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The Great American Mortgage Scam and the Latino Community, Part II

April 1st, 2009 · 17 Comments

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.)

Tags: Congressional Hispanic Caucus · Economics · Henry Cisneros · National Council of La Raza · Rosario Marin

17 responses so far ↓

  • 1 Michaelr // Apr 2, 2009 at 10:58 am

    Great posting…very informative, and brings to light the actions of our very own Latino public servants and their efforts to serve themselves at our expense.

  • 2 BettyM // Apr 2, 2009 at 2:16 pm

    This is very informative. The last sentence is an interesting question. Is it because some of us are not involved enough? Are we too trusting? Hopefully these individuals will never again be public servants.

  • 3 WhatThe.. // Apr 2, 2009 at 2:29 pm

    The crux of the problem appears to stem from too much Government regulation/ interference in the free market and/or vice versus. The web that interweaves most leaders in our government is through money, power and influence. This is not of course solely a Latino phenomenon, but a deterioration in the very fabric of our government. For example, Rahm Emanuel, newly appointed chief of staff, served on the board of directors of the federal mortgage firm Freddie Mac. At the time when scandal was brewing at the troubled agency, the board failed to spot “red flags,” according to government reports. The complaint that was later filed by the Securities and Exchange Commission against Freddie Mac, known formally as the Federal Home Loan Mortgage Corporation, stated misreported profits by billions of dollars in order to deceive investors between the years 2000 and 2002. Emanuel was not named in the SEC complaint, but the entire board was later accused by the Office of Federal Housing Enterprise Oversight (OFHEO) of having “failed in its duty to follow up on matters brought to its attention.” Since his successful run for the House of Representatives in 2002, Emanuel has been the beneficiary of campaign cash from Freddie Mac and Fannie Mae to the tune of $51,750.00. This is just as aggregious as Joe Baca’s lack of oversight of these housing companies he was involved in after receiving campaign contributions. When government becomes involved in the process, some just lose their sense of appointed perspective, feel that due to their appointed status they are entitled to take such liberties at tax payer expense, or they simply have a problem keeping their hands out of the cookie jar. It truly makes it difficult for the few that are trying to do the right thing. The forefathers of our US constitution instituted checks and balances in our government because they foresaw what would happen. The following is a disturbing quote from Thomas Jefferson in 1802 – “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”

  • 4 HMart // Apr 2, 2009 at 3:28 pm

    Insightful to say the least. Where else would we have learned about this? Not in the Wall Street Journal, NY Times or Hispanic Magazine, that’s for sure. We should seek the truth and applaud others that try and do the same.

  • 5 jammer // Apr 3, 2009 at 9:51 am

    Two lessons to be learned from all of this. First: our representatives and leaders are there first to line their pockets and grow their egos before they help anyone. Second: We the consumers have to be more attentive and smarter when we sign on for anything. The time worn cliche, “if it sounds to good to be true…., ” really applies. Has anyone else picked up on this or am I the only one who has figured out that Henry Cisneros has left a wake of bad stuff in every thing he has done and yet He keeps surfacing as a leader in the Latino community. With leaders like that we won’t have a community to call our own…, Henry will have sold it out.

  • 6 Michaelr // Apr 3, 2009 at 1:58 pm

    And I agree with you Jammer. Henry Cisneros has moved throughout his public career like a slug, leaving nothing but slime in his path. He is our own Judas Iscariot providing a portal into our Latino community for real estate developers, and mortgage companies to exploit.

    Rosario Marin has always been too easy to see coming. She has the traditional Latin-American characteristics of a corrupt, self-serving, careless, and revengeful politician. Hopefully, the Latino community shuns her attempts to return to public office. Fabian Nunez, Antonio Villaraigosa, Loretta Sanchez, Joe Baca, Xavier Berreca. And the list seems endless with our political representation.

    Why do we elect people like this? And why do we tolerate their public behavior? Is the Latino political community so ignorant we can’t see the forest through the trees?

  • 7 Anna // Apr 5, 2009 at 11:23 am

    Re: “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.”

    Cisneros pled guilty to one misdemeanor count of lying to the FBI about support payments to his former mistress. She had threatened to sue him for monetary support because she lost her job after their affair became public.

    He was fined ten-thousand dollars. He was later pardoned by President Clinton.

  • 8 webmaster // Apr 5, 2009 at 11:36 am

    Anna,

    You can add the information about Cisneros’s indictment and subsequent pleadings…but he will still indicted on 18 felony counts.

    The WaPo has the text of the 66 page indictment (18 felony counts, 21 counts total):

    http://www.washingtonpost.com/wp-srv/politics/special/cisneros/docs/indict.htm

    All of this still makes me wonder why Latino civil rights orgs let Henry Cisneros speak on their behalf regarding housing, mortgages, the status of our community, etc. His credibility and judgment have proven to be suspect. Would you want to buy a mortgage or a home from someone like this?

