[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
AN EXAMINATION OF THE HOUSING
CRISIS IN MICHIGAN, 11 YEARS
AFTER THE RECESSION
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
AUGUST 2, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-43
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-161 PDF WASHINGTON : 2020
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Oversight and Investigations
AL GREEN, Texas Chairman
JOYCE BEATTY, Ohio ANDY BARR, Kentucky, Ranking
STEPHEN F. LYNCH, Massachusetts Member
NYDIA M. VELAZQUEZ, New York BILL POSEY, Florida
ED PERLMUTTER, Colorado LEE M. ZELDIN, New York, Vice
RASHIDA TLAIB, Michigan Ranking Member
SEAN CASTEN, Illinois BARRY LOUDERMILK, Georgia
MADELEINE DEAN, Pennsylvania WARREN DAVIDSON, Ohio
SYLVIA GARCIA, Texas JOHN ROSE, Tennessee
DEAN PHILLIPS, Minnesota BRYAN STEIL, Wisconsin
C O N T E N T S
----------
Page
Hearing held on:
August 2, 2019............................................... 1
Appendix:
August 2, 2019............................................... 37
WITNESSES
Friday, August 2, 2019
Atuahene, Bernadette, Senior Research Scholar, University of
Michigan....................................................... 5
Fluker, Vanessa, Fellow Practitioner, Vanessa G. Fluker, Esq.,
PLLC........................................................... 11
George, Taz, Senior Research Analyst, Community Development and
Policy Studies Division, Federal Reserve Bank of Chicago....... 14
Hernandez, Hector, Director, Housing Opportunity Center,
Southwest Economic Solutions................................... 7
Mason, Lauren, Member and Housing Committee Chair, Detroit Action 13
Phillips, Ted, Executive Director, United Community Housing
Coalition...................................................... 9
APPENDIX
Prepared statements:
Fluker, Vanessa,............................................. 38
George, Taz.................................................. 48
Hernandez, Hector............................................ 89
Phillips, Ted................................................ 94
AN EXAMINATION OF THE HOUSING
CRISIS IN MICHIGAN, 11 YEARS
AFTER THE RECESSION
----------
Friday, August 2, 2019
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 12 p.m., in
the Larry K. Lewis Education Center, Wayne County Community
College, NW Campus, Detroit, Michigan, Hon. Al Green [chairman
of the subcommittee] presiding.
Members present: Representatives Green, Tlaib, and Garcia
of Texas.
Also present: Representatives Lawrence and Dingell.
Chairman Green. The Oversight and Investigations
Subcommittee will now come to order. The title of today's
hearing is, ``An Examination of the Housing Crisis in Michigan,
11 Years After the Recession.''
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time. Also, without
objection, members of the House of Representatives who are not
members of the subcommittee may participate in today's hearing
for the purposes of making an opening statement and questioning
the witnesses.
The Chair is going to recognize, first, the Congressperson
from this area, the Honorable Rashida Tlaib, to give her
opening statement, and I, as Chair, have indicated already that
we may give her a little bit more latitude because we are in
her congressional district.
So we do now recognize you for a 3-minute opening
statement.
Ms. Tlaib. Thank you so much.
Chairman Green. By the way, we have a little bell here that
will give you an indication that you have one minute left.
Ms. Tlaib. He will use it too.
I want to thank you so much, Chairman Green, and, of
course, our incredible Financial Services Committee Chairwoman,
Maxine Waters, for agreeing to bring Congress to Detroit, to
bring a field hearing of a critical issue to the 13th
Congressional District, which we all know is a very challenged
district, as the third-poorest congressional district in the
country, but also with the most resilient people, the folks on
the ground who have been working on this issue of housing
justice, whom we need to hear from and get the information in
the hearing record.
I do want to thank, also, our incredible colleague,
Congresswoman Sylvia Garcia, for traveling all the way from
Texas to come here, as well as my colleagues, Congresswoman
Debbie Dingell and Congresswoman Brenda Lawrence, for their
continued partnership on this issue.
This morning, all of my residents need to know, was really
important. We always want people in Congress to see our
neighborhoods, to see what is going on, and I want to thank
Representative Garcia and Chairman Green for coming with the
Detroit People's Platform this morning to travel throughout the
community, many of the communities and neighborhoods, to see
exactly what is going on, on the ground. It is something that I
think is going to help, especially around the issue of housing
justice, being much more committed to addressing some of those
concerns. But I want to thank you all so much for being here
and being rooted in the community and helping bring a voice,
and to all those who are testifying before our committee, thank
you so much for agreeing to do this, and thank you for sharing
your stories, and thank you for your continued commitment.
I am so thrilled that this is the first field hearing of
the Financial Services Committee, and that they chose to hold
it in our beautiful City, so I want to thank you guys all so
much, my colleagues, for your continued leadership.
I hope this hearing helps you feel heard and feel seen.
That is so critically important. And I know Chairman Green
knows I am very tenacious, and when I said to him, this is one
of the most critical issues for our district is increasing home
ownership but also the fact that it is so interconnected to
racial justice, environmental justice, economic justice, and
all of those things.
So again, thank you so much, Chairman Green.
Chairman Green. Thank you. Let me add this: The media is in
attendance today, and I would like to make note that, without
objection, members of the local media are invited to this
hearing and may engage in audio and visual coverage of the
subcommittee's proceedings. Such coverage is solely to educate,
enlighten, and inform the general public, on an accurate and
impartial basis, of the subcommittee's operations and
consideration of legislative issues, as well as developing an
understanding and perspective of the U.S. House of
Representatives and its role in our government. This coverage
may not be used for any partisan political campaign purpose or
made available for such purposes.
With this said, I shall now yield to the gentlelady from
Michigan's 12th Congressional District, the Honorable Debbie
Dingell.
Mrs. Dingell. Thank you, Chairman Green. Thank you for
convening this subcommittee hearing. And thank you,
Representative Garcia, for coming, and most importantly, thank
you, Representative Tlaib, for your dedication and passion, and
for bringing them here to Detroit to talk about an issue.
You are in Detroit, and it is an issue that significantly
impacts the City of Detroit and its neighborhoods, but it is
also an issue that hits people throughout this State. And,
Chairman Green, I would say, too, there are many elected
officials in the audience from many of the suburban cities that
Rashida and I both share, that have been heavily impacted.
The 2008 recession hit everyone hard, but Michigan
especially. We saw businesses shuttered, hard-working women and
men were put out of work by the thousands, the near collapse of
the U.S. auto industry, and a long, slow, painful recovery,
and, quite frankly, I don't think anybody has lost that fear or
anxiety in their hearts and souls that they used to take for
granted.
When we are faced with trying times we tend to sit around
our kitchen tables, often with families, in our homes, but
after 2008, that was no longer an option for too many people.
They lost their homes. You will still see today now-vacant
lots, and while there has been an incredible effort by the City
and the State and other groups to clean up blighted
neighborhoods and vacant homes, they remain unoccupied after 10
years, and we have many challenges.
These homeowners didn't cause the Great Recession. They
didn't make a house of cards doomed to fail, they didn't buy
credit default swaps, and they didn't make risky trades on Wall
Street. All they did was pursue the American Dream, to make
enough money to buy a home, to live in a safe neighborhood, and
to start a family.
So, I thank the committee for being here, and I look
forward to hearing the testimony today.
Chairman Green. Thank you very much. At this time, we will
hear from my colleague from Houston, Texas, the Honorable
Sylvia Garcia, the Representative from the 29th Congressional
District of Texas.
Ms. Garcia of Texas. Thank you, Mr. Chairman, and I, too,
want to start by thanking Chairwoman Waters of the Financial
Services Committee, of which we are a subcommittee, for
allowing us to come here and join your great Congresswoman
Tlaib in hearing from Detroit directly on some of the housing
issues. And thank you, too, to Representative Dingell and
Representative Lawrence for coming, for joining us, because, as
Chairman Green said, we are here to listen. He and I are not
here, coming from Texas, to tell you to do anything the Texas
way, so don't worry. We are not here to Texan-ize you. We are
here to listen to you and to find the right solution for you
here in Detroit.
I appreciate that we have a robust group of panelists to
talk to us about the things going on here, and I do want to
especially thank everyone concerned for the great welcome and
for the tour that we had this morning, to show us about the
housing crisis here after the Great Recession.
This committee, and the Congress as a whole, must learn
from lessons today and focus on how to build a basket of
national policy that is flexible enough to adapt to the
concerns of different regions and even to different neighbors,
based on need. As Chairman Green knows, the Houston region has
different challenges from Detroit. We have faced decades of
growth and gentrification in our region, which has put
pressures on our housing stocks.
Recently, we saw an uptick in foreclosures following
Hurricane Harvey. That storm, particularly, was a setback to
low-income owners and renters, as much of the money of the
recovery aid was targeted to more valuable properties. I have
said many times, back home, that Hurricane Harvey just made
poor people poorer. They were poor before the storm, and they
are poorer today, as they wait in their rental properties.
It is important to consider not just homeowners and those
who want to become homeowners, but we must also consider
renters. About 48 percent of the households in my district
rent, which is comparable to this district, which is at 45
percent. And just as we have seen home ownership slip out of
reach for many people, we know that rent prices have increased
in some neighborhoods, pushing more families to the financial
edge.
So finally, working together, I am convinced that we can
focus on the issues related to housing, to make it better for
all Americans.
Thank you, again, for being here and joining us, and thank
you, again, Mr. Chairman, for allowing me to make a few
remarks.
Chairman Green. I would like to, at this time, thank you,
and recognize myself for 3 minutes.
I want to thank Ms. Tlaib and her staff. They have done an
outstanding job in helping us to facilitate this hearing. The
full Financial Services Committee also has staffers who are
here, and they have been very helpful.
The Honorable Maxine Waters is the Chairwoman of the full
Financial Services Committee. She is the person who authorized
this field hearing, so we owe her a debt of gratitude for
allowing it to take place as well.
I want to talk to you very briefly, in my opening
statement, about a complete recovery. The recovery is not
complete unless everybody benefits from the recovery. And I am
here today because, as often is the case, African Americans,
minorities, are the canary in the coal mine. Some of the
information that has been shared with me causes me great
concern.
Example: In the second quarter of 2019, the Black home
ownership rate was at a 50-year low, at 40.6 percent in
Michigan. The current rate of Black home ownership in Michigan
is lower than before the passage of the Fair Housing Act in
1968. Currently, you are experiencing foreclosures wherein 21
percent of the homeowners don't know that they are behind on
their taxes. I want to know why. How can this happen that you
are foreclosed upon and don't know that you are behind on your
taxes?
I am also interested in what is happening to renters. I
have been informed that some 61 percent don't know the tax
status of the property that they are living in, and they, too,
find themselves being the victims of foreclosures when owners
are foreclosed upon; renters have paid their rent, but find
that they have to relocate.
So there are many things that would cause me a good deal of
consternation, but the thing that concerns me most is the fact
that we don't have a complete recovery. It appears to me that
we, in Congress, did a good thing when we bailed out the auto
industry, but we expect the auto industry to help bail out the
people who buy their products. We did a good thing when we
bailed out the banks, but we expect the banks to bail out their
customers, their depositors.
We are here today to try to complete the recovery. We don't
want the industry to recover without the people who are a part
of the tax-paying public who helped the industry to recover, to
not benefit from the recovery. The recovery is not complete and
we are here to find out what we can do to help have a complete
recovery.
