What is the primary agency charged with enforcing Floridas fair housing law?

[House Hearing, 110 Congress] [From the U.S. Government Printing Office] ENFORCEMENT OF THE FAIR HOUSING ACT OF 1968 ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON THE CONSTITUTION, CIVIL RIGHTS, AND CIVIL LIBERTIES OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION ---------- JUNE 12, 2008 ---------- Serial No. 110-183 ---------- Printed for the use of the Committee on the Judiciary Available via the World Wide Web: http://judiciary.house.gov ENFORCEMENT OF THE FAIR HOUSING ACT OF 1968 ENFORCEMENT OF THE FAIR HOUSING ACT OF 1968 ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON THE CONSTITUTION, CIVIL RIGHTS, AND CIVIL LIBERTIES OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION __________ JUNE 12, 2008 __________ Serial No. 110-183 __________ Printed for the use of the Committee on the Judiciary Available via the World Wide Web: http://judiciary.house.gov ---------- U.S. GOVERNMENT PRINTING OFFICE 42-850 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON THE JUDICIARY JOHN CONYERS, Jr., Michigan, Chairman HOWARD L. BERMAN, California LAMAR SMITH, Texas RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr., JERROLD NADLER, New York Wisconsin ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina MELVIN L. WATT, North Carolina ELTON GALLEGLY, California ZOE LOFGREN, California BOB GOODLATTE, Virginia SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio MAXINE WATERS, California DANIEL E. LUNGREN, California WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah ROBERT WEXLER, Florida RIC KELLER, Florida LINDA T. SANCHEZ, California DARRELL ISSA, California STEVE COHEN, Tennessee MIKE PENCE, Indiana HANK JOHNSON, Georgia J. RANDY FORBES, Virginia BETTY SUTTON, Ohio STEVE KING, Iowa LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida BRAD SHERMAN, California TRENT FRANKS, Arizona TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas ANTHONY D. WEINER, New York JIM JORDAN, Ohio ADAM B. SCHIFF, California ARTUR DAVIS, Alabama DEBBIE WASSERMAN SCHULTZ, Florida KEITH ELLISON, Minnesota Perry Apelbaum, Staff Director and Chief Counsel Sean McLaughlin, Minority Chief of Staff and General Counsel ------ Subcommittee on the Constitution, Civil Rights, and Civil Liberties JERROLD NADLER, New York, Chairman ARTUR DAVIS, Alabama TRENT FRANKS, Arizona DEBBIE WASSERMAN SCHULTZ, Florida MIKE PENCE, Indiana KEITH ELLISON, Minnesota DARRELL ISSA, California JOHN CONYERS, Jr., Michigan STEVE KING, Iowa ROBERT C. ``BOBBY'' SCOTT, Virginia JIM JORDAN, Ohio MELVIN L. WATT, North Carolina STEVE COHEN, Tennessee David Lachmann, Chief of Staff Paul B. Taylor, Minority Counsel C O N T E N T S ---------- JUNE 12, 2008 Page OPENING STATEMENTS The Honorable Jerrold Nadler, a Representative in Congress from the State of New York, and Chairman, Subcommittee on the Constitution, Civil Rights, and Civil Liberties................ 1 The Honorable Trent Franks, a Representative in Congress from the State of Arizona, and Ranking Member, Subcommittee on the Constitution, Civil Rights, and Civil Liberties................ 2 The Honorable John Conyers, Jr., a Representative in Congress from the State of Michigan, Chairman, Committee on the Judiciary, and Member, Subcommittee on the Constitution, Civil Rights, and Civil Liberties.................................... 3 The Honorable Melvin L. Watt, a Representative in Congress from the State of North Carolina, and Member, Subcommittee on the Constitution, Civil Rights, and Civil Liberties................ 5 WITNESSES Ms. Jessie K. Liu, Deputy Assistant Attorney General, Civil Rights Division, Department of Justice Oral Testimony................................................. 7 Prepared Statement............................................. 9 Ms. Kim Kendrick, Assistant Secretary, Office of Fair Housing and Equal Opportunity, Department of Housing and Urban Development Oral Testimony................................................. 15 Prepared Statement............................................. 16 Mr. James H. Carr, Chief Operating Officer, National Community Reinvestment Coalition Oral Testimony................................................. 37 Prepared Statement............................................. 39 Ms. Suzanne Sangree, Chief Solicitor, City of Baltimore Law Department Oral Testimony................................................. 53 Prepared Statement............................................. 54 Mr. Stan Liebowitz, Ashbel Smith Professor of Managerial Economics, University of Texas at Dallas Oral Testimony................................................. 57 Prepared Statement............................................. 59 Ms. Audrey J. Wiggins, Director, Fair Housing and Environmental Justice Project, Lawyers' Committee for Civil Rights Under Law Oral Testimony................................................. 64 Prepared Statement............................................. 66 Ms. Shanna L. Smith, President and CEO, National Fair Housing Alliance Oral Testimony................................................. 79 Prepared Statement............................................. 81 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Prepared Statement of the Honorable John Conyers, Jr., a Representative in Congress from the State of Michigan, Chairman, Committee on the Judiciary, and Member, Subcommittee on the Constitution, Civil Rights, and Civil Liberties......... 3 APPENDIX Material Submitted for the Hearing Record........................ 121 ENFORCEMENT OF THE FAIR HOUSING ACT OF 1968 ---------- THURSDAY, JUNE 12, 2008 House of Representatives, Subcommittee on the Constitution, Civil Rights, and Civil Liberties, Committee on the Judiciary, Washington, DC. The Subcommittee met, pursuant to notice, at 10:09 a.m., in room 2141, Rayburn House Office Building, the Honorable Jerrold Nadler (Chairman of the Subcommittee) presiding. Present: Representatives Conyers, Nadler, Davis, Wasserman Schultz, Scott, Watt, Franks, and Jordan. Also Present: Representative Green. Staff present: David Lachmann, Majority Subcommittee Chief of Staff; LaShawn Warren, Majority Counsel; Tracie Powell, CBC Fellow; Caroline Mays, Majority Professional Staff Member; Paul Taylor, Minority Counsel; and Crystal Jezierski, Minority Counsel. Mr. Nadler. This hearing of the Subcommittee on the Constitution, Civil Rights, and Civil Liberties will come to order. Without objection, the Chair will be authorized to declare a recess of the hearing. The Chair anticipates doing so only in the event there are votes during the hearing, which hopefully there won't be. I now recognize myself for 5 minutes for an opening statement. Today we continue our oversight of the Department of Justice's Civil Rights Division by examining the enforcement of the Fair Housing Act of 1968. We are also joined by representatives of the Department of Housing and Urban Development, which also has an enforcement role, and a distinguished panel of witnesses to discuss the state of fair housing enforcement. The right to be treated equally, free from discrimination, in all matters affecting access to housing is one of the fundamental rights guaranteed by law. One only has to look at unequal access to good housing, the current foreclosure crisis, continuing segregation of our communities, and predatory lending practices that appear to have treated communities of color more harshly than other communities, among other disturbing patterns, to understand the dangerous impact that housing discrimination can and does have on this Nation. Housing discrimination is everyone's problem. It divides our society, it affects the stability of our communities, and has even helped to disrupt our capital market. More than anything, it is unjust and has no place in a decent society. Laws prohibiting discrimination in housing--whether rental housing, homeownership or access to fair credit--are important. But they are useless if not vigorously enforced. That is the purpose of today's hearing. I look forward to the testimony of our witnesses. I am especially interested in determining whether we can do a better job enforcing the laws we have and whether there are gaps in current law that need to be addressed by Congress. I want to welcome our witnesses, and I look forward to your testimony. I will now recognize for an opening statement the Ranking minority Member, the gentleman from Arizona. Mr. Franks. Well, thank you, Mr. Chairman. And thank you all for being here today. Mr. Chairman, today we are here to conduct oversight over the housing section of the Department of Justice, which continues, in my judgment, to vigorously enforce the Nation's laws against discrimination in housing. Chairman Conyers and representatives of the civil rights groups held a press conference regarding the current mortgage debate on March 19th of this year. And at that event, Mr. Chairman, not a single speaker, not even Chairman Conyers, accused the Department of Justice of being lax in their prosecution of legitimate housing market discrimination cases. But less than a month later, Speaker Pelosi, on the 40th anniversary of the Fair Housing Act, took the opportunity to suddenly claim that Federal inaction in enforcing the housing discrimination laws has contributed to the current mortgage crisis, especially predatory lending practices. That claim is belied, Mr. Chairman, by the Justice Department's expansive efforts in prosecuting mortgage lending discrimination cases under Federal law. And I am glad we have the opportunity to rebut that claim today. The Fair Housing Act prohibits discrimination in residential real estate transactions. The Equal Credit Opportunity Act prohibits creditors from discriminating in any aspect of a credit transaction. Under the Department of Justice Operation Home Sweet Home initiative, the department conducted a record-high number of fair housing tests in fiscal year 2007 to uncover housing discrimination. The disproportionate number of minorities that receive subprime loans in part is a result of the actions taken by Congress long ago when it passed the Community Reinvestment Act in 1977. That act was designed to direct easier credit to lower-income communities, and it has done that. That act requires the Federal Reserve Board and other financial regulators to rate banks on their lending practices within low-to moderate-income areas within their service areas. A bank's failure to make loans in such areas may cause regulators to halt bank expansion plans until the institution alters its lending practices. Consequently, banks and thrifts have increased their lending to low-and moderate-income borrowers. That is the basic premise. And although subprime lending is, to a degree, outside the act's purview because such lending has been undertaken in large part by financial service companies other than banks and thrifts, loans provided by bank affiliates can be counted to determine whether the bank is meeting the credit needs of their community. If they are included and if the affiliate is a subprime lender, such subprime affiliate loans could be included in a bank's performance rating. Indeed, institutions evaluated under the act issued about half of subprime mortgage loans, many of them of the riskier variety. So as we proceed with this discussion, we need to frankly address the effects of that act of 1977, which encouraged banks, through their affiliates that could be subprime lenders, to make riskier loans more easily available to low-income communities. As recently reported in National Review magazine, Countrywide is one of the biggest players in the subprime mortgage industry and has aggressively pushed subprime mortgages. For decades, the left advanced more credit for homeownership among the poor and especially among poor minorities. Their biggest policy success was the Community Reinvestment Act, passed in 1977 and updated several times. The L.A.-based Spanish-language publication, La Opinion, named Countrywide ``Corporation of the Year'' for its work with Hispanics. In 2005, Countrywide won the ``Best in Minority Lending'' award from the Lending Industry Diversity Conference. Everything changed when the flip side of easy credit became apparent. The New York Times made the shocking discovery that when minorities disproportionately take out the riskiest mortgage, they disproportionately experience foreclosures as well. The result of Congress' action unfortunately hurt many consumers that were supposed to be helped. And I hope we can explore these and other issues at the hearing today and make sure the current mortgage market tension is not repeated in the future. We need fair lending practices, Mr. Chairman. We need to never discriminate against anyone. But we need to make sure that our policies don't make things worse for those that we ostensibly are trying to help. And, with that, I yield back. Mr. Nadler. I thank the gentleman. And I now will yield for an opening statement 5 minutes to the distinguished Chairman of the full Committee, the gentleman from Michigan. Mr. Conyers. Well, I ask that my statement be put in the record, Chairman Nadler. Mr. Nadler. Without objection. [The prepared statement of Mr. Conyers follows:] Prepared Statement of the Honorable John Conyers, Jr., a Representative in Congress from the State of Michigan, Chairman, Committee on the Judiciary, and Member, Subcommittee on the Constitution, Civil Rights, and Civil Liberties Although it's been nearly 40 years since the Fair Housing Act banned housing discrimination, complaints alleging unfair treatment of minorities, the disabled, families, and other groups are increasing. Of an estimated 3.7 million fair housing violations annually, approximately 2 million involve race discrimination. Admittedly, some progress has been made in reducing levels of residential segregation and discrimination since the passage of the Act. But let's face it--most Americans still live in communities largely divided by race and ethnicity. Thus, the obvious question I have for our witnesses--particularly in light of the ever-escalating mortgage crisis--is what actions have Justice and HUD taken to ensure that the Fair Housing Act is enforced effectively? The facts clearly underscore the need for greater enforcement. Let me highlight three particular concerns. First, despite claims that the Administration has continued vigorous enforcement of the FHA, the Government's caseloads and charges have steadily decreased and relatively few cases have been brought on behalf of racial and ethnic minorities, particularly pattern and practices cases. HUD's own data suggests that out of approximately 3.7 million annual fair housing violations, the Department, for example, only processed 11,000 complaints in 2006, which is less than one-half of 1% of the total estimated number of housing violations. Second, I sense that DOJ's longstanding commitment to combat race discrimination in housing has steadily declined over the years. The Department filed fewer fair housing cases in the past two years than in previous years. Look, we're not talking about thousands of cases or even hundreds of cases being filed. In 2007, for example, the DOJ filed only 35 fair housing cases. In 2006, it filed 31 cases. In contrast, the DOJ filed 42 cases in 2005, and and 53 cases in 2001. And, of the 31 housing and civil enforcement cases DOJ brought in 2006, only eight involved claims of race discrimination. Beyond this, I am troubled by Attorney General Mukasey's recently announced refusal to create a national taskforce to combat the country's mortgage fraud crisis. Doesn't he read the newspapers or listen to the television news reports about rampant fraud and predatory lending by brokers and lenders? Finally, we just learned that HUD's mortgage policy may have actually helped to fuel the subprime mortgage crisis that is at the heart of today's turbulent economy. The Washington Post reported Tuesday that, while regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing. I want to know from our witnesses why the number of discrimination cases filed by DOJ has declined, even as the number of complaints has risen. I also hope to learn if, in fact, HUD irresponsibly continued policies that helped create the mortgage crisis we find ourselves in today. Many people forget that Dr. King focused heavily on fair housing issues, with a keen recognition of what costs our society would pay for continued patterns of discrimination and segregated living. Passage of the Fair Housing Act was a fitting tribute to his efforts in this regard. The Fair Housing Act is now one of the most powerful tools in our civil rights arsenal; but a tool is only effective when wielded with skill and intent. I look forward to hearing from or witnesses today as we seek to determine whether the federal government is wielding this tool effectively. Mr. Conyers. I am looking for the press release or the press hearing that my friend, the Ranking Member, Trent Franks, referred to where nobody made a peep about enforcement of discrimination in housing, the March 19 press conference with civil rights leaders on the subprime crisis. But I will get to that, because I am here to confess the error that I said nothing, I didn't make a peep, because I am going to make a big peep this morning. This is one of the most disturbing trends in our history. We were talking it over with LaShawn Warren and others. Three and a half million annual fair housing violations, according to HUD's own data. Last year, DOJ filed 35 fair housing cases. In 2006, they filed 31 cases. In 2005, they filed 42 cases. In 2001, they filed 53 cases. Now, for years and years, we have been saying, how come we can't get rid of the inner city, the ghettos, the places in urban America that nobody will live in but those that are forced to live there? And at the rate that we are going, there will be people sitting in this hearing room with the same representatives from DOJ and HUD, and there will be somebody replacing all of us up here, and we will be saying the same thing. Because, at the rate we are going, this problem will never be solved. The reason we can't get rid of inner cities and slums and ghettos is because, if we are hitting 3.7 million violations-- at least 1.7 million are directly racially connected to race problems; the rest are other problems, and I am in the process of finding out what the other problems are--it is arithmetically impossible to ever eliminate the slums. We will be doing this forever. So, Trent, I owe you a debt of thanks for pointing out how slack I have been on this matter, even as recently as March 19th. Well, I am glad--that is what makes this Committee so unique. We work together. This is great. This is an incredible situation that requires the Department of Justice and Housing to really get to the bottom of it. So I congratulate both my Chairman and Ranking Member for holding the hearing here today, and I thank you. Mr. Nadler. I thank the gentleman. In the interest of proceeding to our witnesses and mindful of our busy schedules, I ask that other Members submit their statements for the record. Mr. Watt. Mr. Chairman? Mr. Nadler. The gentleman is recognized. Mr. Watt. I wanted to ask unanimous consent to make a brief opening statement. Mr. Nadler. Without objection. Mr. Watt. And it will be brief. And, actually, this is spontaneous. It was not planned. It was provoked by some of our Ranking Member's comments, because I think he has left the wrong impression that this is somehow a conspiracy of the left to increase homeownership in this country and thereby drive African-Americans and other minorities to subprime lenders. I think that would be a terribly wrong impression to allow to stand on the record. There is and has been a very aggressive effort of many of us to increase homeownership because we recognize that homeownership in our community is the primary means of gaining wealth. We don't have stocks and bonds and retirement accounts. So, historically in our community, a means of getting any wealth is to own a home. And we have been unapologetic advocates of increased homeownership in minority communities. But to leave the impression that we condone disproportionate numbers of African-Americans and other minorities being given subprime loans, many of whom would have qualified for prime loans had they not been discriminated against, is to leave a very erroneous impression. And to not acknowledge the complicity, the active participation in that by this Administration would be equally inaccurate, because it was HUD that suggested that subprime loans be given CRA credit by lenders. It was HUD that looked the other way while they should have been regulating lenders when we were crying out to them as Members of the Congressional Black Caucus and on the Financial Services Committee, on which I sit and into which I introduced the first predatory lending bill three Congresses ago, not in the middle of this crisis. It would be in error to leave that impression on our record in this communities. And it would be in error to leave the impression that this Department of Justice has not been complicit in it, because as recently as last week, the Attorney General made a decision that he is not going to set up a special unit to look into all of the fraud and misrepresentation and predatory lending practices that took place that led to this economic crisis. And we have been crying out for the Attorney General to take the lead on that, and he has refused to do it. I know the Chair wants to move forward with the hearing, but I didn't come in here planning to make this statement. I just want the Chair to know that this was provoked. It was not premeditated. And for us to allow those kinds of statements and innuendoes that it was somehow our fault that we are being discriminated against and channeled to particular communities and channeled to predatory lenders and subprime loans is just irresponsible if we allow that to be any statement in this Committee or any other Committee of this Congress. And I thank the Chairman for allowing me this opportunity to correct the record, or at least give a balance to it, from what our Ranking Member has said. Thank you. I yield back. Mr. Nadler. Thank you. And I ask that other Members submit their statements for their record. Without objection, all Members will have 5 legislative days to submit an opening statement for the record. We will now turn to our first panel of witnesses. As we ask questions of our witnesses, the Chair will recognize Members in the order of their seniority on the subcommittee, alternating between majority and minority, provided the Member is present when his or her turn arrives. Members who are not present when their turn begins will be recognized after the other Members have had the opportunity to ask their questions. The Chair reserves the right to accommodate a Member who is unavoidably late or only able to be with us for a short time. Your written statements will be made part of the record in its entirety. I would ask each of you to summarize your testimony in 5 minutes or less. To help you stay within that time, there is a timing light at your table. When 1 minute remains, the light will switch from green to yellow, and then red when the 5 minutes are up. I will now introduce our first panel. Jessie Liu has served as deputy assistant attorney general in the Civil Rights Division of the Department of Justice since December 2007. Her duties include supervising the division's Housing and Civil Enforcement section, which enforces the Fair Housing Act of 1968. Before she joined the Civil Rights Division, Ms. Liu served as an assistant U.S. attorney for the District of Columbia. She also has worked in the National Security Division of the Office of the Deputy Attorney General at the Department of Justice. Prior to her service at the department, Ms. Liu practiced law with the firm of Jenner & Block and served as a Federal judicial clerk. Ms. Liu earned her law degree from Yale Law School, where she was an editor of the Yale Law Journal; her undergraduate degree, summa cum laude, from Harvard University. Kim Kendrick is the assistant secretary in HUD's Office of Fair Housing and Equal Opportunity. Ms. Kendrick was formerly the senior counselor for the secretary and advised and represented Secretary Alphonso Jackson on a wide variety of HUD programs, policies and strategies. Before joining the Bush administration, Ms. Kendrick was the general counsel for Covenant House Washington. From 1998 to 2002, she served as a regional administrator for the District of Columbia's Housing Authority. As HUD's assistant general counsel for insured housing and community development litigation from 1990 to 1995, Ms. Kendrick was responsible for nationwide Federal court litigation involving challenges to HUD's programs, policies and procedures. Ms. Kendrick provided agency offices counsel and advice concerning actual potential litigation regarding, among other issues, FHA single and multifamily mortgage insurance programs and the Community Development Block Grant program. A native of Pittsburgh, she received her bachelor of arts in sociology from Bowdoin College in New Brunswick, Maine, and a law degree from the University of Pittsburgh Law School. I am pleased to welcome both of you. It is the custom of the Committee to swear in witnesses. Would the witnesses please stand and raise your right hands? [Witnesses sworn.] Mr. Nadler. Let the record reflect that the witnesses answered in the affirmative. You may be seated. Thank you. The first witness I will recognize for 5 minutes is Ms. Liu. TESTIMONY OF JESSIE K. LIU, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL RIGHTS DIVISION, DEPARTMENT OF JUSTICE Ms. Liu. Mr. Chairman, Ranking Member Franks, Members of the Subcommittee, it is a pleasure to appear before you this morning to represent the Department of Justice and the dedicated professionals of the Housing and Civil Enforcement Section of the Civil Rights Division, who work so hard to ensure nondiscriminatory access to housing, credit and public accommodation. I am pleased to report on some of the outstanding accomplishments of that section. This April, we commemorated the 40th anniversary of the Fair Housing Act, landmark legislation that outlawed discrimination on the basis of race, color, national origin or religion in the sale, rental or financing of housing. Since the original act was passed in 1968, Congress has