Could you just wait a moment until he comes back. (Pause.)
Well, he's not coming back then. Thank you very much for your testimony.
Thank you very much for your attention and the time you gave us. We do appreciate it, and we appreciate your comments as well, and questions.
Could we have Michelle Lewis, Ruth Gaskins, Khalil Walker, Joycelyn Kile. I think it's like preaching to the choir. Do you all want to testify? I mean if you have something to say, please come forward if you want to speak on this bill. Then anyone else here to testify that I haven't called, all right. 197 12/11/00 - PUBLIC HEALTH - BILL 000715 (Witnesses come forward.)
Okay, all right. Khalil Walker, Joycelyn Kile, Sister Ann Marie Weinglass and Allyson Hughes. You all might want to respond to some of the testimony you've heard from the lending institutions. I think we had the bill kind of laid out.
My name is Michelle Lewis, and I'm here on behalf of the Northwest Counseling Service, Inc., and like you said, at this point sort of preaching to the choir. Probably one of the things that I did want to mention, I heard a lot of talk earlier today about how all of this came about and whether or not there has been an inclusive process in terms of, you know, everyone being able to give their input. One of things that we did through the help of Councilwoman Tasco was to create the Philadelphia Predatory Lending Task Force which does involve State, Federal and local legislators as well as other government officials, private industry, community groups and residents that have all come together around this issue who are really sort of the focus is to 198 12/11/00 - PUBLIC HEALTH - BILL 000715 bring all of these conversations into one so that we can come up with reasonable measures. We have enjoyed for the last eight years a wonderful lending environment in the City of Philadelphia and we, obviously, don't want that is to stop. On the other hand, we have seen the proliferation of this predatory lending reach levels that no one in the room would like to see. And I think that not only the consumer people and the legislative people, but also the lenders have all talked about raising the bar in terms of eliminating or minimum reducing this kind of practice in these neighborhoods to say that we just won't have it in the City of Philadelphia, and I think we're all in agreement with that. But I think at the same time, we need to all work together to come up with ways that encourage responsible lending in this city so that we continue to have the same kind of trend that we've had which has led us to be No. 1 in the nation for the last eight years through the development -- well, through the encouragement of the use of existing products and also the development of new products that meet this 199 12/11/00 - PUBLIC HEALTH - BILL 000715 marketplace. I mean, if these predators can go out and study the habits of consumers and figure out what we're going to buy on a day-to-day basis, then I think we can do that, too, and develop products that are responsible that satisfy the needs of these constituents. But I think education, as was mentioned earlier, is just a must. That's one of the most effective ways to get out the word so that people understand what it is that they need to do to avoid being a victim. And I know that this Council particularly -- and again, Councilwoman Tasco, I remember coming to her back in March when we initiated the fraud prevention series and we went from neighborhood to neighborhood. The Councilwoman came, expressed her own experiences with this, along with other elected officials, Congressman Brady, HUD went with us, and as went from neighborhood to neighborhood, each of the Councilpeople, it was just like magic because Councilpeople and other people joined with us in this effort, so education does work because when we came back, many of those seniors that we talked to the in 200 12/11/00 - PUBLIC HEALTH - BILL 000715 trying to give them this information and education are calling back now and now, you know, they're telling us that they think their bank may have charged an extra fee or whatever. We just know, in other words, that now they are reaching out and asking for information before make financial decisions and why that's what we think really should happen is that we need to get together, make sure this education and information is available to the consumer so that they can make informed choices. But by and large, I think that -- I am in full support. Everything that this Council has done to support our efforts, I trust no -- I am convinced that any legislation that comes out of this body in its final form will be something that we will be proud of and will go down in history as something that we did to protect the consumers in Philadelphia. Thank you.
Again, I'm Ruth Gaskins and Director of Housing for the Philadelphia Urban League. I want to address a couple of 201 12/11/00 - PUBLIC HEALTH - BILL 000715 things, being a former banker. All due respect. There were several things that was mentioned here from the Pennsylvania Association of Brokers and Mortgage Banker Association and Mortgage Brokers Association and Services and on and on. And they talked about all of the different acts that we have, the Fair Credit Procedure Act. They talked about the Settlement Procedure Act. They talked about the Home Mortgage Disclosure Act and on and on. And let me tell you something, being out there in the trenches, guess what, those acts aren't doing a darn thing for those people who are affected by predatory lending. (Applause.)
And I heard you. And we applauded you in the back because we know for a fact, one, yes those acts are there; and yes, I can tell you as an underwriter and as a former banker and as now a consumer advocate. Yes, they have laws and yes they have the most informed and the best and the most deceitful predatory people 202 12/11/00 - PUBLIC HEALTH - BILL 000715 and salespeople out there in the world to tell these people, "Look, we need your money now." (Applause.)
