With thousands of home foreclosures predicted for this year in Cuyahoga County, Cleveland Congressman Dennis Kucinich held a federal hearing in Cleveland yesterday. It focused on the rash of high risk loans that have sent many hopeful homeowners into a downward spiral of debt. ideastream's David C. Barnett has more.
Dennis Kucinich led a tour around the neighborhood where he grew up in Cleveland's southeast side this past weekend. But, this wasn't the Slavic Village of 50 years ago. Sheets of plywood have been nailed up over dozens of windows and doors along Hamm Avenue. The former homeowners are long gone due to foreclosure. As westside councilman Joe Santiago walked along with the group, he noticed how many of the abandoned houses had been stripped of copper pipes and other fixtures that could be sold on the salvage market. The same thing has happened in his own ward.
Joe Santiago: This is a shell right here, and unless the title gets turned over to the city, we cannot even touch this house. And look at this house right next door, where they renovated it... put on new siding. Their insurance premiums go up, and the insurance companies go after these residents, they can't afford their payments, so that this will be the next house that will be in foreclosure. It's a vicious, vicious cycle.
A cycle that Santiago, Kucinich and many other local officials trace back to the explosion of sub-prime loans with high interest rates that have caught many low income homeowners in a web of debt. The situation prompted Kucinich, a democrat, to hold a Congressional hearing Monday at the federal courthouse downtown. He was joined by Republican colleague Darrell Issa of California to hear from a variety of witnesses - ranging from the legal and banking communities, to area housing activists. Cuyahoga County Treasurer James Rokakis pointed his finger at a lack of state oversight of the lending industry.
James Rokakis: I've spent many an hour traveling to the Ohio legislature. The power of the mortgage broker industry, the power of the mortgage bankers, the appraisers, the people who are all integral parts to this situation have incredible power.
The featured witness at yesterday's hearing was Federal Reserve official Sandra Braunstein who faced some pointed questions about federal oversight from Kucinich, who chairs the House Subcommittee on Domestic Policy.
Dennis Kucinich: Are you looking at these deceptive lending practices in the sub-prime mortgage industry so that neighborhoods in Cleveland, Ohio are not going to be crushed by these unfair practices?
Sandra Braunstein: Yes, we definitely are looking at that, but the one thing that we all have to keep in mind is that we can write rules which can address some of these practices, but we are not the enforcement agency for most of the lenders. In fact, we have very little sub-prime under our direct enforcement. That is done by other regulators.
Kucinich also expressed his concern that consolidation in the banking industry has led to a weakening of the Community Reinvestment Act of 1977, which required lending institutions to give equal access to loans for all members of a community. He says that's driven many aspiring homeowners into the clutches of sub-prime lenders.
Fellow sub-committee member, and former Clevelander, Darrell Issa was more sympathetic toward the Federal Reserve.
Darrell Issa: Basically, you're damned if you do and damned if you don't. You have to make these loans, but if you make these loans and they are high-risk loans and they default, then you're at fault.
Still, Issa noted that sub-prime lending is a nationwide epidemic and, if anything, is even more rampant in California, where current high employment rates have forestalled the sort of problems now being felt in Ohio. As the hearing wound to a close, Kucinich said the session had re-opened a dialog between the banking industry and federal government which he will continue to pursue. David C. Barnett, 90.3.