With this I will now introduce the witnesses, and each
witness will be given approximately 5 minutes for your
statements.
And our witnesses are Professor Bernadette--I am going to
take a stab at your name one time, but I will have you tell me
first.
Ms. Atuahene. ``Atuahene.''
Chairman Green. ``Atuahene.'' All right. And she is a
professor of law at the Chicago Kent College of Law. We also
have Mr. Hector Hernandez, who is executive director of
Southwest Economic Solutions Housing Opportunity Center; Mr.
Ted Phillips, executive director, United Community Housing
Coalition; Ms. Vanessa Fluker, who is an attorney with Vanessa
G. Fluker, Esq., PLLC; Ms. Lauren Mason, who is the housing
committee chair for Detroit Action; and Mr. Taz George, senior
research analyst, Federal Reserve Bank of Chicago, Community
Development and Policy Studies Division.
We welcome all of you. We greatly appreciate you taking the
time to be with us. You will each have 5 minutes, and without
objection, each witness' written statement will be made a part
of the record. Once the witness has finished testifying, each
member of the subcommittee will have 5 minutes within which to
ask questions. I am the timekeeper and I will give you a signal
when you have one minute left. This is the signal [rings bell],
and after this, your time will expire one minute later.
The witnesses will now make their opening statements, and
we will start with Professor Atuahene.
STATEMENT OF BERNADETTE ATUAHENE, SENIOR RESEARCH SCHOLAR,
UNIVERSITY OF MICHIGAN
Ms. Atuahene. Thank you, Chairman Green.
Between 2011 and 2015, one in four properties has been
subject to property tax foreclosure: one in four. We haven't
seen this number of property tax foreclosures in American
history since the Great Depression. So the real question is,
what in the world is going on?
Well, the Michigan State Constitution is quite clear. No
property can be assessed at more than 50 percent of its market
value. Although the Michigan State Constitution is quite clear,
we did a study and we found that between 2009 and 2013, in each
of those 7 years, anywhere between 53 and 83 percent of
properties were being assessed in violation of the Michigan
State Constitution. And I need you to understand that these
estimates are the most conservative estimates possible.
The second step was we then broke the data into what we
call five quintile, quintile 1 being the lowest-valued homes,
all the way to Quintile 5 being the highest-valued homes. And
what we found is that in the lowest-valued homes, 95 percent or
more were being assessed in violation of the Michigan State
Constitution, but when you got to the highest-valued homes,
less than 20 percent were being assessed in violation of the
Michigan State Constitution, which means that the most
vulnerable amongst us are being subjected to these
unconstitutional property tax assessments.
The next study we did is lots of things cause tax
foreclosure, right? Not just these illegally inflated property
tax assessments but also poverty, divorce, lots of things. So
the challenge in the second study was to hold all those things
constant so we can measure the effect of unconstitutional
property tax assessments on foreclosure rates, and our findings
were astounding. We found that 10 percent of all property tax
foreclosures that happened between 2009 and 2013 would not have
happened but for these unconstitutional property tax
assessments. And when you look at just that lowest quintile,
the lowest-valued homes--remember, I said of those ones, 95
percent or more were being assessed in violation of the
Michigan State Constitution--for just that quintile, 25 percent
of those homes would not have gone into property tax
foreclosure but for these unconstitutional property tax
assessments.
The next study we did has to do with race, specifically,
because if you are doing work in Detroit and you don't address
race directly, you are doing everyone a disservice. What we did
is we looked at all of the cities in Wayne County, and what we
found is that the predominantly African-American cities in
Wayne County were being subject to unconstitutional tax
assessments and foreclosures at a greater rate than the
predominantly white cities in Wayne County.
What I need you to understand here is that these
unconstitutional property tax assessments are just the latest
chapter in a longer history of racially discriminatory housing
policies that start at the beginning with racial zoning,
racially restrictive covenants, urban renewal, racially biased
mortgage rates, and I can go on and on. So, it is important to
understand these racially based, unconstitutional tax
assessments, again, not as an isolated incident but part of a
larger legacy.
And the key here, for all of you who are not from Detroit,
is that this is not just happening in Detroit. The Chicago
Tribune just published a Pulitzer Prize-nominated series
called, ``The Tax Divide,'' and it finds that these same
patterns of racially discriminatory property tax administration
are also happening in Chicago. One of my co-authors,
Christopher Berry, who is at the University of Chicago, is
currently doing a study, and he is looking at the seven most
populated cities in America, and he is finding similar patterns
in each of these cities.
So the real question is, we have this evidence before us--
what do we do? What do we do about it? One thing that Congress
can do about it is what I am asking for today, that Congress
initiate a congressional investigation into how the Fair
Housing Act can address this ominous threat, can address this
latest chapter in this racially discriminatory housing
policies. Because at the end of the day, your children, your
grandchildren, and your great-grandchildren are going to look
back in history and ask, ``What did you do when faced with this
astounding injustice? What did you do?''
And at the very least, again, a congressional investigation
into how the Fair Housing Act can be adopted to address this
issue.
I know my time is running out, so I want to end with the
story of Mr. Jones. I met Mr. Jones in my empirical work when I
was interviewing. He used to work at a factory--remember when
working at a factory put you comfortably in the middle class?
And when the factory jobs went away, Mr. Jones, like many other
faithful Detroiters, stayed, and they stuck it out here.
In 2012, Mr. Jones was able to finally buy his first home,
which was a threadbare home that he bought for $2,500. The home
had no--it was stripped, as we know here in Detroit. It was
just a shell of a home. Despite that, the fact that he bought
the home for $2,500, and similarly situated homes cost just the
same, the City of Detroit taxed his home as if it was worth
$50,000--20 times what he paid for it.
Mr. Jones qualified for something called the poverty tax
exemption, because all he had was his pension and he lived
below the poverty line. But because the City of Detroit erected
so many barriers to people finding out about the poverty tax
exemption, he didn't qualify. He didn't even apply.
So, we have a situation for Mr. Jones, and in Detroit--and
these are my last words; I am wrapping it up--where, number
one, people were subject to unconstitutional tax assessments.
When they couldn't afford to pay these illegally inflated
property tax assessments, they were foreclosed on, at record
rates, for property taxes they shouldn't have been paying in
the first place, because 40 percent of Detroiters live under
the poverty lines and qualify for the poverty tax exemption. My
God.
In my last sentence, I want to just give you a quote from
Mr. Jones, that really perfectly describes the structural
violence that is perpetrated by these unconstitutional tax
assessments. And he said, ``This whole mess makes me feel like
I was stuck up and robbed.''
Chairman Green. Thank you for your testimony, Professor
Atuahene.
We will now hear from Mr. Hernandez. You have 5 minutes,
sir.
STATEMENT OF HECTOR HERNANDEZ, DIRECTOR, HOUSING OPPORTUNITY
CENTER, SOUTHWEST ECONOMIC SOLUTIONS
Mr. Hernandez. Thank you, and I appreciate the opportunity
to speak before this honorable body.
For historical context, I am going to focus on home
ownership. I would like to cite a homebuyer ecosystem study
that was authored by a local working group that I participated
in, and they did a really comprehensive review of the
challenges in Detroit to make some good recommendations.
From 1990 to 2014, Detroit lost over 250,000 residents,
more than 30 percent of its population. As a result of that
population loss and the national credit crisis, Detroit's
housing market obviously crashed. Almost 110,000 housing units
stood vacant that year, roughly a third of all units. From 2006
to 2010, the median home sale price in Detroit plummeted by
over 75 percent. Every year from 2009 to 2016, over 95 percent
of home purchases in Detroit have been cash sales.
This economic hurricane blew away virtually an entire
industry of experienced and knowledgeable lenders, REALTORS,
community development corporations, and homebuyer counseling
agencies. The homebuyer ecosystem, in effect, was devastated by
that crisis and it is still attempting to recover. It is coming
around but it is still slow.
To give you another snapshot of the challenges in Detroit,
from 2001 to 2006, there were, on average, 6,000 to 8,000
mortgages per year. In 2007, that dropped to 3,900 mortgages,
and in 2008, it dropped to 1,400 mortgages. Get this--from 2009
to 2016, the average number of mortgages per year in Detroit
was 416. That is not a functioning mortgage market. Even though
there are, on average, 4,000 transactions per year, and only
400 of those, on average, were with a mortgage, that leaves you
with cash sales and land contracts, and I will talk more about
that later. It is starting to recover but it is awfully slow.
In 2017, we had 1,000 mortgages issued in Detroit.
Detroit's lingering underperformance after the recession is
due to a range of factors, from tighter credit standards to the
hollowing out of the local real estate professions, to buyers'
cautious mindsets. Nurturing this market back to health
requires intentionality, working to attract capable buyers and
creating demand so that sellers can gradually create a viable
market and sell at a reasonable price. Valuation has been
really challenged during this time as well.
In the last couple of years, according to REALTORS and
lenders, demand has increased for purchasing single-family
homes in some neighborhoods. In these areas, demand outpaces
the supply of move-in-ready homes. So we have a really
distressed portfolio of properties. Most developers with the
skills to develop these blighted properties and renovate homes
believe that renting to tenants is more profitable than selling
to an owner-occupant.
With few finished homes for sale, the purchase market is
not currently in equilibrium. When move-in-ready homes are
available in concentrated areas, then a critical mass of
activity that changes the neighborhood perceptions can take
hold. Think of Marygrove. Think of Grandmont Rosedale. There is
a litany of other neighborhoods that fall into that category.
I also recently participated, in March of this year, in an
interview with John Gallagher, and he cited really good data
and really current data, and I am going to reference a few
things from his article.
White people make up just 10 percent of Detroit's
population, yet make up nearly half of the home mortgage loans
made in 2017, for which the race of the applicant was known.
And then citing Home Mortgage Disclosure Act data, white
borrowers got almost the same number of mortgages as Black
borrowers, just by being a much smaller percentage of the
City's population. Of the 1,072 mortgage loans made in Detroit
in 2017, the most recent year for which data is available, 442
went to white borrowers and 461 to Black borrowers.
The mortgage market doesn't exist, or barely exists in more
than half of the City. Of the 297 census tracts in Detroit,
each tract measuring several square blocks, 139 tracks saw no
mortgages at all in 2017, and another 91 saw just 1 to 5
mortgages. So, you can see how the challenge really impacts the
whole City.
In part because mortgages are less readily available in the
City, Black buyers may be more likely to buy in the suburbs
than in the City. In 2017, just two suburbs locally, Southfield
and Redford, accounted for more mortgage loans to Black
homebuyers than mortgage loans made to Black homebuyers in
Detroit.
The lack of mortgage loans does not mean that there are no
home sales in the City. Finance experts estimate 4,000 to 5,000
home sales in Detroit each year, but up to 80 percent of those
transactions are cash or land contracts that open up
individuals to obviously predatory loans. They obviously open
themselves up to a lot of other legal challenges as well, in
terms of losing that property much quicker than they would if
they had a mortgage.
The problem is not, however, limited to access to mortgages
or lack of capital available in the City.
Chairman Green. You can wrap up.
Mr. Hernandez. Okay. Thank you. Southwest Solutions worked
with a land bank to create an appetite for more properties, and
still the demand for move-in-ready products is strong.