Now, let me just say a couple things about that. There is a need, but all of the things they talked about here is in the regular mortgage portfolios. It has nothing to do with what these people are doing. Now, I was down at the Federal Reserve and I heard the Governor speak, and I agree with all that you said that the Governor said, true. In dealing with regular mortgage portfolios, yes, those acts are there to protect those consumers. But what is it doing for the people out there in the trenches? What is it doing for those seniors? What is it doing for those uninformed homeowners and potential borrowers? Nothing. First of all, those disclosures, they're receiving the disclosure the day before settlement. They failed to mention that. They're receiving a till that has absolutely nothing to do with what it's supposed to do. And don't talk about the APR. Let me tell you 203 12/11/00 - PUBLIC HEALTH - BILL 000715 something, the one that we talked about here, they sent me three in one four-hour period and told me, "Oh, the broker made a make. Oh, the lender made a mistake." I called all the way to the State of Washington to find out what is this loan about. Now, I really did not come here to do this, but I was listening to them and I'm thinking to myself, somebody need to say, Guys, that's not what's happening out there. They're not following those Acts. Those prevention measures that you have in place, they don't hearing you and they're not doing it and you know it. Now, let me just say one more thing and then I think I'm going to stop. As far as this balloon payment situation, well, yes, there's a need for a balloon payment; yes, we put in the legislation. Do you know the reason why? How many low- to moderately-income people are going to fall into a windfall and get money so that they can pay it off in the next few weeks. (Applause.)
Let's go to the 204 12/11/00 - PUBLIC HEALTH - BILL 000715 prepayment penalty that they talked about. Listen, when you're talking about flipping a loan and you can add on all of these fees, this does not apply to what to I want to know, guys, what are you doing for your sub-prime lenders? You know, and the truth of the matter is, these people aren't financing themselves. Where is the money coming from? Why don't you track it? You'll probably be surprised. Listen, another thing. Education, I'm all about that. Yes, we need it; certainly, we need it. And we can't wait. And they're talking about time and how much time we need and what's going to happen, it may happen, we are going to do. This is, as Irv said, the exact same thing as crack cocaine is to most people. Let me tell you, people are losing their homes on a daily basis, and it's my mother's peers and it's yours, it is all of ours. I'm watching young, single black women who have three to four kids dying for a home and just being ripped off daily. So when are we supposed to act on it? Are we supposed to wait until finally someone will come up to it? 205 12/11/00 - PUBLIC HEALTH - BILL 000715 I beg you if our legislation that we're presenting to you is not the right, then fine. Let's write the right one, but we can't wait forever to do it. We need to act now. And if they're saying we're going to experience lenders leaving the Philadelphia, well, I say good-bye. (Applause.)
Please, please, consider what we're saying to you. If it is wrong, then let's right it, but we cannot wait forever to do something about what's happening out there. That's all I have to say.
My name is Joycelyn Kyle. I am the Director of Housing of ACORN housing. I'm here today to speak on predatory lending. In our office, we have a program that I'd like to speak on, and that is the Home Emergency Program from Harrisburg. And we are just of officers office that are doing this program and we counsel at least five people a day 206 12/11/00 - PUBLIC HEALTH - BILL 000715 who are losing thier homes. When you start times-ing this by a week and a month just for one office it's unbelievable. When I take time to review the file, five out of a day, three have been affected by this disease of predatory lending. I have people that are coming into my office and we're at the point we all know about this predatory lending. It's out. We know it's a disease that's hurting all of us. They're around. They have a marketing piece that is absolutely unbelievable. I have to give them credit for that. I really have to give them credit because they have used strategies on the people that the people do not even understand. Paperwork is being signed days ahead or days behind. When you ask the applicants, everyone can't be lying about the same thing. They're asked to sign paperwork and then the word comes back with the figures on it. How is that? Everyone can't lie about that. We have interest rates and points that when I look at the HUD-1 sheets, I just can't believe it. I have a lady here that's 207 12/11/00 - PUBLIC HEALTH - BILL 000715 sitting here today, she has a credit score of 680. That's pretty good, I would say. It's better than mines anyway. And she was offered a 27 percent interest rate to borrow $3500. Can this be believable? This is something that we need to take time with. We have people that are coming into our offices every day losing their homes because they cannot afford to keep up with the mortgage payments. So what's going to happen to these people? What are going to happen to these homes? What about new people that are coming and they wish to purchase homes? One thing, ACORN and ACORN Housing, they have programs that they're bringing in clients. They're doing campaigns to see if we can unite people. Yes, education is important. We need this education, but we need to market the right way to do this. We also need an ending solution, and I call it an ending lending solution. We have people who are here who are just about to lose their homes and there's nothing we can do about it because their credit has been really abused to 208 12/11/00 - PUBLIC HEALTH - BILL 000715 the point that no prime lender wants to accept them at this particular time. So there's lot of issue that is we would like to service and we would like to have looked at this time. And if it's anything that we can do in order to resolve these issues, we are here to do that. ACORN now is speaking with a lot of different banks trying to get them to understand exactly what is going on and that everyone is not going to come in picture clean or with excellent credit, but they do need help. Thank you. (Applause.)