reaffirmed and expanded this country's commitment to fair housing by extending the act's protections to include sex, disability, familial status and providing for much-needed enforcement tools. Although we have made progress over the last 40 years, there can be no question that housing discrimination exists today. Since 2001, the division has filed 248 cases to enforce the civil provision of the Fair Housing Act and obtained significant relief. In 2006, the Attorney General launched Operation Home Sweet Home, an initiative to combat housing discrimination focused on improving and expanding our fair housing testing program. Last fiscal year, we conducted more than 500 paired tests all across the country, 20 percent more than in any previous year. These tests are already producing new cases and significant results. For example, this January, we filed suit, alleging that the owner and operators of an apartment complex in Roseville, Michigan, engaged in a pattern or practice of denying apartments to African-Americans by falsely telling them that no apartments were available. In addition to that case, we have filed and settled three other cases based upon testing evidence just since last September. We also have achieved significant results in cases stemming from complaints filed with HUD. Just last month, we settled a particularly egregious case in which we alleged that the landlord of a housing complex in Virginia Beach, Virginia, imposed more restrictive rules on African-American tenants, verbally harassed African-American tenants with slurs and epithets, and evicted tenants by enforcing a limit of two children per family. The settlement we obtained requires the landlord to pay up to $319,000 to victims of discrimination and a $42,000 civil penalty. The division's enforcement of the Fair Housing Act protections against discrimination based on disability is also a vital element of our work. Since fiscal year 2005, we have obtained settlements requiring more than 14,500 apartments throughout the country to be made accessible to persons with disabilities under the Fair Housing Act. Cases alleging systemic sexual harassment by landlords also have been a priority. During this Administration, we have filed three times as many system sexual harassment cases under the Fair Housing Act as the same time period in the prior Administration. And we have achieved substantial relief for the victims of this kind of discrimination. Just in the past year, our sexual harassment settlements have provided for over $1 million in monetary damages and civil penalties. In this brief statement, I have had time to highlight just a few of the division's many fair housing cases and investigations. But these examples demonstrate the division's ongoing and steadfast commitment to doing its part to eradicate housing discrimination and bring relief to victims of discrimination. We look forward to working closely and cooperatively with this Committee in its efforts to protect the fair housing rights of all Americans. I thank you, and I look forward to your questions. [The prepared statement of Ms. Liu follows:] Prepared Statement of Jessie K. Liu [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Nadler. I thank you. We now recognize for 5 minutes Ms. Kendrick. TESTIMONY OF KIM KENDRICK, ASSISTANT SECRETARY, OFFICE OF FAIR HOUSING AND EQUAL OPPORTUNITY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Ms. Kendrick. Thank you. Chairman Nadler, Ranking Member Franks and Members of the Subcommittee, good morning. I am Kim Kendrick, assistant secretary for the Office of Fair Housing and Equal Opportunity at the U.S. Department of Housing and Urban Development. On behalf of Secretary Steven Preston, I am truly honored to have this opportunity to testify before you today. I would like to submit my written testimony for the record. Forty years ago, Congress passed the Fair Housing Act and took a major step toward fulfilling Dr. King's dream of a united society. Today that landmark legislation guarantees that people can live where they want regardless of their race, color, national origin, religion, sex, familial status, and disability. Since that time, much progress has been made. Cities and neighborhoods are much less segregated, and African-Americans and other minorities enjoy more economic opportunities than ever before. Yet discrimination persists. For the last 2 consecutive years, HUD and our State and local fair housing partners have received more than 10,000 complaints of discrimination. These are stark reminders that we still have a long way to go to fulfill America's promise of justice and equality for all. In my role, I oversee the office of HUD that has the principal responsibility for enforcement of the Fair Housing Act. In addition to the men and women at HUD who investigate housing discrimination complaints and the attorneys at HUD that help prosecute them and the Department of Justice attorneys who file suits in Federal court, there are 108 State and local agencies that enforce the law that provides rights, remedies and procedures that are substantially equivalent to those provided under the Fair Housing Act. Not only do we investigate complaints in an efficient manner, we also obtain significant relief for people whose rights have been violated. The department and its State and local partners reached resolution in 3,100 cases in fiscal year 2007, obtaining more than $4.7 million in monetary relief for victims of discrimination through informal resolution and conciliation. My written statement includes several case examples that illustrate how our conciliation efforts achieve positive outcomes. But one case I will mention involves a family in Portland, Oregon, who has an autistic child. The family asked the apartment management company to move the family to a first-floor unit as an accommodation for the son's disability so they would not disturb the neighbors. The management company refused to move the family and also refused to extend their lease when it came up for renewal. HUD conciliated this case, obtaining $40,000 in relief for the child's family, plus an additional $10,000 donation to a charitable organization that focuses on autism. When the department learns of discrimination but no one comes forward to file a complaint, we exercise our authority to initiate investigations. To launch these investigations, which have a broad public impact, the department created an Office of Systemic Investigations within that Office of Fair Lending Division. The Fair Housing Lending Division initiates investigations when lending patterns suggest discrimination by a lender but no individual has come forward to file a complaint. So far this year, this division has selected targets for new lending investigations based on apparent disparities in loan pricing and denial rates between minority and White, non- Hispanic loan applicants. Further, the Fair Lending Division selected an additional lending target this year based upon that lender's stated lending policy. And because enforcement alone is not enough, we have increased our efforts to educate the public and housing providers about their rights and their responsibilities under the Fair Housing Act. Most recently, we launched a national public service announcement campaign to educate the public about their fair lending rights. While the centerpiece of the campaign is a 30- second public service announcement, the campaign also includes a toolkit that lists resources available to help consumers learn about the homebuying process and their lending rights and a series of town-hall forums to inform the public about HUD's efforts to reduce unfair and discriminatory lending practices. At HUD, we are committed to ensuring that each housing transaction in this country is fair and without discrimination. Thank you for the opportunity to testify before you today. And now I would like to show you our lending campaign's 30-second public service announcement. (Video played.) [The prepared statement of Ms. Kendrick follows:] Prepared Statement of Kim Kendrick Chairman Nadler, Ranking Member Franks, and Members of the Subcommittee, good morning. I am pleased to have the opportunity to testify before you today on the state of fair housing in the United States. Forty years ago, in the wake of the assassination of Dr. Martin Luther King, Jr., this country passed the Fair Housing Act, which made it unlawful to discriminate in housing and housing-related transactions on the basis of race, color, religion, or national origin. Six years later, Congress expanded those protections to prohibit discrimination based on sex, and amended the law again in 1988 to prohibit discrimination against families with children and persons with disabilities. In the past forty years, our nation has made great progress in fulfilling the promise of equal opportunity in housing. Today, our cities and neighborhoods are less segregated, loan underwriting guidelines no longer spell out different policies based on race, and many building codes across the country now require new multifamily housing to be accessible to persons with disabilities. But discrimination persists. HUD studies show that African Americans, Hispanics, Asian Americans, and Native Americans receive consistently unfavorable treatment at least 20 percent of the time when they seek to purchase or rent a home. In some communities, persons with certain disabilities encounter unfavorable treatment in one out of two transactions. And more than half of the population is unaware that it is illegal to discriminate against families with children in housing. As the Assistant Secretary for Fair Housing and Equal Opportunity, I oversee the federal government office with the principal responsibility for enforcing the Fair Housing Act. However, we do not do it alone. We are aided by 108 state and local agencies that enforce laws that provide rights and remedies that are substantially equivalent to those provided under the federal law. We also work in close partnership with the Department of Justice, which has the authority to pursue cases against housing providers, lenders, and others who engage in a ``pattern and practice'' of discrimination. The Department of Justice also files suit in cases charged by HUD, when one of the parties elects to have the case heard in federal court. HUD's fair housing mission is broader than the investigation, conciliation, and adjudication of individual cases. The Department also conducts significant education and outreach activities in support of its enforcement operation. This includes the release of public service announcements and other material to educate the general population on its fair housing rights and remedies. The Department also conducts regular studies on the level and extent of housing discrimination in American society and public awareness studies of the rights protected under the law. The Department also manages two major fair housing programs which complement the Department's fair housing activities: the Fair Housing Assistance Program (FHAP), a $25.6 million program in FY 2008, which reimburses the 108 state and local agencies for the investigations they conduct under their substantially-equivalent laws, and the Fair Housing Initiatives Program (FHIP), a $24 million program in FY 2008, which provides grants to non-profit organizations to carry out private education and enforcement activities in support of the federal law. These activities include testing local housing providers to determine whether they treat applicants fairly, filing private fair housing litigation, and holding forums and seminars to educate consumers and housing providers alike. Then, finally, in addition to the Fair Housing Act, the Department administers several other fair housing laws that guarantee fair access and equal opportunity in housing. These laws include Title VI of the Civil Rights Act of 1964, which prohibits discrimination on the basis or race, color, and national origin in federally-assisted housing; Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination on the basis of disability, in federally-assisted housing; Section 3, which requires recipients of federally-assisted housing funds to create economic opportunities for low-income persons in those communities; as well as several other authorities. The Department's enforcement of the federal Fair Housing Act, however, comprises its primary fair housing function. The Fair Housing Act, unlike the other authorities the Department administers, applies to virtually all housing transactions, public and private. HUD enforces the Fair Housing Act through investigation, conciliation, and adjudication of complaints from individuals who believe they have experienced discrimination and complaints the Department initiates on its own based on information that suggests a discriminatory housing practice has occurred. While the Department has increasingly exercised its authority to bring complaints on its own (having brought over 20 such complaints or investigations in the last two years), the Department dedicates most of its resources to the investigation of individual complaints of discrimination. The Department receives these complaints from individuals who write the Department by mail; file a complaint online at www.hud.gov/fairhousing; call HUD's toll-free Housing Discrimination Hotline at 1-800-669-9777 or one of HUD's office's directly; or visit one of HUD's offices in person. HUD investigates each complaint and, as required under the Fair Housing Act, makes informal attempts to resolve the complaint through conciliation prior to making a formal determination on the merits. If conciliation fails, the Department issues a finding on the merits. The Department will dismiss the complaint if there is insufficient evidence to support the allegation of discrimination. Where the evidence supports a finding of discrimination, HUD will issue a charge--the equivalent of a lawsuit--before an Administrative Law Judge. In the Administrative Law Judge forum, HUD attorneys argue the case at no cost to the individual who faced the discrimination. If the Administrative Law Judge finds in HUD's favor, the judge may compensate the complainant for any injury, enjoin the housing provider or other entity from further discrimination, and impose a civil penalty. The parties, at the time HUD issues the charge, also have the right to elect to have the matter heard in United States District Court. If the parties elect to that forum, the Department of Justice will bring the suit on behalf of the government and at no cost to the individual victim of discrimination. One cannot comprehensively describe or assess national trends in fair housing enforcement without also examining the complaints handled by HUD's FHAP partners--108 state and local agencies that administer laws substantially equivalent to the Fair Housing Act. Of the 10,150 complaints filed in FY 2007, FHAP agencies investigated approximately 7,700 of those complaints, or 75%, of the complaints filed nationally. This is a 25% increase from five years ago (FY 2003), and a 75% increase from just ten years ago (FY 1998), when HUD and FHAP agencies received just 5,819 housing discrimination complaints. It is important to note that HUD and the FHAP agencies also receive several thousand complaints about other ``unfair'' housing practices each year that do not constitute a jurisdictional complaint under the Fair Housing Act. These could be complaints of unfair eviction, poor maintenance, or other disputes, where the individual does not allege discrimination based on race, color, religion, national origin, sex, disability, or familial status. The agencies also receive complaints alleging discrimination because of age, marital status, source of income, or sexual orientation. The Fair Housing Act, however, does not authorize HUD to accept complaints on these bases nor can the Department reimburse FHAP agencies for their investigation of these complaints. Therefore, when HUD reports in FY 2007 that HUD and FHAP agencies received 10,150 complaints, it is counting only those complaints determined to be jurisdictional under the Fair Housing Act. FHAP agencies, to be certified as a ``substantially-equivalent agency,'' must attempt to resolve all complaints informally prior to issuing a determination on the merits. Congress included this conciliation requirement in the federal Fair Housing Act in order to expeditiously resolve complaints of discrimination and promptly recover for victims of discrimination the housing they sought and other equitable relief for the individual and the public interest. Together, the Department and its state and local partners successfully conciliated or reached informal resolutions in more than 3,100 cases, or in 30% of cases, in FY2007. Collectively, the agencies obtained over $4.76 million in monetary relief through these resolutions. This amount is in addition to other relief complainants may have obtained, such as housing units they desired, accessible parking spaces sought, fair rental price or fair interest rates on loans, or retrofits to make a property accessible to persons with disabilities. Conciliation agreements also include public interest relief, such as changes in the housing provider's policies or practices, fair housing training, or relief funds for other victims of discrimination. The Fair Housing Act and substantially-equivalent laws require the agencies to attempt to resolve every case through conciliation, regardless of the evidence against the respondent. Even if a housing provider has an explicitly discriminatory policy on its books, which would result in an almost-certain charge against the housing provider, the Department must bring the parties together for conciliation before issuing a charge. In these cases, the housing provider, given the weight of the evidence, more often than not, chooses to conciliate the case. In executing any conciliation agreement, the Department ensures the agreement ameliorates the wrong done to the victim, and that it provides relief for public interest, which includes the elimination of any discriminatory policies and practices and monitoring. Many cases that would lead to charges conciliate instead because the parties decide that conciliation best meets their needs in the given case. Let me share a few examples of cases which may have resulted in charges but where the parties instead negotiated conciliation agreements providing significant relief for the complainants. On April 15, 2008, the Department successfully conciliated a complaint on behalf of the Sanchez family, a couple with an autistic child, who lived in an apartment complex outside Portland, Oregon. Two years after Mr. and Mrs. Sanchez moved into the Masters Apartments in Aloha, Oregon, Mrs. Sanchez gave birth to a baby boy. At three years old, the child was diagnosed with autism and, because of his condition, he caused some noise disturbance to the downstairs tenants. The Sanchez family asked the apartment management company to move them to a first- floor unit as an accommodation for their son's disability so they would not disturb any neighbors. The management company refused to move them and also refused to extend their lease when it came up for renewal. The Department conciliated this case, obtaining $40,000 in relief for the Sanchez family plus an additional $10,000 donation to charitable organizations. Another example of the notable relief HUD obtains through its conciliation agreements are the cases the Department conciliated in December 2007, on behalf of seven families living at Ridge Crest Apartments in St. Louis, Missouri. The families alleged that the property's rules, which included parental supervision of children under 18 whenever they went outdoors (even to go between buildings), discriminated against families with children. The investigation found that many of the families and children lived in fear of the management company, which closely monitored and reported on their children's activities. HUD's conciliation agreement provided: $83,000 in relief for the complainants; $15,000 for a victims'' fund; $72,000 in funding for an after school program for two years; and removal of rules pertaining specifically to children. Conciliation agreements meet the needs of the complainants and the public interest. When complainants are dissatisfied with the relief offered by housing providers, they may reject it and seek determinations on the merits from the agency. If complainants are satisfied with conciliation proposals, but the Department, or the state or local agency, believes the relief proffered does not match what complainants or the agency can obtain in an adjudicative forum, the Department educates the complainants regarding the existing case law and the relief obtained in comparable cases. The complainants may, under those circumstances, decide not to settle the case but pursue the case before an Administrative Law Judge. If, however, complainants insist on accepting settlement proposals that the agency does not believe satisfies the public interest, the agencies will allow the parties to settle privately and open Secretary-initiated complaints. The Department's case against Summer Place in Las Vegas, Nevada, is one example of a complaint filed by an individual that the Department expanded into a Secretary-initiated complaint. In November 2006, the Department received a complaint from a single mother living in Summer Place Apartments in Las Vegas, NV, who had just obtained custody of her daughter. She alleged that less than a month after her daughter came to live with her, the apartment manager told her to find a new place to live, because the management company did not allow children to live at the property. HUD's investigation found that the management company did refuse to rent to families with children, and encouraged other tenants to leave when they became pregnant or obtained custody of their children. The complainant and the management company wished to settle the case. The Department, however, had to address the broader public interest and filed a Secretary-initiated complaint against the housing provider to obtain relief for others who were discriminated against. The Department identified additional victims of the ``no children'' policy. The complainant and the management company wished to conciliate rather than await a determination on the merits. The Department successfully negotiated a settlement that provided $35,000 in relief to the complainant. The Department obtained $10,500 in relief for the other victims identified during the investigation, and $29,500 for an escrow fund to compensate other victims of the discriminatory policy who may be identified after the Respondents placed notices in local newspapers. The Department and FHAP agencies thoroughly investigate all complaints, and reached determinations on the merits in about 54% of the cases completed in FY 2007 (The agencies dismissed 16% of the total cases, where circumstances prevented the agency from proceeding. Such ``administrative closures'' include cases where some investigation determined the agency lacked jurisdiction over the alleged violation, and cases where the complainant party disappeared, withdrew the complaint, or refused to cooperate with the investigation). If the investigative agency finds no reasonable cause to believe that a housing provider or other entity has violated the Fair Housing Act, it will issue a finding of ``no-cause'' and close the investigation. The complainant retains the right to pursue the matter through private litigation. The statute of limitations to file in court is tolled while the matter is pending with the agency. If the agency concludes that discrimination has occurred, the agency issues a ``determination of reasonable cause.'' In complaints filed with HUD, at the same time the Department issues the determination, it also files a charge of discrimination with a HUD Administrative Law Judge. The Department seeks through its charges to recover damages for the individual, civil penalties, and other relief for the public interest. As stated earlier, the parties may also elect at this stage to have the matter heard in federal court, where the Department of Justice files suit on behalf of the government and may recover damages for the individual and obtain injunctive relief. Together, the Department and FHAP agencies found ``cause'' in 609, or 6%, of the cases the agencies investigated in FY 2007. As a result of HUD charges this past year: six female tenants of a Missouri apartment complex received a $165,000 settlement for the sexual harassment they endured from the owner of the complex; an African- American woman who was physically barred from entering an apartment she had contracted to rent, and the woman who tried to rent her the unit over the owner's wishes, received a $74,000 award from an Administrative Law Judge (the judge also imposed a $22,000 civil penalty); a mentally-disabled man who was wrongly evicted from his home while he was in a coma received, along with his family, $45,000 in a federal consent decree; seven Hispanic families whom owners of an apartment building in Orange Grove, California, evicted so they could move in Vietnamese persons, received $174,000 in a consent order; an African-American school principal denied the opportunity to view a home for sale because of the color of her skin received $30,000 and her agent $5,000, in a federal consent order; and a mother, whose daughter's epileptic seizures worsened after the landlord refused to allow her assistance animal on the property, received $102,000 plus attorney's fees in a Department of Justice consent order. In addition, whenever the Department learns of discrimination from an independent source, the Department informs victims of discrimination of their rights and takes a complaint. For example, the Department advised an African-American woman of her right to file a complaint when it learned from a television report about the discrimination she experienced. The woman attempted to rent an apartment at Fountainview Apartments near Orlando, Florida. At the rental office, she saw a map on the wall indicating which units at the complex were currently available. The manager, however, told her that nothing was available and that nothing would be available anytime soon. Suspecting she had been discriminated against, the woman, who had seen HUD's public service announcements, asked another woman, who did not have a racially-identifiable