[Congressional Record Volume 143, Number 22 (Wednesday, February 26, 1997)]
[Senate]
[Pages S1683-S1684]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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                   HOMEOWNERS PROTECTION ACT OF 1997

 Mr. DOMENICI. Mr. President, today I am pleased to announce my 
support for S. 318, a bill introduced by the distinguished chairman of 
the Senate Banking Committee, Senator D'Amato. This bill, the 
Homeowners Protection Act of 1997 will protect consumers across the 
country from paying millions of dollars in unnecessary private mortgage 
insurance PMI premiums. This bill corrects a serious inequity faced by 
many first-time, middle class homeowners, and I commend Senator D'Amato 
for his thoughtful approach to this problem.
  No one can argue that PMI has served a useful and admirable purpose 
by allowing middle class families a greater opportunity for home 
ownership. Traditionally, mortgage lenders expect home buyers to make a 
down payment of at least 20 percent. For credit-worthy borrowers who 
lack the cash to make such a large down payment, PMI enables them to 
purchase a home while protecting lenders from default until the 
borrower has built significant equity in the home. To that end, 
requiring the purchase of PMI is good policy.
  The problem arises when homeowners make several years of mortgage 
payments and reach the point where they have built up enough equity, 
usually 20 percent of the original value of the loan, to virtually 
eliminate the risk of default. At that point, the need for continued 
PMI coverage disappears and borrowers should have the right to cancel 
their policies. Yet, according to many reports in the newspapers and on 
TV, many uninformed borrowers continue to pay unnecessary premiums 
which can cost additional hundreds or even thousands of dollars each 
year. Others who have sought to cancel their coverage have faced 
unbelievable redtape and confusion.
  Senator D'Amato's bill will eliminate these problems and make home 
ownership more affordable and more attainable for all Americans. Under 
this bill, homeowners will have the right to cancel PMI when they have 
accumulated 20 percent equity in their homes, the value generally 
determined to be sufficient to protect lenders from default. The bill 
takes the reasonable step of allowing the Federal Reserve the ability 
to grant exceptions to this rule--either to protect consumer access to 
credit or to protect lenders from economic factors which may create 
unique default

[[Page S1684]]

risks. The bill also will require that notice be provided to homeowners 
at closing and at least once a year thereafter of their right to cancel 
their PMI coverage once they have reached the equity threshold.
  I commend my good friend, the distinguished Senator from New York and 
I am pleased to be a cosponsor of this thoughtful bill. I hope that 
Congress will work hard this year to pass it, so that we correct this 
flaw in the system and provide middle class borrowers with a greater 
opportunity to own a home.

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