Subprime Mortgage Crisis

Floor Speech

SUBPRIME MORTGAGE CRISIS -- (House of Representatives - November 05, 2007)

The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from New York (Ms. Clarke) is recognized for 5 minutes.

Ms. CLARKE. Mr. Speaker, I come to the floor this evening feeling compelled to speak on an issue that has had an adverse and devastating impact in my district and many districts across this Nation. The phenomenon known as subprime lending, which has grown so rapidly over the past decade or so, has made it possible for many New Yorkers with modest incomes and poor credit histories to purchase homes.

The question is, at what cost? The Federal Government has found that subprime loans made up 32 percent of all mortgages in New York City last year, which is up from 28 percent in 2005.

However, an estimated 364,433 subprime loans remain outstanding. As a result, as we stand here tonight, Brooklyn has 4,864 homes facing foreclosure.

When certain unscrupulous lenders aggressively and deceptively convince vulnerable borrowers seeking relief in their pursuit of the American Dream to accept unfair and abusive loan terms, many of these same borrowers have, unfortunately, lost their homes, leaving them displaced, penniless, and bankrupt.

Today, mortgage finance programs in the subprime lending industry are growing more severe, with soaring loan default even diminishing home prices. These defaults have depreciated about $71 billion in housing wealth. I must tell you this evening that this crisis will and is currently affecting State economies.

It has been estimated that there will be 1.3 million foreclosures from mid-2007 through 2009 in subprime mortgages, resulting in an estimated loss of $102.4 million in property taxes.

Also, it has been reported that the subprime mortgage crisis will cost States $917 million in lost property revenue through the end of 2009 and more than $103 billion in lost property values, including $9.5 billion for New York.

What is alarming to me is that there have been reports which have found that embedded within this American crisis there appears to be real racial disparities when it comes to subprime lending. For example, one report stated that blacks and Hispanics are 30 percent more likely than whites to be charged with higher interest rates. Additionally, in New York, blacks are five times and Hispanics almost four times more likely to pay higher interest rates for homes.

Even in East Flatbush, Brooklyn, which is located in my district, an astounding 44 percent of blacks and Hispanics earning between $40,000 and $50,000 received their loans from subprime lenders. We must make a conscious and focused effort to address the subprime lending crisis in predominantly black and Hispanic neighborhoods in New York City and across the Nation.

What is so ironic about this issue of the subprime mortgage crisis is that as a former New York City council member, my colleagues and I saw this crisis arise as representatives of the municipality. We even passed legislation, anti-predatory lending legislation, yet the legislation went nowhere due to the threat of litigation by the financial services sector. Now the crisis is upon us. Hundreds of thousands of Americans across this country are facing this crisis.

I am supporting and will champion any and all measures that ensure that all borrowers, especially those living in underserved communities, are no longer hurt by the recent events and tactics occurring in the mortgage market.

It is our responsibility, and in the public interest, to make certain that we eliminate predatory practices that have the potential to financially harm mortgage consumers living in America.

If we do not, I believe that we will generate an environment where predatory lenders will continue to actively sell high-cost, high-risk mortgages in many communities, including underserved communities, making the American Dream of all Americans an American nightmare.

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