Other challenges, in 2019, there is a sharp decline in
branches in the area. So if you think of the amount of mergers
that are happening in the City, that typically results in a
loss of branches, so that is a challenge. Home-buyer counseling
works, so some of the strategies--if you provide homebuyer
counseling to help homebuyers in communities, they often can
purchase a home. HUD, however, only makes $47 million available
nationwide for home buyer counseling. Michigan had a miniscule
amount and it is not nearly enough to meet the demand. There
are other opportunities for CRA reform that could help improve
the access to credit, be it through protecting the reporting as
well as ensuring that you expand that to credit unions and
fintech agencies. Thank you.
[The prepared statement of Mr. Hernandez can be found on
page 89 of the appendix.]
Chairman Green. Thank you for your testimony, Mr.
Hernandez.
We will now hear from Mr. Phillips. You are recognized for
5 minutes, sir.
STATEMENT OF TED PHILLIPS, EXECUTIVE DIRECTOR, UNITED COMMUNITY
HOUSING COALITION
Mr. Phillips. Thank you very much for the opportunity
today. I am the executive director of the United Community
Housing Coalition (UCHC), and I am also a life-long Detroiter,
living a few miles from here. At UCHC, we provide a wide range
of social and legal services focused on resolving various kinds
of housing problems, primarily related to affordability and
quality for low-income residents.
The foreclosure crisis, nationally and in Detroit, was well
described in the memo that you had before this committee and
has been elaborated on by the two previous speakers. I would
like to add to some of what was said on that, that we recognize
that there has been a massive loss of home ownership,
particularly Black home ownership, and we have also an
overwhelming abandonment problem, which I don't think has been
mentioned much yet, and a glut of homes that became available
for sale, all of which contributed to as much as a 90 percent
reduction in value in some communities in the City of Detroit.
Concurrent with the mortgage crisis, and basically caused
by the mortgage crisis, but concurrent with the mortgage crisis
has been a tax foreclosure crisis. Much of this has been driven
by over-assessments, as Professor Atuahene has mentioned, that
were created, in large part, by a loss in value and the
inability of local government to keep up with the new
assessments.
Federal hardest-hit funds have been allocated to Michigan,
but not nearly as much as what was needed to do the job, and
they were not used nearly as effectively as they should have
been.
Homes that were lost to foreclosure, mortgage, and taxes
were often channeled to investors or companies doing rental
agreements and what have you. Where many lenders would not
offer the occupants of the foreclosed homes, sometimes even
tenants, any discounted purchase amount, they would often sell
or transfer to investors just to get them off of their
inventory.
Tax-foreclosed homes were often purchased at tax auctions
for as little as $500. Many of these were flipped on bad land
contracts to avoid local rental housing laws and to ensure that
the investor would be better able to declare a default and take
the property back and sell it again and again until there was
no value left.
The response that we have tried to make at United Community
Housing Coalition, and in the advocacy community in general,
has been to work with individual homeowners and occupants of
foreclosed homes to keep people in their homes through
counseling--I would agree with Mr. Hernandez on that part--
through litigation and some financial assistance. This has been
either by resolving whatever their issues were or assisting
them in being able to repurchase their homes. Most cases that
we have resolved have been without buybacks.
But this month, with about 500 purchases, we are going to
make in collaboration with the City of Detroit, the Wayne
County Treasurer, and several individual funders, one of them
being the Quicken Loan Community Fund, we will have purchased,
for the occupants of the home, over 4,000 homes in the last 10
years, 1,100 of them through the program with the City of
Detroit. Other purchases have been buying out bad land
contracts, tax auction purchases, and other things like that. I
should note that all of these purchases have been for the
occupant. All of them have been at cost for the occupant.
And that brings me to some of the suggestions that I have
had in the written testimony that was provided. We would like
to see an expanded use of the hardest-hit funds, to provide
additional resources for them to be able to be used for
purchases, for redemptions, for buying out of predatory land
contracts, as well as repairs. Right now, we use hardest-hit
funds to eliminate blight, but we only seem to define that as
demolition of properties. Why not prevent blight by some of
these other methods?
For federally insured mortgages, we believe we should hold
the financial institutions more accountable for providing
significant forbearance relief.
We should recognize that conventional mortgages are needed.
One of the reasons why so many people go to land contracts is
that there is not any loan product available. Many homes can be
purchased still in the City of Detroit for $10,000 to $20,000
to $30,000. Lenders are not providing those kinds of loans.
We would also like to look at some reform around the land
contract, and we do not believe land contracts should be
eliminated, but we do think there is a lot of need for
transparency concerning property conditions. Very often, people
are not told of the conditions that exist in a property.
Disclosing true housing values requiring independent
assessments as a condition of getting into a land contract.
Classifying hybrids. There are a lot of lease purchase
agreements that people enter into that are even worse than land
contracts. They require substantial down payments. They require
rehabbing property. They require paying taxes and insurance.
They are every bit as much as a land contract but they are sold
as a lease-to-purchase, so that when somebody defaults on them
they are simply brought into court as a tenant and evicted, and
they lose all of their equity and all that they have put into
it. We would like to see those defined in such a way that they
are legally a land contract.
And in conclusion, to provide help in the efforts to
enforce this, we do need additional legal assistance. In the
City of Detroit, there are 30,000 cases brought in the 36th
District Court annually. About 4 percent of those have legal
help. So when you have all of these predatory land contracts
and hybrid agreements there is a need for help, and we urge you
to look at ways to do that.
Thank you.
[The prepared statement of Mr. Phillips can be found on
page 94 of the appendix.]
Chairman Green. Thank you, Mr. Phillips.
Ms. Fluker, you are now recognized for 5 minutes.
STATEMENT OF VANESSA FLUKER, FELLOW PRACTITIONER, VANESSA G.
FLUKER, ESQ., PLLC
Ms. Fluker. Thank you very much, and thank you for the
opportunity to testify here today. I certainly appreciate it.
I would like to first start by kind of looking back. We are
talking about tax foreclosures, installment contracts, the
decline of home ownership, but you cannot look at that without
looking at where all this is emanating from, which was the
foreclosure crisis. Yes, there was a recession, but the bulk of
our home ownership issues came from the foreclosure crisis.
And I just want to use a quote from the 2010 House
Judiciary Committee hearing that was held on December 2, 2010,
and I was honored and privileged to have an opportunity to
testify at that hearing about the outrageous foreclosure
conditions here in Detroit. At the end of my testimony,
Congressman Trent said this:
``But the end result, Ms. Fluker is correct; the end result
is that because of government involvement here and the lack of
market discipline that seems to hold the system together, we
are in a situation now where banks have an incentive oftentimes
to foreclose rather than working things out with the homeowner.
And I think there is something desperately wrong with all of
that.''
That has not changed.
I am in court every day. I am on the front lines every day.
The government funded a foreclosure trend. They gave a huge
bill up to the banks, who have, in turn, infused all types of
law firms to fight tooth and nail to foreclose on people. They
are not trying to engage in loss mitigation--never have,
despite the HAMP program. They will litigate this stuff ad
nauseum. And this has disparately impacted minorities,
particularly African Americans, closely followed by Hispanics,
and here in Michigan, people of Middle Eastern descent.
The very programs that were designed to help the homeowners
failed the homeowners, which is why we have the 90 percent
property value drop. It is not like the property value just
dropped. It dropped because it was artificially depressed by
the banks after they were infused with our tax dollars.
Now we bring this forward, and as Mr. Phillips has stated,
rather than work with a homeowner, give them a modification or
forbearance or anything, they would rather turn around and sell
it to an investor for $1. And I don't say that flippantly. I
actually litigated a case for a senior citizen, where they sold
her property for $1 rather than working with her. They get
these properties and they start putting people into these
installment contracts.
I am fighting a case right now--I am in and out of court
every other week. They are trying to evict this woman, after
they locked her out, under Fannie Mae, I might add. She entered
into a contract with deed with someone, had saved up her money,
put down $9,000, $1,000 a month, and thinks she is safe. She
comes home one day and all of the locks are changed, and all of
her stuff is gone, including her dead daughter's ashes. She
finds out the house was in foreclosure and they sold it to her.
Do you think Fannie Mae is trying to work with that lady? Do
you think they are trying to say, ``You know what? You put
$9,000 down. You are paying $1,400 a month, which is above what
you contracted for in escrow, just to try not to be homeless.''
No. They are trying to throw her out on the street.
And as a side note, just so we can get a little true
understanding of the role of Fannie Mae and Freddie Mac,
between January 2014 and August 2017, there were about 109
eviction cases in the 36th District Court filed. Fannie Mae and
Freddie Mac actually represent the two biggest entities
engaging in evictions at 36th District Court, the court here in
Detroit.
So, at the end of the day, we are looking at a scenario
where, if we do not go back and correct this whole role of the
banks and the financial institutions, doing something on the
back end is not going to help. Now, you are talking about
solutions. There is a lot of talk now about reparations, things
of that nature. Make these banks give some reparations to the
City of Detroit. Make them give some money back to the
community--for all the property wealth that they have taken out
of the community. That is something that needs to be looked at,
and it needs to be given to the community, not to the
municipalities. It needs to be given to grassroots
organizations, so you can make sure it is channeled within the
community, not siphoned off through some political process and
not given to pseudo-investors to gentrify out the areas.
At the end of the day, we must look at everything, the
totality of the circumstances--we can't just look at things in
a vacuum--to truly get an understanding and create some
solutions that will be viable for the City of Detroit.
[The prepared statement of Ms. Fluker can be found on page
38 of the appendix.]
Chairman Green. Thank you for your testimony, Ms. Fluker.
We will now hear from Ms. Mason for 5 minutes.
STATEMENT OF LAUREN MASON, MEMBER AND HOUSING COMMITTEE CHAIR,
DETROIT ACTION
Ms. Mason. Thank you for allowing me to be here and to
speak. My name is Lauren Mason, and I am a life-long resident
of Detroit, Michigan. I reside in the 13th Congressional
District. I am a member of Detroit Action, where I am a member
and the Chair of our Housing Committee. I would like to tell
you a story, which is my story, of how the effects of the
foreclosure crisis still play out in unique ways, here in
Detroit.
My fight for affordable housing is what led me to Detroit
Action, where we fight for economic and social justice for our
neighborhoods. I also work at the United Community Housing
Coalition (UCHC) where I am on the tax prevention team, working
hard to keep people in their homes. I do this work with Detroit
Action and UCHC because I have experienced this pain firsthand.
My grandparents bought our home in Detroit in 1968. My
family owned and occupied 1714 Seyburn for 46 years. Our home
was passed down through 3 generations, with 6 generations
growing up in our home. Always knowing this to be home, it was
our legacy, my family's wealth, and a piece of what is called
the American Dream.
I was working part-time when I noticed a hike in our
property taxes in 2008, but by 2012, I noticed a larger hike.
My home was assessed at $70,000, which meant it was worth
$140,000. I was taxed over $900 for the year. At the time, I
was unaware that my property had been illegally and unfairly
assessed by Wayne County and the City of Detroit.
Home assessments, on which taxes are based, had little
relationship to the market value of our home after 2008, which
significantly increased taxes and led to the waves of tax
foreclosures that we have seen. As a result, nearly 100,000
homes were foreclosed on since 2011, with almost 10,000
foreclosed on last year. Nearly all of the people who were at
risk of losing their homes were working-class Detroiters, like
me.