voice, to call the property. That person learned that units were, in fact, available and she was invited to come view the units. The woman reported this experience to a local news station, who conducted its own testing, which showed clear evidence of discrimination. Upon watching the televised report of the woman's experience, the Department contacted her on February 8, 2008, to take her complaint. The Department charged this case on April 28, 2008. The parties subsequently elected to move to the case to federal court, and the Department of Justice filed suit on behalf of the government in May 2008. Moreover, whenever an individual files a complaint that suggests an apartment complex owner/manager or other entity may be engaging in a systemic practice of discrimination, the Department works with the additional victims to assist them in filing complaints and securing compensation for these individuals, as well. For example, in September 2006, residents of an apartment building in Virginia Beach, Virginia, filed complaints with the Department alleging that Mr. Henry, the owner of their apartment building discriminated against them because they were African American. In the course of HUD's investigation, the Department discovered that Mr. Henry subjected African-American tenants to rules and restrictions that he did not place on white tenants. The African-American tenants, for example, had to abide by ``quiet hours'' and restrictions placed on their guests. The Department sought and received complaints from four additional tenants who had faced discrimination and charged the case in April 2007. Just last month, the Department of Justice entered into a consent decree that requires Mr. Henry to pay $361,000, which includes: $84,000 to two of the tenants; $235,000 for a fund to compensate other victims; and a civil penalty of $42,000. Mr. Henry paid additional compensation to five other complainants in private settlements. From charges, conciliations, and settlements combined, victims of discrimination receive positive outcomes in more than 36% of complaints investigated by the Department and its state and local partners in FY 2007. While investigations, settlements, and adjudications of individual complaints comprise the principal means by which the Department enforces the Fair Housing Act, the Department regularly exercises its authority to bring its own action against a person or entity that has violated the Fair Housing Act, where no individual has filed a complaint. In FY 2007 alone, the Department initiated 16 Secretary- initiated complaints or investigations. These included investigations of: a large apartment management company in New York engaged in alleged racial discrimination; several large apartment complexes in Pennsylvania, Nevada, and Colorado, who allegedly refused to rent to families with children, subprime lenders who charged African Americans and Hispanics higher rates and fees, on average, than white borrowers, and real estate associations that limited benefits of association to others of the same religion. In FY 2008, the Department has filed additional Secretary-initiated complaints, including a complaint a large Florida housing provider for refusing to rent to families with children and four additional investigations into the practices of lenders for possible discrimination on the basis of race and national origin. The Department's Secretary-initiated investigations of possible discrimination in the lending market is particularly critical as applicants for loans often do not understand the reason for their denial nor the complicated metrics that go into pricing their loan. Moreover, borrowers have no information regarding what others pay for the same mortgage product, so they do not know if they have received a fair price. HUD can examine the larger lending and pricing patterns of the lender and uncover discrimination an individual cannot. Each year since 2005, the Federal Reserve Board (FRB) has provided the Department with a list of independent mortgage companies that the FRB had identified as having disparities in the incidence, denial rate, or rate spread of high-cost loans. Each year the Department analyzes the loan data for each lender flagged on that list, reviews the complaint data on those lenders and selects targets for investigation. Since the lists were first published in 2005, the Department has conducted econometric analyses on more than 350 lenders to select targets for investigation. To date, the Department has initiated six investigations into independent mortgage companies because of disparities in their HMDA data. To further ensure the best possible handling of all fair housing complaints by the Department, FHEO has made structural changes to the organization. In FY2005, FHEO created the Office of Systemic Investigations, which oversees all of the Department's Secretary- initiated investigations and complaints that involve systemic discrimination. In FY2007, the Department further enhanced its enforcement by adding a Lending Division within the Office of Systemic Investigations. The Division initiates investigations when lending patterns or other information suggests discrimination by a lender, but no individual has come forward to file a complaint. In addition, the Department has reassigned to the Division HUD's fair lending oversight of Fannie Mae and Freddie Mac to ensure their underwriting policies and practices comply with fair lending laws. The Lending Division is currently conducting six nationwide Secretary-initiated investigations of independent mortgage companies for possible discrimination on based on race or national origin in the making and pricing of loans. Because individual complaints are the primary enforcement mechanism under the Fair Housing Act, the Department has increased efforts in recent years to educate the public and housing providers on their rights and responsibilities under the Act. This has included national public-service campaigns over the last several years, funded through the Fair Housing Initiatives Program (FHIP) and other contracts. Fair housing organizations have used the radio, television, and print materials created by these campaigns to promote fair housing and educate people about housing discrimination. The Ad Council estimates that a quarter of television viewers in 2003 viewed Accents, an award- winning public-service announcement. This included the complainant in Orlando, Florida, who used her knowledge of this PSA to test Fountainview Apartments for discrimination. More recently, in FY 2007, the Department purchased advertisements on movie screens across the nation to inform the public about how to report housing discrimination. More than 1.5 million people saw these advertisements over the two weeks that they were in theaters. In addition, the Department distributes the Education and Outreach funding to individual organizations under FHIP. This funds education and outreach programs to inform the public about their rights and responsibilities under the Fair Housing Act. This includes presentations before community groups, participation in homeownership fairs, assistance with housing counseling and development of education and outreach materials targeted to the local audience. In FY2007, the Department provided funding to 33 local fair housing groups in 32 states to conduct education and outreach in their respective areas of the country. Through fair housing presentations alone, these groups will educate more than 250,000 people about their fair housing rights this year. Additionally, all organizations who receive private enforcement grants under FHIP devote a percentage of their budget to education and outreach on the services they provide in the community. Also, to encourage people to report the discrimination they encounter, HUD has widely publicized outcomes in housing discrimination cases. This helps the public recognize that taking action is likely to yield positive results. In February 2007, the CNN program Open House aired a segment on housing discrimination. The segment featured an interview with an African American woman who filed a complaint with HUD alleging that Fifth Third Bank denied her application for mortgage loan because of her race. HUD negotiated a $125,000 settlement in this case. Parade magazine, in an April 15, 2007 profile of the Department's fair housing mission, advised readers that housing discrimination is illegal and provided several examples of unlawful discrimination, such as charging higher rent to tenants based on race or religion or refusing to accept families with children. Parade has a circulation of more than 35.5 million. In addition, on a monthly basis, from June 2006 through June 2007, Essence Magazine featured an article on 12 steps of the home buying process. Assistant Secretary Kim Kendrick served as one of 12 members of an advisory board throughout the 12 steps and provided fair housing information for three of the 12 articles. While more than 10,000 people each year avail themselves of the investigation and complaint process, HUD understands that some persons may not want to file a federal complaint. Among other reasons, persons may not want to invest the time and effort into filing a complaint and going through an investigation. In order to serve such persons, the Department funds dozens of private fair housing groups though Fair Housing Initiatives Program (FHIP). These groups provide immediate assistance to persons who have experienced discrimination. Private enforcement groups are able to provide on-the-spot assistance without going through the administrative and legal requirements involved in a formal complaint and provide the public with a useful alternative to the formal complaint process available through HUD and state and local fair housing agencies. Finally, the funds the Department administers under FHIP support organizations that provide first-line assistance in many communities. For example, HOPE Fair Housing Center, a FHIP grantee, discovered that a private property management company in DuPage, Illinois, used a rental application that required potential renters to disclose their race, ethnicity and any disability. In June 2007, as part of the conciliation agreement in the case the organization filed, the management company agreed to pay HOPE Fair Housing $30,000, undergo fair housing training, and remove the offending questions from its application. In another case, an individual with HIV, who was denied housing, turned to Project Sentinel for assistance. Project Sentinel, a FHIP recipient in California, conducted testing that substantiated the allegation that the individual was denied housing because of his HIV status. The individual filed a complaint with HUD, and based on the Department's investigation and the testing by Project Sentinel, the Department charged that case in September 2007. In order to encourage and compensate fair housing group for their work on large resource intensive complaints HUD added multi-year grants to FHIP in 2005. This funding accounted for 73% of FHIP's $13.9 million enforcement budget in FY 2007, providing the top-performing groups with three years of funding. Many fair housing organizations, including the National Fair Housing Alliance, advocated for this funding, arguing that it would promote more comprehensive testing and better strategic planning by the organizations. Any organization that receives a performance-based grant must have exceptional experience and excellent performance reviews. The multiple-year funding encourages these groups to take on larger cases of housing discrimination and allows for better strategic planning by the organizations. Both of the organizations discussed above were recipients of performance-based funding under the FY2007 grant cycle. HUD's other civil rights responsibilities include the oversight of HUD-funded recipients to ensure that they are providing housing and housing-related services in a nondiscriminatory basis and that they are affirmatively further fair housing. HUD reviews its programs by investigating complaints alleging discrimination by HUD-funded recipients and conducting compliance review of recipients. HUD uses several methods to provide remedies for public interest: voluntary compliance agreements, corrective action orders and debarments. For example, after HUD found the Atlanta Housing Authority in noncompliance with Section 504 of the Rehabilitation Act of 1973, HUD entered into a voluntary compliance agreement with the housing authority in which it agreed to make changes to its housing and other programs to improve accessibility for persons with disabilities. Until the City of Gainesville, Florida Housing Authority agreed to enter into a voluntary compliance agreement, HUD issued a Corrective Action Order to the housing authority. The corrective action order restricted the housing authority's access to all Capital Fund Program funds not already obligated or under contract to expenditures necessary to cure the civil rights noncompliance and to remedy emergency situations. In one instance, HUD debarred an Omaha Section 8 landlord for sexual harassment of women tenants. This landlord is no longer a Section 8 participant. When HUD has found discrimination in Fair Housing Act cases, HUD has not hesitated to eliminate Section 8 landlords from HUD programs. On June 11, 2007, HUD debarred John Koch, the manager of several Section 8 properties in Omaha, Nebraska, from participation in HUD programs after a jury trial in the U.S. District Court for the District of Nebraska found that Koch had engaged in unwanted verbal and physical sexual advances toward prospective and current female tenants. Further, on September 13, 2007, HUD debarred Bobby and Jewel Veal of Kansas City, Missouri, from participation in federal programs after the U.S. District Court for the Western District of Missouri found that Mr. Veal, a Section 8 landlord, engaged in a pattern of housing discrimination on the basis of sex through unsolicited sexual advances toward female tenants, including rape and fondling. The court found that Mr. Veal entered the homes of these women without notice, destroying their sense of security, and that Mrs. Veal had personal knowledge of his activities and failed to take steps to prevent them. The Department debarred the Veals'' participation in HUD programs for five years. The work of each component of HUD's fair housing program is necessary to fair housing enforcement in the United States. The Department's enforcement system allows an individual to file a formal fair housing complaint, which is investigated by a federal agency. Through the Fair Housing Assistance Program, an individual has the option of similar services but on a state or local level. Finally, the Fair Housing Initiatives Program provides the public with quick resolution to housing discrimination, without the filing of a formal complaint. But more important than any individual program is the right of every person in the United States to rent an apartment, to buy a home, to obtain a mortgage, to live in their home without prejudice because of their race, color, religion, national origin, sex, familial status or disability. This was the goal of Dr. Martin Luther King, Jr. This is the goal this country reached for when this country passed the Fair Housing Act in 1968, and amended it to protect more people 20 years later. This is the goal that this Department rededicates itself to every fair housing month. We are committed to ensuring that each housing transaction in this country is fair and without discrimination. And when a housing transaction is discriminatory, when someone violates the Fair Housing Act, there is no greater priority for this office than assisting the man or woman whose rights have been violated. Thank you for this opportunity to appear before the subcommittee today. Mr. Nadler. The lady's time has expired. I thank the witnesses. And I will recognize myself for 5 minutes to begin the questioning. Ms. Liu, 2 years ago, the Department of Justice launched Operation Home Sweet Home, to which you have referred, to combat more hidden forms of discrimination. In the last fiscal year, the department conducted 20 percent more housing discrimination investigations. How many pattern-or-practice cases were filed as a result of these investigations? Ms. Liu. Thank you so much for that question, Mr. Chairman. In February of 2006, the Attorney General announced Operation Home Sweet Home to beef up our fair housing testing program. And in fiscal year 2007, as you mentioned, we had an extremely successful year, with over 500 paired tests. That was 20 percent more than had been conducted in any prior year. I can tell you that, since September of 2007, we have filed four cases based on testing evidence. Mr. Nadler. You have filed four cases in the last, what, 6 months, 7 months? Ms. Liu. Since September---- Mr. Nadler. Nine months. Four in the country? How many pattern-or-practice investigations have been filed since 2006? Ms. Liu. Mr. Chairman, I am not sure of the number off the top of my head. Mr. Nadler. Roughly, roughly. Ms. Liu. I am not sure of the number---- Mr. Nadler. About how many have you been filing of pattern- or-practice investigations in recent years on an annual basis? Ms. Liu. Based on testing evidence? Mr. Nadler. Based on testing. Ms. Liu. Over the last few years, the number of pattern-or- practice cases has averaged about 21 per year, I believe. But I can get you the more specific numbers. Mr. Nadler. Well, 21 sounds pretty specific. Roughly 20, 25 pattern-or-practice cases a year. Three-and-a-half million--I think it says 3.7 million housing discrimination cases, and we are filing 21 or 25 pattern-or-practice cases a year? That is one out of every 200,000 or something like that. Does this sound a little weak, in terms of real enforcement? Ms. Liu. Mr. Chairman, as I think I said in my written statement, the Civil Rights Division's jurisdiction extends to pattern-or-practice cases as well as cases in which HUD investigates, issues a charge, and one of the parties elects to proceed in Federal court. The number, 3.5 million or 3.7 million, as I understand it, includes an estimated number of complaints of discrimination. So I just want to emphasize that our jurisdiction is to pursue the large-scale pattern-or-practices cases as well as charges that HUD has issued and in which one of the parties has elected to proceed in Federal court. So we deal with a much smaller subset than the 3.7 million number that has been referenced. Mr. Nadler. And how many land-use and zoning cases has the department brought based on race and national origin for the last couple of years? Ms. Liu. In this Administration, Mr. Chairman, we have brought a number of land-use and zoning cases based on race and national origin. We have also been very successful---- Mr. Nadler. Wait a minute. I know you have brought ``a number.'' Can you be a little more specific than that? Ms. Liu. Well, over the past 7 years, I know of at least four cases against municipalities in zoning and ordinance cases based on race and national discrimination. Mr. Nadler. Four cases in 7 years? Ms. Liu. At least. And I am certainly happy to get you more details on the numbers. Mr. Nadler. Again, do you think that that is a fair representation, a vigorous policy against land-use and zoning discrimination? Ms. Liu. I do. I think we have been very successful in bringing those cases. And I---- Mr. Nadler. No, wait a minute. You may have been very successful in those four cases. But do you think four cases over 7 years is a vigorous attempt to enforce the laws, including the laws against land-use and zoning discrimination? Ms. Liu. I do, because those are at least four cases in the zoning context against municipalities for alleged race and national origin discrimination. We also do many, many other kinds of cases. We had a very recent successful case against General Properties that resulted in $725,000 in relief---- Mr. Nadler. Okay. I am sorry, I am going to have to rush to one other thing. Ms. Kendrick, approximately 3.7 million fair housing complaints occur annually, but in 2006 HUD processed 11,000 complaints. That is less than half of 1 percent of the estimated fair housing violations that occur in the United States. Given the large number of violations, can you explain why so few complaints are processed by HUD? Why is it 11,000 and not 110,000, for example? Ms. Kendrick. Thank you for that question, sir. We actively seek out complaints. We don't just sit in our seats and wait for complaints to come to us. The 10,000 complaints that you are talking about are complaints that were brought to us, but we don't sit in our seats and wait. What we have been doing for the last 3 years is we have actively been using the authority that we have to initiate---- Mr. Nadler. I am sorry. Those 11,000 are complaints brought to you? Ms. Kendrick. Brought to us by individuals. Mr. Nadler. They do not count actions initiated by you? Ms. Kendrick. Exactly. Mr. Nadler. And could you give us an estimate of how many that might be? Ms. Kendrick. In the last 3 years, we have brought 20 secretary-initiated complaints based on cases that we have observed in the press, actions that we think need to be taken against a discriminatory lender---- Mr. Nadler. So roughly 11,000 complaints brought to you and 20 initiated by you. Ms. Kendrick. But the 20, you have to accept, sir, represents more than just one case. For example, if we go against an apartment owner who is renting out 353 units, when we bring a secretary-initiated case against a landlord that has that many units, that is an additional 357 complainants that would have come to us but we went to them. Mr. Nadler. Thank you. My time has expired. I will now yield 5 minutes to the Ranking minority Member, Mr. Trent Franks. Mr. Franks. Well, thank you, Mr. Chairman. And just for the record, Mr. Chairman, I would like to address the comments of one of the minority Members who criticized the citing of the National Review magazine. But let me first say the thing on which I agree with the gentleman very deeply: that, indeed, with low-income families, one of the most important ways that they can stabilize their families economically is homeownership. And it is something that I have supported all of my public life, both through private initiative and public initiative. But I believe it goes even beyond the economics. I think there is strong evidence that says that if families own a home, that they are also more stable structurally as a family. And I believe it is vitally important. It is something I hold as a very deep conviction, and that any discrimination against anyone on these bases should be prosecuted to the fullest extent of the law. I think the point of The New York Times discovery--that when minorities disproportionately take out the riskiest mortgage, that they also have disproportionate foreclosures as well--is something that we should face as policymakers. Policymakers should do everything that they can to prevent discrimination, but if they force banks into making loans that are actuarily not sustainable, then we don't do the people that we are trying to help any good. We end up ruining the customer. And that is one of the things that a bank is not supposed to do. And I think that sometimes policymakers need to take responsibility for their actions in that regard. And I just wanted to make that very clear, that every family I think is improved by homeownership, but I especially think the pressures of low-incomes families are ameliorated to a great degree by homeownership. And it is something that I have supported privately and publicly all of my adult life. With that said, Ms. Liu, I wanted to ask you, what proactive measures is the Department of Justice taking to protect the rights of all Americans to obtain housing without illegal discrimination? Ms. Liu. Congressman Franks, thank you for that question. Operation Home Sweet Home lies at the very center of our effort to act proactively in seeking out discrimination. This is a fantastic initiative that the Attorney General announced in February of 2006. And what we do is we send out testers, both testers from a protected class and testers who are not from a protected class, all over the country to determine whether people are being treated differently on the basis of race, national origin, familial status, sex, et cetera. And we have been very successful. In fiscal year 2007, we conducted more than 500 paired tests all over the country. That was a record number for us. In fact---- Mr. Franks. And how does that paired test work? Explain that for the less educated among us. Ms. Liu. Sure. We will identify, for example, an apartment complex that we would like to test. And we will quite often make a phone call to find out whether or not they have vacancies. We will send in, for example, an African-American tester. They will express that they are looking, for example, for a one-bedroom apartment. They will give a little background about themselves and why they want the apartment and so on. And we will track how they are treated--for example, whether they are told that an apartment is available, whether the property manager is polite to them, offers to show them apartments and so forth. Very shortly afterwards, we may send in a White tester who has the same profile, who is looking for the same kind of apartment, and then we will track how that person is treated. And based on this evidence, we are able to uncover hidden forms of discrimination. And, as I mentioned a little bit earlier, we have filed a number of cases since last September, including a race discrimination case in Michigan, as well as the first-ever case alleging discrimination against Asian-Americans based on testing evidence, and that was in Lowell, Massachusetts. We settled that a little bit earlier this year. So we are very proud of that. In addition, we do a substantial amount of outreach. One example is we do do outreach to the construction community. We do multi-family housing access forums twice a year all over the country, where we reach out to developers and architects and emphasize how important it is to everyone in the community that housing be built so that it is accessible to persons with disabilities. And we try to essentially stop the problems before they occur by educating people. Mr. Franks. Ms. Liu, this is more of a subjective question, but do you, in your capacity, sense any sense