | 235 |
| going. She needs a new car. So she's talking about a | 13 | 235 |
| reverse mortgage. | 14 | 235 |
| And I know there's a lot of different languages. In | 15 | 235 |
| fact, last count in San Jose was 84, the difference between | 16 | 235 |
| languages and dialects. So that's hard on the industry, | 17 | 235 |
| true. | 18 | 235 |
| But something should be made to happen to put it in | 19 | 235 |
| dollars and cents so that they know how much their loan is | 20 | 235 |
| going to cost, how much it's going to cost financing, so it's | 21 | 235 |
| actually they can see it. Most people understand, no matter | 22 | 235 |
| what language, if they see dollars and cents. And it should | 23 | 235 |
| be taken care of. | 24 | 235 |
| And they need time to think it over after so they | 25 | 235 |
| can take it home and there should be a demand that there's | 1 | 236 |
| enough time after that. | 2 | 236 |
| I think that's all. | 3 | 236 |
| MS. BRAUNSTEIN: Thank you very much. And thank you | 4 | 236 |
| to all our speakers. | 5 | 236 |
| The next group -- I just want to check. I had | 6 | 236 |
| called two names who didn't come forward before, if they're | 7 | 236 |
| here, Pearl Caldwell and Don Gerimonte. No? | 8 | 236 |
| Okay. We'll move on to the next group, Martha | 9 | 236 |
| Jimenez, Leticia Gonzalez and Gerardo Gonzalez, Caroline | 10 | 236 |
| Washington, Christy Leffall, J. Reyes Rios, Ricardo Corona, | 11 | 236 |
| Marna Schwartz. Let's see if that pretty much fills the | 12 | 236 |
| seats for now. | 13 | 236 |
| Okay. We'll get you the next group. We're not | 14 | 236 |
| going to forget you. | 15 | 236 |
| Okay. Same as before. I just want to remind people | 16 | 236 |
| you have three minutes. We have a timekeeper who will give | 17 | 236 |
| you a sign when you have one minute left and then when your | 18 | 236 |
| time is up. | 19 | 236 |
| And ask you to please speak directly into the | 20 | 236 |
| microphones for purposes of the court reporter, as well as so | 21 | 236 |
| everyone in the back of the room can hear you. | 22 | 236 |
| And with that we'll start, please. | 23 | 236 |
| MS. JIMENEZ: Hello. My name is Martha Jimenez and | 24 | 236 |
| I'm a resident of the Bay Area. And I am here as -- to share | 25 | 236 |
| my experience as a victim of predatory lending. | 1 | 237 |
| One year ago my sister and I decided to join | 2 | 237 |
| together to be able to buy a home. And we were referred by a | 3 | 237 |
| friend from our church to a Spanish-speaker broker. | 4 | 237 |
| We went to the broker, and in our first meeting with | 5 | 237 |
| the broker, he discouraged us to have me as part of the loan | 6 | 237 |
| on the basis that since they had a good credit score, which | 7 | 237 |
| was about 750, they were able to afford a good loan without | 8 | 237 |
| me. My credit score was a little bit more than 700. So | 9 | 237 |
| they -- they trusted the broker and they went forward with | 10 | 237 |
| the -- with a loan. | 11 | 237 |
| And all the communication that they had with the | 12 | 237 |
| broker was in Spanish. All the loan papers that they | 13 | 237 |
| received were in English. The broker discouraged us to -- or | 14 | 237 |
| discouraged me and them to -- or he was not willing to | 15 | 237 |
| communicate with me. Maybe because I asked too many | 16 | 237 |
| questions. And he was more willing to work with them because | 17 | 237 |
| they were the ones on the loan. | 18 | 237 |
| So after they signed the papers, I reviewed the | 19 | 237 |
| papers and I was shocked to discover the loan that they got, | 20 | 237 |
| which was very different from what he promised initially. | 21 | 237 |
| I took my sister and my brother-in-law to legal | 22 | 237 |
| counseling and housing counseling. And when we went to | 23 | 237 |
| counseling, we discovered that they had a loan with | 24 | 237 |
| adjustable rate of 6.8 percent with a two-year prepayment | 25 | 237 |
| penalty and a second home equity loan with an initial APR of | 1 | 238 |
| 7.26 percent that adjusts daily. | 2 | 238 |
| Through counseling we discovered that if I had been | 3 | 238 |