At the time, I asked for my property to be reassessed. It
never happened. I applied for the tax exemption, which is the
home tax application. I even applied for Step Forward and State
emergency relief (SER), but I was denied everywhere I went,
even though I qualified. There was no help for me.
I felt the weight of the universe and it was breaking me
down. I was my mother's caregiver for 9 years until she died in
2009, then I had to care for my nephew, who was like a son to
me, until he died in 2012. I also was sick, constantly having
surgeries at the time, and working a part-time job that I
couldn't afford to take the time off to care for myself.
In 2014, my house was sold to an investor in a tax auction.
The pain of losing my home still stings to this day,
because I still go through the trauma of just being locked out
of my own home and not having it. I was in North Carolina for a
healing trip and was unaware of the foreclosure process, like
most Detroiters are. The process began to take place.
I came back working, hoping to catch up on the property
taxes, but one night, basically in the middle of the night, I
came home from work and was locked out. My gold color locks
were now silver. I had nowhere to go at 4:00 in the morning. I
would sleep in my car and couch-hop from friends and family for
years. I would leave notes for whoever had bought my home, to
see if I could get my things. I watched my mail pile up in the
door, and I never got a response from them.
After the county sold my home to the buyer, and I was
illegally evicted and my possessions were thrown out without
proper notice, I lost everything--my siblings, my husband, as
she stated, my child's ashes that I can never get back. All of
my family heirlooms. These are the things that can never be
replaced. There was no restitution or retribution for people
like me whose house was taken for profit.
Just recently, I have found housing for myself, even though
I have always been employed. In Detroit, it seems impossible to
find adequate affordable housing.
In Detroit, we see homes like my family home bought at a
low rate. My taxes were only $6,000. My house was sold for over
$40,000.
The speculators have changed the face of our neighborhoods
for the worse. There must be something done locally and
nationally to keep families from falling prey to these
vultures, just like we know there needs to be something done to
keep families from falling prey to the same type of subprime
loans that caused our housing collapse.
There is more that Congress can do at the Federal level to
fight for working-class Detroiters and people in other cities.
My organization, Detroit Action, endorses a broad set of
policies. We need more investment from HUD in affordable
housing for people like me to improve home ownership. There is
also a lack of affordable housing for middle- and low-income
residents and without that investment, Detroiters like myself
will continue to be displaced,
There is about $500 billion that is needed to be invested
in affordable housing and home ownership for the type of
housing that middle- and low-income Americans will need.
Legislation like the American Housing and Mobility Act will
help people like me stay in our homes and have the freedom to
thrive in our communities.
Chairman Green. Thank you for your testimony, Ms. Mason.
We will now hear from Mr. George for 5 minutes.
STATEMENT OF TAZ GEORGE, SENIOR RESEARCH ANALYST, COMMUNITY
DEVELOPMENT AND POLICY STUDIES DIVISION, FEDERAL RESERVE BANK
OF CHICAGO
Mr. George. Thank you. I am a senior research analyst in
the Federal Reserve Bank of Chicago's Community Development and
Policy Studies Division. This division works to promote fair
access to credit and financial services, and conducts policy-
oriented research on the economic resilience and mobility of
low- and moderate-income households. All views and comments
related to my testimony are my own and not those of the Federal
Reserve Bank of Chicago or the Federal Reserve System.
Today, I will discuss research I conducted with colleagues
from the Urban Institute, a nonpartisan policy research
organization in Washington, on the challenges of financing the
purchase of lower-cost, single-family homes. In our study,
these are properties valued under $70,000, which is about the
lowest 15 percent of home sales nationwide. Our research
suggests that this segment of the housing market is not well
served by existing mortgage financing products, in part due to
profit, liquidity, and risk constraints associated with small
loans. Lower-income homebuyers and homebuyers in low-cost
areas, are particularly at risk of facing challenges obtaining
financing.
Here are some of the high-level findings from our study.
In many parts of the country, including here in Wayne
County, lower-priced homes are a significant share of the
housing market. In 2015, about 45 percent of sales in this
county involved homes with values below $70,000. Low-cost sales
are far less likely to be financed by a mortgage and are,
instead, more likely to be financed with cash or other means.
This means that low-income buyers must either save more or
pursue alternative financing products that do not offer the
same consumer protections of a mortgage.
In cases where buyers of low-cost homes were able to obtain
loans, we found, in our research, that these loans stayed
disproportionately on the originating bank's balance sheet.
This suggests that access to the secondary market, which is a
key source of liquidity for lenders, is more limited for these
smaller mortgages, compared to larger loans.
If buyers of low-cost homes cannot obtain a mortgage and
are unable to pay in cash, they may turn to sellers for
financing, in what we have discussed today as land contracts or
contract for deed. Under these contracts, buyers may have no
means of accruing equity in their home, and they have few of
the consumer protections of a mortgage or a rental contract.
The combination of limited access to credit and the prevalence
of these contract for deed transactions compounds the risk of
homebuying for low-income households, including those in Wayne
County.
Now, I would like to discuss some of the factors impacting
the supply of small-dollar mortgage credit that makes these
smaller loans so difficult to obtain.
The structure of mortgage lending, in terms of the
compensations and incentives for lenders, works to the
disadvantage of small-dollar loans, as these loans are
typically less profitable for lenders to originate. Smaller
loans generate lower revenues, yet the costs borne by the
lender for appraisals, underwriting, and administrative
procedures could be similar to those of larger loan amounts.
Another factor inhibiting the flow of credit for these
properties is that they may need repairs to meet code
requirements before a lender can underwrite a loan on the home.
Finally, prospective low-cost homebuyers may experience greater
challenges with qualifying for a mortgage due to their credit
scores, income, and ability to finance a down payment on a
property.
Today there are organizations that may help address some of
these challenges, like the ones represented on this panel
today. For example, community development financial
institutions can help households build credit to obtain home
ownership. To address challenges with housing stock condition,
mission-driven lenders and other organizations may combine
purchase and rehabilitation loans so that buyers can acquire
and repair homes in poor condition.
Other organizations promote land banking and other
rehabilitation strategies, which have helped to stabilize
housing markets and support affordable home ownership.
Thank you again for the opportunity to testify today, and I
look forward to discussing this further.
[The prepared statement of Mr. George can be found on page
48 of the appendix.]
Chairman Green. Thank you, Mr. George, for your testimony.
Now, we will hear from the Congresspersons.
First, Ms. Tlaib is recognized for 5 minutes to ask
questions.
Ms. Tlaib. Thank you, Mr. Chairman. As we all know, across
our district, across the 13th Congressional District, and the
State of Michigan, we are seeing more and more families renting
instead of owning their own homes. From Redford Township to
Inkster, all the way to Wayne, Michigan, I have seen the
economic instability it is causing for our residents and
communities, especially when I saw 56.8 percent of our
households in the 13th Congressional District pay more than 30
percent of their income for housing.
Just last year, a series of reports released by the Urban
Institute showed that Michigan suffered the steepest decline in
Black home ownership. While there are a number of contributing
factors, one thing is certain, and I truly believe this, that
provisions in the Fair Housing Act of 1968 had cracks and
flaws, and simply did not go far enough to protect our
communities in the time of corporate-driven economics that put
profits before people.
And so with that, I wanted to ask the professor specific
questions. One of the things that we talked about, even during
the tour, was the assessment and the flaws, and the fact that
basically, we were not provided our constitutional right to the
assessment. What can we do, and is this not only a Detroit
issue but is this a Wayne County-wide issue?
Ms. Atuahene. Thank you. Yes, absolutely. First, in the
study I had mentioned, we looked at each of the municipalities
in Wayne County, and we found that the three municipalities
with a super majority of African Americans, which is Detroit,
Inkster, and Highland Park, were far more likely to experience
these property tax foreclosures and these unconstitutional tax
assessments than the counties that had a super majority of
whites. So, this is a Wayne County issue, for sure, but it is
also a racialized issue.
Second, it is not only in Wayne County or in Michigan. This
is a national issue of this racialized property tax
administration. I mentioned the problem in Chicago, brought to
light by the Chicago Tribune, and also the study my co-author
is doing of the seven most populated cities.
So this is a Detroit problem, this is a Michigan problem,
and this is a national problem. And as far as what we can do
about it, in the Detroit context--you have been a huge
supporter of the Coalition to End Unconstitutional Tax
Foreclosures, and we have three solutions.
The first solution is we want to stop these
unconstitutional tax assessments. At the top of 2017, the City
finally did a parcel-by-parcel reassessment of all the
properties. We redid our study after that and found that there
was lots of improvement, which is the good news, but the
lowest-valued homes are still being over-assessed. And we are
calling on Assessor Alvin Horhn to do an across-the-board cut
of those low-valued homes, to get it right. And again, it is
not that these are evil people. It is just, as many people
mentioned, a home worth $500 is hard to value. And so, there is
some of that going on.
The second solution is we want to have zero owner-occupied
homes going into the tax foreclosure auction. We cannot have
this empirically proven, unconstitutional tax assessment and
continue to foreclose on people as if the problem is they don't
want to pay. I did several interviews and I asked one Detroit
official--I won't mention his name here--``Why do you think we
are having this property tax foreclosure crisis?'' And he said,
``Professor, when people have a choice between buying a purse
and paying their taxes, unfortunately, they buy the purse.'' It
is these narratives that put the blame on the individual. And I
need you to understand these narratives as strategic
narratives, because the work that they are doing is moving our
gaze from the structural injustice, which are these
unconstitutional property tax assessments, into the failure of
personal responsibility of individuals, and we need to resist
that.
Ms. Tlaib. Thank you so much, Professor.
Mr. Phillips, as you know, my office has been working--
actually, I have spoken to Chairwoman Maxine Waters about the
issue of land contracts, or land installments, processes that I
know have been impacted all throughout Wayne County. Can you
talk and take a deeper dive into what are some of the changes
that you want to see? You talked specifically about values, but
there are other protections that we need to see, because a lot
of folks think that you have the same protections with a land
contract as you would with the mortgage foreclosure process.
Mr. Phillips. Right, and you don't, because very often in
these situations the person is--with a mortgage, you are going
to have the mortgage company there, you are probably going to
have a title company there, you may have an attorney or two
there to protect your interests. In many of these you are going
to have the seller and you are going to have the buyer, who
maybe is buying a home for the first time, and is believing
whatever he or she is told.
So certainly requiring that there be inspections done
before a purchase can be had, it would be very beneficial, at
least to put the buyer on notice. Requiring that there be
complete disclosure. We very often see homes in tax foreclosure
that are sold in late March--those are usually cash sales, not
usually land contract sales--but sold in late March. The
significance of that is that April 1st is the deadline for the
redemption of properties when they are going into tax
foreclosure. So, the requirement that there be full disclosure
on those kinds of things.
Certainly, in terms of the hybrid ones, that we eliminate
them by saying that any agreement that has certain features to
it, such as requiring the buyer, whether you call the buyer a
tenant or a buyer, the tax is a super down payment that is
above and beyond the security deposit limits in the State of
Michigan, that requires them to rehab--not repair, but rehab--
property, is what these are often defined as. Those kinds of
things, it should be clear that those are clearly land
contracts.
And where that becomes a problem--it is not so much of a
problem when you can have an attorney representing somebody in
court when those cases come up, but again, very few people have
an attorney, and judges will tend to look at, well, it says it
is a lease, so regardless of what it says in this lease, that
is what it is.
