The National Black Caucus of State Legislators'
Housing Symposium

FRIDAY, JUNE 29, 2007

Thank you, Calvin (Smyre). It's good to see you, Mayor (Johnny) Ford and so many other good friends.

Seventy-three years ago this week, on June 26, 1934, an historic, shocking speech was delivered by W.E.B. DuBois. It was a speech that opened minds and disturbed America with its possibilities. The speech was called "A Nation within a Nation." Some of you may know it. DuBois argued that segregation was so powerful and unyielding that Black Americans had no alternative but to unite and use every resource to overcome discrimination. He believed such unification could be powerful, politically and economically. He believed that the black churches and black schools stood as examples of that promise. And he was right: organization and unification can be powerful, as we can see through efforts like the Congressional Black Caucus and the National Black Caucus of State Legislators. DuBois predicted that consumer power, intellectual power, and political power could transform the condition of Black Americans, giving them clout, opportunity, and freedom. We didn't need to be characterized as victims. We did need to become full political and economic participants.

Well, 73 years later, Black Americans have made considerable progress. We have become a formidable force in American society, while at the same time continuing the process of integration, equality, and justice. We have done this through our institutions, through our individual accomplishments, through greater economic wealth, and through the moral force of our just demands for civil rights and enforcement of the law.

Homeownership is one measure of progress. In 1934, black homeownership was somewhere around 25 percent, and as low as 10 percent in some parts of the country. In the past 73 years, we have made significant gains for everyone, including our minority citizens. America has become what President Bush has termed an "ownership society," with homeownership at its core. Nearly 70 percent of all American families own a home. Right now, more than 50 percent of our minority families own a home. But compare this figure to non-minorities, where the homeownership rate is 74 percent.

We have to accelerate our progress and close these gaps. And part of this requires you and me to keep faith with the ideal of homeownership. Americans who want a home and can afford one shouldn't be discouraged from purchasing a home. The American Dream is still a solid vision for a family and this nation.

So we have to find the ways and means to increase minority homeownership. That is a key to wealth acquisition, equity, financial security, and a stronger stake in the community.
However, many first time and minority homebuyers face significant challenges when trying to purchase a home. In recent years, such difficulties have resulted in many of these individuals assuming risky, adjustable-rate, sub-prime loans. The impact on Black American and Hispanic/Latino borrowers has been particularly profound.

Have we become a nation within a nation? Let the facts speak for themselves. According to one study, 40 percent of African Americans and 23 percent of Hispanics pay an interest rate three percent higher than the market rate. Affordable loans are hard to come by because credit problems persist for many Americans of color; the loan denial rate is as much as twice as high for minority applicants than white households.

And many recent immigrants fall victim to inappropriate lending practices because of credit problems. For example, one recent study found that 35 percent of Latino families don't have a checking account. This lack of credit history makes these families easy prey for predatory lenders and those peddling exotic sub-prime loans. Another study found that, in 2005, about 46 percent of Hispanics and 55 percent of blacks who took out mortgages got higher-cost loans, compared with about 17 percent of whites. These problems extend across the financial spectrum. Recently, there was a report that minorities even pay more for car loans than the national average.

These figures show a widespread, persistent pattern. Economically, we still face the lingering vestiges of segregation. Today we still encounter economic segregation in many places…a financial apartheid. And we can only address these problems by using every resource at our disposal, and by encouraging powerful partnerships, innovative thinking, and steadfast commitment to fairness, equity, and justice.

If we can overcome these disparities, then we can change the face of homeownership in America. One study found that we can close the gap by half in the next ten years if we get fair loans to those with enough income. The study found that there are potential minority home buyers earning more than 95 percent of the area median family income. So, if we create a level field, the housing market will gain a significant number of minority homeowners.

President Bush understands the importance of this issue and that's why he made a public commitment to increasing minority homeownership back in 2002. He committed to creating five million new minority homeowners by the end of the decade. I am proud to report that we are already more than half-way there, with more than 3 million new minority homeowners.