| part of the loan initially, they would have been eligible for | 4 | 238 |
| a better loan. | 5 | 238 |
| This experience shows the need for loan products | 6 | 238 |
| like this to be covered by federal law so that written | 7 | 238 |
| documents are in the language that the people understand and | 8 | 238 |
| that housing counseling be required before people sign this | 9 | 238 |
| kind of documents. | 10 | 238 |
| Thank you. | 11 | 238 |
| MS. BRAUNSTEIN: Thank you very much. | 12 | 238 |
| MS. MARCUS: Hello. My name is Maria Marcus. I | 13 | 238 |
| work here for the Federal Reserve Bank and I will translate | 14 | 238 |
| for Mr. and Mrs. Gonzalez. | 15 | 238 |
| MS. BRAUNSTEIN: Thank you. | 16 | 238 |
| MS. GONZALEZ: My name is Leticia Gonzalez. My | 17 | 238 |
| husband is Gerardo Gonzalez. | 18 | 238 |
| MS. MARCUS: Okay. They were interested in | 19 | 238 |
| purchasing a home. They were -- they talked to a broker who | 20 | 238 |
| was -- who helped them sell their previous home and look into | 21 | 238 |
| buying a new one. | 22 | 238 |
| They told the broker they had $123,000 to put down | 23 | 238 |
| as a down payment and they wanted their payments to be at | 24 | 238 |
| $2,700 a month. | 25 | 238 |
| The broker -- all of the conversations were done in | 1 | 239 |
| Spanish. All of the paperwork was in English. The loan -- | 2 | 239 |
| the monthly payment ended up at $4,700 a month, which was | 3 | 239 |
| more than the family could afford. | 4 | 239 |
| So initially the loan was an adjustable rate for two | 5 | 239 |
| years. The payments actually went up this last month for a | 6 | 239 |
| $1,000 because the loan that they did receive was adjustable | 7 | 239 |
| after six months. | 8 | 239 |
| Initially when they were discussing the terms of the | 9 | 239 |
| loan, the family said that they were only going to be able to | 10 | 239 |
| give the, you know, $2,700 payment. And this is when the | 11 | 239 |
| broker that they were dealing with said that she would | 12 | 239 |
| personally lend them $1,000 a month so they could make their | 13 | 239 |
| payment. | 14 | 239 |
| This went on for six months. And Mrs. Gonzalez has | 15 | 239 |
| proof of the check stubs that she deposited into her account | 16 | 239 |
| from this broker who was giving her monthly payments. | 17 | 239 |
| After six months, when the family talked to the | 18 | 239 |
| broker, letting them know that the terms of the loan had | 19 | 239 |
| changed and they weren't able to afford this anymore, the | 20 | 239 |
| broker cut off all communication with the family and they | 21 | 239 |
| haven't been able to get in contact with her since. | 22 | 239 |
| Her husband has, in fact, contacted the Gonzalezes | 23 | 239 |
| asking for the $6,000 that they have loaned them to pay | 24 | 239 |
| for -- you know, to help towards the mortgage. | 25 | 239 |
| So I think most of you understood that. They were | 1 | 240 |
| told that there was going to be no penalties if they wanted | 2 | 240 |
| to refinance. However, when they started the refinancing | 3 | 240 |
| process, they had a $16,000 penalty if they want to refinance | 4 | 240 |
| their home. | 5 | 240 |
| Currently they're paying the new -- it's almost | 6 | 240 |
| $5,000 that they have to pay monthly and it's something that | 7 | 240 |
| the family cannot afford. The Gonzalezes have eight children | 8 | 240 |
| at home, so that cost is well and beyond what they had | 9 | 240 |
| originally anticipated on paying monthly. | 10 | 240 |
| So the home insurance they're paying is $1,600 a | 11 | 240 |
| year for their home insurance. | 12 | 240 |
| All the paperwork were in English. And they just | 13 | 240 |
| feel, you know, that they were really betrayed by this person | 14 | 240 |
| whom they trusted and is a Latina as well. So all of the | 15 | 240 |
| conversations were conducted in Spanish. | 16 | 240 |
| So when they initially did all the paperwork, the | 17 | 240 |
| house was 584,000. A week later, when they were closing, it | 18 | 240 |
| was $604,000. | 19 | 240 |
| Thank you. | 20 | 240 |
| MS. BRAUNSTEIN: Thank you. | 21 | 240 |