  • 9 Anna // Apr 5, 2009 at 11:59 am

    He hasn’t been in public office since 1997. He’s not setting policy. The only time I ever read about him is on this website.

    Here is a good article about the origins of the financial crisis:

    http://www.salon.com/opinion/greenwald/2009/04/04/summers/

  • 10 webmaster // Apr 5, 2009 at 4:36 pm

    Anna,

    You don’t necessarily have to be in public office to be setting or influencing public policy. Cisneros was on the Congressional Hispanic Caucus’s Hogar Advisory Board. This article here talks about NCLR using his expertise to help Latinos in their housing turmoil:

    http://www.nashuatelegraph.com/apps/pbcs.dll/article?AID=/20090330/COLUMNISTS46/303309924/-1/columnists

    Now he seems to be jumping on the “unequal balance of wealth” argument, but I d0n’t think that he is touting that notion when he’s with his banking friends, do you?

    Cisneros is all over. He’s on some high profile boards, he’s editing books about Latinos and the Nation’s Future, etc.:

    http://www.newsweek.com/id/180037

    Believe me…if there’s a real estate or banking policy or issue involving the Latino community, Cisneros is likely to be involved.

  • 11 Anna // Apr 6, 2009 at 6:43 pm

    Re: “Meanwhile, in their fight to make sure Latino families are not blamed and get help, NCLR counts on the expertise of Henry Cisneros, former secretary of Housing and Urban Development during the Clinton administration.

    Cisneros, a former San Antonio, Texas, mayor and now CEO of investment firm American CityVista, said the fault lies with people who are responsible for predatory lending. He also blames Wall Street and an unequal balance of wealth.

    “Latinos pay $50 to $500 more in for automobiles, 2 percent more in car loans, and $50 to $1,000 more in automobile insurance. Even in check cashing operations, they pay 3 to 5 percent more of the face value, including in Social Security checks,” said Cisneros.”

    I agree with what he says there. He’s a spokesman. He’s not setting policy. He was in the Cabinet and he has access to the media. That’w why they’re consulting him.

    He’s one of the few Latinos in government who can handle himself in the media. Other than Richardson and Federico Pena, I can’t think of any. The NCLR people sure can’t.

    Until somebody else steps up, Cisneros isn’t going anywhere.

  • 12 DelToro // Apr 6, 2009 at 9:42 pm

    Oh yeah and for all those who think that democrats are innocent in the mortgage debacle go ahead and read the documented evidence.
    http://www.judicialwatch.org/news/2009/apr/new-documents-uncovered-judicial-watch-show-congress-ignored-corruption-fannie-mae-and

  • 13 theKaiser // Apr 7, 2009 at 3:37 pm

    And what a sad state we are in, if we are forced to even entertain the thought that Henry Cisneros will act as our spokesman for driving stimulus dollars to the Latino community. Couldn’t we use someone who didn’t profit from all this subprime mortgage mess? Henry Cisneros was right at the forefront of all of this. Who do you think was consulting Hogar?

  • 14 Anna // Apr 7, 2009 at 4:52 pm

    When I read the Newsweek article Cisneros wrote (linked above) it seemed like a job application. He’s positioning himself, not as our representative, but as somebody who can communicate to white people who we are and what we need. He probably wants a job with some foundation, etc. These applications always list negative statistics about us and then make the assertion that their fate is linked to ours, and so they’d better fund education, etc.

    I agree that education and healthcare should be funded for everybody, but that’s not the argument one should use.

    I can see now what others have been saying. I think it was difficult for me to see it because I remember when there were very few Latinos in politics.

  • 15 Sen. Chris Dodd to call it quits tomorrow // Jan 5, 2010 at 10:32 pm

    […] Latino leaders. It is worth reminding everyone in light of Dodd’s pending retirement that Henry Cisneros, former cabinet secretary and Latino honcho, was on the Countrywide Board and also profited […]

  • 16 According to former HUD Secretary Henry Cisneros, AT&T-T-Mobile Merger May Help Improve Latino Drop Out Rate // Jul 11, 2011 at 1:19 pm

    […] failed or cost the public tremendously. Once upon a time, he sat on the board of the now-defunct Countrywide mortgage company. For those of you needing a refresher, click here to read about how his adventures in the mortgage […]

  • 17 Barbara Rierson // Nov 10, 2011 at 10:27 am

    See San Antonio Express News, Business page, Oct. 31, 2011. …”Henry Cisneros …named to the new housing commission of the nonprofit Bipartisan Policy Center”. The Latino community needs to be aware that there is NO mention of his membership or benefits from Countywide Mtg Co.

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