Good afternoon. I'm Allyson Hughes. I'm with the Home Ownership Counseling Association. It is the trade association --
And we want you to summarize this information, darling.
It's been a long day. 209 12/11/00 - PUBLIC HEALTH - BILL 000715
It is the trade association for housing counselors. We work throughout Philadelphia and the Delaware Valley. And as my counterparts have said here today, this is a crisis for us. We are dealing with people on a daily basis who are losing their homes. We certainly support this bill and we feel that in Philadelphia, we have to have a no-tolerance policy. This not only affects me at work, I can't tell you for the last few years, every time I have gone to some type of family event, I'm hearing a conversation about someone who has refinanced their home or gotten a home improvement loan that they cannot afford to pay and they are in crisis. And I need to be able to enjoy my holiday time without having these conversations. This also touches me because I am a West Philadelphia native. The neighborhood that I grew up in, many people received those homes with programs that they had in early '70s where you were able to get the house, get the basic systems put in and you put in the cosmetic work. I have also talked to the people in that 210 12/11/00 - PUBLIC HEALTH - BILL 000715 community who have since taken out these loans, they were mortgage-free. And if they had problems with their credit and those problems weren't addressed, they would have been better off by a lender saying no to them instead of adding this burden of a mortgage when the money was used to pay back utility bills, water bill, tax bills. They did not need to take a loan. What they needed was housing counseling. They needed advice. They needed information about their credit. They not only needed a credit report, they needed someone to interpret that credit report and show them how to get on the right track. It is not an easy process for someone who has damaged their credit, however, it is much better for many of our constituents who worked through to that process as opposed to getting a quick fix which is the predatory loan. The issues that I want to also bring up today is that we can't afford to wait for State legislation. We need to act now. We also do need to look at the public education and do a public education and outreach campaign. I am an avid fan of the Home Improvement Channel, and I 211 12/11/00 - PUBLIC HEALTH - BILL 000715 almost died when I saw Bob Villa, how convincing to see Bob Villas pushing a sub-prime.
I need to talk to Bob. We also need alternative products. I think we need to look at a way that we can increase the funding for basic systems repair so that families are not left -- (Applause.)
-- to look for loan products and become victims of predatory loans. We also have to look at the enforcement of this process and how we can work together. Since I've done the amendment and I've heard numerous comments here today, we would like to be a part in planning this process, but certainly we can't continue to wait.
Thank you so much. We appreciate your testimony and thank you all very much. (Applause.)
We'll have the final people make their testimony and then we'll 212 12/11/00 - PUBLIC HEALTH - BILL 000715 make some comments about this bill. Is there anyone else here to testify? Dan Shah and Sharon Mar? They're not here?
Is there anyone else who would like to come forward and testify, please come to the table. (Witnesses come forward.)
Yes. My name is John Shuman from the Shuman Group Mortgage Company.
My reason for being here and sitting through this whole meeting was the fact that today I heard a lot of information on predatory lending and I am a mortgage broker and I was born and raised in Philadelphia and I have got into this business to help people who look just like me to get a loan when they couldn't get 213 12/11/00 - PUBLIC HEALTH - BILL 000715 them through banks and other places. And one of the things that I found out from this meeting today was that most of the people that you talked about were finance companies who have percent 6 interest and gouging interest rates and this that 7 and the other. And if you create something 8 that's going to put the small brokers out of 9 business by limiting how much they can make, they 10 already deal in small loans because our people 11 deal in small loans. The average loans 12 throughout the State is $100,000. 13
Okay, all right. But anyway, I still would just like to say that we are about trying to help the people in the community, not put them out of business, not take and gouge them for their money. And that's my 214 12/11/00 - PUBLIC HEALTH - BILL 000715 statement that I want to say. And one of the reasons why I said that was because most of those consumer finance companies that you talked about earlier today United Companies, Beneficial, GMAC, all of these companies have tacked on things onto our lenders. I have dealt with a lot of these companies myself. And what we try to do is help the people in our community get a loan that reasonable and everything. I am a member of the National Association of Mortgage Brokers and the Pennsylvania Association of Mortgage Brokers. And we do have a rules and we have 72 hours to give them a HUD-1. We also have to give them disclosure statements once they take a loan application that they can read take home with them. Also, there's a 72-hour rescission period that once their loan is done, they can look at all of the paperwork for three days before they can make a statement saying that this loan is -- I want to sign this loan. They come back and they sign. And if they decide they don't want to go through with it, they can go home. So there's a lot of things in place that the consumer read 215 12/11/00 - PUBLIC HEALTH - BILL 000715 and learn from and we need to probably put things in place. And you talked about the Credit Bureau. The Credit Bureau is the worse predator of all because the Credit Bureau has erroneous information on people's credit reports and you cannot get it corrected. And we have done this and worked with people and did everything. We don't charge any application fees. We don't have any monies up front. There's no monies that we get until the loan closes. So we do all of this with the consumer being able to walk away from the table and we not gain a dime from it. And those are just some of the things that I wanted to say.