| Just a question. Did you pursue this with legal | 22 | 240 |
| services or -- | 23 | 240 |
| MS. MARCUS: Acorn is the company that's | 24 | 240 |
| representing them. And I believe they have a meeting on | 25 | 240 |
| Monday with a lawyer. | 1 | 241 |
| MS. BRAUNSTEIN: Thank you very much. | 2 | 241 |
| And thank you, Maria. | 3 | 241 |
| Next speaker. | 4 | 241 |
| MS. WASHINGTON: Good afternoon. My name is | 5 | 241 |
| Caroline Washington and I am a client of the Acorn Housing. | 6 | 241 |
| I first wanted to refinance my house to lower my | 7 | 241 |
| payments. A couple befriended me from my church and said | 8 | 241 |
| they were mortgage brokers and they could help me. | 9 | 241 |
| In November of 2001, I refinanced my then mortgage | 10 | 241 |
| of 52,000 to a new loan of 152,000. I never received any | 11 | 241 |
| paperwork about the loan and these brokers didn't even give | 12 | 241 |
| me information about what happened. | 13 | 241 |
| In July of 2003, these same brokers convinced me to | 14 | 241 |
| refinance again and to take out some cash and lower my | 15 | 241 |
| payments. This time the loan was far -- this time the loan | 16 | 241 |
| was for $202,000. I only got a few thousand dollars from the | 17 | 241 |
| transaction to pay off a few credit debts. But my payments | 18 | 241 |
| were higher than -- were higher each month instead of lower. | 19 | 241 |
| During this loan transactions, the broker would come | 20 | 241 |
| into my home and take important loan documents away and they | 21 | 241 |
| never brought them back. | 22 | 241 |
| In May 2004, the same broker refinanced my house | 23 | 241 |
| with a new loan of $240,000. My new loan payments were | 24 | 241 |
| $1,678 per month, while my only income from retirement and | 25 | 241 |
| Social Security was $2,155. I could not afford this and I | 1 | 242 |
| began to fall behind on payments. | 2 | 242 |
| These brokers then suggested that I move to a | 3 | 242 |
| smaller place and sell my house to some people they knew. | 4 | 242 |
| Over the last year, I've had numerous calls from people who | 5 | 242 |
| say they can help me, really, just -- they just want to buy | 6 | 242 |
| my house from me. It's been hard for me to identify who was | 7 | 242 |
| trying to help me and who was trying to cheat me. | 8 | 242 |
| This past winter I was assigned a conservator and a | 9 | 242 |
| case worker from Adult Protective Services to help me sort | 10 | 242 |
| out financial problems. Unfortunately it was too late. Last | 11 | 242 |
| month my house was sold in a foreclosure sale, and after | 12 | 242 |
| living in my home for over 25 years, I'm facing eviction. | 13 | 242 |
| If I had had mortgage counseling before refinancing, | 14 | 242 |
| I could have avoided most of these problems. I just didn't | 15 | 242 |
| understand what I was getting into. | 16 | 242 |
| I really hope that laws will change to protect | 17 | 242 |
| homeowners, especially the elderly, because we need a lot | 18 | 242 |
| more help understanding the refinancing and mortgage of | 19 | 242 |
| loans. | 20 | 242 |
| Thank you for your time. | 21 | 242 |
| MS. BRAUNSTEIN: Thank you very much. | 22 | 242 |
| MR. CORONA: My name is Ricardo Corona. I'm a | 23 | 242 |
| counselor for MEDA, Mission Economic Development Agency. | 24 | 242 |
| And I work with Latino population. I can say that | 25 | 242 |
| 90 percent of my clients are Latinos and 40 or 50 percent of | 1 | 243 |
| my clients are just Spanish speakers. | 2 | 243 |
| I try to help them to buy their first home. This is | 3 | 243 |
| why -- in San Francisco. And lately I've been having a lot | 4 | 243 |
| of cases, a lot of calls from people who want me to help them | 5 | 243 |
| to have a -- help refinance their home or find a better loan | 6 | 243 |
| because they can't afford the monthly payment. | 7 | 243 |
| And I will say just three things that I find is the | 8 | 243 |
| most commonly -- that I find most common from my client. One | 9 | 243 |
| is the stated income loan. Many borrowers are loan based on | 10 | 243 |
| stated income loan, often inflated by the broker with no | 11 | 243 |