on the part of the Administration to de-emphasize the effort to prevent housing discrimination in this country? Do you sense that there is any environment in the Administration that has reduced your focus in that regard, as opposed to previous Administrations? Ms. Liu. Absolutely not. This Administration, this Department of Justice, is completely and totally committed to fair housing. And I think we have a very good record on that. I should also add that we have the good fortune of working with some very talented and extremely dedicated career professionals in the Housing and Civil Enforcement Section. And I couldn't be prouder to work with them. Mr. Franks. Thank you, Mr. Chairman. My time is up, but where did the yellow light go? Okay. It goes to red from green. Mr. Nadler. It is probably still somewhere in the vicinity. I now recognize for 5 minutes the distinguished Chairman of the full Committee. Mr. Conyers. Thank you. I would be happy to give the gentleman a minute if he needs some more time. Mr. Franks. No, forgive me, I wasn't asking for more time. I just wondered where the yellow light went. There was no yellow light that time. Mr. Conyers. All right. You know, Ms. Liu, you are the most positive person I have heard all day about this horrendous problem. And your courtesy and style is very charming. I am just caught up with how wonderful this is and the progress we are making. Now, tell me, where did you ever practice civil rights law? Ms. Liu. Sir, I began my career at Jenner & Block in both Chicago and here in D.C., a very---- Mr. Conyers. Right. Ms. Liu [continuing]. Fine firm. And I had the opportunity to do some housing enforcement work there. You may recall that there was a very large case against the City of Baltimore's housing authority a few years ago involving racial segregation, and I was lucky enough to be a part of that case. Mr. Conyers. Okay. Now, who were you representing in that case? Ms. Liu. We were on the plaintiff's side, sir. Mr. Conyers. The plaintiff. And who was the plaintiff? Ms. Liu. We worked with--and I wish I could--unfortunately, the name of the named plaintiff is escaping my memory right now. But Jenner & Block worked with one of the fair housing groups in Baltimore to bring suit, and I believe it was not only against the housing authority---- Mr. Conyers. Okay, all right. Thank you. Ms. Liu [continuing]. But HUD, as well. Mr. Conyers. All right. We will find out afterwards. Now, how long have you been in your position? Ms. Liu. In my current position---- Mr. Conyers. Yes. Ms. Liu [continuing]. Since December of 2007. Mr. Conyers. So that is less than a year. Ms. Liu. That is correct. Mr. Conyers. Okay. What we have here is a tremendous problem. Do you know how long it will take us to ever get this problem of 3.7 million fair housing violations dealt with at the rate that we are going? Ms. Liu. Sir, I wish I could tell you how long it would take to eradicate housing discrimination in this country. I think---- Mr. Conyers. I didn't ask you all that. The fact of the matter is that we will never get it accomplished. So I don't need you to admit that you can't project it. I can't either. The point I am trying to make is that, at the rate we are going, I can't see how you could possibly positively come here to trumpet the accomplishments of either of these departments when the situation is horrendous and getting worse. Now, let me turn to Attorney Kendrick. Here we are getting so few cases. You are the ones with subpoena power. They don't even have subpoena power and don't get the cases unless you refer to them in the housing area, right? Ms. Kendrick. That is correct. Mr. Conyers. So if we have millions of complaints, and we are talking about 31 cases brought and 50 cases brought and 20 cases brought a year, what is the problem? That is why we are holding the hearing, ma'am. Ms. Kendrick. I think the problem, sir, is that we have to get out more to the people who have complaints to make sure they understand---- Mr. Conyers. You mean you are needing millions more than the ones you are already getting. Ms. Kendrick. That is correct, sir, because until we are able to make sure that everybody understands what their rights are---- Mr. Conyers. But you are not processing--you are processing a fraction of the ones in the pile that you are getting. Getting more complaints isn't going to give---- Ms. Kendrick. No, sir, that is not--sir, I would have to beg to disagree, because the cases that we are getting we are processing. We are conciliating those cases. In 40 percent of the cases that we are processing, we are conciliating and getting---- Mr. Conyers. All right. Ms. Kendrick [continuing]. Substantial results for those-- -- Mr. Conyers. I ask for a minute more. Mr. Nadler. Without objection. Mr. Conyers. Well, I won't ask you if you are proud of your record. You can't come before a Committee like this and say you are not. But we have got a humongous problem here. And both of you are telling us about a case here and a case there and ``they had 500 tenants, and so this is a big case.'' This is a mess that we will never get out of. And, of course, you are new on the job. How long have you been on your job? Ms. Kendrick. It will be 3 years in October, sir. Mr. Conyers. Well, then you ought to have some sense of the frustration that some of us are feeling here today. All this back-and-forth, and we have got a problem that will never end the ghettos in America. We have been talking about this since I came to Congress and probably well before. And these kinds of reports that you are giving us, your successors 20 years from now will be doing the same thing and telling us the same thing. Thank you. Mr. Nadler. The gentleman's time has expired. I now recognize for 5 minutes the gentleman from Alabama. Mr. Davis. Thank you, Mr. Chairman. Ms. Liu, let me begin with you. And let me, frankly, move a little bit beyond what you have talked about today in your testimony. You focused primarily on, frankly, I hate to use the term ``garden-variety'' fair housing cases or ``garden- variety'' civil rights cases, but the standard red-lining, the standard obvious, overt kinds of discrimination that we have seen in the housing industry is what you talked about. I want to move beyond that to talk a little bit about, frankly, one of the major factors that is pulling our economy into a recession right now, which is the explosion of the subprime market and all of the issues around that market that are now affecting the economy. And I want to read you one statistic from a notably non- Democratic, non-liberal source called The Wall Street Journal. The Wall Street Journal says that, in 2006, 61 percent of subprime borrowers qualified for a better loan based on their credit scores. And I have no idea what number of those were Black, what number of those were White or Hispanic or Asian. But a number of people have, frankly, raised the question of why the Department of Justice has not been more aggressively focused on the whole subprime market. I want to read you some other quotes that I thought were interesting. Perhaps Mr. Franks might even find them interesting. This is a story that was written in The New York Times last week, June 6, and it outlines in a fairly succinct nature some of the issues around the subprime market's collapse. ``Mortgage brokers were not told the true terms of their loans, homes were overvalued, and investment firms put together mortgage-backed securities packages in ways that inflated their true value.'' Your boss, the Attorney General, was asked to respond to that description of the subprime market, and he said, ``That has happened over and over again. Someone that I met with characterized it as `white-collar street crime.' '' So perhaps Mr. Franks might find it interesting that someone of his party in this Administration that I think he supports on a fairly regular basis doesn't view this as a public policy matter in its entirety, but the Attorney General of the United States describes the proliferation of problems around subprime as ``white-collar street crime.'' Would you agree with the Attorney General, Ms. Liu? Ms. Liu. Congressman Davis, let me answer the question in two parts, if I could. Mr. Davis. As long as one of them actually answers the question. Ms. Liu. I will do my best. The first part of the questions is that the Civil Rights Division's jurisdiction in the fair lending area stems from the Fair Housing Act and the Equal Credit Opportunity Act. And one of the things that we have done in the subprime area is that we have pursued a number of very large red-lining cases in this Administration, notably in the Chicago area, in Detroit---- Mr. Davis. Now, you are not suggesting the Justice Department's jurisdiction is limited to red-lining subprime cases. There is no dispute that if there is an obvious instance of someone extending subprime to African-Americans in a disproportionate manner that you have jurisdiction. Let's not waste time arguing about that, given my 5 minutes. I am talking about, frankly, the nonracial dimensions affecting so many people in this country of all colors. And I am asking why the department has not been more aggressive in tackling that problem. You wouldn't dispute that the Department of Justice would have jurisdiction if there was evidence that mortgage-holders weren't told the true terms of their loan, that homes were deliberately overvalued, and that some investment firms deliberately put together securities that were inflated--you are not suggesting that any of those things that are proved would not be in the jurisdiction of the department, are you? Ms. Liu. Those may well fall within the jurisdiction of the department, but not necessarily within the Civil Rights Division, which is the division that I work for. I will say that there are, as far as I know, a number of other components of the department that may have jurisdiction over those areas. The Criminal Division, for example, I would imagine may have jurisdiction to prosecute instances of out- and-out fraud. Mr. Davis. Now, let me stop you at that point. Has the chief of the Criminal Division talked with you about the feasibility of a combined task force, perhaps, to address these problems? Why not take your expertise, as someone who runs the housing section, Civil Rights, why not match it up with the Criminal Division, which investigates fraud? Has that kind of internal conversation happened within the department? Ms. Liu. Congressman Davis, we, at the department, have had a tradition of not discussing our internal deliberations for a variety of reasons, most notably so that we can have candid discussions and receive advice from the folks that we work with without chilling them. Mr. Davis. Well, I am not asking you for any privileged, confidential communications. I am not even asking you what the results of those communications would be. From my old days of practicing law, I always thought even the most ill-conceived privileges protected the content of the conversation, not whether or not they have happened. Have there been conversations with the chief of the Criminal Division about a combined, coordinated task force effort within the department to address not just the racial part of this problem but broader issues? Ms. Liu. Sir, I believe the Attorney General made a statement about a mortgage fraud task force. And I really don't think it is appropriate for me to go beyond what the Attorney General has said on the matter. Mr. Davis. If I could ask for an additional 15 seconds, just to follow up on that. Would you have an opinion on that, Ms. Liu? I mean, the Attorney General has made a statement that he is not going to appoint a task force, as a matter of fact. Does that strike you as being an advisable decision? There was a task force regarding Enron. Frankly, Enron did not cause the kind of ripple effects in this economy that the securities crisis and the subprime crisis has caused. This is worse than Enron, isn't it? From what you read in the paper, isn't this worse than Enron? Ms. Liu. I appreciate your question, but I really don't think it is appropriate for me to go beyond what the Attorney General has said. Mr. Davis. All right. Well, thank you, Mr. Chairman. Mr. Nadler. Thank you. The time of the gentleman has expired. I now recognize for 5 minutes the gentleman from Minnesota. Mr. Ellison. Ms. Liu, do Whites and African-Americans and Hispanics have subprime loans at the same rate? Ms. Liu. Sir, I don't know the statistics, so I am unwilling to express a view on those statistics. I have seen news reports that indicate that there may be a disparity. Mr. Ellison. Yes. So, are you saying you don't want to express a view on whether or not there is a disproportionate impact of the subprime mortgage crisis on people of color than others? Ms. Liu. I have seen news reports that seem to suggest that there is a disparity. Mr. Ellison. Well, you would agree that the subprime mortgage crisis is a housing issue, right? Ms. Liu. I would agree that, broadly speaking, the subprime crisis is a mortgage issue. But---- Mr. Ellison. Is it an issue that your department has focused on, the disproportionate numbers that you have heard about in the press of subprime mortgages? Ms. Liu. If I could, I would like to highlight some of the work that we have done. Mr. Ellison. I can read about that. I am still stuck on this idea that you don't know whether or not there is a disproportionate impact. Why don't you know that? Ms. Liu. Sir, I can tell you about what I have seen in the news reports. I can tell you what reports that I have read. Mr. Ellison. Has your department done any focused research on this issue? Ms. Liu. I don't know the answer to that question, but I am happy to go back and get back to you with a response. Mr. Ellison. Well, let me ask you this. Let's just assume for a minute that there has been a disproportionate--well, Ms. Kendrick, can you speak to this issue? Ms. Kendrick. Yes, sir. I think that we can--I certainly think, from our point of view at HUD, I think we have seen studies and we have conducted studies where we have seen that African-Americans and Hispanics have received higher rates in the subprime market than Whites. Mr. Ellison. You know, I want to talk about how we arrived there, because I think it is connected to housing discrimination. Let me ask you this. Do you think that historic housing discrimination patterns made African-American and Hispanic homebuyers more susceptible to getting into predatory loans? Ms. Kendrick. I think the lack of education, in terms of lack of history and not being homeowners, not having high rates of homeownership, may have contributed to the situation, yes, sir. Mr. Ellison. Well, what about if you are historically barred from the prime market of home mortgages, discriminated against in areas of credit, aren't you sort of ripe for somebody to come along and say, ``Hey, this is your chance to buy a piece of the American dream''? Ms. Kendrick. I think that one of the things that we have tried to do in this Administration is to make sure that we have increased homeownership dollars, increased dollars for homeownership counseling to make sure that people understand what their responsibilities, what their rights are and obligations are when they are purchasing homes. So I think that we have done that. Mr. Ellison. I am glad you mentioned that. Now, let me ask you this. Now, Chairman Conyers, you know-- I assure you, the frustration he expressed is shared by most of us on this side of the aisle. I mean, we are not prosecuting enough cases of housing discrimination. We are not really bringing the cases forward. So, in many ways, this problem that I think you are sort of agreeing with, the historic housing discrimination patterns, has contributed to this susceptibility of African-American and Hispanic homebuyers to get into predatory mortgages---- Ms. Kendrick. I think I said lack of education, sir, just so we make sure that--the lack of education or the lack of history in homeownership, owning property---- Mr. Ellison. Okay, you want to go there? What about education--so education has been equally available for all Americans through the course of our history? Ms. Kendrick. That is what I am saying, the lack of education in these areas, sir. Mr. Ellison. Which is the result of what, ma'am? Ms. Kendrick. Not being---- Mr. Ellison. Segregation, right? I mean, right, Ms. Kendrick? Right? Ms. Kendrick. The lack of opportunities to secure mortgages, the lack of opportunities to own homes---- Mr. Ellison. Ms. Kendrick, I have only got 5 minutes. That is because of discrimination, yes or no? Ms. Kendrick. In some cases, yes. Mr. Ellison. Okay, let's talk about the ``yes'' part, okay? The Justice Department's lack of enforcement of housing discrimination cases, their lack of aggressive enforcement has helped to contribute to the subprime mortgage crisis, wouldn't you agree? Ms. Kendrick. I can only speak for the Department of Housing and Urban Development and the tactics that we have been taking to try to address the situation. Mr. Ellison. Yes, but I am asking you about your cohort there. I mean, isn't this a causal factor in the situation we have now? Ms. Kendrick. I am not willing to say the Department of Justice by itself is the sole cause of the problem. Mr. Ellison. But would you agree that they played a role? Ms. Kendrick. I would not say that, sir. Mr. Ellison. They played no role? Okay. Ten seconds just so Ms. Kendrick can answer? Ms. Kendrick. I can speak to what HUD has been doing in working with the Department of Justice to try to address this issue. As I said before and I think as we testified last year, we have been trying to take an aggressive approach to taking a look at these lenders, using the HMDA data. And by taking a look at these lenders who have these high pricing disparities and going and investigating these, filing complaints against these lenders, I think jointly the Department of Justice and HUD are trying to do those sorts of things, sir. Mr. Nadler. The time of the gentleman has expired. And I recognize for 5 minutes the gentleman from Virginia. Mr. Scott. Thank you, Mr. Chairman. Ms. Liu, you have referred to the 500 testing pairs several times. That is about one per congressional district. There are 435 congressional districts; that is about one per district. What result did you find from those tests? Ms. Liu. Sir, I have already mentioned that we have brought some cases based on the results of those tests. Since the beginning of the testing program, I believe we have brought about 85 cases. Fifty-three or so of those---- Mr. Scott. Wait a minute. Eighty-five cases were brought out of the 500 tests? Ms. Liu. No, 85 since the beginning of our testing program, which was begun in the early 1990's. Mr. Scott. Out of the 500 tests, what kind of differences did you detect from the protected classes? How were they treated differently? Ms. Liu. Well, we have one case that we are currently pursuing in the Detroit area, in Roseville, MI, in which we found that the owners and operators of the apartment complex were telling African-American testers that there were no apartments available while telling White testers that there were apartments available. Mr. Scott. Out of the 500 pairs, how often was discrimination detected? Ms. Liu. I can tell you that since September we have brought four cases. And I also want to add---- Mr. Scott. Wait, wait. That is 1 percent experienced discrimination. Ninety-nine percent of the time there was no discrimination detected by the testers? Ms. Liu. Congressman Scott, whenever we find that the law and the facts justify bringing a case alleging discrimination, we do that. Mr. Scott. I have heard of studies that show that almost routinely when you send out pairs that there is a different in treatment. And you are saying that in about 99 percent of the cases, there is no difference in treatment. Is that your testimony? Ms. Liu. No, sir. My testimony is that whenever we find that the evidence and the law justifies bringing a case--and remember, we have pattern-or-practice authority and not general authority to bring cases alleging individual instances of discrimination---- Mr. Scott. Well, I am not asking authority to bring a case or whether you can even make a case. What kinds of differences did you detect between the pair going into the same apartment? I mean, I assume this is not only apartments but homeownerships? You go into realtors---- Ms. Liu. We do do sales testing, yes. Mr. Scott. Okay. And what kinds of differences--did you find a difference only in about 1 percent of the cases? Or was it routine, like everybody else in the world has seen? Ms. Liu. I think I have described earlier some of the kinds of differences that we have seen. And I can just state again that when we find that there is evidence to justify--remember, we are looking for pattern or practice---- Mr. Scott. I am just asking a simple question. What kinds of differences did you detect from the way people were treated based on your pairs? Ms. Liu. We have seen members of protected classes being told that there are no apartments available---- Mr. Scott. And how often does that occur? Ms. Liu. We have brought four cases based on---- Mr. Scott. How often does it occur that people are given different stories about the availability of apartments? How often? One percent? Twenty percent? Fifty percent? Ms. Liu. I can't, as I sit here right now, put a number on that. I can tell you what we look for is whether or not we can bring a lawsuit. And where we think that we can based on---- Mr. Scott. I am asking you a simple question, not whether you can bring a lawsuit, but what kinds of differences among people occur. And I am not getting an answer. I have got one answer, that 1 percent of the time there is a difference. And I think people would be shocked to hear that number, quite frankly. And you are under oath that 1 percent of the time people go finding an apartment, they are not given a different story. Now, the question is, how often were people given different stories? Ms. Liu. Sir, I don't know the answer to that question, because what we are looking for is whether or not we can file a case, whether the facts and the law warrant filing a case under our pattern-or-practice authority. Mr. Scott. Well, let me ask Ms. Kendrick, if you had 500 pairs go out, how often would you expect them to get different stories? Ms. Kendrick. Since we don't have a testing program, sir, I really don't know the statistics on that. Mr. Scott. Have you seen studies of pairs going out? Ms. Kendrick. I can tell you based on our own cases that we take a look at, there are cases from 2007 where we had 10,000 complaints of discrimination, and of those cases 40 percent we were able to settle. Certainly there was some discrimination that went on in those 40 percent of the cases. So I can't say specifically on paired testing, but based on our statistics, in about 40 percent of the cases we get, we see discrimination. Mr. Nadler. The time of the gentleman is expired. I now recognize for 5 minutes the gentleman from North Carolina. Mr. Watt. I am just going to continue exactly where Mr. Scott left off, because the HUD doesn't have testing in its repertoire of things that it can do, is that correct? Ms. Kendrick. That is correct. But I was just passed a note by my trusty colleague that says, under our housing discrimination study in 2000, we showed about 20 percent of the time we see discrimination in paired testing. Mr. Watt. Okay. The Department of Justice has testing authority, has used that testing authority, pairing authority, in 500 cases, 500 times, it says. I don't know how, even if you found 500, that would be a pattern or practice probably. There is a bill--Representative Al Green of Texas has introduced bill H.R. 2926 that would give HUD testing authority, this kind of pairing testing authority that is not being used effectively by Justice. Does the Department of Housing and Urban Development have a position on Representative Green's bill? Ms. Kendrick. I have not had an opportunity to review the congressman's bill yet. Mr. Watt. Okay, but will you go back and do that---- Ms. Kendrick. Yes, I will. Mr. Watt [continuing]. And report back to us about whether you all have an opinion about it? Ms. Kendrick. Yes, I will. Mr. Watt. Okay. That would give you broader authority to do the kinds of paired testing that is being done. Ms. Liu, I know you have no interest in second-guessing the statement that the Attorney General made in which he rejected the idea of creating a national task force to combat the country's mortgage fraud crisis and called the situation ``regular white-collar crime'' even though it has thrown the whole economy into absolute distress, just ``regular white- collar crime.'' And your response to it is, well, you deal with housing discrimination, you deal with pattern-or-practice, and the Justice Department operates in these different silos where somebody over there can prosecute corporate fraud and you can do housing, you are the Civil Rights Division and--you know. It seems to me that everything you have said--although you, justifiably so, don't want to say that the Attorney General is out to lunch by refusing to acknowledge this as a multidisciplinary problem--everything you have said suggests that there needs to be a more coordinated approach to dealing with these issues of discrimination: failure to be fair in loan terms, directing people. Unlike what Mr. Franks says, when people elect to get subprime loans, the great bulk of the evidence is that people were directed by one means or another, quite often through discriminatory means, to subprime loans even though they would have qualified, in 60 percent of the cases, for regular prime loans, and disproportionately more for minorities. All of that evidence is in the record in Financial Services, which I happen to sit on also. Don't you think there needs to be a more coordinated, multidisciplinary, outside the silos that you all operate approach to dealing with this? This is the Justice Department, and basically you have just said, ``This is localized crime, and we are going to let local people deal with this.'' That is ridiculous, isn't it, Ms. Liu? Ms. Liu. Congressman Watt, I appreciate your remarks, but I am not---- Mr. Watt. You appreciate them, and you agree with them, don't you? Ms. Liu. I didn't say that I appreciate---- Mr. Watt. I mean, but everything you have said suggests