I think there are other reforms that could be made as well.
I do think that there is a need for not eliminating land
contracts, because they do, in some instances, work. We use
land contracts for some of the 4,000 homes that we are able to
sell. It is a convenient tool and there are some individuals
for whom that is the only--they may have been in their home for
40 years and legitimately want to sell it, but the buyer can't
get a mortgage anywhere. So how do you deal with those kinds of
things?
So, there is a need for keeping them, to some degree, but
there certainly are a lot of reforms that need to be made to
make them fair.
Ms. Tlaib. Thank you so much, and if I may, Mr. Chairman, I
do want to recognize a number--not individually, but a number
of our elected officials, local elected officials who are here.
We do appreciate their presence.
Chairman Green. Thank you very much. We may have an
opportunity for you to ask some additional questions, Ms.
Tlaib.
At this time, we will now yield to Ms. Garcia, from Texas,
for 5 minutes.
Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you
to all the witnesses for being here.
I was really struck this morning, during the tour, by the
number of what appeared to be abandoned homes, and I was very
curious about that, so I googled you all, just like every time
we have a question and we don't have an encyclopedia, those of
you who still remember encyclopedias, and it says here, ``Is
Detroit an abandoned city?'' An abandoned city. It says, ``A
significant percentage of housing parcels in the City are
vacant, with abandoned lots making up more than half of total
residential lots in large portions of the City. With at least
70,000 abandoned buildings, 31,000 empty houses, and 90,000
vacant lots, Detroit has become notorious for its urban
blight.''
Now, urban blight is a difficult problem to solve. I don't
know that Congress has an answer, and I don't know that we will
come up with an answer today. But I wanted to ask the professor
and Ms. Fluker the question--give us a recommendation, at least
one, of what you think Congress can do to help solve that, so
that when we Google Detroit, we don't come up with this
abandoned City, because I am sure that is not what you all
want. So, help us get there. What are your recommendations?
Just one or two.
Ms. Atuahene. Let me give you my main recommendation--
Ms. Garcia of Texas. One would be good.
Ms. Atuahene. --which is, again, you have to understand the
scourge of unconstitutional tax assessments as the latest
chapter in a larger history of racialized--
Ms. Garcia of Texas. Right. You have talked about that.
Ms. Atuahene. --housing. That is exactly right. And so to
stop--the reason why we are going to have another chapter, and
another chapter, and another chapter until people are held to
account, right?
So, the real solution here is to provide some compensation.
You can't have this empirically proven instance of these
unconstitutional tax assessments and people then get their
houses foreclosed upon, and you say, ``Oops, I'm sorry.'' There
is no ``oops'' here. We need compensation. And providing
compensation is the only way that we can ensure people are held
to account so that there will not be yet another chapter,
another chapter of this kind of--
Ms. Garcia of Texas. But is that the role of your State
Government or the role of the Federal Government?
Ms. Atuahene. We need both. To really provide compensation,
we are going to need Federal dollars and State dollars. The
City of Detroit doesn't have money, and so we are going to need
the Feds to come in and we are going to need the State of
Michigan to come in. We need all hands on deck in order to
provide compensation.
Ms. Garcia of Texas. Okay. Ms. Fluker?
Ms. Fluker. Yes. Thank you very much for the question. I
appreciate that. Everything I am citing is attached to my
testimony. I attached a data sheet.
And it is very important that we understand that prior to
the housing crisis, the housing bubble, statistics have shown
that 78 percent of the foreclosed homes in Detroit were
predatory subprime loans. The reason that becomes very, very
significant is because now we have a scenario, after the
bailout, after Fannie Mae and Freddie Mac, ``sheared the toxic
loans'', that they are a large percentage of the owners of the
abandoned property. And, in fact, according to the 2015 study,
Fannie Mae had about 46 percent of the abandoned housing and 58
percent of the housing owned by Fannie and Freddie was
abandoned here in Detroit. I find that extremely--
Ms. Garcia of Texas. But what can we do to change it,
Fannie Mae and Freddie Mac? What is your recommendation there?
Ms. Fluker. Stop throwing people--
Ms. Garcia of Texas. I only have only 5 minutes, and I am
trying to get you to answer my question.
Ms. Fluker. Yes. Stop throwing people out on the street.
Allow them to purchase these homes. Particularly when the
mortgage was subprime, things of that nature, give them an
alternative to purchase the homes. Or in the case of my lady
who did the contract, the deed was defrauded, why are you
throwing somebody out when they are willing to pay a reasonable
price and they are trying to purchase a home?
And it is sad because so many of my clients that we are not
successful on for mortgage foreclosures, things like that, they
go back to their house 5 years later, or 7 years later, and the
house is sitting there abandoned, when no one will work with
them to allow them to pay a reasonable amount, when they knew
the mortgage was subprime. That hasn't gone away. We still have
those mortgages. Most of those were 30-year mortgages and it
hasn't been 30 years, but we still have a consistent
foreclosure process going on in Detroit, and it is feeding into
this abandonment. And if we just allow people to stay in their
homes, pay for the homes, rather than just letting them sit
there and be abandoned, particularly government-owned property.
Ms. Garcia of Texas. All right. Thank you.
And my question now is for Mr. George. I listened to your
testimony and you were talking about the low-cost homes and the
high foreclosure rate. What can we do to work with the Federal
Reserve Bank, in terms of some of our mandates to regulation,
to improve that situation and also to make changes and reform
and modernize the Community Reinvestment Act (CRA), to get the
banks to work with the community? It shouldn't be the other way
around. You are the regulator up there. What could we be doing?
Mr. George. I think that is a really important question. It
is beyond the scope of the research that I have presented
today. I think that there may be others within the Federal
Reserve that are working on those issues.
When I think about potential solutions to address the lack
of credit flowing to these communities, I think of the
organizations that are active there today and what they are
doing, in particular, community development financial
institutions (CDFIs). They may not face the same profitability
pressures of a private lender, where, for a smaller mortgage
that is going to have a thinner profit margin or maybe not be
profitable, a private bank may have a minimum loan size or
incentives that discourage their loan officers from being
active in that segment of the market, whereas a CDFI, if it
aligns with their mission to serve the needs of their
community, they are going to be more motivated to try and
address those kinds of credit gaps.
So I can't speak to the regulatory matters you mentioned,
but I can think of what organizations--
Ms. Garcia of Texas. But did any of the studies that you
cited make recommendations as to what we can do to make the
banks more accountable under the CRA?
Mr. George. Under CRA? I would have to think about that
question more and get back to you.
Ms. Garcia of Texas. All right. I yield back. Thank you,
Mr. Chairman.
Chairman Green. Thank you. Without objection, we will have
a second round of questioning, and Ms. Tlaib, we will yield to
you for an additional 5 minutes.
Ms. Tlaib. Thank you. So right now, I know about 65,000
foreclosures--this is for you, Ted--65,000 properties in
foreclosure in 2019. Twenty-one percent of them didn't even
know that it was in foreclosure. I think, what, back in 2018,
they were saying there was a high percentage that didn't even
know.
But the one issue that came up during the tour, Ted, is
specifically around this move for community groups, who are so
tired of trying to deal with the banks or trying to get the
Federal Government to do something, that they are now creating
community trust funds, basically saying that we are going to go
on the auction, we are going to buy these homes back for our
neighbors, and we are going to help them stay in their homes.
And they were saying how the Wayne County tax foreclosure
process now, and that it is online during the auction. The one
that I have--always, my colleagues, even, were kind of taken
aback by that process. Can you talk a little bit about that,
because it is not very accessible? People think that somebody
in the audience right now can just go online and try to buy
their home back, that there is this process that you can get it
back for $500. There are a lot of misconceptions out there.
I know the Wayne County tax foreclosure process online, the
auction, is broken. It is so lenient and easier for investors,
and out-of-State investors, specifically, to buy people's homes
versus nonprofit organizations and others who are trying to get
folks to stay in their homes.
Mr. Phillips. Well, there are a lot of impediments,
certainly, and it has gotten much more difficult.
Ms. Tlaib. Can you go through the process?
Mr. Phillips. Yes. Basically, you have to register, you
have to have money to register, a deposit to put down.
Ms. Tlaib. How much?
Mr. Phillips. At least $2,000, I think. In the September
auction, you have to be prepared to bid all of the back taxes.
A lot of investors don't do that. For the October auction, a
month later, the minimum bid is $500, so it is a little bit
easier. But you also have to do it online. It is a quick
process. They list all the homes. There are like 15-minute
increments they do closings on. It can get somewhat cumbersome.
What has been the biggest problem of the last couple of
years has been that there has been a rebound in some property
values. Last year, we were able to get 520 homes through the
process we have worked out with the City of Detroit, through
using their right to take property before the auction. We were
able to get those homes for generally between $2,000 and
$5,000, and give the people a year to pay back what we paid.
When we participated last year in the October auction, we
got 3 properties. Five years ago, we had as many as 300
properties we were able to get through that process. Five years
ago, $500, $600, $1,000.
Ms. Tlaib. Why only 3? Why now only 3?
Mr. Phillips. There are fewer properties. That was one
thing. But the other thing is that there is much more
competition for the properties that are left, and it is a much
more difficult process to get them. Notwithstanding that,
still, for investors to pay, instead of $500, $5,000 for a
property is not that big of a deal, and they are still buying
properties for $5,000 and letting them sit there and rot, or
flipping them on bad land contracts and basically doing the
equivalent when they get it back after one or two or three, and
let it rot. So we are still having that kind of problem.
But it is not easy for an individual. We, for a number of
years--and we still--offer to bid, on behalf of people, to be
able to get the home that they are in.
There also was legislation passed in Michigan banning the
former homeowner from bidding, which was a huge mistake. It was
supposedly to keep investors from buying back the properties
that they weren't paying taxes on. They simply changed their
name. They are bad as Smith Corporation 1, so the next year
they are Smith Corporation 2, and there is a number like that.
One of them is up to 16, and they are that blatant, but yet
they get away with it. Same people, different name, so they are
considered a different company and they are allowed to do it.
But individual homeowners who lose are not allowed to bid in
the October auction.
So there is a lot of cumbersome--and it is online. If you
are not used to doing that, it can be very difficult to do.
Ms. Tlaib. And the last--one of the things, and, Ms.
Fluker, if you can--what have you seen in regards to how this
movement around foreclosure has been so aggressive, especially
in Wayne County, how that is connected to what is happening
with water shutoffs, how that is all interconnected? Because I
know that people's water bills were somehow attached to their
tax bills and all of that, and trying to unpackage that and
understanding how that really fed into the crisis that we have.
Ms. Fluker. It is very significant, particularly--there are
actually two or three layers and I am going to try to do it as
quickly as I can.
Layer one is, if you have a water bill and it is converted
onto your taxes, if you have a mortgage, that can actually
accelerate that mortgage, because now you are in breach,
encumbered to property and property with taxes, things of that
nature. So it can be problematic from that perspective.
It is also problematic from the perspective of many times,
people who may have owned their home outright, have a water
problem, and suddenly it becomes a tax bill, collecting 25
percent interest, I might add. So if you don't have that
immediately, in a year's time it is just going to be out of
control. And without the ability--obviously, if you couldn't
pay it initially, a year later, 25--
Ms. Tlaib. Ms. Fluker, we didn't always have that as an
issue. They didn't put it on your tax bill before, correct?