| documentation to show the borrower are able to afford the | 12 | 243 |
| loan. | 13 | 243 |
| Most of the time the broker tell the borrowers that | 14 | 243 |
| in order to help them to buy a home, he will make it up an | 15 | 243 |
| income that will allow the borrower to qualify for a higher | 16 | 243 |
| loan amount. The problem with this is that a borrower cannot | 17 | 243 |
| afford the loan that they qualify for. | 18 | 243 |
| For example, I had a client who her monthly gross | 19 | 243 |
| income is around $3,000 a month and was qualified by a lender | 20 | 243 |
| for a stated loan, without any documentation required, that | 21 | 243 |
| was based on a salary of $16,000 a month. The monthly | 22 | 243 |
| mortgage payment were more than 5,000 or more. So she can't | 23 | 243 |
| really stay at home. We tried to help with selling the home, | 24 | 243 |
| but he is -- there is nothing at this point. | 25 | 243 |
| Reasonable high interest rate loan are often offered | 1 | 244 |
| with what seem to be a reasonable interest rate. However, if | 2 | 244 |
| the loan was fully examined, one would find that the | 3 | 244 |
| difference between an interest rate and the actual annual | 4 | 244 |
| percent rate, APR, is substantial and ultimately means that | 5 | 244 |
| the loan is very expensive and predatory. | 6 | 244 |
| Again, I have a client who requested to have a six | 7 | 244 |
| percent interest rate, but the broker never ever said to her | 8 | 244 |
| that APR was 10.50 percent, which means it's a very high-cost | 9 | 244 |
| loan. She's unable to make the monthly payment now. And she | 10 | 244 |
| has been in that new home for two months. And it's not -- no | 11 | 244 |
| longer able to pay that amount of money. | 12 | 244 |
| And the other thing that is very common is they | 13 | 244 |
| never ever explain their document. Broker were great at | 14 | 244 |
| trust with the potential borrowers. This mean that the | 15 | 244 |
| borrowers are dependent on the information that the lender | 16 | 244 |
| provides, in particular not English speaker. Borrower rely | 17 | 244 |
| on their mortgage lender to help them understand the loan | 18 | 244 |
| documents. | 19 | 244 |
| Predatory lenders encourage borrower to sign | 20 | 244 |
| document without truly understanding all of the information. | 21 | 244 |
| They may direct buyer to sign here and there, instructing | 22 | 244 |
| their client that this paperwork is merely procedural. | 23 | 244 |
| If the communication for non-English speaker | 24 | 244 |
| occurred in native language, the document are always still | 25 | 244 |
| written in English and, therefore, there's limited English, | 1 | 245 |
| borrower can easily sign document without a full | 2 | 245 |
| understanding of their contents. | 3 | 245 |
| Thanks. | 4 | 245 |
| MS. BRAUNSTEIN: Thank you much very. | 5 | 245 |
| MS. SCHWARTZ: Hello. My name is Marna Schwartz and | 6 | 245 |
| I also work at MEDA, Mission Economic Development Agency. I | 7 | 245 |
| coordinate the homeownership program. We also help to | 8 | 245 |
| coordinate an anti-predatory lending committee and a campaign | 9 | 245 |
| around that. And I would like to share with you a couple of | 10 | 245 |
| concerns with regard to pre-purchase predatory lending. | 11 | 245 |
| In particular, there's a lot of concern about the | 12 | 245 |
| adjusted rate mortgages, the ARMs right now, because we see | 13 | 245 |
| many potential buyers getting into dangerous loan situations | 14 | 245 |
| since there's been a visible increase in adjustable rate | 15 | 245 |
| mortgages and interest only and 100 percent financing loans. | 16 | 245 |
| These loans can be perilous for first-time home buyers if | 17 | 245 |
| buyers are not fully versed in the consequences of market | 18 | 245 |
| fluctuations. | 19 | 245 |
| In particular, we have seen buyers get into adjusted | 20 | 245 |
| rate mortgages whose interest rates and ultimate monthly | 21 | 245 |
| mortgage payments are quick to float above the new buyer's | 22 | 245 |
| ability to pay. Consequently, the buyers become at risk of | 23 | 245 |