that there needs to be some coordination of this effort, which is exactly what we have asked the Attorney General to do. Ms. Liu. Sir, I am not in a position to go beyond what the Attorney General has said, or I am certainly not in a position to second-guess his excellent judgment. Mr. Watt. Well, in that case, you may find him to have excellent judgment in some cases. In this case, everything that you have said suggests that his judgment is not so excellent, Ms. Liu. I yield back. Mr. Nadler. On that note, I want to thank the witnesses on this panel. And thank you very much. And we will ask the second panel to come forward. And while they are taking their seats, I will read the biographical information so as to save time. Our first witness will be Mr. Jim Carr, who is the chief operating officer for the National Community Reinvestment Coalition. He is also a visiting professor at Columbia University in New York and at George Washington University in Washington, DC Prior to his appointments to NCRC, Mr. Carr was senior vice president for financial innovation, planning and research for the Fannie Mae Foundation and vice president for research at Fannie Mae. He has also held posts as assistant director for tax policy with the U.S. Senate Budget Committee and research associate at the Center for Urban Policy Research at Rutgers University. He holds a bachelor of architecture degree with honors from Hampton University, a master of urban planning degree from Columbia, and a master of city and regional planning from the University of Pennsylvania. Shanna Smith has served as president and CEO of the National Fair Housing Alliance since 1990. NFHA has recently released its 2008 Fair Housing Trends report, ``Dr. King's Dream Denied: Forty Years of Failed Federal Enforcement.'' Prior to joining NFHA, she was executive director of the Toledo Fair Housing Center. Ms. Smith has a B.A. from the University of Toledo. Suzanne Sangree has been a chief solicitor in the Baltimore City Department of Law since March 2007. She is the counsel in the case Baltimore v. Wells Fargo, a Fair Housing Act case alleging racial discriminatory and predatory lending. Her other work includes low-income energy assistance, foreclosure prevention and relief, and issues affecting the homeless. Previously, Ms. Sangree was director of appellate advocacy at the Public Justice Center and taught at the University of Maryland School of Law, the Washington College of Law at American University, and the West Virginia University College of Law. Ms. Sangree received her LLM from Harvard Law School. Professor Stan Liebowitz is the Ashbel Smith professor of economics in the management school at the University of Texas at Dallas and is head of the Center for the Analysis of Property Rights and Innovation. In addition to five books, he has published over 60 academic articles in journals. Professor Liebowitz's research interests include the economic impact of new technologies, intellectual property, anti-trust, and mortgage discrimination. He holds a Ph.D. in economics from UCLA and a B.A. from Johns Hopkins University. Audrey Wiggins is the director of the Fair Housing and Environmental Justice Project at the Lawyers' Committee for Civil Rights Under Law. During her 10 years at the Lawyers' Committee, she has also served as a senior counsel for the Employment Discrimination Project, litigating employment discrimination cases involving racial, national origin, and sexual discrimination in the workplace. Ms. Wiggins received her undergraduate degree cum laude in broadcast journalism from Hampton University and a juris doctorate degree from North Carolina Central University. Immediately prior to joining the Lawyers' Committee, she was an attorney advisor for the U.S. Commission on Civil Rights. I am pleased to welcome all of you. As a reminder, your written statements will be made part of the record in its entirety. I would ask each of you to summarize your testimony in 5 minutes or less. To help you stay within that time, there is a timing light at your table. When 1 minute remains, the light will switch from green to yellow, and then to red when the 5 minutes are up. It is the custom of the Committee to swear in witnesses. Would the witnesses please stand and raise your right hand? [Witnesses sworn.] Mr. Nadler. Let the record reflect that the witnesses answered in the affirmative. Mr. Carr, you are recognized for 5 minutes. Thank you. TESTIMONY OF JAMES H. CARR, CHIEF OPERATING OFFICER, NATIONAL COMMUNITY REINVESTMENT COALITION Mr. Carr. Good morning, Mr. Chairman, Ranking Member Franks, and other distinguished Members of the Subcommittee. On behalf of the National Community Reinvestment Coalition, I am honored to share with you today our thoughts on the context for and effectiveness of the Fair Housing Act of 1968. The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to banking services and supports sustainable, affordable homeownership, job creation, and vibrant communities for America's working families. Members of the Subcommittee, we applaud your efforts to ensure equal housing opportunities for all Americans by convening this hearing. Discrimination is irrational and counterproductive to the common good of the Nation. It stifles human potential, undermines the economic and social well-being of communities, and limits the Nation from reaching its potential as a fully inclusive and competitive society. Major disparities in economic and social advancement exist for African-Americans, Latinos, Native Americans, and other Asian communities. Lack of economic advancement, it is important to note, is not due to market forces or a lack of personal responsibility by people or communities of color. Rather, limitations on economic mobility and wealth accumulation are a direct result of more than a century of policies and practices that directly undermined access and opportunity for members of color. I would be pleased to discuss specific policies in the Q&A. The net result of discriminatory actions is the hypersegregated, isolated and disadvantaged communities that we see today. The goal of highlighting the historic role that discrimination has played, however, is not to point fingers, assign blame or to live in the past. Rather, it is important that America understand the fundamental underpinnings of public policy that have created the disparities we see today. Moreover, historically, the issue of discrimination has been argued solely on the basis of equality and justice. There is increasingly another critical reason to level the playing field by race/ethnicity. Globalization represents for America competitive challenges this Nation has never experienced. America cannot afford to stumble into the 21st century; the risks are too great. Yet we are already stumbling. Consider that by the middle of this century, half the U.S. population will consist of people of color. Yet this fastest-growing share of the Nation's population is disproportionately composed of people who are the least well-housed, the most tenuously connected to labor markets and financial markets, are disproportionately isolated from quality educational opportunities, and achieve relatively low levels of wealth. The Fair Housing Act was signed into law in 1968. A full 40 years later, millions of instances of discrimination exist on an annual basis. As a result, we have 40 years of experience that the current enforcement system does not work. In response to this continued failure to enforce the law, we recommend the establishment of a new Cabinet-level agency focused on civil rights enforcement. This agency would report directly to the President of the United States and would be responsible for measuring, monitoring and eliminating all forms of discrimination from our society once and for all. And given the importance of housing to accessing opportunity for social and economic advancement, housing- related laws would be among the agency's highest priorities. This position is essential. And I outline this proposal and others in my written testimony. Enforcing the law would immediately open the door for millions of households that are prepared to access opportunity today but for whom their only impediment is illegal denial of access. Let's open that door, let equality and justice prevail. Thank you. [The prepared statement of Mr. Carr follows:] Prepared Statement of James H. Carr [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Nadler. I thank the gentleman. I will now recognize for 5 minutes for an opening statement Ms. Sangree. Let me just explain. Ms. Smith--I normally proceed in order, but she has something, a video thing, that isn't quite ready yet. So we will come back to her. Ms. Sangree is recognized for 5 minutes. TESTIMONY OF SUZANNE SANGREE, CHIEF SOLICITOR, CITY OF BALTIMORE LAW DEPARTMENT Ms. Sangree. Thank you, Mr. Chairman, Ranking Member Franks, Members of the Committee. I am Suzanne Sangree. I am a Chief Solicitor in the Baltimore City Department of Law, testifying on behalf of the Mayor and City Council of Baltimore. Baltimore is a case study of the damage that has befallen cities in the absence of aggressive Federal enforcement of our civil rights laws, especially the Fair Housing Act of 1968. In particular, lax enforcement of the Fair Housing Act, combined with Federal relaxation of Federal banking regulations and Federal preemption of States' abilities to regulate lenders, created an environment in which predatory lending flourished. And Baltimore, a majority-African-American city, is now contending with the devastating economic fallout of this petri dish for racially targeted predatory lending. Baltimore City has turned to the Fair Housing Act as our best weapon for stanching the economic damage and obtaining resources to remedy it. The shapers of that act smartly fashioned it to have very broad standards for standing, and the Supreme Court has long recognized that cities have standing to sue under the act. But the shapers of the act always envisioned that the Federal Government would play a major role in enforcement of the act, and it has not done so. Like other American cities with large non-White populations and a history of racial segregation, Baltimore was particularly vulnerable to racially targeted predatory lending. And that is because racially targeted predatory lending happens when two conditions are present. This has been pointed out by several of the representatives here today. A history of red-lining, of denying credit to minority communities is the first condition. And the second condition is a history and a present, contemporary racial segregation in housing patterns. Baltimore has both of those conditions. Initially, our housing patterns were set with racially restricted housing covenants, which were enforced by the courts up until the 1950's and 1960's. However, well into the 1970's, the siting and maintenance of public housing projects were also racially segregated. As late as the 1970's, the secretary for HUD, Romney at the time, admitted that the Federal Government had refused to provide insurance in integrated neighborhoods, promoted the use of racially restrictive covenants, and engaged in other methods of red-lining. So we have condition number one, minority communities deprived of access to credit, and condition number two, as well, patterns of racial segregation. Not surprisingly, therefore, beginning in the 1990's, Baltimore was targeted for racially discriminatory predatory lending, and we are now contending with the tsunami of foreclosures that this lending has brought upon us. Since 2000, more than 33,000 homes have been subjected to foreclosure filing. In a city of 650,000 people, we are expected to have over 6,000 foreclosures this year. January 8 of 2008, the City of Baltimore filed suit against Wells Fargo under the Fair Housing Act, alleging that it had engaged in racially targeted predatory lending. It is also known as ``reverse red-lining.'' We chose to sue Wells Fargo because it is the biggest lender in Baltimore and it is among the lenders with the greatest racial disparity in their lending practices. And to give you some of the examples which are in our complaint, which is attached as an exhibit to my written remarks, in 2006 Wells Fargo made high-cost loans to 65 percent of its African-American mortgage customers in Baltimore, but high-cost loans were only made to 15 percent of its White customers in Baltimore. Refinanced loans were even worse. An African-American borrower was two-and-a-half times more likely to have a high- cost loan in a refinance than a White borrower. And we see similar racial disparities in foreclosure rates as well. African-American borrowers have four times the rate of foreclosure in Baltimore than White borrowers. And it is interesting to note, although we have not had access to borrowers' credit scores yet, because we haven't gotten into discovery, a study that is being done by the Annie E. Casey Foundation in 13 cities including Baltimore concludes that for Baltimore, when one corrects for credit scores--this researcher has access to Experian credit scores--when one corrects for credit scores in Baltimore, there is a very high, meaning over 15 percent, racial disparity in Baltimore neighborhoods for refinances in 2006 and a high to medium, meaning 5 to 15 percent, racial disparity for purchase loans in 2006. Mr. Nadler. The time is expired. Can you wrap up very rapidly? Ms. Sangree. Yes, I can. The impact of this predatory lending and the foreclosures that it has spawned is quite devastating to municipalities. A study, in 2006 alone, the city lost $41.9 million in tax revenues. And between 2004-2005, a total of $17.8 billion in real estate value was lost. Thank you. [The prepared statement of Ms. Sangree follows:] Prepared Statement of Suzanne Sangree Members of the Committee, my name is Suzanne Sangree, and I am a Chief Solicitor in the Baltimore City Department of Law, testifying on behalf of the Mayor and City Council of Baltimore. Thank you for inviting me to speak with you today. Baltimore is a case study of the damage that has befallen cities in the absence of aggressive federal enforcement of this nation's civil rights laws, especially the Fair Housing Act of 1968. In particular, lax enforcement of the Fair Housing Act, combined with federal relaxation of federal banking regulations and federal preemption of states' ability to regulate lenders, created an environment in which racially discriminatory predatory lending flourished. Baltimore, a majority African-American city, is currently contending with the devastating economic fall out of this petri dish for racially targeted predatory lending. The City has developed and continues to develop a six pronged approach to staunching the resulting economic damage and repairing it. Litigation against the wrong doers is one prong of our plan; act one of this prong being our Fair Housing Act suit against Well Fargo for reverse redlining. In the absence of federal enforcement cities have been left to contend for themselves. Under the leadership of City Solicitor George Nilson, and our co-counsel John Relman and Brad Blower of Relman & Dane, Baltimore City turned to the Fair Housing Act as our best weapon for fending off reverse redlining and obtaining relief to repair the damage it has been inflicted. The shapers of that Act smartly provided a broad capacity for standing to sue and the Supreme Court has long recognized that Cities have standing under the Act. However, it was always envisioned that the federal government would play a leading role in enforcing it. It has not. Like other American cities with large non-white populations and a history of racial segregation, Baltimore was particularly vulnerable to predatory lending. This vulnerability is caused by two complimentary factors: 1) a history of denying minorities access to credit; and 2) a history of racially segregated living patterns. Communities that for generations had been locked out of credit and housing opportunities, because of redlining are rendered desperate for credit and without the knowledge or experience required to identify loan products and lenders offering better terms. When one's only experience with loan applications has been no--it is common to jump on the first yes without much critical evaluation. The fact that these vulnerable communities are geographically concentrated and so easily targeted by abusive lenders sets up the second condition. Unfortunately Baltimore suffers from both of these conditions. Our solid patterns of racial segregation were initially enforced by racially restrictive convenants. In 1954, within months of the Supreme Court's Brown I decision, forward looking Baltimore officials decided to desegregate the City's low-income housing units. However, well into the 1970's and later the siting and maintenance of racially segregated public housing continued to reinforce Baltimore's patterns of housing segregation. Importantly, redlining practices by federal and state government authorities--and private entities--mortgage lenders, insurers--also created barriers to desegregation. The Secretary of the United States Department of Housing and Urban Development admitted in 1970 that the federal government had ``refused to provide insurance in integrated neighborhoods, promoted the use of racially restricted covenants,'' and engaged in other methods of redlining. Data from the 1980's, long after the institutionalized government and corporate apparatus of discrimination had been formally dismantled, shows that the more African-American residents in a Baltimore neighborhood, the fewer the mortgage loans and dollars the neighborhood received. And while we are 64% African-American and 32% white, today's map of our neighborhoods shows that many still have very high concentrations of one race or the other. As the presence of these two conditions would predict, beginning in the late 1990's Baltimore has been targeted for predatory loans, and this fact is reflected in the wave of foreclosures currently wracking the City. Since 2000, more than 33,000 homes have been subjected to foreclosure filings. From the first to the second quarter of 2007 foreclosure activity in the City increased five-fold. Moreover, we expect this year to be even worse than last year as an additional 4,300 ARMs adjust to higher rates in the City, often to rates the borrowers cannot afford. Another 2,000 ARMs readjust in 2009. During the first quarter of 2008 alone 1,447 foreclosure filings were made in Baltimore City. On January 8, 2008 Baltimore City filed suit against Wells Fargo in the federal district court of Maryland alleging that Wells Fargo engaged in reverse redlining, i.e. that it has targeted Baltimore's African-American neighborhoods for bad loans. We chose Wells Fargo because it is one of the largest mortgage lenders in Baltimore and it has the greatest number of foreclosures in the City. Since 2004 to the present, Wells Fargo has made over a 1,000 mortgage loans per year in Baltimore City. No other lender made more than 1,000 mortgage loans in Baltimore during these years. In addition, the racial disparities in lending practices for Wells Fargo loans were among the greatest of all lenders. But there are certainly other bad actors in the City, and we hold them accountable as well. Home Mortgage Disclosure Act (HMDA) data reveals the racial disparities in Wells Fargo lending practices in Baltimore. As documented in the attached complaint, in 2006 Wells Fargo made high- cost loans to 65% of its African-American mortgage customers in Baltimore, but to only 15% of its white customers in Baltimore. Wells Fargo's refinance loans were even worse: in 2004, 2005, and 2006, a Wells Fargo refinance loan to an African-American borrower was 2.5 times more likely to be high cost than a refinance loan to a white borrower. In addition, Wells Fargo's pricing sheets require that equally credit worthy borrowers in predominantly African-American neighborhoods pay higher interest rates compared to their counterparts in white neighborhoods, imposing thousands of dollars in extra interest payments on African-American borrowers. Interestingly, research recently conducted by Chris Herbert of Abt Associates Inc. for the Annie E. Casey Foundation confirms that race accounts for lenders' disparate lending practices in Baltimore neighborhoods and not credit scores or other risk factors. He has analyzed HMDA, Census Bureau and credit scores from the credit bureau Experian for selected neighborhoods in 13 cities, including Sandtown/ Winchester/East Side Revitalization Area in Baltimore. He concludes that when one corrects for credit scores, there is a ``Very High'' (over 15%) racial disparity in these Baltimore neighborhoods for refinances for 2006, and a ``High/Med'' (5-15%) racial disparity for purchase loans in 2006. Wells Fargo Bank NA was the most active lender in both categories in Baltimore. In other words, even after taking the credit characteristics of borrowers into consideration, Wells Fargo was ranked first among lenders in Baltimore for having the largest disparity in the prices it charged African Americans versus whites. As our complaint documents, Wells Fargo also has one of the highest foreclosure rates of any lender in Baltimore and its foreclosure rates in majority African American neighborhood is 4 times the rate in majority white neighborhoods. Two thirds of Wells Fargo foreclosures in Baltimore in 2005 and 2006 were in census tracts more than 60% African American, while only 16% were in tracts that are less than 20% African American. Wells Fargo foreclosure rate for loans in African American neighborhoods is nearly double the overall City average, while the loans in white neighborhoods is less than half of the average. An interesting fact about Wells Fargo loans in Baltimore is that fixed rate loans constitute the majority of Wells Fargo's foreclosures. With contemporary underwriting methods lenders can reliably predict whether a borrower will be able to repay a fixed rate loan (debt to income ratio/loan to value/FICO/work history etc) the loan payments do not change over the life of the loan. However, even though 70% of Wells Fargo's foreclosures in both the African-American and white neighborhoods are on fixed rate mortgages, African Americans are nearly 4 times more likely to be foreclosed upon by Wells Fargo than whites. This is compelling evidence that Wells Fargo followed a policy of putting African Americans into loans they could not afford. When people are locked into mortgages that they cannot afford--they will soon fall behind on payments and foreclosure will often result. This pattern of predatory lending and foreclosure is ravaging our City. The TRF/Goldseker Study, ``Foreclosures in Baltimore, Maryland'' found that Baltimore lost $41.9 million in tax revenue in 2006 alone because of foreclosures. Lost property values across Baltimore in 2004 and 2005 total $17.8 billion. Baltimore incurs increased code enforcement, police and fire costs when buildings remain vacant. And the dollars and effort spent to nurture neighborhoods and to spark and maintain the urban renaissance the City had been undergoing, are being washed down the drain, as up and coming neighborhoods are stalled and even reversed in their economic progress. The City seeks compensatory and punitive damages from Wells Fargo in order to mend the damage that company's predatory lending has inflicted and to deter such conduct in the future. We would welcome federal law enforcement partnership in ensuring that such racially discriminatory practices do not occur in the future. Mr. Nadler. Thank you. There are, as some people may have noted, five votes on the floor pending. One vote has 5 minutes left; the others are 5- minute votes. So the Committee will stand in recess pending the end of the votes. I ask the Members to come back as soon as the last vote is completed. We will reconvene after the last vote. My estimate, but it is only that, is about 12:15. It could be a little earlier, a bit later. So the Committee will stand in recess. We ask the indulgence of the witnesses. The Committee will stand in recess until after the votes on the floor. [Recess.] Mr. Conyers. [Presiding.] Mr. Liebowitz, are you prepared to give your statement? We have been waiting anxiously for you to begin whenever you choose. TESTIMONY OF STAN LIEBOWITZ, ASHBEL SMITH PROFESSOR OF MANAGERIAL ECONOMICS, UNIVERSITY OF TEXAS AT DALLAS Mr. Liebowitz. Thank you. As we all know, the major economic news for the last year has been the disarray in the mortgage market. Now, the question is, how did we get here? And it is not like there is necessarily one single answer. But one key component is that the Government in the 1990's began to base its housing policy on several flawed claims. I believe these claims poisoned the working of the mortgage market, and now the economy is suffering. The poison began with the claim that minorities were being denied mortgages because of racial discrimination. Now, I am sure, as most of the people in this room know, every year after HMDA data were made available, newspapers have run stories reporting on the discrepancies in denial rates between minorities and Whites. The charges against the mortgage lenders were made based on the difference in denial rates, which were undeniable. There were clearly large differences. But the individuals making the claim, in the newspapers certainly and I think their political backers, I think it is fair to say they were hell-bent on finding discrimination, whether it was there or not. Now, it was obvious to a more sophisticated audience that the HMDA data were inadequate for testing whether discrimination was actually going on. To solve that problem, an expanded data set was created by the Boston Fed to allow a more complete analysis of the question. The researchers at the Boston Fed performed a study using this data, and they concluded that 40 percent of the higher minority mortgage rejection rate was due to discrimination. Unfortunately, this data set was created with insufficient care. The data had apparently never been examined for transcription errors. When my coauthor and I actually looked at the numbers contained in the data set, it was clear that the numbers were, in many cases, outrageously unreliable. The data set could not provide a basis for a claim that mortgage lenders in Boston discriminated against minorities. Full details are available in my 1998 article, published in the