Ms. Fluker. That is correct. That is a tool that is being
used to gentrify our property. They are doing it a lot with
churches, particularly Black churches. In fact, they are doing
it with Black churches who don't have outstanding water bills.
I represent a pastor right now. It is the third time. The same
investor has allegedly bought his property at a tax sale, but
it is a tax-exempt church and it has been for about 40 years,
because certain areas, I guess, are designated to be, certain
development areas, whatever the case may be.
So, actually, water bills are being used as a tool to
create an encumbrance, to take property. So it is all
interrelated, not to mention the ancillary health issues,
things of that nature.
Ms. Tlaib. Thank you, Mr. Chairman.
Chairman Green. Thank you. We will again hear from
Congresswoman Garcia for an additional 5 minutes.
Ms. Garcia of Texas. I am just sitting here, almost
shocked. You are telling me they are using the water bill to
add it to the tax bill?
Ms. Fluker. At 25 percent interest.
Ms. Garcia of Texas. So that is a State law that allows
them to do that? Well, you all need to go in and change that.
That is just outrageous. No, that is not a Federal law. And I
just can't believe, because I know during the tour they
mentioned the water bills being so high. Because I am one of
those who pays things per quarter because I am in Washington
and I don't have to worry about the bills, right? If I send
$100 to the water company in Houston, that does me good for
like 3 months, and I don't have to worry about paying another
bill.
I am sitting here just sort of in shock. And you are
talking to someone whose first job out of law school was a
Legal Aid lawyer, and my favorite tee-shirt said, ``Housing for
people, not for profits.'' To me, it sounds like you are giving
me a perfect example of the kind of case I used to love to have
when I was in Legal Aid, because that sounds like it is purely
for profits, and to take over the homes.
So I am just aghast and certainly will work with your
Congresswoman to see if there is anything we can do at the
Federal level. But it sounds to me that this needs to be done
at the State level, to go in and repeal that law.
But like I said, I didn't come here to tell you how to do
things the Texas way, but it is just shocking. You live next to
the water. Why is your water bill so high?
It should be easier. But I will move on, Mr. Chairman. I do
have a question for Mr. Hernandez.
I listened to your numbers about the number of mortgages.
You said only 416?
Mr. Hernandez. On average.
Ms. Garcia of Texas. On average. So is that traditional
financing or is it also any secondary financing?
Mr. Hernandez. Correct. It is traditional.
Ms. Garcia of Texas. Traditional financing. So what is it
that we can do with Fannie Mae and Freddie Mac and other
lenders to hold them accountable, give them incentives, make
them be fair, and provide home financing to increase home
ownership in this City?
Mr. Hernandez. So fundamentally, strengthening CRA. Right
now, it is under attack, right? They are trying to weaken it,
trying to aggregate data so that you are not tracking it
specifically in LMI areas. And then, even more specifically,
who was actually the borrower?
So putting some teeth into the CRA, strengthening it, not
weakening it, helping ensure that--
Ms. Garcia of Texas. But how, specifically, do you want us
to strengthen it? I asked Mr. George and he told me I need to
talk to the regulators. So tell us how to do that. What is it
that you recommend we do?
Mr. Hernandez. Well, if you look at the reviews that the
regulators perform, they kind of skim over a lot of things and
they don't really--they don't put the hammer down when they
can. And so if they are not enforcing the way they should and
can, because CRA is a really powerful tool.
When a bank gets a ding on your CRA, they are meeting with
local community groups and listening, and incorporating
feedback to generate a community benefits plan and strategy on
how to rectify that challenge. We have done it successfully
with a couple of local banks, and in a couple of instances that
I have been involved in CRA negotiations, where the banks
either had a challenge with a merger or a CRA--we were
negotiating with, I think, Fifth Third, I think, like $30
billion.
And it is an investment, for sure. They didn't have to, but
they were willing to because it is a sound business strategy to
partner with a couple hundred community groups, to rectify and
enhance their business model, to ensure that they are meeting
goals and lending in LMI communities.
Ms. Garcia of Texas. Thank you. I yield back, Mr. Chairman.
Chairman Green. Thank you. Without objection, I am going to
give Ms. Mason some additional time. We did interrupt your
statement, Ms. Mason. Do you have anything else you would like
to say before I ask my questions?
Ms. Mason. Well, yes, I do have something I would like to
say. I do believe that this is unjust, unfair, and
unconstitutional, the evictions, the foreclosures. It is just
not right. We have DTE as well as water connected to the
properties that are foreclosed upon, and it makes it hard for
people to become homeowners as well as stay in their homes,
even if they get them.
So we need laws, we need policies, most definitely, because
this all is intentional. It is strategically intentional. And I
lost my home, that I watched my grandparents buy for me and my
family to stay in. My mother struggled, along with me helping
her, to make sure that the home was bought and paid for, only
for us to lose it to illegally assessed taxes.
Chairman Green. At this time--thank you for your
testimony--I am going to yield myself 5 minutes for some
questions. Let's start with Mr. Phillips.
Mr. Phillips, you indicated that you have an instrument
called a lease-to-purchase contract. With the lease-to-purchase
contract, is that regulated by the State in some way?
Mr. Phillips. Not really. What we argue legally is that it
they are effectively our land contracts, and when we argue
under the State land contract law to try to get greater
benefits. So if they are a tenant, for example, if they miss a
payment, they are in court, in a short period of time they have
a judgment to pay in 10 days, and they win the right to
continue to pay rent. If they have a land contract, they get a
longer period to redeem. If they pay off the land contract,
they get ownership.
So the problem is that many of the lease purchase
agreements are written in a way that the person is called a
tenant, they are treated as a tenant, but everything in the
agreement reeks of land contracts.
Chairman Green. Would it be beneficial, Mr. Phillips, to
have lease-to-purchase contracts, land contracts, contracts for
deed, all of them to be identified as a single entity, such
that clever people won't be able to call it something else in
an effort to get around the law? Would it be helpful to have
all of these things identified in a such a way?
Mr. Phillips. And the criteria for them, yes.
Chairman Green. Yes.
Mr. Phillips. I think it absolutely would be.
Chairman Green. And let's move to the bidding. It is my
understanding, from the testimony, that the owner is prohibited
from bidding on the property. Is that correct?
Mr. Phillips. They can bid at the September auction where
all the taxes have to be paid, but other than that, they cannot
bid.
Chairman Green. They cannot bid. Would it be appropriate to
have the owner given the opportunity to have the right to
purchase the property at the bid price, and if not, then the
person who actually prevails with the bid can purchase the
property at that price? Are you following me?
Mr. Phillips. Yes, and that would be very helpful for
persons who did not owe a lot of taxes. The practical problem
at that point, by September, is that very often, low-income
people don't have $3,000, $4,000, or $5,000 in their pocket.
But for those amounts, those are the kinds of ones that we try
to buy--have the City intervene on in July and August.
Chairman Green. This would be somewhat of a last-chance
opportunity for an owner to continue to have ownership of the
property?
I read one case where a person's home was taken at an
auction for $500. Attorney Fluker, you mentioned $1. If that is
the bid price, and the owner has paid thousands of dollars to
purchase, giving the owner that one last opportunity to
purchase the home now for the $500, or, in your case, the $1
purchase price, it seems to me that might be beneficial, if the
law allowed that.
Your thoughts, Ms. Fluker?
Ms. Fluker. I think it would be beneficial to permit the
owner to purchase at the bid price before the bid price is
finalized. I think that owner should have every opportunity to
retain home ownership, particularly in light of the owner's
process, the excess not just taxes but the excessive interest
and fees. So many times--you know, you can start off with a
basic bill. Okay, yes, $500--let's use a hypothetical--but at
25 percent interest, it doesn't take long for that to spiral
out of control, particularly if you are working with limited
means.
So, if they have an opportunity at that bid to be able to
almost go back to square one for that last chance, I do believe
that would be helpful, for sure.
Chairman Green. Thank you. Ms. Mason, a quick question for
you, please. I have another Member here and will be yielding to
her in just a moment. But do you recall what the bid price was
for your property?
Ms. Mason. I don't know how much it started off at, but it
did sell for like $44,000 to $46,000.
Chairman Green. That is what your home ultimately sold for?
Ms. Mason. Yes.
Chairman Green. But you don't know what it was purchased
for at auction?
Ms. Mason. $44,000 to $46,000.
Chairman Green. Okay.
Ms. Mason. I think.
Chairman Green. We will now have a final round, without
objection, and we will start with the Member who is here,
Congresswoman Lawrence of Michigan, and we welcome you.
Mrs. Lawrence. Thank you.
Chairman Green. We are grateful that you were able to make
it. We didn't know that you were coming. And Congresswoman, you
hail from the 14th Congressional District?
Mrs. Lawrence. Yes.
Chairman Green. All right. You are recognized for 5
minutes.
Mrs. Lawrence. I want to thank the chairman and my esteemed
colleague, Congresswoman Tlaib, from the neighboring 13th
District, for convening this important hearing. Minorities have
always faced historic patterns of discrimination when it comes
to home ownership, and if you look at the numbers on a national
level, the number of minorities, African Americans, home
ownership is dropping in America.
Black, Hispanic, and Asian households face neighborhood
segregation, and in 2008, the financial crisis devastated
homeowners all across this country, but it significantly
decimated the Black community, where home ownership is a larger
part of the overall wealth in our communities.
I have a question, and this is going to those of you who
have the opportunity to provide loans. Can you describe what
funds--Federal, State, local, or private--your organization
relies on to fight discrimination in housing, and to have
affordable and adequate housing? I need to know, as I sit on
the Appropriations Committee, and so my job is funding. I want
to know what funds you are relying upon to help us in this
fight?
Mr. Phillips. Well, we have developed a very small pool of
money that we have built up over the years. We started buying
properties about 10 years ago. As I mentioned earlier, we have
bought, I think it is 3,500 properties to date.
Mrs. Lawrence. Is that private funds?
Mr. Phillips. It is private funding.
Mrs. Lawrence. Do you get any Federal, State--
Mr. Phillips. There is no Federal funding in that
particular--that was mostly foundation funds, the United Way.
More recently, the Quicken Community Loan Fund has been a huge
participant in that. And what we have done is we have provided
loans to people that they pay back, and then we use that money
the following year to help people purchase homes.
Mrs. Lawrence. If I could, is there anyone on this panel
who knows that they can use Federal dollars to fight
discrimination or to help in housing for people in poor and
underrepresented communities? I am getting a ``no.''
So, this is a very powerful statement to say. Yes, did you
have a statement?
Ms. Atuahene. Are you talking about the Fair Housing Act,
money through the Fair Housing Act?
Mrs. Lawrence. Yes.
Ms. Atuahene. Okay.
Mrs. Lawrence. So tell me about that. What are you getting
and how is it being used?
Ms. Atuahene. No.
Mrs. Lawrence. You don't get any?
Ms. Atuahene. No.
Mr. Phillips. I think the Detroit Fair Housing Center would
be who would get that, and none of us are directly connected to
them.
Mrs. Lawrence. Why aren't you connected?
Mr. Phillips. We work with them, but we are not--our
division of labor is that generally we represent tenants and
others facing eviction and they will handle discrimination
cases.
Mr. Hernandez. Our organization does receive counseling
funding through HUD.