| losing their newly bought homes as they get further behind in | 24 | 245 |
| their payments, moving from default ultimately to | 25 | 245 |
| foreclosure. | 1 | 246 |
| Also, because we live in such a high-cost area, | 2 | 246 |
| there's additional concerns that are very specific to this | 3 | 246 |
| Bay Area. So buyers in the San Francisco and the Bay Area | 4 | 246 |
| are interested -- are at increased risk for predatory loans | 5 | 246 |
| because they become desperate to qualify for loans that would | 6 | 246 |
| afford them homes in such a high-priced area. | 7 | 246 |
| I want to give you an example of what that may look | 8 | 246 |
| like. The median sales price here in San Francisco is | 9 | 246 |
| $750,000. And that would require an income of over $150,000 | 10 | 246 |
| with no debt, a $50,000 down payment, and less than a 6.75 | 11 | 246 |
| percent fixed interest rate for 30 years. | 12 | 246 |
| Well, the folks that we work with and that many of | 13 | 246 |
| these organizations represent are not making that kind of | 14 | 246 |
| salary. And they are then trying to afford homes that are | 15 | 246 |
| way out of their price range and are doing so by using loans | 16 | 246 |
| that get them into a lot of trouble. | 17 | 246 |
| Low and moderate income buyers are then pressured to | 18 | 246 |
| lie about their incomes as Ricardo mentioned, especially | 19 | 246 |
| through stated loans, in order to qualify for loans that | 20 | 246 |
| are -- can afford a purchase price of that $750,000. | 21 | 246 |
| And finally, as Ricardo also mentioned, we wanted to | 22 | 246 |
| talk about language. We work with Spanish speakers. And | 23 | 246 |
| although that we've seen a growing number of real estate | 24 | 246 |
| professionals, mortgage lenders in the field who are | 25 | 246 |
| Spanish-speaking, the documents as mentioned earlier are not | 1 | 247 |
| yet in a language that helps folks understand what they're | 2 | 247 |
| getting into. | 3 | 247 |
| Also, we find that realtors and lenders build that | 4 | 247 |
| trust and ultimately can lead their clients into a delinquent | 5 | 247 |
| state. | 6 | 247 |
| So thank you very much for your time and I hope you | 7 | 247 |
| take these comments seriously. | 8 | 247 |
| MS. BRAUNSTEIN: Thank you. | 9 | 247 |
| And before we go, did you want to make a statement? | 10 | 247 |
| MS. LEFFALL: Yes, please. | 11 | 247 |
| My name is Christy Leffall and I work with Acorn | 12 | 247 |
| Housing in Oakland, California. Thanks for the opportunity | 13 | 247 |
| to speak today. | 14 | 247 |
| You can see some of our clients are here that have | 15 | 247 |
| done mortgage counseling at our office. And primarily what | 16 | 247 |
| we do is we work with folks who are facing predatory | 17 | 247 |
| mortgages and possibly delinquency and foreclosure. | 18 | 247 |
| I just want to talk about some of the things I see | 19 | 247 |
| in counseling every day when I'm meeting with these folks. A | 20 | 247 |
| lot of the target population is represented here, families | 21 | 247 |
| that don't speak English, the folks that are elderly and | 22 | 247 |
| don't have the whole capacity to understand what the mortgage | 23 | 247 |
| loan and refinancing process is like. | 24 | 247 |
| A lot of folks don't have, you know, maybe family | 25 | 247 |
| that can help them to come to counseling or even participate | 1 | 248 |
| in sort of the loan documentation signing. So you get a lot | 2 | 248 |
| of people who just aren't, you know, ready to sign on loan | 3 | 248 |
| documents and get caught up in these sort of situations. | 4 | 248 |
| Some of the main -- the loan types that I see a lot | 5 | 248 |
| are option ARMs, negative amortization loans that clients | 6 | 248 |
| have no clue they have until they come to counseling. See | 7 | 248 |
| lots of families that come in and have, you know, two loans | 8 | 248 |
| instead of one loan. They don't have any clue why. | 9 | 248 |
| Interest rates are much higher than they were told | 10 | 248 |
| they'd be. Even sometimes the payments. The payments | 11 | 248 |
