Women and Housing and Finance (WHF) Luncheon Speech
Good afternoon ladies and gentlemen. I welcome you to Washington and to the first days of the 110th Congress. Women and Housing and Finance (WHF) is an organization that has been around since 1979. What dramatic changes we have witnessed in the past 25+ years since this organization was founded! The role of women has changed as America has changed. Clearly, America's role in the global economy has changed, which in turn will continue to reshape the role of its women.
I would like to thank WHF for its incredible work over the years, working to strengthen communities through grants and its generous financial support to many organizations -- the House of Ruth, Latino Economic Development Corporation, Women Empowered Against Violence, and many others. I would also like to acknowledge Members of the WFH Board of Directors; Ali Solis, the President; and President–Elect, Rebecca Laird. Without your dedication and commitment, many of the organizations you assist would not exist. It is the important work of these organizations that must continue.
Of course, no change is as dramatic as the change that has brought us to this historic moment in our nation with a new Congress and Democratic majority. We elected the first woman speaker in the history of Congress, Nancy Pelosi. The House has the largest number of women in its history -- 74 women to be exact. Women are heading several Committees of the House and Senate, and many women, including me, are poised to take major leadership roles in the 110th Congress.
As Speaker Pelosi said, "It's an historic moment for the Congress. It's an historic moment for the women of America. It's an historic moment for which we have waited for over 200 years." These are prophetic words that speak, in part, to the political struggles of women over the years. However, we must not lose focus of the struggle that continues for many women in America. I will not speak to all of the issues facing women in America but rather issues upon which I believe the members of this organization can have a direct impact.
Many of you are practitioners in banking, finance, housing, public policy, and law, so let me turn my attention to a number of related issues that are extremely important to me. The list is not too long, but it is very comprehensive –
affordable housing and homeownership for Americans, particularly women – who are heads of households;
affordable housing and homeownership for Americans, particularly women – who are heads of households;
predatory and sub-prime lending;
women and financial literacy; and
women and opportunities in the financial services industry.
Affordable Housing and Homeownership
Housing and wealth are inseparable. They go hand and hand. Homes represent the single largest source of wealth in America. The American homeownership rate has soared over the last several years to an astonishing level of about 70 percent for all Americans. But for both African-Americans and Latinos, the rate is around 50 percent. This means that both groups, including women who are among them, are less likely to own a home. In the City of Los Angeles, the homeownership rate is 39.9 percent with the median price of a home in excess of $500,000.00. For poor households, the homeownership rate is about 27 percent. In fact, homeownership is out of reach for many families in this country.
To the extent that homeownership rates lag, the ability to build wealth lags. We all know that equity in one's home equates to wealth. That equity can unlock many doors, particularly for women. Homes translate into the financial resources for higher education, investments, and business start-ups. You name it. If I can tap into my home equity for a good reason, then in all likelihood, it will turn into a long-term benefit.
The new Congress will make affordable housing and homeownership a major priority. Working with Chairman Frank and other Members of the Financial Services Committee, we will pick-up where we left off last year by re-introducing the FHA Modernization bill to increase the loan limits and make FHA backed mortgages available in high cost areas like my State of California and the City of Los Angeles. The bill will use risk-based premiums to make mortgages available to many first-time homebuyers. Most important, the bill will be an alternative to the numerous sub-prime loans that are being made across this country.
Another major initiative will be a Government-Sponsored Enterprise (GSE) bill. The GSE bill will provide more than $500 million for affordable housing nationwide. This will be an important measure because it will enable the GSEs to better serve the housing needs of low- and moderate-income families in America.
In addition to these measures, the Financial Services Committee will consider streamlining the process by which HUD assistance is used to develop affordable housing. It will work closely with the Ways and Means Committee to establish affordable housing tax credits to work in concert with the various federal housing programs. These are just a few of the initiatives that we will consider. Of course, many of the housing bills that were passed in the last Congress will be reintroduced in the 110th Congress. Everything that we intend to do relative to housing will address the affordable housing crisis in the country.
Women and Financial Discrimination
Women still experience discrimination with regard to credit. There are even more subtle forms of credit discrimination against minority women. Credit discrimination occurs in: (1) advertising and outreach (placing far fewer branch offices in minority neighborhoods and conducting little direct mail solicitation in minority communities; (2) handling of pre-application inquiries; (3) the loan approval and disapproval process; (4) loan pricing (charging minority customers higher costs than other groups of borrowers); and (5) loan administration (treating whites who have missed payments more leniently that non-whites).
Credit discrimination against minority women, who are the sole breadwinners in many families, has the affect of destroying the opportunity for financial well-being for those families. Without access to credit, minority women are often shut out of quality housing opportunities (both rental and ownership), automobile transportation to and from work, and education (college and vocational). Wealth can only be built in a few ways - housing, quality jobs and education are the most tried and proven ways. Without equal access to credit, women are unlikely to either get ahead financially, have the opportunity to purchase a home, or take advantage of higher educational opportunities.
As you know, the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) should protect women from financial discrimination related to home mortgage credit, refinance, home improvements and rental housing. I will work with Mr. Frank and others on the Financial Services Committee to make sure that discrimination against women in credit is a thing of the past. The Financial Services Committee, through its oversight activities, will examine this issue during this session of Congress.
