HUD Archives: Cuomo Designates Certain Los Angeles Neighborhoods "Hot Zones" for Extra Protection from Predatory Lending

HUD No. 00-256
Further Information:	For Release
In the Washington, DC area: 202/708-0685	Monday
Or contact your local HUD office	September 25, 2000

CUOMO DESIGNATES CERTAIN LOS ANGELES NEIGHBORHOODS AS "HOT ZONES" FOR EXTRA PROTECTION FROM PREDATORY LENDING

LOS ANGELES – Housing and Urban Development Secretary Andrew Cuomo today designated certain Los Angeles neighborhoods as Hot Zones for protection from possible predatory lending practices and also allocated resources to protect consumers from unscrupulous lenders.

Delivering the keynote speech to a conference of community and faith-based organizations, Cuomo announced that the Federal Housing Administration (FHA), an agency within HUD, will employ new techniques to detect possible predatory practices, provide stepped-up lender monitoring and enforcement, and provide relief to victims of predatory lending in the Los Angeles Hot Zone.

"We know that for most of FHA’s one million customers every year, buying a home is the fulfillment of the American dream," said Cuomo. "But for some, who fall prey to unscrupulous lending practices, it can be a nightmare."

Hot Zones are selected low-income neighborhoods where FHA has seen higher than normal foreclosure rates. Cuomo said that 21 zip codes in Los Angeles County were being targeted as Hot Zones. While the FHA insures nearly seven million homes nationwide, it has only a one-percent foreclosure rate.

Cuomo also announced $200,000 in grants to two groups in Los Angeles to provide housing counseling and empower consumers to fend off unscrupulous lenders. Cuomo made the announcements on the second day of a three-day tour of 20 cities in Southern California.

Consumer Credit Counseling Service of Los Angeles and Los Angeles Neighborhood Housing Services were each awarded $100,000 grants to increase public awareness and provide counseling on predatory lending practices and mitigating losses when a buyer has been victimized. The grants will also be used to help build partnerships among mortgage lenders, brokers and realtors to conduct public education and outreach aimed at preventing predatory lending in low-income communities.

The FHA’s Fraud Prevention Program is currently being tested in five Hot Zones around the country – Los Angeles, Chicago, New York, Baltimore and Atlanta. The program is targeted in select neighborhoods that exhibit a high default and claim rate. The four principle objectives of the program are:

Impose a 90 day moratorium on foreclosures in those neighborhoods where predatory lending is discovered and assist more FHA borrowers in default to avoid foreclosure;
Detect evidence of inflated property appraisals before endorsing home loans for FHA mortgage insurance;
Step-up enforcement actions against lenders who do not follow FHA underwriting guidelines, and;
Provide relief to victims of predatory lending.

For the Los Angeles area, 21 zip codes have been selected to make up the L.A. area Hot Zone. These zip codes are 90001, 90002, 90003, 90004, 90005, 90006, 90010, 90011, 90015, 90021, 90037, 90044, 90059, 90061, 90220, 90221, 90222, 90303, 90723, 90802, and 90813. The zip codes generally track the 110 freeway from the 101 to the 91; two zip codes in the Long Beach area, 90813 and 90802 have also been included.

"The vast majority of FHA’s 7,000 lender partners are honest business people who help families buy the right home for the right price," Cuomo said, "But we will not rest until we know that not one FHA borrower falls prey to these practices."

Cuomo said that a national HUD/U.S. Treasury Department task force on predatory lending recently found that the vast majority of predatory lending practices occur in the sub-prime market, which does not include FHA-insured loans.

The theme for Monday’s conference is Creating Partnerships for Renewed Hope. Cuomo called on community and faith-based organizations to broaden their cooperation with government on behalf of the country’s poor. Cuomo noted that HUD has long worked with those groups on issues such as homelessness, AIDS and housing for the elderly.

"Surveys indicate that while 89 percent of churches participate in community development, only four percent are working hand-in-hand with government," Cuomo said. "Imagine what we could achieve together if you combined your abilities and energy with government’s resources."

Also today, Cuomo announced awards totaling about $5.5 million to 15 colleges and universities across the country serving Hispanics, including four in California.

The California schools receiving awards of $400,000 each under the Hispanic-Serving Institutions Assisting Communities Program (HSIAC) are: California State University at Northridge; Merced College in Merced; Modesto Junior College in Modesto, and; San Diego State University – Imperial Valley Campus

Cuomo later addressed the Long Beach Chamber of Commerce, and also announced HUD grants for the communities of West Hollywood, The City of Commerce, Reseda, Sylmar, San Moreno Valley and Bakersfield.

West Hollywood – through the County of Los Angeles – received a $10 million Brownfields Economic Development Initiative (BEDI) grant and Section 108 economic development loan guarantee to redevelop 7.75 acres for a four-story, mixed-use complex. The project is projected to create 750 new jobs and leverage $66 million in private and public investments.

The City of Commerce – through the County of Los Angeles – received an $11 million Economic Development Initiative (EDI) grant and Section 108 economic development loan guarantee to construct the Commerce Urban Entertainment Center along the Interstate 5/Santa Ana Freeway corridor. The center, which will include a 16-screen theater, will create approximately 930 new jobs.

Under HUD’s Section 202 Supportive Housing program for older Americans, Cuomo announced the following Southern California grants:

The Section 202 program provides a capital advance for construction or rehabilitation as well as rental assistance. Under this highly competitive program, non-profit organizations plan affordable seniors housing developments including supportive services.

Cuomo’s three day, 20 city tour concludes Tuesday in Los Angeles at Closing the Gap: Investing in America’s Communities, an economic development conference that will focus on effective strategies, tools, and resources for creating partnerships that address the needs of America’s distressed communities.

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