| sometimes are even more than the family makes in income. So | 12 | 248 |
| they're told, "Okay. Well, you can refinance in six months," | 13 | 248 |
| or, "I'll help you pay," things like this that, you know, | 14 | 248 |
| sound totally crazy to us. | 15 | 248 |
| Certain people are, you know, representing | 16 | 248 |
| themselves as, you know, a friend of the family, someone | 17 | 248 |
| that, you know, speaks their language. And this is a problem | 18 | 248 |
| that's among brokers, among realtors. | 19 | 248 |
| And other things I see, loan flipping, as with | 20 | 248 |
| Mrs. Washington's case. She was refinanced I think four | 21 | 248 |
| times within five years, with the same brokers, you know, | 22 | 248 |
| time after time. | 23 | 248 |
| And so having mortgage counseling prior to doing | 24 | 248 |
| refinances, especially in the subprime market with elders, is | 25 | 248 |
| really, really crucial. And that's one thing I want to | 1 | 249 |
| pressure on the Federal Reserve Board to put that into law | 2 | 249 |
| nationally. Also, obviously loan documentation, having that | 3 | 249 |
| be in a language that the clients can understand. | 4 | 249 |
| And those are my main comments. And one more thing | 5 | 249 |
| would be obviously the housing prices in the Bay Area are | 6 | 249 |
| much higher than the HOEPA protection. So that's a huge, | 7 | 249 |
| huge thing happening. You know, families come in every | 8 | 249 |
| single week with loans in excess of $700,000, $500,000, in | 9 | 249 |
| Oakland, San Francisco. So those are the folks we need to | 10 | 249 |
| really be protecting with legislation. | 11 | 249 |
| MS. BRAUNSTEIN: Thank you much very. And thank you | 12 | 249 |
| to all our speakers on this -- in this group. | 13 | 249 |
| We have a few people left still on the sign-up | 14 | 249 |
| sheet, so I'll call them forward. If J. Reyes Rios is here, | 15 | 249 |
| Ana Rivera, and Nery Hartschen is here, as well as we never | 16 | 249 |
| did hear from either Pearl Caldwell or Don Gerimonte. If | 17 | 249 |
| either one of them are here, this is your final opportunity | 18 | 249 |
| to come forward. | 19 | 249 |
| Okay. Thank you much very. And we all -- I've seen | 20 | 249 |
| you before right? | 21 | 249 |
| MS. JIMENEZ: I will translate. | 22 | 249 |
| MS. BRAUNSTEIN: Okay. No problem. That's fine. | 23 | 249 |
| And we will go forward with the same rules. I think | 24 | 249 |
| people have heard them now. Three minutes. You'll get a | 25 | 249 |
| signal from the timekeeper. | 1 | 250 |
| We ask that you start by stating your name and if | 2 | 250 |
| you're from an organization what the organization is and to | 3 | 250 |
| speak directly into the microphone so the court reporter can | 4 | 250 |
| hear and people in the back can hear. | 5 | 250 |
| And with that you want to start. | 6 | 250 |
| MS. RIOS: Hello. My name is Silvia Rios and this | 7 | 250 |
| is her brother-in-law Reyes Rios. And thank you for | 8 | 250 |
| listening to us. | 9 | 250 |
| We decided to buy a home. They referred us, | 10 | 250 |
| someone, a realtor or broker, who spoke Spanish of course. | 11 | 250 |
| We told him the payments that we could make. He said okay | 12 | 250 |
| and asked the information to him, or from him. | 13 | 250 |
| He took us to see homes. We saw one that we liked. | 14 | 250 |
| Time passed by. He did not call us. He called us later and | 15 | 250 |
| said that the house was already sold. | 16 | 250 |
| He called again and to ask if we could see other | 17 | 250 |
| houses. We went. We saw another one and we liked it. He | 18 | 250 |
| put forward the offer and he said -- but he never called. | 19 | 250 |
| The papers were in English. He signed. Later he | 20 | 250 |
| called again and said, "I need you to come and sign." He | 21 | 250 |
| went to sign the 4th of May. And there he was the owner of | 22 | 250 |
| the house. | 23 | 250 |
| He never sent any papers. He never called. I'm mad | 24 | 250 |
| with him. He gave until the 10th. The broker said, "Come | 25 | 250 |
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