Predatory Lending
Minorities are often the victims of predatory lending tactics in the housing mortgage market. African–Americans and Latinos are more likely to receive higher rate home purchase and refinance loans than similarly situated white borrowers, particularly for loans with prepayment penalties. For African-Americans, the figures are 6 to 34 percent; for Latinos the figures are 29 to 142 percent. This often leads to foreclosures as a well as other unintended consequences. Foreclosures are on the rise, and most evidence points to predatory or sub-prime lending as the major cause. The Center for Responsible Lending just released a study of foreclosures, indicating that there is a direct link between sub-prime lending and foreclosures. Unfortunately, many women who are seniors have been major victims of predatory lending as well and stand to lose their homes. Minority women are also victims of predatory lending practices.
Just think, a car loan paid in installments - a 5-year loan with an interest rate of 15 percent for $20,000, will have total interest of $8,548. But a car loan refinanced into a home equity loan for the same amount at 11 % interest rate costs the homeowner more than four times as much in extra interest. The interest charges over 30 years will add up to $48,567.00.
Predatory lenders flourish often as a result of bad credit decisions and uninformed credit decisions, which leads to lost equity in the homes owned by African Americans and Latinos, many whom are women. This lost equity could have been used for retirement or college education for one's children, among other things. Predatory lending is directly tied to credit access. It creates a vicious circle – a product that is often disguised as help that only ends up creating victims. As recently as 2000, sub-prime loans represented about 2.4 percent of all home loans, or 719,000. Today, almost 6 million or 13.4 percent of all mortgage loans are sub-prime.
Only 1 in 100 mortgages in the prime mortgage industry end in foreclosure; but in the sub-prime mortgage credit market, where minorities and women are often the victims, the ratio is 1 in 12. My goal is to eliminate predatory lending and to protect consumers from anything that looks remotely like it. We can ill-afford to sit idly by and watch foreclosure rates reach the sky and watch families lose their only real asset - their homes.
The Committee on Financial Services has identified predatory lending as a major priority. Its goal will be to pass legislation sometime this year that addresses predatory lending practices in this country. Many of you are aware of the Miller-Watt-Frank proposal. I believe that some version of that proposal will soon be unveiled and that the Subcommittee on Financial Institutions will hold hearings on the issue over the next few months.
Women and Financial Literacy
Many women are now the primary breadwinners in their homes. Many women spend most of their time working and raising their children. So, it only makes sense for financial literacy and planning to become a calling for women. Many women have managed household finances for years. No budgets, small budgets, feeding their children and making ends meet has been the mantra for many women. However, many women are now in the predicament where they are forced to operate at their best. Children must become introduced to the concepts of financial literacy and planning as part of growing up in America.
One survey suggests that 60 percent of young people in America between the ages of 18 and 34 say that they do not have the knowledge necessary to effectively manage their personal finances and retirement security. If these figures do not change, many of these persons will become marginalized in today's society over time.
Last year, I supported two House Resolutions that stressed the importance of financial planning and financial literacy for all Americans. Of course, the Resolutions accept the goal of financial planning and literacy as tools to enable families and individuals to achieve their financial and life goals.
However, sound financial planning must be integrated into a comprehensive life plan. Many of today's financial instruments and investments require basic if not advanced financial literacy and planning to be used wisely. Attaining a state of financial independence is a goal that I strongly advocate for women. Without financial independence, it will be impossible to function and meet future challenges. I believe that financial literacy and planning are two critical steps to this independence. I will continue to work with my colleagues to ensure that these goals are achievable.
Women and the Financial Services Industry
I was surprised by the findings of a recent Government Accountability Office (GAO) report titled "Financial Services Industry, Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2004."
According to the Equal Employment Commission (EEOC) data used in the GAO study over 10 years, African-Americans increased their representation in the industry from 5.6 percent to 6.6 percent, while Hispanics increased their numbers from 2.8 percent to 4.0 percent. I was really appalled that we have witnessed such growth in the overall percentage increases in the numbers of these groups moving into management in the financial services industry — after all ten years is a long time.
Are women really making progress in the financial services industry? Maybe I am missing something, or was the report a gauge of how much progress we have made in developing African-American and Hispanic talent, especially women for the managerial ranks of major corporations in the financial services industry—banks, securities and insurance companies. What can be done to change this trend? This is where you come into play. To the extent that you are a decision-maker in the financial services industry, it is up to you to make sure that you hire qualified talented women, particularly minority women. Women must stand up for other women when it comes to advancing in the industry. We must reach out to African-American and Latino women and recruit them for positions that will lead to managerial roles in the financial services industry.
You are on the front lines. So, I think that it is critical that you become involved in all of these issues. With your incredible network and resources, you can make real progress on many of these fronts in the next several years. Of course, we must continue to educate the public about all of these issues -- homeownership, predatory lending, credit discrimination, financial literacy and planning, and women in the financial services industry. As your partner, I will be working in this Congress over the next several months to see that legislation is passed that will address many of these issues. I encourage you to present your ideas to the new Congress at every opportunity.
Thank you.
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