Prepared Remarks of Deputy Director Zixta Martinez at The Greenlining Institute’s 2023 Just Future Summit

Thank you to The Greenlining Institute for inviting the Consumer Financial Protection Bureau to the 2023 Just Future Summit. For 30 years, The Greenlining Institute has worked towards an inclusive future where communities of color build wealth, have access to economic security and mobility, and have the means to meet and even mitigate future challenges, including the effects of climate change.

My remarks are about the CFPB, a government agency in Washington, D.C., but I want to tell you just a little about myself.

I was one of five children raised by a single mother in Southside San Antonio, Texas. As with 75% of families headed by a single mother, we did not own our home. We lived in a three-room shotgun, where the kitchen table was the only table in our home. With five kids, it was a struggle to sit at that table – it is where food was prepared, where we ate, where my mother corralled all the papers and bills that come with raising a family, and where I did my homework – lots of homework.

And that’s one way the CFPB approaches our engagement with organizations like Greenlining; there is room at the table. To be perfectly accurate, it is because of groups like Greenlining that the CFPB exists.

The day the CFPB opened its doors we knew we had to be a consumer-driven agency. The 2008 financial crisis taught us that consumer protection is foundational for the stability of the financial system. It was the failure of, or more specifically, the absence of, consumer protection safeguards in the mortgage market that led to the collapse of the U.S. financial system and our global economy.

The CFPB stabilized the mortgage market, and the CFPB’s rules now undergird the entire fabric of our country’s mortgage system, including marketing, origination, securitization, and servicing.

But Congress did not establish the CFPB to just look after the mortgage market. Congress also provided CFPB the authority over multiple consumer financial markets, including bank accounts, credit cards, loan originators, mortgage servicers, and private student loan lenders and servicers.

Since we opened the CFPB’s doors in July of 2011, we have:

• Put more than 17 and a half billion dollars back in the pockets of Americans, in the form of monetary compensation, principal reductions, canceled debts, and other consumer relief resulting from the CFPB’s enforcement and supervision work.
• Received more than four million consumer complaints that drive our work by helping to identify places where we might need to focus our supervisory and enforcement efforts.
• Imposed an additional $4 billion in civil money penalties on companies and individuals that have violated the law.

One area where more must be done is in the mortgage market. It is almost 90 years since state-sponsored housing discrimination began, and 55 years since the Fair Housing Act made the practice illegal. Yet, redlining continues around the country, and fighting it is a top priority at the CFPB.

Redlining is no longer just the drawing of lines between “safe lending” and “unsafe lending” zones. It now can take more pernicious forms that are harder to catch. It can appear as black-box algorithms trapping families within certain communities or failing to offer affordable mortgages for certain demographics. This digital redlining is caused by bias programmed into lending or home valuation algorithms and other technology marketed as artificial intelligence. It may be marketed as AI or neutral algorithms – but often the new technology is just scraping data that reinforces long existing biases.

It can also take the form of companies targeting specific communities with predatory lending products and services. The CFPB is looking closely at potential discriminatory targeting – otherwise called reverse redlining. Similar to actions by subprime lenders in the lead-up to the housing collapse, reverse redlining involves targeting specific groups for harmful lending products and services.

Appraisal bias is another concern for the CFPB.

You know better than anyone that owning a home is one of the most effective ways to build intergenerational wealth. And getting an accurate estimate of a home’s value is a critical step in mortgage origination and refinancing.

I heard first-hand the testimony from one family in Marin City, California. After having their home undervalued by nearly half a million dollars for reasons they believed were related to their race, the family made the devastating choice to whitewash their home for a new appraisal. Removing everything of who they were, so as to remove the potential for any bias. They even asked a white friend to stand in for them.

With a whitewashed home and a new appraiser, the appraised value of their house went from $995,000 to nearly $1.5 million. This family’s experience highlights the role race continues to play in the mortgage market.

The CFPB has taken several steps to address appraisal bias, which particularly impacts people of color.

In June of this year, we, along with five other agencies, proposed a rule on automated valuation models that are used to determine real estate property value.

The proposed rule would create basic safeguards to mitigate the risks associated with automated valuation models. It would require companies to have policies and processes in place to avoid conflicts of interest, conduct random sample testing and reviews, and comply with nondiscrimination laws.

The CFPB will continue our work to fight appraisal bias and on November 1, the Appraisal Subcommittee, of which the CFPB is a member, will hold a third hearing on the issue.

In addition to creating more accountability and transparency in the mortgage market, we need to shine a light on small business lending, which brings me to the CFPB’s small business lending rule, which many of you fought to have included in the Dodd-Frank Act. While people often point to homeownership as a critical goal for wealth building, small business ownership is also important to building individual and family wealth, developing local economies, and expanding job opportunities.

The CFPB finalized the Small Business Lending rule earlier this year which will require lenders across the country to report key data, including demographic data, on small business loan applications. In many ways, this rule is like the landmark Home Mortgage Disclosure Act, which requires lenders to collect and report mortgage data to the CFPB.

The data that will be collected under the rule will, over time, also be made public to give local communities, investors, governments, and others deeper insights into small business lending trends. It will also help detect and deter lending discrimination.

The Small Business Lending Rule can serve as a complement to the Community Reinvestment Act. When the proposed CRA rule is finalized by banking regulators, the Small Business Lending Rule will give the CRA more teeth by providing policymakers much needed data to ensure that lenders are meeting their community lending requirements.

Lastly, I would like to address the Supreme Court case involving the CFPB. As you may know, the Supreme Court heard oral arguments on October 3rd in CFPB v. CFSA. The case centers on whether the CFPB’s statutory funding mechanism violates the Appropriations Clause of the Constitution.

The Solicitor General of the United States did an excellent job representing the CFPB. She explained that Congress’s choice to fund the CFPB under the Consumer Financial Protection Act is supported by the text of the Constitution, historical practices dating to the nation’s founding, and longstanding Supreme Court precedent.

We expect a decision sometime in the first half of next year. In the meantime, we will continue to enforce the law and protect the millions of Americans who depend on the critical work we do each and every day.

Thank you for all the work you do in your communities. If the past 30 years has taught us anything, it is that the stakes for consumers and families, our financial system, economy, and society are too high for us to sit on the side lines. In fact, you need to be at the table.

Thank you for inviting the CFPB to be here with you this morning.