Testimony at the RBA CIAB Bronx Hearing – Harold DeRienzo

From the testimony of Harold DeRienzo

RBA CIAB Bronx Hearing

Bronx Borough Hall

Thursday, February 12, 2015

My name is Harry DeRienzo.  I am the President and CEO of Banana Kelly Community Improvement Association, Inc. in the South Bronx.  I am also Vice President of the Association of Housing and Neighborhood Development and General Counsel to a group, the Parodneck Foundation, that provides mortgage counseling and mortgage foreclosure assistance to homeowners.

Banana Kelly was formed out of the ashes left by redlining, disinvestment and arson culminating in the 1970s.  Our neighborhoods suffered but the residents persevered and ultimately we preserved and rebuilt our neighborhoods over the next two decades.

In the late 1990s, we saw many of our neighbors who owned homes, many free from mortgage debt, fall prey to predatory lending.  An entire industry rise up, comprised of lawyers, appraisers, contractors, real estate brokers, banks and others who seemed to work in unison to steal equity from seniors and other vulnerable populations.  But the warnings of many of the groups in our sector went unheeded, and soon the practices spread to the multi-family sector as well.

In the earlier part of this decade, we began working with tenants whose building owners over-leveraged their multi-family properties with unaffordable mortgage debt, debt that was irresponsibly provided by a financial services sector wedded to, and abetted by, a system of what can only be described as lemon socialism, where gains are privatized and losses socialized.  To use Kelly Street as an example, a new owner with 79 decent units and $800,000 in mortgage debt, refinanced for $5 million and hardly a cent was expended to upgrade the properties, properties that quickly fell in to disrepair and mortgage default while the owner was transformed into an overnight millionaire.  In the meantime, the bank that advanced the mortgage on speculation that the buildings would be improved and the rents would be increased, was bought out of its bad receivable, ultimately financed in part by city loan funds and tax credit proceeds, not to mention about $1 million spent by the city in emergency repair funds while our organization managed the buildings as court appointed administrator and we worked on a redevelopment package with the city.  Over the past five or so years, our organization was successful in removing control from owners of eight such buildings with over 140 units.  Many other community development groups were able to rescue buildings across the city.  But for every unit saved, there were likely many more thousands lost to speculation, not only fueling further speculation but also adding to the homeless rolls.

We need responsible banking.  We need banks that will lend based upon building demographics and actual operating statements.

We need banks that will work with community groups to ensure that investment is responsible and not simply fostering profit at the expense of private deprivation and increased public cost and responsibility.  We need banks that support genuine community organizations and community efforts through grants, program related investments, recoverable grants, low interest loans, and more.  We need banks that recognize that for the privilege of making what, in many cases, amounts to unconscionable levels of profit and executive compensation, there is a commensurate responsibility to provide needed services, especially to those who cannot afford even the most basic financial services.  We need banks that expand their presence in our neighborhoods and work with us to find ways to preclude the dependence of our residents on the never-ending cycle of sanctioned theft, be it through pay-day loans, rent-a-centers, extravagant financial transaction fees, or other exactions.  We need banks that will work with the community sector to frame and make available banking services that will help us preserve and make this city a city of opportunity, inclusivity, equity, fairness and economic justice.  Even though implementation is overdue, our organization welcomes, supports, and commits to assist in the full implementation of the Responsible Banking Act, including our commitment to work with responsible banking partners to ensure success and compliance.

Thank you.

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