DEVAL PATRICK
Leadership needed
Three candidates for governor have vowed to support legislation that would extend the requirements of the Community Reinvestment Act to mortgage companies and expand a housing trust fund that has helped build 2,600 affordable homes.
Democratic candidate Deval Patrick, independent Christy Mihos and Green Rainbow Party candidate Grace Ross made those promises at a forum organized by the Massachusetts Affordable Housing Alliance that took place last week at the Reggie Lewis Track & Athletic Center in Roxbury. The candidates were briefed on the questions prior to the forum, which lasted less than an hour.
All three candidates pledged to provide at least $5 million in state funding for the Massachusetts Housing Partnership’s SoftSecond mortgage loan program, which has assisted 8,800 low-income homebuyers since it was started in 1991. The program combines a conventional first mortgage with a second bank mortgage that is supported by a one-time state subsidy and offers borrowers loans with below-market interest rates and 3 percent down payments.
“This is a no-brainer,” said Mihos, a Brockton native and businessman who added that $5 million was not enough for the loan program. “[The program is] not funded properly at $5 million.”
The crowd of about 800 responded with cheers when all three candidates said they would boost the affordable housing trust fund, which was established in 2000 and has received about $20 million in state money annually since then.
‘Dishonest’ Companies
Housing advocates maintain that the fund is a flexible resource that has helped with the construction of large urban housing projects as well as smaller suburban developments.
Patrick and Mihos said they would provide $40 million or more if elected, while Ross said she would seek $50 million or more.
“It’s been a key tool for building starter homes in this state,” said MAHA Executive Director Thomas Callahan, who noted that the fund has been “woefully under-funded” over the years.
Callahan said Patrick, Ross and Mihos were the first three candidates to also publicly express support for a MAHA-sponsored bill that would extend provisions of the Community Reinvestment Act, or CRA, to mortgage companies. Currently, banks are covered by the act, which requires lenders accepting deposits from certain communities to reinvest back into those communities and to offer credit throughout their entire market area.
Supporters believe the legislation will help cut back on the number of subprime mortgage loans to low-income borrowers who might otherwise be able to get more favorable financing. They argue that since mortgage companies are providing a larger share of the home loans, they should be required to abide by some of the CRA rules.
According to research, mortgage companies are providing nearly 80 percent of the home loans to purchasers in Massachusetts.
Frances Laroche, a homeowner in Marlborough, warned audience members to be careful when securing a home-purchase loan. She said when she bought her first home, a mortgage broker promised her a 30-year fixed-rate loan with a 6.9 percent interest rate, and Laroche even received a commitment letter with the loan terms.
But just two days before the closing, the broker called to say the mortgage company could only provide two adjustable-rate loans with 9.4 percent and 10.7 percent interest rates, Laroche said.
Having already packed all her belongings and given notice to her landlord that she was vacating the apartment she was renting, Laroche said, she was stuck.
“You can’t trust mortgage companies’ promises, even when they are given in writing,” she said. “Too many are dishonest.”
Patrick, a former civil rights attorney, said he has been working to halt predatory lending for the past 20 years.
“This has got to end,” noted Patrick, who has announced plans to step down from the board of ACC Capital Holding Corp., parent company of embattled mortgage lender Ameriquest.
Ameriquest has been at the center of controversy, having settled a $325 million lawsuit in 49 states, including Massachusetts, for purportedly failing to disclose to consumers high fees associated with refinancing loans and other unfair lending practices.
Patrick’s involvement with Ameriquest came under attack by Attorney General Thomas F. Reilly, who is also vying for the Democratic candidacy. Patrick announced last month that he would be resigning from the board by July 1.
At last week’s forum, Patrick said he would “definitely” support legislation that would apply parts of the CRA to mortgage companies.
MAHA has been trying to pass the legislation for the last five years. The proposed law has received backing from several senators, including Andrea Nuciforo, a Pittsfield Democrat who chairs the Joint Committee on Banks and Banking, and Jarrett Barrios of Cambridge.
Candidates also were asked whether they would follow the lead of states like Rhode Island and New Jersey, which have sued lead-paint manufacturers. In February, the state of Rhode Island won a lawsuit against three paint companies, forcing them to clean up thousands of lead-contaminated homes throughout the state.
All three candidates said they would pursue companies, with Ross saying that the state needs to “do more than the Rhode Island case.”
Patrick said a lawsuit “wasn’t enough” to address the issue.
“We need leadership on this,” he said, noting that Massachusetts would need to work with other states and paint companies to deal with the issue.
The other three candidates for governor – Reilly, Democratic candidate Christopher F. Gabrieli, and the Republican Lt. Gov. Kerry Healey – did not attend.
Gabrieli’s press secretary said there was a scheduling conflict and the candidate was in the western part of the state. Campaign staffers for Healey and Reilly did not return calls from Banker & Tradesman requesting information about their absence.