economics journal Economic Inquiry, which is attached somewhere to your sheet. Nevertheless, Government officials and regulatory agencies showed no interest in getting to the truth of the matter. In a rush to judgment and before any outside analysis of the Boston Fed study could even take place, the study was described as definitive and conclusive in various quarters. In other words, it appeared that the fix was in. The Boston Fed study was just a fig leaf for continuing attacks on the mortgage industry. Under the guise of ensuring greater minority participation in the housing markets, traditional lending standards were attacked as a form of discrimination. It was claimed that mortgage applicants could handle larger obligation ratios than those imposed by traditional standards. It was claimed that mortgage applicants could make their monthly payments without having been consistently at a job. It was claimed that mortgage applicants didn't need to be able to come up with a downpayment. It was suggested that mortgage applicants should be deemed credit-worthy if they watched some sort of educational video about the mortgage process. This was all nonsense. The old obligation ratios and standards served a purpose. The purpose is to make sure that the people lending the money got their money back and the people borrowing the money would stay in their houses. When you build the housing market on false claims, it follows you are asking for trouble. The unusually high current defaults would not be occurring in such large numbers if substantial downpayments had been made on the homes that are out there now. We can thank relaxed lending standards for that. The recent price bubble was unlikely to have occurred with such a vengeance if the relaxed lending standards were not in place. It is much easier to speculate on house prices if no money needs to be put down and if income does not need to be verified. Nor is it likely that the secondary market would have purchased so many bad loans without those claims. The oft-repeated praise of relaxed lending standards provided justification to investors for the belief that secondary market loans were a AAA. If you examine sales pitches that were being made for mortgages in the secondary market, you will see those claims being echoed. Although there are many other contributing factors, I think the proliferation of relaxed lending standards is at the center. And if we do not learn from the past, we deserve the future. Thank you. [The prepared statement of Mr. Liebowitz follows:] Prepared Statement of Stan Liebowitz [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Conyers. Thank you, Mr. Liebowitz. Good afternoon, Ms. Wiggins. TESTIMONY OF AUDREY J. WIGGINS, DIRECTOR, FAIR HOUSING AND ENVIRONMENTAL JUSTICE PROJECT, LAWYERS' COMMITTEE FOR CIVIL RIGHTS UNDER LAW Ms. Wiggins. Thank you, Mr. Chairman. Are you ready for me to begin now? Thank you. I am Audrey Wiggins. I am the director of Fair Housing and Environmental Justice at the Lawyers' Committee for Civil Rights Under Law. Thanks to you, Chairperson Conyers and all the other Members of the Subcommittee, for having this important hearing on the enforcement of the Fair Housing Act at this point in history and inviting the Lawyers' Committee to participate. I am honored to provide testimony as an advocate for those brave enough to challenge discriminatory practices that the Department of Justice and HUD have left unchecked. The law correctly empowers individuals to bring fair housing cases, but neither the intent nor the spirit of the law requires that individuals act alone. Both DOJ and HUD have unique authority, resources and obligations to enforce the Fair Housing Act, yet communities have emerged as the private attorneys general in the enforcement of the Fair Housing Act. I think all of us on both the panels have expressed the belief that housing choice should be free from discrimination and that no one should be denied shelter because of their race. Yet why are we at odds? Those reasons that I believe are described more in depth in my written testimony. I wanted to briefly talk about two cases of the Lawyers' Committee. One occurred right after Hurricane Katrina. With the backdrop of the human crisis of people trapped on the roof of their homes and jammed in municipal arenas, St. Bernard Parish in Louisiana, which borders Orleans Parish, issued an ordinance that prevented single-family homeowners from renting to anyone, with one exception: a blood relative. According to the 2000 census, the parish population was roughly 90 percent White, and 93 percent of all those single- family homeowners who could only rent to their relatives were also White. Thus, the ordinance has a disparate impact on potential renters of color. Although HUD did investigate some complaints, neither HUD nor DOJ took any enforcement action against this blatantly discriminatory blood-only ordinance. Instead, in cooperation with the Greater New Orleans Fair Housing Action Center and the law firm of Relman & Dane, it was the Lawyers' Committee who filed a Federal complaint against St. Bernard Parish. You have already heard statistics about FHEO's office. In 2004 and 2005, the General Accounting Office issued reports analyzing the intake and investigation practices of FHEO. At that time, the GAO found that 39 percent of HUD matters were over 100 days old. Our client, James Perry, who is the executive director of the Greater New Orleans Fair Housing Action Center, soon after Hurricane Katrina saw some Internet ads from individuals who wanted to house certain people to help those that were displaced. Some of the ads he saw stated, ``Not racist, but white only;'' ``Two bedrooms, private bath, use of whole home for a white family up to five;'' and, ``We would prefer a middle-class white family.'' As those ads were printed in a newspaper, they would no doubt be found as violations of the Fair Housing Act. And, with our assistance, Mr. Perry filed several complaints with HUD's FHEO office in December of 2005. To date, more than 2 years after his filing of these complaints, they are still pending with the FHEO office. To wrap up, either those of us in the fair housing community are right and the Federal Government should apply its authority and full resources to ensure the breadth of the Fair Housing Act is protected and enforced in all aspects, or those from the Federal Government are right and there is no problem with the narrowing of the scope of the Fair Housing Act and the selective enforcement of its provisions. Because the Lawyers' Committee and other advocates in the fair housing community will bring the cases. So the answer is, we cannot both be right. We urge Members of Congress, and this subcommittee in particular, to use the full force of your authority and influence to make sure that all who are protected under the Fair Housing Act are served by their Government. We beseech you to require that the staff of the Department of Justice and HUD in this Administration and the next will fulfill their obligations under the act to investigate and litigate cases challenging race discrimination, especially cases that challenge systemic discrimination and pattern-and- practice and impact cases. Thank you. [The prepared statement of Ms. Wiggins follows:] Prepared Statement of Audrey J. Wiggins [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Conyers. Thank you very much, Attorney Wiggins. Ms. Smith, are you ready to roll? TESTIMONY OF SHANNA L. SMITH, PRESIDENT AND CEO, NATIONAL FAIR HOUSING ALLIANCE Ms. Smith. Yes, Mr. Chairman. I am going to reserve 1 minute at the end to show a public service announcement. Thank you for the invitation to come here. Listening to the questions that arose--we were talking about the 3.7 million and what are we going to do about it--I want to announce that the National Fair Housing Alliance, the Leadership Conference on Civil Rights, the NAACP Legal Defense Fund, and the Lawyers' Committee for Civil Rights Under Law has formed the commission; it is called the National Commission on Fair Housing and Equal Opportunity. It is being chaired by former secretaries Jack Kemp and Henry Cisneros. We will be having four hearings across the country to talk about what are the problems, what are the issues, what can we do to make the enforcement of the Fair Housing Act an actual reality. And we will be presenting that report in December to your Committee and to the new Administration. The purpose of my testimony is to talk about the failure of enforcement at HUD and the Department of Justice. As we all know, the Fair Housing Act had two purposes. The first was to eliminate housing discrimination; the second, to promote residential integration throughout the country. And 10 years ago I testified before this Committee, and I implored the Committee to give the Department of Justice money for its testimony program, because testing is so critical to uncovering not just the individual cases of discrimination, but the pattern and practice, the large, systemic, institutionalized practices in this country. The department has been doing a good job when it comes to sexual harassment in housing cases. I applaud them for that. They have done some pretty good design and construction cases. The failure is in the rental market, the sales market, the lending market, and the insurance market. While they have been doing rental cases, they have not focused on the major, large rental management companies in the United States. In fact, after Katrina, we were able to do testing and identified the largest rental management company in the Southeast that engaged in discrimination. We filed complaints with HUD, and that one complaint that we filed in December of 2005 has been conciliated. All the other Katrina complaints we filed with HUD remain open. In the Department of Justice, when I think of their testing program, I would suggest to the Committee to talk to present and former employees of the Department of Justice, because I have heard that the testing is moving forward, that they have produced pretty good evidence, but they have not received authorization to file those cases. The testing program is incredibly valuable, but it must be used in mortgage lending. The Department of Justice could actually test through the whole mortgage-lending process and get to where the discrimination, particularly in the subprime and predatory market occurs, and that is at closing. I can't do that testing, because if we fill it out, it says it is a felony if we do this on the mortgage loan application. So at Justice we need to get them to do testing that is totally focused on the systemic issues. They should be testing the largest real estate companies in this country. They should be testing the largest mortgage lenders and subprime lenders. And they should be looking at the homeowners' insurance issue. Now, to HUD. On the age of cases, for me, it is just ridiculous that any of HUD's cases should be aged. The majority of their cases are rental cases, and, with all due respect, a rental case is not, you know, brain surgery. It is going in to see if an apartment was available or it wasn't available at the time that the person applied for it. One of the problems is that we have 10 little HUDs all over the country. We have a court decision in the 2nd Circuit saying, you know, how can one HUD say this, sub-office, and how can the other division of HUD say something else? And, finally, we were talking about why the number is so low. Two big reasons: HUD did its own survey that said people have no confidence in filing a complaint with the Federal Government of housing discrimination. The second is the failure to do media campaigns, appropriate media campaigns. And the commercial you are going to see now is something we produced in 2003. HUD failed to fund its national media campaign in 2005 and 2006. And what you saw that Assistant Secretary Kendrick showed you is their current ad campaign. And I just want you to compare the ad campaigns, because the ad campaigns are supposed to have a call to action and motivate people to file complaints. (Video played.) Ms. Smith. My time is up, but I wanted you to see that, because HUD tried to block us issuing this, even though they paid for the campaign. They ordered us to remove their name from the spot. When we had a meeting with Kim Kendrick when she was assistant to Secretary Jackson in the Office of Public Affairs--the FHEO office had supported this commercial, and the Ad Council helped us develop it. The Office of Public Affairs said, ``This commercial will offend lenders.'' And Kim Kendrick said she didn't think her grandmother would understand it, and required us to do more focus group testing and required us--we already had 5,000 of it ready to go out to all the TV stations and radio stations and print ads all across the U.S.--made us remove their name and their phone number from the print campaign. And then, subsequent to that, they didn't continue the national media campaign that should have been the follow-up to this and help people avoid predatory lending. [The prepared statement of Ms. Smith follows:] Prepared Statement of Shanna L. Smith [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Conyers. Did anybody ever see it? Ms. Smith. Actually, we released it anyway, and it appeared on CNN. And we have documentation to show that our members' complaints in mortgage lending increased significantly because these ads were out. Now, her current campaign, they spent a million dollars on it. All you heard her say is you are getting one television spot, you are getting some public forum and a tool kit. For a million dollars, we got television spots, radio spots, we have this in English and Spanish, radio spots, print materials that went on billboards, buses, posters that went all over the United States, and we set up an 800 number so people could see these ads, read the print thing, hear things on radio, and give us a call. And I can tell you, television public service announcements rarely get aired. You have to have a massive radio campaign. And I have these ads up here because State Farm Insurance joined us to start promoting the benefits of multicultural, multiracial neighborhoods. And, you know, we look at the corporations, everybody-- many, many corporations have a very diverse workplace but people go home to segregated neighborhoods. So how are we going to make change in this country? So we met with some of the corporations, and State Farm has given us $800,000 to do a campaign directed to White, suburban communities to say, ``Here is the benefit of multicultural, multiracial associations. Open up your neighborhoods.'' But we will never get there if we are not investigating the real estate sales companies who stop African-Americans from moving into neighborhoods, as they did in Detroit. We have a lawsuit pending against this real estate company in Detroit. Well, they are not in Detroit. They have 16 offices outside of the city of Detroit. And they---- Mr. Conyers. I wonder who ``they'' are. Ms. Smith. I am sorry? Mr. Conyers. I wonder who ``they'' are. Ms. Smith. Century 21 Town and Country. And we filed a Federal lawsuit after--and at the same time, the Michigan Department of Civil Rights charged our case against them. We found that they were steering Whites into Grosse Pointe, and even when African-Americans asked to see Grosse Pointe, they were steered into the beautiful area of East English Village. And Whites were denied the opportunity to see East English Village. I drove through there, took pictures. Beautiful neighborhood, great brick and stone homes. But these real estate agents engaged in steering. We tested 14 of the agents. We found nine of the agents, in our opinion, that they were violating the Fair Housing Act. We shared that information with the Department of Justice. They said it is not a pattern and practice. Mr. Conyers. Well, when do you determine to go to HUD first to file a complaint, as opposed to going to Department of Justice? Ms. Smith. Well, we have a number of cases pending before HUD. We often immediately file with HUD because it stops the statute of limitations from ticking. And then we meet with the Department of Justice. We don't always get a chance to--I mean, the staff is very open to talking to us about our cases. And the issue is that we did the follow-up testing of HUD's housing discrimination study, and we conducted 145 paired tests. We found an 87 percent rate of racial steering in sales properties in the United States in 12 metropolitan areas. HUD has all of our evidence. The Department of Justice has access to all of that evidence. HUD, on Monday, finally charged one of the cases. These complaints started to be filed in 2005. On Monday, they filed a case that is in suburban Chicago. All the other complaints are just sitting at HUD. We have a number of lawsuits that we have filed now. We have stopped taking our design and construction complaints to either HUD or Justice. We are just going directly into Federal court, because we want to see immediate change and not just something negotiated. And we want to see stronger implementation of the law. I mean, you know, I only have one attorney on my staff, so I rely on the Lawyers' Committee and Relman and Dane and the good works of Fried Frank and other law firms to help us. But we take them to HUD for two reasons. I want to see how the process is working. I have been doing this for 33 years. So I have seen it in the first 20 years of the law and this last 20 years of the law. I am a cynical optimist. I keep wanting to use the process to make it work. Because you passed a law, it is supposed to work. We have the greatest civil rights law in fair housing than any of the other ones, but there is no will in the enforcement agencies at the Administration level to get it done. So we need the Housing Fairness Act to be passed, so that we can do the systemic investigations. I have met with the Office of Management and Budget, and they agreed with me a couple years ago when I said, ``We can't continue to do this case by case by individual case. We have to deal with the systemic and institutionalized nature of the problem.'' And they even said, ``Well, then your fair housing groups ought to have a systemic unit,'' and we said, ``Yes, they should.'' Now we need the money to do that. Mr. Conyers. I recognize the gentleman who is the Chair of the Crime Subcommittee of the House Judiciary Committee, Bobby Scott of Virginia. Mr. Scott. Thank you, Mr. Chairman. Mr. Chairman, we only have 5 minutes, and when I used my 5 minutes at the last panel I just asked the question, what did they find with the 500 pairs, and we got evasion and confusion and failure to answer. Ms. Smith, if the representative from the Department of Justice had testified truthfully and candidly, what kinds of schemes and tricks would she have described as a result of the 500 testing pairs? Ms. Smith. If I look back at HUD's previous testing in the 1990's, she would have been able to describe cases of rental discrimination all over the country, where African-Americans, Latinos or Asian-Americans inquired about the availability of apartments and were either, with a smile and a handshake, told, ``You know, they are already all rented,'' or, ``We have three people on the waiting list, and I will get back to you,'' and then when the White tester went out they would have been given an apartment immediately. Mr. Scott. And how often does this occur? Ms. Smith. Well, my members do audit testing, which means they send testers out. When we have created the new fair housing groups in Boston and New Orleans and Fresno, California, we find a rate of discrimination anywhere from 47 to 75 percent of discrimination against African-Americans, Latinos or Asian-Americans when they are looking for rental housing. Mr. Scott. Mr. Carr, if she had testified truthfully, what do you think she would have said? Mr. Carr. Congressman, the paired testing by national neighbors of the National Community Reinvestment Coalition reinforces the same findings that Ms. Smith has just indicated. We routinely find disparate treatment in at least 40 percent of instances, sometimes close to 50. And other research has shown it to be as high as more than 60 percent of the time. The range of disparities in information is really across the spectrum, in terms of units available, in terms of explaining financial terminology, in terms of call-backs. There are just huge disparities found in paired testing studies. So it would be just hard to believe that if someone developed a competent paired testing study, out of 500 cases, you wouldn't have at a very minimum somewhere around 200 of those cases showing some forms of important disparities that could have potentially limited housing opportunities. Mr. Scott. And that would be for each contact? I mean, that is, when you go to a rental unit, you would expect discrimination 40, 50, 60 percent of the time. So if you are looking for an apartment and have checked out five or six different units, and you experienced discrimination 40, 50 percent of the time, it is virtually hard to believe that a person looking for a house wouldn't have run into some discrimination every time they have looked for a house, is that right? Mr. Carr. That is correct, yes. Mr. Scott. You mentioned apartments. What about steering for homeownership, for purchases, how often does that occur? Mr. Carr. We find the same general findings for homeownership and rental housing. Mr. Scott. And so, with 500 testers, you would think it would be incredulous that someone could not have found widespread discrimination in their testing? Mr. Carr. It is just simply hard to believe from any evidence and information that is available widely in the industry. Mr. Scott. And what about--we have heard testimony about subprime loans. How often would someone have discrimination in terms of mortgages? Mr. Carr. The subprime lending market is an area--one of the things that we said in our testimony is that we need better information. And the reason we need better information is because we continue, year after year after year, to have debates whereby, for example, the groups that represent consumers and minority households point out these severe disparities and the only defense is, ``Well, but you haven't looked at all the variables. And, therefore, it makes sense.'' And what we say is, ``Well, stop hiding the variables. Give us the information. Make publicly available credit scores information, LTV, other product information. Remove from that information individual attributes, so that you don't know specifically whose loan you are looking at, but that you have a good, clear understanding of the industry.'' We have found repeatedly, when there is good industry data provided on credit scores and others, that severe disparities continue to exist in the loan process. And I might say that the idea that a study by the Federal Reserve Board is somehow responsible for excessive subprime lending to communities is novel, to say the least. The fact of the matter is that the lending industry changed pretty dramatically. And people were writing about subprime loans, including me, as early as the late 1990's, early 2000. I published a study in 2001 called, ``Financial Services in Distressed Communities,'' and that study was not about trying to promote subprime lending. In fact, it was cautioning about the fact that consumers were being steered into the subprime market and, as well, predatory lending. These were just policy papers. We also did a review of the Boston Fed paper that was academically reviewed. And we found that the Boston Fed did contain a number of methodological errors, but our work found that those methodological errors were not determinative. And, in fact, the power of the Boston Fed study wasn't to suggest that consumers should get into the housing market using alternative credit scores and alternative data. The real power of that was to say that, when individuals had blemishes in their credit record, they weren't treated the same. To the extent that Black and Latino households had perfect credit records and credit scores, they were treated pretty well. But, unfortunately, that occurred in only 20 percent of instances; that 80 percent of the market, everyone has some type of blemish, and that is where the disparities arose. And if I had known we were going to talk about this, I would have reread the study; it was 16 years ago. But---- Mr. Scott. Well, let me ask you this. When you talk about the variables, what kind of variables would you be looking for? Mr. Carr. In terms of--oh, we would look for things like the credit score. Because when people say, ``Income is not determinative of whether you should receive a loan,'' they are absolutely correct. And no one has ever argued that. It is just that when you see the severe disparities, for example, when you see five times the loan-denial rates, you know that just tells you right off-hand, there are not five times the level of credit problems. But the problem is that we don't make that data available, the credit score, so that we can stop arguing about what is missing and start having rational discussions on what data is available to us. Mr. Scott. Let me ask just one, kind of, concluding question. If someone where to testify that, in terms of seeking housing, you sent out 500 pairs of testers, that they didn't find widespread discrimination in the United States, would you find that testimony credible? Mr. Carr. I would find it curious. It might be that the testimony is correct and the tests were conducted in an insufficient manner, in an inappropriate manner. Mr. Scott. But is there any way that it could have been conducted in an appropriate manner where you would not have found widespread discrimination? Mr. Carr. Not based on any evidence or information that I have seen about standard paired testing conducted by a range of institutions, from public bodies to private nonprofit agencies. Mr. Scott. Thank you. Thank you, Mr. Chairman. Mr. Conyers. Would you submit those studies you referenced? And I am sure Professor Liebowitz has written on this subject, on these related subjects, right? Mr. Liebowitz. I am not sure what you mean by ``related subjects.'' Mr. Conyers. Well, have you written at all? Mr. Liebowitz. Yes, I referenced a paper that I wrote in 1998. I am working on something now that will talk about the subprime type of problems. But the reality is that is not my main