This is the second part of a two part blog post detailing how the Latino leadership was involved in the foreclosure crisis. If you need to be refreshed, part one is here.
We already know that Washington Mutual has been sold to Chase, and of course, that Fannie and Freddie both were seized by the federal government back in September of 2008. Fannie Mae and Freddie Mac are important entities in the Mortgage Scam because they retained a Republican Consulting firm, DCI, to put the kibosh on a regulatory bill that was sponsored by Sen. Chuck Hagel (R-NE) back in 2005.
Senators who supported this regulatory bill wrote a letter to then Senate Majority Leader Bill Frist, stating, “If effective regulatory reform legislation … is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
DCI’s effort proved to be effective, and one noted Latina, who was working to stop the regulatory bill, was former Treasurer Rosario Marin, who just recently resigned her position as the head of the California State and Consumer Services Agency. Marin visited some states in her capacity as a consultant for DCI to speak out against Hagel’s regulatory bill, which could have trimmed both Fannie and Freddie. Remember that both Fannie and Freddie were sponsors of the Congressional Hispanic Caucus Institute’s Hogar Program.
Former HUD Secretary and CEO of American City Vista, Henry Cisneros, also had a key role in the mortgage fiasco and continues to be a force in the real estate industry. Last February, MySanAntonio.com reported that Cisneros’s tenure on the Countrywide Board coincided with the company’s rise and subsequent fall. From 2001 to October 2007, just days before Countrywide reported a $1.2 billion quarterly loss, Cisneros still served on the board, where he collected a base salary of $70K, received extra compensation for meetings, and received health insurance. He was granted and sold more than $5 million in Countrywide stock. Countrywide was also a Hogar program sponsor, and Cisneros was a Hogar Advisory Committee Member. Back in February of last year, MySanAntonio.com asked Cisneros for an interview, and he declined, but it gets better…Mr. Cisneros was asked about his role with Countrywide on a call sponsored by the National Council of La Raza (NCLR) a month ago on Latinos and the Economy.
Mr. Cisneros revealed the following when asked if he would do anything differently while serving on the Countrywide Board pertaining to the company’s alleged predatory lending practices:
“…I joined the Board of Countrywide at a time when it was the largest producer of mortgages in the United States and growing. It was – it developed more mortgages for Latinos and African-Americans than any other company in the history of the United States, was given awards in every form including as a best employer, as a best company, etc. And I, frankly, as a Board member, did not see the effects of anything that you might even call abusive. Countrywide was not involved in predatory – you used the word “predatory” lending – that is a particular term of art that describes particularly egregious mortgages. They did have a subprime ARM, but at the time, subprime was viewed as a way to price risk. The higher the risk a premium was placed on pricing, and Fannie Mae and Freddie Mac and the government and everyone else acknowledged a role for subprime in making credit available to people.
Now, did Countrywide go too far? In retrospect, probably so. Did they ever engage in the practices of other companies that no longer exist, that came into existence to do a predatory? No, they never went that far, and we never established that they were involved in that kind of abusive lending. So, to close and answer your question specifically, I can’t say I would have done anything differently as Secretary of HUD except perhaps put in place safeguards that would prevent companies from hijacking the Home Ownership push.”
What Cisneros failed to state is that Counrywide has been settling lawsuits with states across the country resulting from complaints that the company engaged in deceptive trade practices that ultimately put borrowers at risk. In February of this year, the Colorado Attorney General’s office reached a $6 million settlement with Countrywide for violating the Colorado Consumer Protection Act. Regarding this settlement, the Colorado Attorney General said, “We felt that there was enough misleading information in the presentation of these loans that Countrywide had violated the Colorado Consumer Protection Act. In this instance, borrowers were victimized by loans that were predatory.”
In October of 2008, Bank of America, the company who bought Countrywide last summer, reached an $8.6 billion settlement with attorney generals representing 11 states. This was considered the largest predatory lending settlement in history. In commenting on this settlement, California Attorney General Jerry Brown said, “Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford.” How could Henry Cisneros tell the Latino community that Countrywide was not involved in predatory lending after these settlements had been splashed all over the news? Perhaps he was drunk on the profits from his stock sales, or quite possibly, he ignored what was happening to families across the country.
For me, what is troubling about Henry Cisneros’s involvement in Countrywide, is that he is now speaking to Latino issue organizations about Latinos and the economy, after having enriched himself in a company that was one of the biggest offenders in the mortgage fiasco. His connections to the banking industry also include being a member of the Federal Reserve Bank of Dallas. Edmundo of XicanoPwr put together a diagram detailing some of these relationships that Henry Cisneros has/had to the banking and real estate industry.
Why is this important and how does it relate to the Congressional Hispanic Caucus Institute’s Hogar Program? To conclude, some of the Hogar Advisory Committee Members and program sponsors were the very ones who helped promote risky mortgages, questionable lending practices, and less regulatory reform (Fannie and Freddie vis-a-vis Rosario Marin’s lobbying).
My thought is that our community needs to take a closer look at the corporate sponsorships and involvement of initiatives promoted by our leaders. A balance needs to be achieved between promoting business and selling products that we can afford without becoming massively indebted to the banks. And furthermore, we need to more closely scrutinize our leadership’s activities as it pertains to lobbying and influence peddling. Why do we allow people like Henry Cisneros and Rosario Marin to reinsert themselves in discussions about our well being after they have been compromised and their credibility lessened?
(Note: Henry Cisneros was indicted on 18 counts of conspiracy, obstruction of justice, and lying to the FBI in relation to an affair with a mistress. He was eventually pardoned by President Clinton. Rosario Marin’s protégé was convicted of grand theft. While on the Huntington Park City council, she had a travel budget of $10,000 to $20,000 per year, one of the highest travel budgets for a small city, which was funded by the public.)