Mrs. Lawrence. Counseling funding?
Mr. Hernandez. Yes, but it's wholly inadequate. And there
is now a certification requirement. They have expanded the
requirements to provide counseling. It is very comprehensive.
Everyone has to be licensed by August 1st of next year, and
pass that exam. But the funding is wholly inadequate. I think
the funding we received last year to provide that, and that
includes Fair Housing, was $40,000, and we have counseled 300
people and produced at least 125 homebuyers. And so, we have
had to supplement that with just lots of fundraising.
Mrs. Lawrence. This will go into my next question. How can
the Federal Government do a better job of supporting the
expansion of affordable housing? Ms. Mason, I understand you
were a victim. What can the Federal Government--what would you
recommend we do better? Do you have any recommendations?
Yes, sir?
Mr. Phillips. With $47 million appropriated to HUD for
housing counseling nationwide, and I think Michigan's cut was
$3 million, and $2 million of that went to one organization
that is a nationwide organization, it is just not enough. There
are hundreds, literally hundreds, and probably thousands of
prospective homebuyers in Detroit who could receive credit-
building counseling, and in 6 to 12 months could be eligible to
buy a home versus rent, which is what they are doing now,
because the rental rates typically are higher than what they
can do if they bought, if they only knew and understood the
process.
Mrs. Lawrence. Right.
Mr. Phillips. Plus, there are hardest-hit funds still out
there with Michigan, and there is no reason why there shouldn't
be others. And their limitations on that are ridiculous. The
fact that you can use the funds to tear down homes, to
eliminate blight, but you can't use the same damn funds to help
people stay in their home to prevent blight is ridiculous.
Mrs. Lawrence. I agree.
Ms. Atuahene. And I would just say, we really do need--you
are asking what Congress can do, what you all can do, and I
said it before and I will say it again. We really do need a
congressional investigation into this abusive property tax
administration that is happening not only in Detroit but most
other Black cities in America. So we really need, as a first
step, a congressional investigation, and then from that
investigation is where we can answer your question as to where
exactly the Federal Government can plug in. But as a first
matter, order of business, is we need an investigation.
And I just want to also thank Representative Tlaib who has
been fighting this fight way before she got into Congress, on
the property tax foreclosure, fighting with us here in Detroit.
And thank you so much for bringing Congress here and lifting up
this issue. But that is exactly what we need from you all, is
an investigation.
Mrs. Lawrence. Thank you. I yield back my time.
Chairman Green. Thank you very much. We will now hear from
Congresswoman Tlaib for a final 5 minutes.
Ms. Tlaib. Thank you so much. Mr. Hernandez, we talked
about the CRA, and I have been really a big critic of just not
feeling like the enforcement is there. You called it teeth, but
it is enforcement, and they do skim through it, and they get--
and for folks to know, the Community Reinvestment Act was all
about forcing the banks to do what they were supposed to do,
which is to help low- and moderate-income communities.
The loophole I see now, especially in Wayne County, is they
are making mortgage loans in low- and moderate-income
communities, but they are not minority communities, communities
of color. So the majority of loans are still going to white
families who are moving into Detroit versus Black families, and
they are getting credit for that, which wasn't really the true
intent of the Community Reinvestment Act. It was to
desegregate. It was to force banks to open up branches in
communities that lacked access to financial stability and
access.
And so in there, what is it--and we talked about this--but
Hector, what would go wrong if we said it can't be based on
geography, that it has to be based on the makeup of the family
who is applying for the mortgage?
Mr. Hernandez. I think it should be both, and right now
they are watering it down by taking a larger swath of the
lending they are doing in certain areas and geographies, and
not drilling down in specific communities, and then the
ethnicity, demographics of that bower. That is how they get
around it right now, and I think we need to strengthen it.
I also think we need to enhance it by asking or requiring
your fintech financial institutions and your credit unions to
also report on the data. I think they are both doing good work
but you should level that playing field so we know who is
lending what to whom.
Ms. Tlaib. And one thing that we talked about--and this is
for Ted--in regards to land contracts and so forth, you talked
about the fact that most--I think it is only 4 percent of those
who end up at 36th District Court have access to legal
services, even though there were, what, 30,000 cases?
Mr. Phillips. Right.
Ms. Tlaib. And you said it would be really great to try to
find support and funding towards expanding access to free legal
support at the courts or at that level for specific things
around land contracts and so forth.
Where have you seen it done the best? Where have you seen
for there to be that direct connect? Because I know, when my
residents go down there, it is like speed dating, literally.
No, really, it is. They lose their homes within minutes. They
don't know what happened. They have no idea what exactly was
going on.
And, Ms. Fluker knows. She was my first boss chairman. I
don't know if you know that. That is probably why I turned out
the way I am.
[laughter]
It is all Vanessa's fault.
But, Mr. Phillips, one of the things that--we talk about
more money and sometimes I worry about that. I worry about
throwing more money at something that is already broken. And so
I am cautious about--when you mentioned it, of course, it is
something that sounds great, but explain to me how that would
really look like at the 36th District Court? Would it be
extended more to organizations like yours? I think there is a
culture there, because there are so many. We are talking about
thousands of people who go through there, who lose their homes
to all kinds of things--land contracts, tenants, you name it,
it is happening there. If you could talk a little bit more
about that.
Mr. Phillips. Currently, there are essentially three
organizations that provide legal representation: ours, which
provides the most; Lake Shore Legal Aid, which is the federally
funded legal services organization in this area, but they cover
three counties, including Detroit, but three counties; and
Michigan Legal Services. With our combined resources, we are
able to do roughly 4 percent of the 30,000 that go through.
There are 200 to 300 cases a day that are heard by three
judges. We have the capacity to run a clinic at the court three
mornings a week. Lake Shore does two other times.
So, there are just not enough people there. We will very
often have to cut off intake 15 minutes into getting there,
because there are just not enough folks to do it. If we had the
ability to have more, if those three organizations had the
ability to have more attorneys, like New York and other places
have had, that are moving to the right-to-counsel concept--
Philadelphia, and a few other places that have gone to that--
they are seeing a dramatic reduction in the number of evictions
that not only impact land contract situations but people in
subsidized housing that are massively losing their vouchers,
losing their housing, becoming homeless because they are, in
some ways, even more dire because their $50 a month rent--where
do you go if you are paying $50 a month rent and you lose your
voucher?
So, there is a desperate need for more attorneys, but you
are right, they have to be attorneys who are part of a system
that works, and not just necessarily turning to the private bar
or something like that, or allocating the funds to the court. I
am not advocating allocating the funds to the court. The court
has been supportive in terms of providing space and working
cooperatively to let us be there, and that shouldn't be a big
deal, but it is. There was a time that we couldn't even do
that.
But there is a desperate need for more bodies to represent
people of all types, and certainly one of those types is people
losing their homes.
Chairman Green. Thank you. We will now hear from
Congresswoman Garcia for a final 5 minutes.
Ms. Garcia of Texas. Thank you, Mr. Chairman, and I wanted
to go back to the call for an investigation, I believe you
called it. You have said it now twice so I always think that
the third one is the charm, so I think we are listening. We
have heard you.
I just want to be clear on what you think we need to do
with that, because in your writings you note that unjust
property tax administration was frequently used to dispossess
African Americans of their land and other property during the
Jim Crow era.
Ms. Atuahene. That is right.
Ms. Garcia of Texas. Do you believe that the administration
in Detroit is operating in a similar fashion today? Is this
just modern redlining? What is it you think we need to
specifically look at, in terms of the structural challenges
involved here?
Ms. Atuahene. I think the investigation needs to look at
the property tax administration practices in majority Black
cities. That is basically what I am talking about.
Ms. Garcia of Texas. In Detroit and major cities across
America?
Ms. Atuahene. Yes, cities with a substantial number of
African Americans. Because, again, the empirical work is
finding that it is these especially vulnerable communities of
African Americans in urban areas who are being subjected to
this abusive property tax administration.
So I would suggest that the investigation start with the
five most populated cities that have a significant population
of African Americans, and look into it. Again, we would be more
than happy to come provide the empirical evidence showing the
racial disparities, and then starting there and unpacking it
from there would be my suggestion.
Ms. Garcia of Texas. What other areas do you think we need
to look at?
Ms. Atuahene. Besides abusive property tax administration?
Ms. Garcia of Texs. Yes.
Ms. Atuahene. Goodness gracious.
Ms. Garcia of Texas. Well, the lending practices, I would
suggest.
Ms. Atuahene. The whole shebang, actually. Well, yes,
lending practices have been talked about today. The
availability of credit. The land contracts. Those people who
only have access to land contracts versus mortgages and all of
the disclosure and protections that go along with it would be
the things I would suggest, so, the abusive property tax
administration, access to credit, abusive land contract
practices.
Ms. Garcia of Texas. Ms. Fluker, do you have any additional
specific items? I just want to make sure that we leave today on
a more positive note of where are we going from here.
Ms. Fluker. I definitely do. I think that we need to
actually look at the whole judiciary with respect to this and
how people are treated. As our Representative Tlaib said, you
go down to the 36th District Court, you can have an attorney
and they will just throw you under the bus. But if you are just
there, even trying to ask a basic question, or whatever the
case may be, you are not going to be--what should I say?--
treated as justly as you should.
Ms. Garcia of Texas. But do you have meaningful due
process? The very idea that Ms. Mason came home and found her
door locked, with everything she owned, including the ashes
that she had there, is just shocking to me. Is there not due
process?
Ms. Fluker. That is why I think it is something that should
be investigated, because there is due process, in theory. We
actually have a statutory anti-lockout statute here. But
getting that enforced and actually being able to get people
damages for what they have actually experienced is a whole
other ball game, and the further you go up the food chain, as
far as the economic status is concerned, versus mom-and-pop,
versus investor, versus Fannie Mae, Freddie Mac, or the bank,
determines the type of relief that you are going to get.
Ms. Garcia of Texas. But did she have due process at the
beginning, when she was first in arrears of her taxes?
Ms. Fluker. I can't speak to that because I don't know if
she got notices.
Ms. Garcia of Texas. Ms. Mason, did you?
Ms. Mason. No. I did not.
Ms. Garcia of Texas. Did they give you a right to challenge
the amount of taxes, the assessment, and to have a hearing
before some administrative level before they took you to court?
Ms. Mason. No. I didn't even get a notice to come to court.
Ms. Garcia of Texas. You didn't even get a notice to come
to court?
Ms. Mason. No, ma'am.
Ms. Garcia of Texas. So did you have a lawyer?
Ms. Mason. No.
Ms. Garcia of Texas. You didn't. Is there a Legal Aid
office in town?
Ms. Mason. Yes. I didn't even know that my house was--what
the process was, of foreclosure. I came home--
Ms. Garcia of Texas. And your door was locked?
Ms. Mason. I came home from work, hoping to catch up on my
taxes. I came home in the middle of the night and my key didn't
fit, and it took me a couple of minutes to realize the reason
why my key didn't fit. It was because my locks were changed.
Ms. Garcia of Texas. Thank you. Mr. Chairman, if you will
indulge me, I believe Mr. Phillips wanted to respond to part of
this question, about this issue. I think it is important.
Chairman Green. We will hear his response, and then--
Ms. Garcia of Texas. Thank you, Mr. Chairman.