specialty. Most of the papers that I write are not on mortgage discrimination. Mr. Conyers. Well, I am fascinated by them, I am sure, if I read them. But we are on the other subject. You write about it sometimes as well. Mr. Liebowitz. The other subject being? I mean, I have written about mortgage discrimination. Mr. Conyers. Well---- Mr. Liebowitz. And---- Mr. Conyers [continuing]. Don't you think that would excite our imaginations, if we read it? Mr. Liebowitz. Oh, yes, I recommend you read it. Mr. Conyers. Well, why don't you submit it? Mr. Liebowitz. I did submit it. Mr. Conyers. Well, okay. Have you got any other written works that we might enter and put in the record, as well? Mr. Liebowitz. On that topic, just an op-ed or two, which I think are also submitted. Mr. Conyers. Well, let's make sure they are. You know, you fascinate me as a modest writer who keeps secret some of his best writing, and we have to make sure we have to get it out. When is this study you are writing now, currently, coming out? Mr. Liebowitz. I am supposed to have it done by the end of August. Mr. Conyers. Does it relate to the subject matter that brings us all here this afternoon? Mr. Liebowitz. Yes and no. It is---- Mr. Conyers. I will take the ``yes'' part. That is all I need. [Laughter.] That is good. Mr. Liebowitz. Okay. That is fine. Mr. Conyers. Would you send that to us too? Mr. Liebowitz. Yes, I will. Mr. Conyers. I thank you very much. We turn now to Mel Watt, who not only is a distinguished Member of this Committee but Chairman of the Oversight Subcommittee of the Finance Committee, on which he sits. Mr. Watt. Thank you, Mr. Chairman. I am glad you started with Mr. Liebowitz, because I was going to give him an opportunity to clarify what he was saying in his statement. I happen to agree that the study that was done by the Boston Fed was probably unreliable. I don't know whether it was outrageously unreliable. Unreliable is unreliable. Mr. Liebowitz. I said---- Mr. Watt. What I have trouble with is the next sentence of your testimony, which says, ``There was no basis for a claim that minorities were discriminated against by mortgage lenders.'' And I am hoping that you will clarify that you mean no basis in the Boston Fed study. You can't possibly be sitting here representing to this Committee that you believe that there is no basis for claiming that minorities are discriminated against by mortgage lenders. Or can you? Mr. Liebowitz. I certainly wouldn't say that there are no individual members of minority groups who are not discriminated against. I would not say that. Mr. Watt. Well, I am asking you, is your testimony that there is no discrimination by mortgage lenders against minorities? That is the question that is--and that, I believe, could probably be answered with a ``yes'' or ``no.'' Either that is your testimony or it is not your testimony. Is it your testimony? Mr. Liebowitz. My testimony is that, in aggregate, for the United States in the early 1990's, which is the time period I am referring to in the study, that there was no evidence that there was overall mortgage discrimination against minorities in the United States. Mr. Watt. And what period of time was that? Mr. Liebowitz. Early 1990's. Mr. Watt. What period of time is the early 1990's? Mr. Liebowitz. In particular, I think we are talking about 1992. Mr. Watt. So you surveyed the whole industry, you are not just talking about the Boston Fed study, you are talking about the whole industry you surveyed. And your testimony to this Committee is that, in the early 1990's, 1990 to, what, 1993, that there was no discrimination by mortgage lenders against minorities? Mr. Liebowitz. No, I am saying that there was no evidence that there was aggregate discrimination. By that, I mean---- Mr. Watt. Okay. All right. Mr. Liebowitz [continuing]. A statistical analysis, where you take a look at mortgages and you carefully examine whether or not they appear to be turned down at a greater rate for minorities than for non-minorities after you have controlled for enough variables. The one thing---- Mr. Watt. Okay. You have answered my question. I think your testimony has gotten to the point that it is so incredible that I am not going to waste any more time with it. I mean, I was trying to give you an opportunity to clarify what you were saying, but let me just go on to somebody who makes some sense here. What are you finding--what is everybody else in the real world finding in your experience about whether there is discrimination in mortgage lending, rental, homeownership? Is there anybody else who joins in this opinion? Steering? Anybody else who wants to opine on this, that aligns themselves with Mr. Liebowitz's opinion, first of all? And then, if not, maybe you all could tell me what your opinion is on the same issue. Mr. Carr, I will start with you and just come down. I won't ask any more questions. But I don't want to leave, as you noticed in the first--even before the witnesses started, I don't want to leave any indication in a hearing record that goes unrefuted or uncontradicted, as the case may be. Mr. Carr? Mr. Carr. Thank you very much, Congressman. I just want to reiterate that we did publish a significantly refereed article on the Boston Fed study, and we found it to be a credible study. And so I will submit that for the record. Second of all, we have found in our paired testing studies significant levels of disparity in rental and homeownership whenever any studies that I have seen that are credible studies include that. We also operate a Homeownership Sustainability Fund, in which we help consumers who are dealing with problem loans as a result of subprime, predatory and/or loans that contain otherwise unfair and deceptive terms and practices. And we find routinely in those files all sort and manner of deceptive practices in those loans. Again, those would not be considered statistically significant in terms of being, you know, something you could report on nationally as a national study, but they are good anecdotal evidence that reinforces the best information that we have that is unfortunately the HMDA data, which we report on. And we have a study that we are very proud of called, ``Income is No Shield,'' where we show that income really doesn't protect consumers of color in the housing market. In fact, that we find even greater disparities as income increases for minority households. And what we would encourage and urge is that Congress consider expanding the data variables that we have available, so that, again, we don't debate---- Mr. Watt. As you know, Mr. Carr, I am on your side of that. We are strong advocates of that. And perhaps we can give Mr. Liebowitz some more statistically verifiable information; then he can perhaps reach a different conclusion. Ms. Smith? And then I will get Ms. Sangree and Ms. Wiggins. Ms. Smith. Undersecretary Jack Kemp, he authorized---- Mr. Watt. He was a Republican, wasn't he? Ms. Smith. Yes, yes. Mr. Watt. Okay. Just trying to be bipartisan here. Ms. Smith. Me, too. We received a grant through HUD to do testing, mortgage lending testing, in eight cities in the early 1990's. And we found high rates of discrimination against African-Americans and Latinos in those eight cities. If you look at from the mid-1990's to just 2 years ago, the Department of Justice brought red-lining lawsuits against some incredibly large lenders in Grand Rapids, Detroit, Chicago, and Gary, Indiana. And last November and December, when we realized the credit crunch was coming in and the underwriting guidelines were tightening up, I thought back to my days in 1975 forward in fair housing and I saw, whenever there was a credit crunch, as there was in the early 1980's, who was squeezed. And that was women and people of color. So we did some testing of banks in several States. And we found that, while the Latino, African-American and White testers were all given information about loan products, the Latino and African-American testers were referred to the highest-cost loan product, the highest interest rate, the highest downpayment. And in some instances when the African-American homebuyer went in, the banks said, ``The person who deals with mortgage loans is not here today. She is on vacation, and no one can help you.'' When the White tester came in the next day, she was still on vacation, but they made sure someone helped that White tester get information. Mr. Watt. Not statistically reliable, according to Mr. Liebowitz, I am sure. Ms. Sangree? Ms. Sangree. I would just add that, in the field of the subprime lending that the Baltimore City lawsuit is concerned with, although there isn't publicly acceptable data, as Mr. Carr is urging should be made more available, we have several snapshots that are provided principally through litigation. And if you look at page 30 of the Wells Fargo complaint that is attached to my written testimony, you will see a citation to a case from Philadelphia where, through discovery, they had access to the loan documents of borrowers. So they were able to look at credit scores and all of the other risk factors. And the conclusion in that case was that borrowers residing in African-American neighborhoods pay more than comparable non-African-Americans and residents of communities in which White people predominate. We see similar patterns in Baltimore City. We have not had access yet to the discovery in our lawsuit, but we will be having that. And in the meantime, as I mentioned in my oral remarks, the Annie E. Casey Foundation, based in Baltimore, is doing research in 13 cities across the country, including Baltimore. In Baltimore they are focusing on a cluster of neighborhoods encompassing 20,000 people. They have a contract with Experian, and their researcher is looking at not just income data but also credit scores and other risk factors. And the conclusion he has made in these Baltimore neighborhoods is that there is an over 15 percent racial disparity for refinances in 2006 and a slightly lower disparity in home-purchase loans. So we are getting these snapshots of the statistics that show that, you know, the HMDA data that shows vast racial disparities in lending practices can't be explained away by differences in credit scores or other risk factors. And if HMDA data included more of that data, we could see it on a nationwide scale as well. Mr. Watt. I can tell Mr. Liebowitz is not convinced yet. Ms. Wiggins, perhaps you can help. Ms. Wiggins. You have great faith in me, Congressman. I don't know that I will be the one to---- Mr. Watt. He is turning red, though. [Laughter.] So his body language is changing a little bit. Ms. Wiggins. The Lawyers' Committee generally does not engage in this kind of testing, but I would agree with what has been said so far. I always quote and cite the NCRC study that Mr. Carr referred to. The Center for Responsible Lending has also done good studies on this as well. And I would be happy to talk with the staff about how they could get copies of those studies. Mr. Watt. And Mr. Liebowitz, make sure you send them to him too. Ms. Wiggins. Yes, I will make sure I CC him on that. [Laughter.] I also just wanted to underscore the point, the need to have funding through the FHIP and FHAP programs, so that the statistical data would be available. One of the things that I highlighted in my written testimony on pages nine and 10 is that, when the funding for that kind of testing is unavailable, that disparate impact cases aren't able to be filed. And as NFHA pointed out in their Fair Housing Trends Report, about a quarter of those centers have had to either go down or shut off some of their enforcement activities or just close their doors all together, one of which was a powerful center in North Carolina, where I know you are from. Also, the FHIP and FHAP agencies accounted for 91 percent of all fair-housing complaints that were filed in 2007. So I wanted to use this opportunity to just underscore those. Mr. Watt. Thank you. Mr. Liebowitz, we are working to try to get the data set expanded on the HMDA. We vigorously believe that it should be expanded so that verifiable statistical studies of the kind that you say don't exist can exist. Although a number of people have jumped across that threshold substantially. I am sure that in your heart of hearts you don't believe that discrimination doesn't exist. Mr. Chairman, with the earlier witnesses, I alluded to the fact that Representative Al Green has a bill that he has introduced that would enable HUD to do paired testing using other agencies beyond what the Department of Justice is doing. And I wonder if it would be appropriate to perhaps allow him, since he came and has a very strong interest in this area, a couple of minutes to question the witnesses. Mr. Conyers. Yes, I am interested to know how it would help us deal with the issue that is in front of us. Mr. Watt. I ask unanimous consent that he be allowed to ask questions of this witness panel. Mr. Green. Thank you, Mr. Chairman. And I thank Member Watts for his kind assistance. He is the chairperson, of course, of our Oversight Subcommittee, and he does a stellar job. And, Mr. Chairman, your reputation is far and wide, and it is always good. And I am honored to sit with you today. If I may, I will move right to what I consider the bottom line, which is the testing. Is it agreed upon by all present-- and to respond, I would beg that you kindly extend a hand into the air. This is comparable to what we call voir dire, or ``voir dire,'' in a court, depending on where you are from. [Laughter.] I am from Texas. We say ``voir dire.'' Which is a French term that means ``to speak the truth.'' So mendacity would not be appropriate. If you agree that testing is the best methodology by which to ascertain the empirical evidence necessary to prove discrimination, would you kindly extend a hand into the air if you think it is? Okay. We have two people, three people---- Ms. Sangree. I am agnostic. Mr. Green. Okay. Well, permit me to ask, because I am looking for something better than testing. If you have a methodology that is better than testing to acquire the empirical evidence, would you kindly help me to understand that methodology? Ms. Sangree. Well, I am just not an expert in rental discrimination. I think for rental discrimination that certainly testing would be the best, and probably for home purchases. In the lending environment, I think access to the data would probably be enough. You wouldn't even need to do the testing. Mr. Green. One of the reasons why, as I understand it, we don't have more testing in the area of lending is because we have laws that prohibit one from fabricating a story so as to perfect testing. If I am incorrect, would you kindly help me? Ms. Smith. No, you are correct. Ms. Sangree. Yes. Mr. Green. Okay. So we really have not had a fair opportunity to apply testing to the lending environment. Is that a fair statement? Ms. Smith. We have had the opportunity just at the inquiry but not through the application process. Mr. Green. Exactly, because of the application itself---- Ms. Smith. Yes. Mr. Green [continuing]. You cannot fabricate. Ms. Sangree. I want to amend my vote and say, yes, testing. Mr. Green. Ah, thank you. [Laughter.] So now I have--for clarity purposes and because Watts is a great lawyer and he will remind me that I did not properly address the record, so would you kindly raise your hands into the air one more time if you agree? Okay. Let the record reflect that all but Mr. Liebowitz--is that correct? You did not raise your hand. Okay. You may lower your hands. Mr. Liebowitz, if you would, kindly explain to me a methodology that is better than testing in the area of home purchasing, for example, or leasing--we will just take these-- that is better than testing in acquiring the empirical evidence. Mr. Liebowitz. If you want to talk about rental or home purchasing, it might very well be the case that that is the best method for one-on-one, individual, in every instance finding out whether---- Mr. Green. Thank you. Let me reclaim my time quickly and ask this question, Mr. Liebowitz. Mr. Liebowitz. I thought you were talking about---- Mr. Green. No, no, I have one more question. I accept your answer. One more question, please, sir. In the area of testing, with reference to purchasing a home, have you had any experience in this area in terms of acquiring intelligence, meaning information, and synthesizing additional thoughts from the data acquired? Have you had any experience with this? Mr. Liebowitz. I have not had any direct experience with testing, but---- Mr. Green. Well, it is testing we are talking about. Mr. Liebowitz. But if you let me---- Mr. Green. No, no, no. It is testing we are talking about. Mr. Liebowitz. Can I answer the---- Mr. Green. I will, but only if we finish this. I only have 5 minutes. So you have not had experience with testing in this area. Would you conclude that the methodology that you have utilized could have benefited from testing, to some extent? Mr. Liebowitz. It is conceivable it could have. But the problem with testing is you test some particular location, and the advantage of a database is it covers everyone, or at least what you are hoping is a large, representative area. And---- Mr. Green. So would you agree, sir--if I may, if I may, if I may. Would you agree that--are you a lawyer? Mr. Liebowitz. No. Mr. Green. Okay. Would you agree that in court the empirical evidence that we seek probably will be derived from testing as opposed to the statistical analysis that you performed? Mr. Liebowitz. I can't talk about what would be---- Mr. Green. All right. All right. I appreciate your answer. Finally, let me say this. This bill, H.R. 2926, for those who are unfamiliar, provides about $260 million over 5 years for FHIP, for the Fair Housing Initiative kind of testing that you have been talking about. And for those who would say $260 million is a lot of money, I agree; it is almost what we spend on 1 day in Iraq. So it is a lot. But it is needed. And my hope is that we would be able to acquire that type of assistance from our Congress. A final question before I again thank the Chairman and yield back is this: In performing the testing--I think you have answered the question--but in performing the testing, if you don't have someone who is willing to take the evidence and use the evidence, perhaps even in court, how much value is the evidence--or how do you find value with the evidence? What do you do with it when you cannot take it to court or you find that you have an agency that is not cooperating to the extent that it deems it necessary to pursue and prosecute? What are you doing with the evidence? I will just start with the gentleman, Mr.--and I am sorry, I can't see your name from here, but I can look here and find it. This is Mr. Carr? Mr. Carr. Yes. Mr. Green. Okay, Mr. Carr. Mr. Carr. With the evidence that we find, we bring actions against a range of mortgage market participants, and we have, ranging all the way from investment banking institutions to the credit rating agencies, all the way to individual lenders. So we act as expeditiously and as forcefully as we can. But, again, the level of funding that is available, the paucity of information, really limits our ability to perform. Which is why we have argued that what we really need is a new institutional structure, a Cabinet-level appointment for civil rights enforcement that will talk directly to the President and provide leadership in order to finally and once and for all break the back of discrimination in housing, in education, in health care, insurance, the credit markets and others. And until we have something that is broader and more powerful than that, we simply will be working around the margins. Mr. Green. Thank you. And, Mr. Chairman, I will yield back. I will just comment and make--someone mentioned that the way has been shown to us. I think that what we are doing with the Fair Housing Act is a part of the way, but the will still has to be there to enforce it. Thank you, Mr. Chairman. I yield back. Mr. Conyers. Thank you all very much. Professor Liebowitz, what are you thinking about now? Have you been slightly moved by the discussion that has taken place? Mr. Liebowitz. No, I can't really necessarily say I have, even though some of the earlier discussion with some of the people on this panel moved me somewhat. The thing that I am picking up, however, which confirms something that was in my statement, was that people are convinced they know the answer before the analysis is done. And when you know the answer in advance, you are not really open to finding out what the truth might be. And I am picking up people saying they know what the answer is, and they just wait for some study to confirm what they already know. If that is the case, that is fine, but there is not much point in trying to, sort of, conduct studies to actually see what the story is. Mr. Watt. Would the gentleman yield for just a second? Mr. Conyers. Yes. Mr. Watt. And I am sure the Chairman can attest to this from a vantage point of years that exceeds my 62, 63 come August. But when you are Black and you live in a world for 63 years, I don't need empirical evidence to tell me that discrimination exists. Now, do we need to verify that to a court? Do we need to test for it? Do we need statistical analysis? Do we need databases for that purpose? Absolutely. Do we need that kind of verification to make good public policy? Absolutely. But if you are detecting that I know that discrimination exists in the housing market, in the education market, in the criminal justice system, I would have to plead guilty to that, because it is based on years and years of personal experience. And so that I don't apologize for. We have to get good information and have it verified in every way that we can to convince, quite often, people like you who are reluctant to acknowledge that these things happen in our world and have happened in our world and continue to happen in our world. And I acknowledge that that is part of our responsibility in setting public policy and in winning cases or in operating in this world. I suppose you came here with some predispositions too based on your life experiences. So that is it. I just thought he needed to hear another perspective on that. Mr. Conyers. Well, Stan Liebowitz, you have become the focus of so much attention. I can't understand why. Learned, a writer, prolific, I suspect. Let me refer you to a book edited by James Carr. It is called, ``Segregation: The Rising Costs for America.'' And I recommend it to the whole panel. Listen to this. HUD's enforcement powers have, for various reasons, largely remained underutilized. In 2003, HUD brought only four racial discrimination cases, although it had received more than 2,700 complaints that year. Nearly 40 years after the passage of the Fair Housing Act, at least 3.7 million fair housing violations still occur each year. And it seems to me that it isn't--we don't have to base it on our individual experiences in America. It is there for everybody to see. We live in an essentially segregated housing pattern system in the United States of America. Is that a reasonable question to put to all of us here? Mr. Liebowitz. Are you asking me specifically? Mr. Conyers. Well, we always point to you to kick off the discussion. Mr. Liebowitz. I am not trying to deny that there is no discrimination. I am talking about one specific area, which is mortgage discrimination and particularly whether or not one gets a ``yes'' or a ``no.'' And at the time period when I was looking at it, there was no issue, there were no numbers on what the rate was. At that time period, the arguments that you could make for why somebody would discriminate, if you were going to be discriminatory in the mortgage business, would you do it, you certainly hurt yourself if you don't make a sale because you want to not allow somebody based on their skin color to get a mortgage. But we are talking about generally large institutions that were making mortgages that had been taking a terrible beating publicly from the yearly HMDA data coming out. They, I am sure, were concerned about their general track record and the publicity and, I would have thought, would have tried very hard to make sure that they weren't engaged in discrimination, even to the point of bending over backwards the other way to avoid any possible bad publicity. You also didn't have what you will find in a lot of rental situations, where it may be, because there is still a certain amount of racism that exists in the country, I am sure, of tenants who might not want other tenants to live there of a different color. And, therefore, somebody who is in charge wants to take that into account, or maybe they are racist themselves. But for the mortgage process, that doesn't really exist, because the person who is giving the mortgage doesn't live anywhere, doesn't have to worry about what any of the other mortgagees out there think, because nobody knows. The neighbors may not like it if somebody moves in, but they don't know necessarily who gave the mortgage. So the arguments for why you would see people engaging in racism occur much less so in this particular transaction with making the mortgages. And then, given all the negative publicity, I am willing to accept the proposition that there may not have been any mortgage discrimination going on in the early 1990's, and, therefore, I would like to see a test. And I don't see any evidence that there was. And unfortunately--I am in agreement with you when you say you want to get more data. More data would be good. More data is always better than less. And any time you can get more data, I think it is good. In the case of the mortgage discrimination, the data from HMDA is insufficient, as almost everyone understands. There was this one attempt by the Boston Fed to increase it, and we don't have other attempts where we could take a look, for instance, how this thing was done. And it was done-- the mortgage lawsuits that did it in a flawed way. And it was unclear that you could ever clean those numbers up properly. When I used the term ``egregiously bad,'' I wasn't talking about their study so much as the numbers. Somebody put those numbers in that database and didn't look at what they were doing, and there were all sorts of crazy things going on that couldn't possibly be correct: negative interest rates, mortgages that were sold in the secondary market but that were