WASHINGTON – In the small basement of a Rockville church, where faded pink curtains and plastic flowers offered the only color to this room of white walls, 13 people came together, prayed — and then talked about predatory lending in Montgomery County.
The region’s NAACP and human rights office met at Mt. Calvary Baptist Church Tuesday night to discuss a housing discrimination bill, which is aimed at stopping predatory lending practices, that will come before the council next week.
The bill, sponsored by Council President Tom Perez, D-Silver Spring, and Councilman Michael Subin, D-At Large, would increase compensatory damages for humiliation and embarrassment, require the human rights office to provide an annual report on discriminatory lending practices and establish procedures for the consumer affairs office to identify and process a complaint based on discriminatory, predatory or abusive lending practices.
The law would not, however, include a provision that used to be in the bill, which would have made discrimination easier to prove by showing impact to the renter or homeowner, instead of proving discriminatory intent by a lender. That provision was voted down.
“It’s terribly important we have that piece in the bill,” said Janet Ricks, from Potomac. “(Montgomery County is) one of the most blatant of the offenders.”
NAACP President Henry Hailstock, who led the meeting Tuesday night, agreed with Ricks.
“If you don’t have that clause, (the bill) is for naught,” he said. It’s just a piece of paper that makes people feel good, but has no substance.”
While the impact test is commonly used in cases of employment discrimination — in which employees can claim that a company’s hiring practice reflects bias against protected classes — the section was struck from the bill after the Maryland Bankers Association raised concerns that banks would only make loans to people who have perfect credit.
“It would have a chilling effect on mortgage lending in Montgomery County,” said MBA President Kathleen Murphy. “If that language stays in the bill, there’s a very strong possibility that the loan would not be sold into the secondary mortgage market. . . . If a lender can’t sell, it means they can’t make any more loans.”
But Dan Parr, Perez’s chief of staff, said bankers are just trying to avoid a regulation that would make proving predatory lending easier.
“Why would we want to make it more difficult?” Parr said. “We could actually lose the one tool that’s most effective to win a case. If (the clause) is not in there, we would have to find a (lender) witness or a tape or a memo that says, ‘We’re doing this because we want to discriminate against this person.’ That’s just very unlikely to happen.”
Parr pointed to a February study by Calvin Bradford & Associates, a Virginia consulting firm, which found that more than half of home loans taken out by black borrowers in Montgomery County are Federal Housing Administration and subprime loans.
Such loans typically carry higher interest rates because lenders consider them to be at a higher risk of default than prime mortgage loans.
Only 14 percent of home loans to whites are subprime, the study showed, and almost 50 percent of home purchase loans to Hispanics in Montgomery County are FHA and subprime.
“It’s a huge issue in this community,” said Michael Brown from the county’s human rights office.
She said the study, which was based on Home Mortgage Disclosure Act data from 1998 to 2000, did not consider credit history, kinds of collateral and payment history.
“We do not agree with the study,” Murphy said. “Conclusions were drawn based on a limited subset of information. . . . We have not seen the evidence that this is a very specific issue in Montgomery County.”
Tyrone Singman, a loan officer from Annapolis, agreed.
“You hear this stuff every day,” he said. “The old lady loses the house. The newspaper gets called. . . . Are there people out there who take advantage of (others)? Yes. . . . (But) the root of the problem is not the lenders — it’s people not managing their finances.”