Chairman Green. --just let me remind all of the Members, if
I may, I have not had my 5 minutes, but we will have a one-
minute closing for each Member.
Mr. Phillips. Just really quickly, these are tough cases,
but if you don't even have an attorney to get off the ground
level one, you are not going to go anywhere. I wish I had known
Lauren back in that era, but there just aren't enough attorneys
to deal with what needs to be done. I talk about 4 percent
represented. Those are the cases coming to court. And then
there are the lockouts and there are the utility shutoffs and
everything else. So there just is a dearth of available
attorneys to take these cases, and that is the start of it. It
is not the end of it because there are problems with the
courts, as well, but that is part of it.
Ms. Garcia of Texas. But is there is a Legal Aid office in
town?
Mr. Phillips. I'm sorry?
Ms. Garcia of Texas. Is there a Legal Aid office in town?
Mr. Phillips. Yes, there is a Legal Aid office. There is
our office dealing with housing issues. None of them have the
capacity to do what needs to be done
Ms. Garcia of Texas. Well, because that goes to funding for
Legal Services. I wanted to get that on the record, because our
colleague, Representative Lawrence, is here. She is an
appropriator.
Mr. Phillips. In that era, there was a different legal
services organization funded, but yes, there was a legal
services funded organization in Detroit then.
Ms. Garcia of Texas. Thank you, Mr. Chairman. I yield back.
Chairman Green. Thank you. I now yield myself 5 minutes.
If you believe that discrimination in lending is taking
place on the panel--this is not for the audience, please
friends. I know that you have much that you would like to say,
and I trust that you will believe that we have been generous in
allowing people to ask question and getting answers. But this
is for the witnesses only.
If you believe that discrimination in lending is taking
place currently here, in your area, will you kindly extend a
hand into the air--discrimination in lending?
[show of hands]
Chairman Green. All right. Let the record reflect that all
of the members of the panel, all of the witnesses, have
indicated that they believe it is taking place.
Now, if you are familiar with a process known as testing,
where you test to determine whether or not discrimination is
taking place, and you are on the panel--I can understand that
some of you may not be, but if you are familiar with it, would
you kindly extend a hand into the air?
[show of hands]
Chairman Green. Okay, good. The persons that I would
expect, all but Ms. Mason. And Ms. Mason, I wouldn't expect you
to know.
Do you believe that testing would be an effective tool to
determine whether this discrimination is taking place, as with
testing you can acquire what is called empirical evidence of
whether or not you are getting fair treatment when you apply
for a loan?
So if you believe that testing would be beneficial--and for
the benefit of the audience, testing would allow maybe three
persons to go in and apply for a loan. Perhaps two of them
would be persons of African ancestry and one of another
ancestry. And let them go in at or near the same time, and they
would be equally qualified. Sometimes, the person who is of
African ancestry may be more qualified than the one who is not.
And then, let's see if the one gets the loan and the two are
denied. That is called testing.
If you think that this would be an efficacious tool to
ascertain whether or not we, in fact, have invidious
discrimination, would you kindly raise a hand? This is for
members of the panel.
[show of hands]
Chairman Green. Okay. I see two persons did not. Mr.
George, is it because you didn't quite understand the question
or do you believe that testing would not be effective?
Mr. George. I think I understand the question. I would just
want to look at more evidence to provide a yes or no answer. I
am not sure, off the top of my head.
Chairman Green. Okay. Are you familiar with testing, Mr.
George?
Mr. George. Yes.
Chairman Green. Okay.
I am going to go to the professor.
Ms. Atuahene. Chairman Green?
Chairman Green. As briefly as you can now, Professor.
Ms. Atuahene. I understand the question perfectly. I am an
empirical researcher, and I don't believe we need testing
because we have all the empirical evidence already. And I am
going to say, quickly, in Detroit--
Chairman Green. No, no, ma'am.
Ms. Atuahene. --it is an 80 percent--
Chairman Green. If you would--
Ms. Atuahene. --Black City--
Chairman Green. --if you would, Professor--
Ms. Atuahene. --but 90 percent--
Chairman Green. --Professor--
Ms. Atuahene. --of the loans go to white people.
Chairman Green. Professor, would you just respect the Chair
for a moment, please?
Ms. Atuahene. I'm sorry.
Chairman Green. Thank you very much. Do you agree that the
Chair has been very generous with his time? So let me just ask
you this. Please, now, listen.
What you are telling me is that you already know that it
exists. But if I am to act on it, I have to have proof that I
can use. Testing gives me the proof that I can use. Now I can
say that I know it exists, intuitively. I can say that it
exists because I see people being turned away. But when I have
three people, equally qualified, and two are denied and one is
not, that gives me some additional evidence.
I am not saying to you that all of these other things can't
be litigated, but if I have that evidence it seems that it
would be beneficial.
Now I am going to give you a minute to respond.
Ms. Atuahene. I totally understand what you are saying, but
what I am saying is we have even stronger evidence than this
testing evidence, of this racial discrimination, that we
already have stronger evidence than testing, is what I am
saying.
Chairman Green. Okay. Well, let me ask you this: Can we use
the stronger evidence and not preclude the testing? Is there a
reason that we should preclude it?
Ms. Atuahene. No, we don't need to preclude it. But the
point is we already have sufficient--if the testing came in
addition, it wouldn't be harmful, but I want to make the point
that we don't need the testing to move forward.
Chairman Green. Okay. I believe you do, and I suggest that
you move forward. Move forward with what you have, but for
Congress, it may be wise for us to have a law that allows us to
test, because it is not just your area that I am concerned
about. I am a United States Congressman, and I care about every
place in this country. Not every place has the empirical
evidence. Are you with me?
Ms. Atuahene. I am.
Chairman Green. Thank you very much.
All right, with that said, we will now have each Member
accorded one additional minute to close, and, Members, we are
running short on time, so if you would, try to adhere to the
one-minute timeline. And we will start with Congresswoman
Lawrence.
Mrs. Lawrence. Again, I want to thank everyone for being
here.
I want you to know I serve on Government Oversight with my
colleague here, but I also serve on Appropriations, and I serve
on THUD, which is Transportation and Housing. And one of the
things we have put into the appropriations for this next
Congress is funding for programs for disadvantaged homeowners
and renters. So I hear, clearly, there needs to be an
investigation in either Oversight or in THUD, on discrimination
in multiple places, because what we are hearing here we hear in
Baltimore, we hear it in Seattle, we hear it in all these
places where normally there are large groups of minorities and
poorer populations, and it is changing.
The other thing is that when we allocate funds, we have the
oversight ability to ensure they are doing what they are
supposed to do, and what I heard today is that while we put
funding out for counseling, it is not doing what it needs to be
done.
I know for a fact that if you do not know your rights, you
can't demand them. And so that is a place that I feel, from the
short time I have been here, that we need to do a better job
mandating, before you take house from anyone, that they have
been given the proper notification and knowledge of their
rights.
Thank you so much.
Chairman Green. Congresswoman Tlaib?
Ms. Tlaib. Thank you so much, and again, I want to uplift
the phenomenal team, the House Financial Services Committee's
Oversight Subcommittee staff. Thank you so much for working
with my staff here on the ground. I also want to uplift
Detroit's People's Platform, who gave us an incredible tour
this morning. I think it really made a profound impact on a lot
of my colleagues to understand the sense of urgency that we
have.
This is happening across our country and across the nation,
but I think many of us know that we feel like we are at the
front lines of how bad it got and how much work we still have.
I really appreciate the fact that I am hearing, over and
over again--and I agree, I think even Chairwoman Waters has
said the Community Reinvestment Act needs to be looked at and
it needs to be enforced.
I also agree that there needs to be more dollars towards
housing counseling services, and we have to look at that.
I also agree that we have to really look at this definition
of rent-to-buy and really lock down some protections for folks
who are now entering into land contracts.
I really do appreciate the insight on what is happening in
the courts and the fact that only 4 percent of over 30,000
cases going in--I can't imagine what it is across the State--
that don't have legal representation when they get there. Even
me, as an attorney, I will always be seeking out a Vanessa
Fluker in my community to try to get me representation if I was
facing that.
The tax assessment in our State, that is something that I
don't care if you are from Detroit or across any other part of
Wayne County, have felt the burden of the fact that our homes
were not assessed properly. And so we want to uplift, I think,
Professor, thank you for bringing that lawsuit forward. I know
we still have a lot of work to do in regards to that, in at
least getting people some support.
I also, lastly, want to uplift those who talked about
reparations. I think that is really important. This is just one
element that recently happened in our decade, but we knew
decades before that, that reparations is something that was
caused by structuralism, needed because of structural racism
that continues, of some of the sins of our country. And I think
this was proof that we still have some really deep-rooted
racism within our policy that does not lean towards people who
look like us, that helps people like us but also mostly hurts
people like us.
So I want to thank you again, Chairman Green, and thank you
so much, you and Congresswoman Sylvia Garcia, for taking the
time. They were there at 7:00 in the morning, and toured with
us all throughout Detroit and Highland Park, and I want to
thank them so much for that. And thank you to the community
organizations who helped put this together.
Thank you.
Chairman Green. Thank you. Congresswoman Garcia, you are
recognized for one minute.
Ms. Garcia of Texas. Thank you, Mr. Chairman, and I, too,
want to join with Representative Lawrence and Representative
Tlaib's remarks. I think they pretty much have stated what has
happened here today, and under your leadership, thank you for
having us here and making sure that we were here to listen, and
now perhaps working together, develop some solutions for this
area.
I just wanted to underscore the points of due process,
which are really very important. Perhaps it is because I am an
old Legal Aid lawyer at heart, and I just cannot believe that
someone could just come home and be locked out of their own
home, and can't turn the key. So I think we should really
address some of those issues, particularly when it comes to any
more of these remaining Fannie Mae and Freddie Mac, which
obviously would be under our jurisdiction.
And to the professor, I heard you loud and clear:
investigation. You have given us somewhat of a road map, and I
think we will have to pick up from there and see how we can get
that done.
So, thank you again to all the panel for being here, and
thank you, Detroit, for your hospitality, and for a great tour.
And I love my little box of chocolates. Thank you all very
much.
Chairman Green. This is going to conclude our hearing. I am
appreciative for many reasons. First of all, I had an
opportunity to see what I have heard others talk about, and it
was important for me to see it, because when I go back to
Congress I can tell my colleague what I have seen in Detroit.
I am also appreciative because we have had some outstanding
witnesses give us testimony that we will be able to use when we
have future hearings. This won't be the last hearing on this
issue. It is the first field hearing that we are having, and we
are having it here in your City, but it won't be the last.
And I want you to know that the Members of Congress have
not forgotten Detroit. You are not alone. We are going to do
what we can to be of service to you. And that includes Members
who are not at this table. We represent some Members who would
dearly like to be here, but their schedules did not permit it.
So, I am grateful that you are here, I am grateful to the
staff, the committee staff, as well as our very own staff. Each
Member has a staff and we are grateful to them for helping us
to acquire all of this intelligence today.
And we will be leaving, but I want you to know that we will
not be leaving you behind when we leave. With this said, the
witnesses are greatly appreciated. Your testimony today has
helped to advance the important work of the Subcommittee on
Oversight and Investigations.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
Without objection, the hearing is now adjourned.
[Whereupon, at 1:59 p.m., the hearing was adjourned.]
A P P E N D I X
August 2, 2019
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