This bill is not designed to hurt people who are reputable. It's only those people who are unreputable who will be hurt by this bill. If you're doing a reputable business, you're not going to be hurt by this bill. It's only to protect those consumers who deal with unreputable lenders.
Good afternoon. I'm Reginald McGlawn with the McGlawn & McGlawn. We're mortgage and insurance brokers in the Philadelphia area. Our company has supplied approximately $6 million in loans last year. We're probably one of the largest African-American brokers in the City. Let me give you just you another viewpoint of what McGlawn and McGlawn. As far as education is concerned, our family's very much into it. We have paid for educational programs for lending throughout the City. We've represented the African-American historical and cultural museum, let everyone in free and brought in lenders to teach people how to buy and refinance their home. At McGlawn & McGlawn we only finance people with credit problems. We do not -- as a matter of fact, if you have good credit, we are refer them to outside sources, a multitude of outside sources and counseling. What I see wrong with this bill 23 coming into the City as it is now is that --
Have you read the bill? 217 12/11/00 - PUBLIC HEALTH - BILL 000715
Yes, I have. It won't hurt me per se as a broker, no, it won't hurt me. But what it would do is stop me from pursuing people in the City for loans. As far as people say getting percent for a loan, that doesn't 7 exist anymore. That's called a Section 32 Loan 8 which most lenders will not allow anymore. And 9 the Section 32 loan gives you four days before 10 you sign the document to read it, three days after you sign it, and then if you decide you don't want it, it's null an void. But what happens to a person like me, my company spends over a hundred thousand dollars in advertisements in the City of Philadelphia, Daily News, television, every newspaper.There we do not want you if you have good credit, but if all the moneys I can make off a loan, which is 4 percent, of $17,000, I can't I can't afford to do business in the City of Philadelphia. By the way, predatory lending was not made for African-Americans who are sitting behind me. It was made for white people. White people, that's where predatory lending comes from. If you look in North Carolina and New York, they 218 12/11/00 - PUBLIC HEALTH - BILL 000715 have $200,000 brownstone homes in New York. They have $100,000 homes in North and South Carolina where these laws are enforced. Now, in North Carolina for $100,000, I can live off 4 percent of that; $200,000, I can live off 4 percent of that.
Could you tell me what is in this bill that prevents you from doing business in the City of Philadelphia?
What happens is there are lenders -- the lenders that we're doing business with our subsidiaries of giant corps., the bill that you will pass, as is, right now, it will set precedence for someone else. In other words, there is no law in the State that says we cannot charge 10 percent on a loan, but there are some State provisions saying that you have to give out these documents. So most lenders will just, even though not law, they will follow precedence. And what goes on here will make other lenders follow precedence, the way it is right now. No, they won't stop me. Trust me, the bill wouldn't even hurt my company at all. But if the companies that I'm doing business with 219 12/11/00 - PUBLIC HEALTH - BILL 000715 will tell me, "Reggie, now we're not going to pay you what we paid you before on the loan." Then I moved. And now some people behind me say "good." I'm torn. By the way, I've never had people testify. A lot of people have given loans that I have seen behind an Acorn. Here's the other thing that happens here. Let me move out of the City. Not me, and I'm not threatening you move, I am forced. Let me move our business out of the City of Philadelphia. The Sheriff's Department sells 150 homes with these liens are to First Union at a sheriff's sale because of delinquent taxes. If I move, who's going to service those people? These are people who will lose their home in the Sheriff's sale because they're delinquent on their taxes. These are that the City no longer kept but they sold to an outside agency. And here's the big thing that really gets me. You don't see any banks in this room 23 because they don't care. They want, they want this ordinance to go through as is so, therefore, if it goes through, people like myself -- 220 12/11/00 - PUBLIC HEALTH - BILL 000715
I'm still trying to understand what is wrong with this bill that would put you out of business? I don't understand it.
No, you don't put me out of business. The 4 percent will stop me from doing business in the City of Philadelphia.
Yes, ma'am. But when you say 4 percent over the Treasury, when a loan goes into play you have --
You can charge as much as you like within the federal law. This bill does not stop you from doing that.
