WASHINGTON -- A top housing activist went for the jugular last week as a House panel took up a plan to expand government mortgage insurance.
Gale Cincotta of Chicago, who opposes the plan, ripped into Stephen B. Ashley, president of the Mortgage Bankers Association and chairman of Sibley Mortgage Corp., Rochester, N.Y.
"Sibley Mortgage leads Rochester in the amount of defaults and foreclosures," Ms. Cincotta asserted at House Banking subcommittee hearing.
"I can see why Mr. Ashley wants to be guaranteed 100% by the federal government," she added, as her supporters erupted in applause.
The incident, which left Mr. Ashley quietly fuming, underscores the tensions surrounding a plan to expand the Federal Housing Administration's mortgage insurance program. The agency has proposed raising the program's loan limits to about $173,000 from $152,000.
Mortgage bankers -- the prime originators of FHA loans -- support the plan vigorously. But Ms. Cincotta, head of the National Training and Information Center and a frequent witness on Capital Hill, dismissed the plan as a "jobs program" for mortgage bankers, homebuilders, and realty brokers.
Ms. Cincotta and other activists have argued that brokers and mortgage bankers routinely steel lower-income minority borrowers to FHA-insured loans without making sure they can pay off the mortgages. When the borrowers default, lenders fore-close, collect the loan amount from the FHA, and leave behind boarded-up neighborhoods, the argument goes.
Getting Personal
The attack on Mr. Ashley brought the debate to an unusually personal level.
Warren Lasko, the Mortgage Bankers Association's top staffer, branded Ms. Cincotta's comments "a cheap shot." Mr. Ashley declined to comment, except to point out that Sibley is the largest government lender in Rochester.
Ms. Cincotta said her comments were based on statistics from the FHA. She said Sibley made 20.5% of Rochester's FHA loans between 1987 and 1990. But the company accounted for 32.0% of Rochester's FHA defaults and 41.3% of its foreclosures.
A day after the hearing, the Mortgage Bankers Association countered with another set of statistics. As of March 31, the trade group said, 3.18% of the company's FHA loans were overdue by 30 days or more, versus a national average of 5.11%.
