ASSEMBLY STANDING COMMITTEE ON BANKS
NOTICE OF PUBLIC HEARING
NOTICE OF PUBLIC HEARING
In 2002, the New York State Assembly investigated and became aware of the growing number of consumer complaints and litigation involving predatory lending. This form of lending extends credit to borrowers with a higher probable default risk than other borrowers with prime credit, and generally includes onerous provisions, which trigger default. Not surprisingly, predatory lenders targeted senior citizens and minority communities. The Assembly led the efforts to end this deceptive practice through the passage Chapter 626 of the Laws of 2002, commonly referred to as New York's High-Cost Home Loan.
Unfortunately, lenders found loopholes and circumvented the law by creating exotic, innovative mortgages with low "teaser" rates that increased significantly after several years, interest-only mortgages, and mortgages made with little or no income verification. While this helped to drive the homeownership rate in the United States to a record seventy percent, it also led to a record level of foreclosures when the housing bubble burst. The Assembly once again led the effort to pass the New York Responsible Lending Act, Chapter 472 of the Laws of 2008, which strengthened the predatory lending statute from 2002 as well as assisted current and future homeowners by modifying the foreclosure process, enacting a sub-prime mortgage statute, setting standards and limits for home loans and requiring the registration of loan servicers.
Despite New York's efforts to stem the foreclosure rate, the number of foreclosures has continued to increase, particularly in minority and low-income communities. The New York State Commission of Investigation stated in the report, A Perfect Storm: Easy Money and the Mortgage Meltdown The Subprime Mortgage Crisis in New York, that the hardest hit areas in the State included New York City, particularly Queens, Brooklyn, and the Bronx, Long Island and Monroe County (Rochester) in upstate New York. The report also stated that borrowers in minority neighborhoods were at least twice as likely as borrowers in non-minority neighborhoods to receive a subprime loan. The National Association for the Advancement of Color People (NAACP) in March released a report titled, Discrimination and Mortgage Lending in America; A Summary of the Disparate Impact of Subprime Mortgage Lending on African Americans. The report noted that throughout the nation, African Americans and other communities of color were disproportionately exposed to discriminatory practices that resulted in elevated rates of subprime lending and unnecessary risk to borrowers. In addition, nationwide African American borrowers over the age of 18 represent 12 percent of the population, but were awarded 52.4 percent of subprime and/or high cost loans.
Most recently, the New York Times reported on June 7, 2009, one of the nation's biggest banks, Wells Fargo, had been named in a federal lawsuit allegedly involving blatant discrimination against African Americans in the state of Maryland. Two formers loan officers from Wells Fargo admitted, "the company saw the black community as fertile ground for subprime mortgages, as working-class black were hungry to be part of the nation's home-owning mania." The article also stated that in a recent analysis of mortgage lending in New York City, it was found that "black households making more than $68,000 a year were nearly five times as likely to hold high interest subprime mortgages as whites of similar or even lower income."
This hearing will examine lending practices in the subprime market and whether fraudulent and discriminatory mortgage practices have occurred, specifically targeting the minority and low-income community; and, how best to assist all parties in providing more information, greater lending, more efficient oversight, and the elimination of any such practices. In addition, this hearing will examine how the laws of 2009 have alleviated and impacted the mortgage lending crisis.
Oral testimony will be limited to ten minute durations. Fifteen copies of any prepared testimony should be submitted at the hearing registration desk. The Committee would appreciate advance receipt of prepared statements. Written testimony will also be accepted and may be sent to the contact persons listed on the reply form. In order to publicize the hearing further, please inform interested parties of the Committee's interest in receiving written testimony from all sources.
In order to meet the needs of those who may have a disability, the Assembly, in accordance with their policy of non-discrimination on the basis of disability, as well as the 1990 Americans with Disabilities Act (ADA), has made its facilities and services available to all individuals with disabilities. For individuals with disabilities, accommodations will be provided, upon reasonable request, to afford such individuals access and admission to Senate and Assembly facilities and activities.
What is the extent of discrimination if any, by lenders and mortgage brokers against communities of color in the residential lending market?
What is the extent to which financial institutions that received aid through the Troubled Asset Relief Program (TARP) adhere to federal laws that prohibit discrimination, and legislation that mandates their investment in economically distressed areas?
How have the joint efforts between Office of Court Administrators (OCA), Division of Housing and Community Renewal (DHCR) & the New York State Banking Department assisted in alleviating the housing and foreclosure crisis?
Are the staffing levels at lending institutions call centers adequate to properly handle the volume of borrower inquiries?
What, if any, improvements to New York law and regulations might be useful so that borrowers can make more informed decisions before obtaining a mortgage?
What additional protections should be enacted into law that would assist homeowners facing foreclosure presently and going forward? What if anything, can be done to improve the mandatory settlement conferences?
How have the rules and regulations instituted by the Banking Department been implemented?