Again, what happens, you set precedence for -- say, for instance, this bill is interpreted different ways. I'll go one step further, one step further to this here, the bill, and what we can charge. The Pennsylvania Association of Mortgage Brokers which spoke here today here, coming here to prevent this bill from going into play or saying let's modify the bill. I'm going 221 12/11/00 - PUBLIC HEALTH - BILL 000715 to say they're my colleagues. I want to let you know now, they really have, if I'm not mistaken, this is the first time they've ever come to Philadelphia. I live here. Their reasons for coming here is to prolong this ordinance to go into play so that they can further study it themselves to see what effect have on the State. The great thing you said was, yes, this might set precedence for the state. It affects them at the State level. It affects us as individual brokers at the City level because whatever you do sets precedence for the next or, should I say, for the higher up or the State. Now, one more thing if I could go into where I was going. McGlawn & McGlawn has gotten together a group of people a little over a year ago and we got $4 million together. The $4 million we got, we were going to start a bank, but we needed someone to securitize this money so that we wouldn't have to charge higher interest rates. Councilwoman, we called your office and got no response. We called a few other politicians, got no response. We talked to 222 12/11/00 - PUBLIC HEALTH - BILL 000715 ACORN. We asked ACORN, look, we can get this money together, securitize these loans. You won't have to worry about a high-interest loan. I was told by ACORN that, no, that's not our business. My company also got together, we got with ACORN. And I said, ACORN, look, all of the loans that you have that are bad loans, let me look at them. I'll go over the loans. I won't charge you a fee. We'll do the loans, you just cannot let anyone know that McGlawn $ McGlawn is involved with this. We were also told no. So here I'm looking at both sides here, I'm looking at City Council, yes, there's something should be done. What should be done? I believe on your advisory board of predatory lenders there is not one mortgage broker on that advisory board.
What mortgage broker is on the board? Bankers, but not brokers.
I want to be on the task force. 223 12/11/00 - PUBLIC HEALTH - BILL 000715 The only think I want look at, look at the HUD-1, your HUD-1 that you showed me there earlier today. Someone talked about the HUD-1 and all of the fees on the HUD-1. I am a broker. I have an attorney here show you this HUD-1. The first thing they say the mortgage company charges percent and broker charged a fee that was on 9 that HUD-1. That is illegal. That's a federal 10 offense. And to me I'm wondering why the attorney was not bright enough to know that there are law which is broken by looking at the HUD-1. So therefore, yes, I'm going to sum this up because I know it's getting late. We need a task force, yes, we do. We do need an ordinance, yes, we do. But we need to make it so that it's good for the consumer and it's good for the lender because one more thing, redlining as you know it will exist in Philadelphia like you've never seen it before. It has, when I came into business. McGlawn & McGlawn came into business eight years ago. They would lend money in Philadelphia because of your zip code. Now, and I deal with a lot of lenders, they won't lend money because is it near the houses that are 224 12/11/00 - PUBLIC HEALTH - BILL 000715 falling down? The row homes. Before it didn't matter how many vacant homes you had on your block. Now it matters, whether they're going to give you any monies or whether you have two, three, four vacant homes on your block. And, no, these lenders are people that you don't know and you will never see. But I bet you they lend in Philadelphia than your First Unions, your Mellons, your PNCs or any of the lenders, they have the ability to lend funds where no other lender that is doing business in this city will or will or can lend.
My name is James Cox. I'm president of a company called New World Mortgage. We're actually based out of Lansdale, but we do probably half of our business in the City of Philadelphia. Basically, to kind of tell you what we do as brokers. Brokers are here the to provide option to see customers who normally don't get options. Normally they're either denied credit based on the credit situation because of the value of the house because of 225 12/11/00 - PUBLIC HEALTH - BILL 000715 income which is unreportable and yet they make. Maybe it's under the table. We get loans for people who normally can't get them. It's a valuable service. It's a valid service. And for that, we make a fee, a broker fee. Just like lawyers make a fee for basically handling a case, Realtors get a fee for basically buying and selling a home, we make a broker fee for placing a loan using our expertise ro get a loan done, which beforehand are not going to be closed. You talked before about the effect that this type of legislation would have if it would have any effect. If you look at North Carolina just from the immediate effect of what the legislation was there, several lenders actually pulled out of doing loans in North Carolina that we've used a lot. Companies likes Saxon, Advanta, Advanta right up in Blue Bell, Sally Mae Financial, all of these companies stopped doing business in North Carolina.
Why? Because the regulations in North Carolina were so onerous the 226 12/11/00 - PUBLIC HEALTH - BILL 000715 fees restricted to such a point that it became untenable to actually do business there.
Yeah, it's just unprofitable. I just made no financial sense for them to do that.
No, but the bands aren't lending them the money. Otherwise, people would have gone there in the first place. What happens is when people are not able to get the money from the banks, they come to brokers. That's the role that we fill in terms of trying to meet the needs of the people that the banks don't meet. As an example, what kind of real effect does this have, two examples --
The banks can't -- is the reason the banks won't -- never mind. 227 12/11/00 - PUBLIC HEALTH - BILL 000715 Go ahead.
Just as two real examples of what kind of effect this would have in North Carolina to people living there. Sally Mae financial, they're actually the only, to my knowledge, the only sub-prime company that does not charge prepayment penalties, okay. Prepayment penalties are a big problem. There a problem for our clients, they're problems for us. But because they no longer do business in North Carolina, those people do not have access to that lender because it's not tenable for them.