disapproved--and you can't sell a mortgage that hasn't been approved--and those types of things. And there were hundreds and hundreds of those problems. That was the basis of the problems. And that is the only thing we have to hang this whole big question on. Mr. Carr. Mr. Congressman, if I could just comment really quickly on two quick statements that were made. One was the idea that somehow if you are selling these loans into the secondary market into investors who don't live next-door, the likelihood of discrimination is less, one could argue completely the opposite. The fact that you don't have to personally endure what happens when you provide that person with a predatory loan could, in fact, potentially enhance discriminatory practices. And one of the reasons that many argue that the subprime crisis got to the magnitude it is today is because those loans were shipped off to unknown investors and the result happened concentrated in minority neighborhoods. The second argument about the HMDA data, I don't want to make it sound as if the HMDA data is to be dismissed. There is no publicly available credit-related data that reinforces or supports the levels of disparity in lending by race and ethnicity in the HMDA data. The question is, to what extent, and can you put a specific statistic on it, et cetera, et cetera. But, in fact, the HMDA data do show wide disparity of treatments that cannot be explained by publicly available credit data. Mr. Conyers. Ms. Smith? Ms. Smith. Thank you. Mr. Liebowitz implied that people don't act against their own economic interest, that, you know, if you are selling a home, you are going to sell it to anybody because you want that commission. If you are doing a loan origination, you are going to give it to anybody because you want that commission. The fact of the matter is, that is simply not true. And I will send him the report that the Urban Institute did based on our eight-city testing investigation of hundreds of lending tests in these eight metropolitan areas. People think and economists often say to me, you know, it is irrational for people to act against their economic interest. And I have to remind them that discrimination is irrational, and they act that way anyway. Mr. Conyers. Well, I have to submit that people also act against their political interests. I have noted that in the course of my career. And so I am not shocked to hear you say that they act against, sometimes, some, against their economic self-interests. Mr. Carr. Congressman, if I could, just one comment very quickly. When I say there is no publicly available credit data, it is not that there aren't studies that have shown that minority households have higher credit challenges than do non- Hispanic, White households. It is that the disparities in their credit profiles don't in any way relate to the extreme disparities in the HMDA data. So there is data; you can actually compare it, and they don't make sense. Ms. Wiggins. May I add just a few more points? I wanted to just speak as the advocate for the folks who are left to bridge the gap when Government agencies underutilize their authority and the obligations under the act. That there is a chipping away of the breadth, of the complete range of what is possible under the Fair Housing Act. When HUD and DOJ doesn't file disparate impact cases, what happens is what we are seeing now in the court system. Just last month, the Supreme Court ruling from Ledbetter v. Goodyear Tire was applied to a design and construction case. This was the 9th Circuit. And they said that the discrimination would have occurred when the design and construction of the noncomplying building was completed, not when the individuals with disabilities learned that the building was out of compliance. The Department of Justice was silent on that issue. Also, we are seeing a chipping away of the act as to discriminatory acts that occur after the sale contract, or rental contract of housing units. There is a trend among two circuit courts of appeal and some district courts to outrightly reject any allegation of discrimination that takes place after those instances, saying that it is not within the Fair Housing Act. So I just want to reiterate that, as I was the one who was asked to testify about the burden on the community when Federal agencies don't fully enforce the Fair Housing Act, that this is part of what happens. Ms. Smith was modest in part of her earlier testimony. She was talking about how her organization has filed a suit against a real estate agency in Detroit. What she got in exchange for that is a suit that we are representing her in. She is now facing court action because of statements she has made about that case. And the Lawyers' Committee, along with some brilliant people at Fried Frank, are representing her and the National Fair Housing Alliance in that. And I just wanted to say that is another deficit when the Federal agencies do not do what they are supposed to do. I just wanted to briefly address Mr. Liebowitz's comments. What I hear is a different orientation, certainly, from where I come from. That discrimination occurs when only it can be proved as intentional, when someone uses a racial slur, when someone says, ``We don't want those people here,'' or, ``Sell to everybody but them,'' and we draw a red line around a certain neighborhood. But the disparate impact, pattern-or-practice cases are out there. We are bringing those cases. Other advocates in the fair housing community are bringing those cases. And DOJ and HUD should be bringing those cases too. Mr. Conyers. Well, let me, before I recognize the Ranking Member, let me read this passage again. ``In 2003, HUD brought only four racial discrimination cases, although it received more than 2,700 complaints that year. Now, 40 years later after the passage of the Fair Housing Act, at least 3.7 million fair housing violations still occur each year.'' Now, those all don't have to be racial; there could be other reasons for them. And so, Professor Stan Liebowitz, we come back to the original question that we started off with. Isn't it apparent to you that there are serious violations of the act that we celebrate, that was passed 40 years ago, in the millions? And this is annually. So might we reach some agreement on the seriousness of the problem based on these statistics? Mr. Liebowitz. I have no idea of the provenance of those statistics. I have been talking about discrimination in the origination of mortgages. And I don't think that is what those statistics are related to. My guess is they are related to renting and other activities. But I have no idea where that number comes from; I am unfamiliar with it. So I don't know what to make out of that number. My expertise is more narrow. It is really just with the mortgage origination. And I am not aware of any number that indicates there is a great deal of discrimination going on in that market. So I don't think we are getting any closer right now. Mr. Conyers. Well, let's set my statistics aside for a moment. Does your visual knowledge, from what you have seen of the way communities in America are laid out in every part of the United States of America lead you to suspect that the geography of this country, we somehow always seem to be ending up in communities that are distinguishable by race? Mr. Liebowitz. I certainly agree with that. The exact reasons are not completely clear, because you find that, to some extent, on college campuses as well. And on college campuses, the students are choosing on their own to live and act segregatedly. I think that is very unfortunate, but that is what you see there. So there is no doubt--I am certainly not going to argue against history, that, you know, there has been a great deal of discrimination in the past. And it was a terrible thing. I don't doubt that discrimination still goes on in terms of activity. In the origination mortgages, I don't see any evidence to that. And I think there are other parts of society where there may not be as much discrimination going on. I think the country has undergone a great change in my lifetime. And, thus, I have no idea about the 3 million number that you keep bringing up. So I am not going to deny that discrimination is going on and that racism exists. I would say it is, in my mind, really quite small, that most Americans are very open-minded, much more than they used to be. And there are people who try to go out of their way to, sort of, be open-minded and give everyone a fair chance. And I think that largely describes a great deal of the country right now. Mr. Conyers. Well, I hear you implying that it may be the kind of self-segregation on university campuses is somewhat the same as what is going on in housing patterns in the United States. Is that a fair assumption? Mr. Liebowitz. No, because there is one other difference, and that is there is going to be segregation by income levels, because different parts of cities have different style of houses. So that is going to occur. Within income levels, segregation still occurs. And that would seem to be something that you wouldn't expect to necessarily happen. And there I have no doubt that, in the past, it was largely due to racial discrimination. But I am not sure now that that is really all that much of it. I think it may be that it is what we are seeing that people can move and they want to be with people with whom they feel more comfortable. Mr. Conyers. What about school patterns, which frequently follow housing patterns? I don't claim you to be an expert here, but it is fairly observable that, as a result of housing segregation, you end up with the resegregation of the school system in America. Does that comport with what you have seen and heard and read about this subject? Mr. Liebowitz. It is certainly my understanding. I sent my kids through public school. There were attempts to try to integrate by creating magnets and whatnot, not all that terribly successfully. That is a very difficult problem. Mr. Conyers. Could I recognize the Ranking Member now, Mr. Franks of Arizona? Mr. Franks. Well, thank you, Mr. Chairman. My remarks here are more contemporaneous than anything else, because I have to apologize that I couldn't be here for all of your testimony. And I was out trying to save the world, and that is the truth. But this is a challenging situation here, and if I could just kind of lay the premise from my own perspective. I think with all of my heart that everywhere we find discrimination, whether it be systemic or personal, individual discrimination, we as a society have a responsibility to crush it. I think it is an evil that goes against the dignity of humanity of every individual. I do associate myself with Mr. Liebowitz's comments, however, in that I believe that the whole mortgage crisis is not predicated on discrimination. There may be elements there that are hard to divine in all of the challenges that we have, but I think there is a great point that he made that related to some of the income levels here. And this is going to hard, and I will probably say something controversial, and I don't mean to, but I am going to go ahead. I think that the tragedy in this country where we had racial discrimination was such a mark on our hearts and on our history that there is just no way for us to adequately address that and, you know, to really be able to express how tragic that was. Because discrimination, at its very core, is saying that because someone is different that somehow they are not a child of God. And if there is anything that this country is fundamentally founded on, it is that we hold these truths to be self-evident, that all men, all human beings, are created equal. That is who we are as Americans. And where we step from that, it is a great tragedy. And I believe we continue to step from it in many areas of society today. But in this particular situation, I believe that we are aiming at the wrong cause, in this particular Committee. And I say that with great respect for the people who disagree with me. But I also believe something else happened. And maybe this is not the right forum to present it. But I think in the Great Society programs, that however sincere they may have been, with a lot of these sectors of our society, in many cases the minority sectors of our society, brought a dependence upon Government that did not accomplish the ultimate goal, which was to see all sectors of society come to be equal in every way. And I think, unfortunately, that it has created such a dependency that it was depressed the income levels. And I think that somehow it is hard for us to face those things, because, you know, we don't want to look at something like that directly. But I think, unfortunately, that has been the case. And we have to have equal opportunity and do everything we can to be color-blind. And I will say this. It was mentioned about schools. The most integrated institutions in America are faith-based institutions, and certainly that applies to schools. There are probably no more integrated schools in America than the local faith-based private schools, because they see everyone there as a child of God and equal in his sight and equal in the sight of all human beings. And until we as a society, I believe, embrace that and say we are going to see each other equally and we are going to act as brothers and sisters, but we are not going to institute failed policies of a socialistic nature that have proven throughout history to hurt the very people that it purports to help. Now, again, this is a hard place to bring a subject like this, and I know that I am so outnumbered in this room. But I still say it with absolutely all the respect and love in my heart for everybody in this room. And I hope that somehow we could delineate the difference between discrimination and bad policy. And the mortgage crisis was caused by greed. It was caused by mortgage brokers that told lenders things that weren't true. It was caused by people who looked at houses and thought, well, I can make money by appraising this house for more than it was. And these are things that we should be going after, because that is what caused the problem. And, in the meantime, we should go after discrimination wherever it presents itself but not tie the two together unless they deserve to be tied together. With that, Mr. Chairman, I yield back. I think I am going to take a run for it, okay? Mr. Conyers. I think we appreciate your comments, and I am glad that you were able to return. Attorney Wiggins, you left us with a choice to be made in your presentation. You said there were two strategies, and you were hoping that the right one would be chosen. Would you redescribe what choices were before us and which one of them you might prefer yourself? Ms. Wiggins. Thank you. What I was saying was that we are at odds, the advocates, those of us in the fair housing community, we are at odds with the Federal agencies who are supposed to be enforcing this broad act. And we both can't be right. I was saying that either those of us in the fair housing community are right and that we should safeguard the protections, the full range of arsenals that are afforded to us under the act. Or the Federal agencies are right, and as the lack of using their authority chips away at the breadth of the act is okay because there are folks like me and the other folks on this panel who will pick up the slack. My request is that the Members of this subcommittee, in particular, as well as other Members of Congress would use the full force of their authority and influence to ensure that we all have the ball picked up, that it is not just the people in the communities who have to bridge this gap, but that those agencies who have obligations and resources under the Fair Housing Act to do everything they are supposed to do within the full force of their authority and influence to ensure that all of us who are protected under that act are served by their Government. Mr. Conyers. The Attorney General recently declined to form a task force that deals with parts of this subject. Does anyone want to make any comments about that? Ms. Smith? Ms. Smith. I have been investigating mortgage lending discrimination since 1977. And when the subprime market came about and grew exponentially from 1992 to 2002, we saw the inflated appraisals happening. I actually met with the largest company at the time who was selling all of the appraisals to the lender. And I said to him, do you understand that you are churning these inflated appraisals, that when an unscrupulous lender and appraiser push it into the system in a neighborhood, then other lenders don't understand that it is just artificially increasing the value of the property and that you need to do a better job about this? And his response to me was, ``I am just taking public records. So I am not discriminating.'' And I said, ``I understand you are taking public records, but you have some responsibility to do due diligence to see that those appraisals are accurate.'' Then Fidelity bought them, and it kept the churning. But I was looking at this from the 1970's forward, because I saw this happening first in the African-American community. The lenders who saw the high equity that, particularly, senior citizens had in their homes and ways to strip that equity. And North Carolina passed the first anti-predatory lending law to address this. The Attorney General should look at not just loan origination but underwriting guidelines that were directed to have higher costs for people of color in neighborhoods. For example, we filed a lawsuit against United Guaranty, the fourth-largest mortgage insurer in the United States, in 1988 because they have limits. If your home--I am from Toledo, Ohio, originally, so when I say to you that you had--and you know this, Congressman, because you are from Detroit. You can have beautiful homes that are under $40,000, three-bedroom frame homes with a garage, well-maintained homes. And we uncovered that the mortgage insurance companies had a minimum insurance amount, so that if you were putting less than 20 percent down on your property, they were denying mortgage insurance on the house, which then made the lender reject that loan, which made them then go to a hard-money lender to get a loan. Now, this was in the 1970's. We saw it replicated in the 1980's, the 1990's, and now today, that the lenders just kind of twist how they are making these loans and what kind of activities they are going to engage in to make it a higher- priced loan in a neighborhood of color or a higher-priced loan to a senior citizen regardless of their race, a higher-priced loan to women. The Justice Department did a great job with the Long Beach case back in the mid-1990's. They were first to understand with that case, in Decatur Federal, that there was a subprime market and how it was acting. And I think if the Attorney General would look back at those cases in the early 1990's and the mid-1990's and start looking at all the players in the mortgage lending market and see what their role was--and then we have to jump to Wall Street, because Wall Street paid a premium to lenders to push the exotic loans, the adjustable rates, the 327s, 228s. It paid a premium. And the lenders told me this. You know, I didn't make this up. They came to me, and they said, ``Shanna, you want to criticize us for pushing ARMs, but they pay us more to push these loans.'' And we all know--some of us are old enough to know that when the adjustable rate loans were first made, the 525s, it was for a niche market. It was for people who had increasing income and lived in neighborhoods where the property was appreciating pretty rapidly, so that it wasn't a risky loan. It was made for that particular demographic. It didn't include me, but it included a lot of other people. But then they pushed this exotic loan into the full market and onto people who just didn't know that these loans weren't good. They sold it to the real estate agents, who said, ``You know, you tell me you are qualified for a $200,000 home, but I can get you into a $300,000 home, and here is your payment.'' Lenders would say and real estate agents would say to people, ``What do you want your payment to be?'', rather than, ``What can you really afford in the long term?'' And they kept saying, ``Oh, you can just refinance it.'' And I listened to that for a little while, because I pay my bills on time, and I thought, ``Well, yes, you could just refinance.'' Then I realized, well, any time you buy your house, you know, you buy something for the house, or during that 2 years you might get another car, and your debt-to-income ratio has changed, so you can't necessarily refinance it. So I think if the Attorney General would look at all the players in the market, from the originator all the way up to Wall Street, who created these loan products--I mean, there is nothing wrong with an ARM. It was just marketed to the demographic that it wasn't intended for. And that demographic, then, is suffering. We are seeing middle-class White Americans now losing their homes left and right, but it was the African-American community who was first targeted. And many, many seniors who were African-American lost their homes years ago. And now we have to make sure--hold people accountable for what they have done to our communities and how they have stripped our wealth, our taxes, how it is hurting our schools. What is it going to do to grocery stores? What is it going to do to our whole economy? And if the Government, if the Attorney General holds somebody responsible, I think we can rest assured it won't happen in the future. Mr. Conyers. Mr. Carr, you get the last word. Mr. Carr. I just wanted to say that the subprime market meltdown, I agree with Congressman Franks that it is not solely an issue of discrimination. It was a lot of regional economic downturns; there was speculation on the part of a number of homebuyers. But there was a lot of unfair and deceptive practice, and within that unfair and deceptive practice was a lot of steering of minority consumers. I would just like to reinforce one of the things that Ms. Smith said also, though, which is the whole system--there was unfair and deceptive and/or just completely irrational business practices throughout the whole system. And if you just pick one point, the credit rating agencies, if those agencies had not been stamping on loans that were basically subprime junk bonds ``investment-grade'' and sending them out the door, millions of Americans would not be losing their homes now. And as we look at this issue, that issue has to be one that is focused on. A final thing, if I could just really quickly say I really appreciate the conversation, Congressman Franks, from you. It was very powerful and very moving for me. And I just wanted to say, one of the things that I think that we have to do better as a country is not necessarily focus on the past so much. I mean, I think the past is important to understand how we got here. But more important is our future. And the question is, where is America going to be in the 21st century when, in fact, the communities of color are the fastest-growing populations and they are the most disconnected from opportunity and the ability to compete? And I think maybe that is an area where, if different sides of the aisle can, sort of, galvanize themselves around the need to really understand what is the competitive landscape for America if we don't succeed, then maybe we can purge a lot of the conversations about, well, it was this, it was that, it was that program, it was, you know, discrimination, it was bad Great Society, and focus on the fact that we have to move forward as one country and succeed. And then once we have built the resonance among the public to say, ``You know what? We have to succeed,'' then maybe there will be greater understanding of and appreciation for things like: collect better data. What is the harm in collecting data? If you are convinced that discrimination doesn't exist, then why object to collecting the data so we can measure it and monitor it and then, to the extent that we find that it actually exists, do what you have encouraged us to do here in a very, I think, powerful and moving way, which is to end it. But I don't believe that will happen unless America understands we are all on the same team. And we need to start acting that way and acknowledging it. Mr. Conyers. Well, Trent Franks and I are working hard within the Committee to rise above the natural politicization that comes out of the Federal legislative process. And I wanted to commend him. Mr. Franks. Thank you. And I just appreciate Mr. Carr's comments, sir. Mr. Conyers. Yes, I do too. Now I will close the hearing with a comment to the Chairman of the Crime Subcommittee in Judiciary. Because I haven't heard the term ``predatory lending'' raised since I have been in and out of the hearing. And I think that that requires some investigation. This is the Constitution Subcommittee, but it seems to me that there has been some predatory activity--you know, I believe in the system, but all these brokers, all these appraisers, all these banks, all these mortgage lenders, all these bundlers, all these Wall Street people--hey, look, I am cynically optimistic, to use the phrase, that somebody knew something about this besides the witnesses here this afternoon. Mr. Scott. And if the gentleman would yield, Mr. Chairman, we intend to inquire with the Justice Department as to whether or not some of the activities could have constituted fraud and misrepresentation, which contributed to the total collapse of this market. People have lost billions of dollars, and there appear to be misrepresentations and fraud all up and down the line. And we will be inquiring with the Justice Department what they are doing about it. Mr. Conyers. Well, I will rest more comfortably in my bed tonight, knowing that the Chairman of the Crime Subcommittee is going to be looking at this. And this has been a very interesting conversation. I thank you all for your attendance. We are dismissed. [Whereupon, at 2:21 p.m., the subcommittee was adjourned.] A P P E N D I X ---------- Material Submitted for the Hearing Record [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Who enforces the Florida Fair Housing Act?

Who is responsible for enforcing the Fair Housing Act quizlet?

What is the Florida Fair Housing Act?

Which agency upon receiving a complaint regarding a Fair Housing Act violation investigates?