But what more can we do? First, we can end predatory lending. There is no place for it in American housing or lending practices - no place at all!!! Predatory lenders have targeted homebuyers - especially minorities -- and successfully manipulated many of us into unwarranted, illegal, or unethical loans. For minority citizens, in particular, affordable loans are hard to come by which is why slick and sinister predatory lenders often appear to be the only option for many. I will continue to aggressively pursue any predatory lender. And I ask you to do the same in your states.

Second, we must have more housing counseling. Consumers must be educated. Our citizens need to be empowered with the tools to know when to spot a sham. The key is to be able to read and understand the fine print, and also to know when to ask for help. At a summit I convened last month, there was testimony that half of all homeowners facing foreclosure were afraid to contact their lender for help. That's right - instead of picking up the phone and asking for help, people are willing lose their house. We also learned that while most people facing foreclosure are afraid of their banks, they are much more open to talking to a local non-profit counseling agency about their problems.

That's why housing counseling and financial education are so important. This Administration has increased the budget for counseling over 200 percent, with the President requesting another increase, to $50 million, in the coming fiscal year.

Housing counseling is vitally important for the future. We must help Americans better determine if they can afford a home, and how much home to buy.

We are also working with other agencies to strengthen our financial literacy initiatives.

Finally, we need FHA reform. It will help us deal with the sub-prime problem. Some of these loans are responsible and democratized credit. Actually, we think about 80 percent of the sub-prime loans are going to be OK. But the remaining 20 percent are a problem. They are exotic loans that didn't take into account the financial situation or the ability of the borrower to pay back the loan. They were financially irresponsible loans.

The Federal Housing Administration (FHA) is one answer. FHA was created in 1934, the same year as DuBois spoke about a "nation within a nation." Here we have an important tool for meeting the housing needs of millions of Americans. So, I have asked FHA to do everything possible to help refinance problematic sub-prime loans. And it did, helping tens of thousands of homeowners. They were able to refinance into safer, federally-insured mortgages. Our lenders' foreclosure rate of 1.3 percent is half the sub-prime average. FHA and its lenders actively work with people who are running into financial difficulty. They do this by extending their loans terms, temporarily reducing their payments, or making a partial claim through the FHA insurance fund. But we have done as much as we can with our current regulatory authority.

Frankly, we need legislation to modernize the FHA. We need this reform now!!! The FHA is a mainstay of the American housing enterprise. Over the past 73 years, the FHA has helped millions of families become homeowners. This month, we celebrated our 34 millionth FHA customer. And we have helped families stay in their homes. If Congress passes FHA reform, we could help hundreds of thousands and we could do so without cost or risk to taxpayers.

We need to be able to help more first-time homeowners and low-income Americans - the groups we were designed to serve, and to serve safely. The National Association of Hispanic Real Estate Professionals has warned that gains in minority homeownership may be undone without FHA reform. And the Association also warns that minority homeowners who experience foreclosure usually need longer than the ten-year average to quality for another home. Most minorities just get one chance at homeownership. So we need to make sure it works for them the first time.

Everyone should have access to a safe, affordable mortgage product, and this should not change just because that person is a first-time homebuyer or a minority homebuyer.

We can make America a homeownership society for every citizen. We can end the economic disparities that continue to shackle Black Americans. We can do this through straightforward actions that address predatory lending, provide housing counseling, and modernize the FHA. And we can learn from the foresight of DuBois by uniting together, joining in common cause. Together, we can shatter any barrier, overcome any difficulty. We can change opinions, patterns, and traditions. In partnership, we can make a profound difference.

That is why I am here today. I ask you to join with me to level the laying field, to end the covert and overt economic segregation that is unfair and unjust. I ask you to help me end the wrongful patterns of lending and finance that allows this kind of segregation to continue to haunt this country, long after its legal demise.

I don't agree with Dubois' later idea that Black Americans must be separate to survive; we know that isn't true. In fact, it is just the opposite. We must unify in order to fully integrate, to make America fully free, and equally fair to all, regardless of color.

Will we remain a "nation within a nation"? I hope not. We must provide an answer to that question, and housing is one place to look for our future as a nation.

Thank you.


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