I've read some of bill I've read some of bill. Again, my concern is to explain where we're coming from and to try to make sure that we're all on the same page.
Well, what we want to know is what do you all are willing to do to help protect the consumer and to stay in business and how far are you willing to go to protect the consumer and feel that you can still 228 12/11/00 - PUBLIC HEALTH - BILL 000715 do business in the City of Philadelphia? You don't have to answer that today, but that's a question I want answered.
The fact is when people were mentioning earlier that there are good brokers out there, I feel like I'm one of them. To be honest, every time I do an application -- and being here today, just to let you know, I've missed three appointments in trying to talk to you on this matter. At each appointment, I have packet of papers I go through. There the same disclosures that they see at closing, the customers do. Normally, you're not required to disclose all this up front. It's all a lot of excess information, but we try to over-disclose. We see that as our role as informing the customer. We give them a good faith, we go over all of the disclosures that they'll likely see at closing. We're up front with everything. The fee that we charge, if it's 8 percent, if it's 6 percent, whatever it is, it's there in writing. If it's going to be a rate of 11 percent or if it's going to be a rate of 9 percent --
That's basically 229 12/11/00 - PUBLIC HEALTH - BILL 000715 what we're trying to do is protect the consumer. We're trying to do what you are doing.
I understand that. You have to understand that there are actually mechanisms in place and those mechanisms have to be used.
But we're out there doing this and actually making the effort to inform the consumer and do our job. If there are problems, and there are problems, they need to be taken up with the Pennsylvania Banking Committee.
Well, that's what I was saying. Just as an example, there was a customer that called me last week. She was dealing with a broker in Jenkintown. She was purchasing a house in Sellersville. This broker basically spent an entire month -- first of all, the broker gave her 230 12/11/00 - PUBLIC HEALTH - BILL 000715 a handwritten pre-approval that basically he handwrote himself for a loan that she was approved to go to 90 percent of what the house was valued at. This woman put down $20,000 on a house that was a foreclosure property that she was trying to purchase with the assumption that she was going to get the financing. Come to find out three days before closing, he said, "Oh, you need to come up with more money. She had no more money. She never got any disclosures. She never signed anything. I mean, there was one problem after another in terms of real violations of the types of laws we've talked about, RESPA, Home Equity PROTECTION Act. All of these are things that need to be addressed. What she should do is contact the Banking Commission. This is what I tell her. In the meantime, I'm trying to place her loan so that she doesn't lose her 20,000. I'm trying to help her out. But the point is there are brokers like that and there needs to be some sort of remedy. There needs to be enforcement. But in the meantime do not crucify everybody in terms of trying to get to the problem apples that are in 231 12/11/00 - PUBLIC HEALTH - BILL 000715 the barrel. I've rambled off into left field, so I'll leave it there. Next.
Thank you. Would you identify yourself for the record, please?
Thank you, Madam Chairman. My name is George Cormeny. I am with All First Bank, headquartered in Baltimore, Maryland, with operations which stretch from Northern Virginia through the District of Columbia, the entire State of Maryland and the central part of Pennsylvania on up and including as far northeast as Allentown. We as an institution do not have any branches or facilities in the City of Philadelphia, but I appreciate your taking the time to listen to me. I think I'm the only bank that is here and speaking today. I come to you because of several reasons. Number one, I was born and raised in West Philadelphia. I have a soft spot in my heart even though I've been in Maryland for 232 12/11/00 - PUBLIC HEALTH - BILL 000715 almost 30 years. I am the corporate CRA officer for Allfirst. I'm responsible for our performance under the Community Reinvestment Act, and in fact, our entire community development activities throughout our company's footprint. And, you know, I guess the first thing I think I need to do is say here that not for my company, but for a lot of people that have done this to the victims that have come forward today, you all are really owed an apology. I think you've been treated terribly and I want to acknowledge that. (Applause.)
There's got to be a little bit of sympathy in your heart. We have what we consider to be a good corporate record. C. we help fund our community development financial institution to serve low-income and some moderate-income communities. In Baltimore and throughout Maryland, we're active in our support of community development organizations, housing counseling clinics. We think education is absolutely a critical component to the consumer's ability to make a good choice. 233 12/11/00 - PUBLIC HEALTH - BILL 000715 In Pennsylvania, we have taken on three cities, Lancaster, Carlyle, and Harrisburg, and we have a continuing program where we put in $100,000 per annum in each of those communities which is leveraged up to 1, so amounts to a 7 million dollars a year going into those 8 communities and that commitment is for ten years. 9 And we do that because we think it's important to 10 show a long-term stretch of hope to the development of a community, and Lancaster just happens to be Hispanics, it's in the South Duke street Corridor, but our end game is to help stabilize those neighborhoods and, obviously, to end up doing some business with them. We would like to see the mortgage loans for rehabilitations. Let me just offer one brief comment here that it's been in the press, certainly, in Maryland and has received some recognition in national publication that there was just a terrible experience of home flipping and predatory lending that took place in Baltimore, Maryland, and I have attended hearings on it. I haven't spoken as a participant in any of them, 234 12/11/00 - PUBLIC HEALTH - BILL 000715 but I've been a very intense observer. Many of the instances outlined here today also took place there. The question in Maryland arose is how do we deal with this and how do we try to stem the flow of the blood. A member of the State House of Delegates, Carolyn Kirsiac (ph) from Baltimore held hearings with lenders. She held hearings with regulators, had HUD in there on several occasions, and she was instrumental in introducing and as passing a bill in the Maryland General Assembly. And just by way of background, we in Maryland have something called a commissioner of financial regulation at the State level. I know you have a Banking Commissioner here in Pennsylvania, but our extends out and has jurisdiction over the mortgage brokers, them mortgage bankers, the check cashers. If not licensed, you can't cash a check. You cannot do a pay-day loan. She also has the banks, the savings an loans, the credit unions that are State chartered, and the list goes on and on. But suffice it to say, she has a wide ranging scope of responsibility and there was a bill that 235 12/11/00 - PUBLIC HEALTH - BILL 000715 was put forward to give her real control, real authority including cease and desist orders, et cetera. And I have been on the road since I heard of this hearing last week. I apologize. I have nothing with me that I can give to you, but if I could be helpful in providing you with any kind of sample legislation like that, I'd be happy to do so. I bring this up because if you do something in one municipality, a city, a county, a borough, whatever it is, and there is a following of suit across the State and they differ a little bit, we as an institution who will assumption some day, hopefully, be able to count all of Pennsylvania as part of the area that we serve. We're hard-pressed in a mortgage operation to know what are the rules here, what do we have to do there, how many cities do we need to report to as to our practices. So again, I'm being selfish in my statements, but it gets to be an administrative difficulty for us. Let me also just offer some comments. I did have an opportunity to read the bill today, and there are a couple of areas that I'd 236 12/11/00 - PUBLIC HEALTH - BILL 000715 identify.
First of all, there was counsel here earlier, and I apologize I don't recall his name, but he did make the statement that none of the depository institutions who were engaged in this activity. I find it sort of incongruous to say of those entities, gee, if you have a contract with the City, then you have to sign an affidavit and say that you're not doing these things. It may not be a depository contract, it could be for cash management or investment services or another type of service, but you have to do that. My point is, the bad guys that are doing these kinds of activities don't have any such requirement. And we haven't been, but we would have the requirement secondly that the depository institutions are required to report loans by census track, be they minority or non-minority loans, whether they be low- and moderate-income loans or loans that don't fall into that category. We already do that. We do it at the examination levels. That data is available through HMDA reports, the Home Mortgage Disclosure Act, in reports of our examination for 237 12/11/00 - PUBLIC HEALTH - BILL 000715 CRA. That's a public document. We frankly prefer not to do to have it again. And, you know, if we're doing it in one place and it can be made available, it's just an added paper burden. The last thing is the investment where the municipal retirement system would be shielded from investing in an entity that involved in this activity. I would suggest you probably don't have all that many public companies that would be engaged in this kind of thing that you would even want to invest in without it, but that's your call. I respect that. Lastly, and I don't know the answer to this, whenever -- because I'm not a mortgage professional in my daily work. But whenever you create a standard and the standard is different. It's my understanding that in the mortgage market, you then create a separate standard that you have to deal with in selling to a secondary market. And that in turn can make the primary mortgage more difficult to sell because you're dealing with that add standard that doesn't 238 12/11/00 - PUBLIC HEALTH - BILL 000715 conform to a nice, tidy, well thought-out, easily conceived package of loans. And with that concern I have is, and I don't know the answer, there are penalties for engaging in certain activities as I read them here and I've looked at other cities' bills and I don't know because I'm not an attorney whether any of that liability travels to a purchaser in the secondary market. I don't have an answer for that question. I know in one other case it sure appeared to. And I haven't had the time to study your bill, but I just through that out as an observation that in some cases they appear to travel. And again, that would have a chilling effect for a secondary purchaser. With that, I want to thank you for your time. I'm here. I came up for this. I'm happy I did. And if I can work with you or at Council or perspective in any way, I'd be happy to do it. Thank you.
I'd like to bring up another point. There was some discussion earlier 239 12/11/00 - PUBLIC HEALTH - BILL 000715 about credit scoring and about the effect that that has on lending. Credit scoring is really, and I know this is kind of an aside, but really it gets to the root of what people are charge in terms of rates. Credit scoring is really dictated by the credit agencies and in a way that a lot of times doesn't really represent the true risk of a person. I mean, it's purported to if all of score of 620, you're A credit. You get 7.5 percent rate, you can go up to such-and-such level of equity in your house. Pretty cut and dry, pretty clean for the underwriters, not really a lot of thought to put into it. What happens, though, is and I'm sure Reggie's seen it a lot. I've seen it a whole lot. People with three pages of charged off credit cards, collection accounts, having scores of 640. By the same breath, you have people with spotless credit, never being late on a payment, let's say they have four pages of credit cards, they have a 520. The person with the 520 score can borrow up to 75 percent of what their house is worth at rate of 13 percent. He's never missed a payment. It's supposed to be a guide post, and yet it's 240 12/11/00 - PUBLIC HEALTH - BILL 000715 really -- that's what dictates rates. We as brokers, we deal with the marketplace. This is what's out there. I've actually gone to D.C. to try to get some information, figure out what can be done as far as get hearings in D.C. about this. Nobody's interested in doing it, obviously because I don't have a lot of money.
You should talk to Congressman Bob Brady. He's on the task force.
Again, I'd be welcome to do whatever it takes to get some answers, but at any rate, that's just another item that goes into the dynamics here of what is fair lending. You know, is it fair for person to make their payments on time and yet not be able to get the rate that he really deserve? No. But these are things that are not in our control and which really need to be looked at so...
Thank you. Thank you very much. Let me just say this before some of you leave. We're going to pass this bill out of committee today. However, we will have conversations with those of you who 241 12/11/00 - PUBLIC HEALTH - BILL 000715 came to me earlier who did not know about the bill, had not had an opportunity to read the bill. We have had the benefit of this hearing. The bill will be held until we can work out and take into consideration some of the comments that have been made here today. Some of the Councilmembers have comments. They want to look at the amendments. And prior to making a final vote on the bill, we will certainly meet with all of the individual parties or certainly those of who you want to meet, we'll sit down an talk about it and go over it point by point and see how we can adjust it so that you don't lose business and leave town, but at the same time, we are going to protect the consumers in Philadelphia. Now we will make that very, very clear. (Applause.)
We're going to protect the consumers in Philadelphia, but at the same time we don't want to rush to judgment and do something that's going to help us on one side and hurt us on another side. We've heard you. We've heard the consumers and we've heard you, 242 12/11/00 - PUBLIC HEALTH - BILL 000715 the business people. And we want to see what we can work out. But we, in the end, will have a bill that will, hopefully, can work for everybody. But it certainly will work for the consumers. So I am going to adjourn this public hearing. We'll leave the public hearing and go into the public meeting. Could I get a motion to move the bill 10 out of committee? The meeting is now in public meeting. Wait a minute. Just a second. Excuse me. Back up. Let's go back to the public meeting. We have the amendments that were offered by staff and we have to read those amendments into the record, Which will be very, very brief. They are already in the bill, but we will note them. (The amendments read into the record. See attached.)
Could I get a motion for the amendment and the amendments will be submitted to the stenographer and I'd like the motion to include that the amendments are to be 243 12/11/00 - PUBLIC HEALTH - BILL 000715 recorded as presented in case there were any misreadings.
Madam Chair, I move that the amendments as recorded be voted out of this committee with a favorable recommendation.
There has been a motion to accept the amendments as will be presented to the stenographer just in case there may have been some mistakes during the reading. All in favor will say aye? Any opposition? There being none, the amendments are approved.
Now we'll go into our public meeting. And could we have a motion to adopt the amendments?
Madam Chair, I move that this committee adopt the amendments.
Can I get a second? 244 12/11/00 - PUBLIC HEALTH - BILL 000715 (Duly seconded.)
It has been moved and seconded we adopt the amendments. Could I get a motion. All in favor will say aye. Any opposition? The motion is passed. Could I get a motion to pass this bill out of committee, as amended, with a favorable recommendation and a suspension of the rules.
Madam Chair, I move that this Bill No. 000715 be reported out of this committee with a favorable recommendation, as amended, with a rules suspension to permit first reading at our next Council session.
It has been moved and properly seconded Bill 000715, as amended, be reported out of committee and with a favorable recommendation and with a request for a suspension of the rules so as to be read at the 245 12/11/00 - PUBLIC HEALTH - BILL 000715 next session of Council. Could I get a second? (Duly seconded.)
All in favor? Any opposition? There being none, this bill is reported out of committee as amended. (Applause.)
Thank you. 4 $55. For the record, this bill will have a first reading on Thursday. However, final passage cannot come until January when we come back from recess. So that gives us time to meet with all of the interested parties so we can work out whatever amendments we might want to propose on this bill. And we will include the entire Public Health and Human Service Committee in that discussion. Thank you very much. This meeting is adjourned. (Adjourned at 5:30 p.m.) - - - 246 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Monday, December 11, 2000, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON PUBLIC HEALTH AND PUBLIC SAFETY BILL NO. 000715 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter