[Congressional Record Volume 146, Number 111 (Tuesday, September 19, 2000)]
[House]
[Pages H7745-H7747]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  HOMEOWNERS FINANCING PROTECTION ACT

  Mr. LEACH. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 3834) to amend the rural housing loan guarantee program under 
section 502(h) of the Housing Act of 1949 to provide loan guarantees 
for loans made to refinance existing mortgage loans guaranteed under 
such section, as amended.
  The Clerk read as follows:

                               H.R. 3834

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Homeowners Financing 
     Protection Act''.

     SEC. 2. GUARANTEES FOR REFINANCING LOANS.

       Section 502(h) of the Housing Act of 1949 (42 U.S.C. 
     1472(h)) is amended by adding at the end the following new 
     paragraph:
       ``(13) Guarantees for refinancing loans.--Upon the request 
     of the borrower, the Secretary shall, to the extent provided 
     in appropriation Acts, guarantee a loan that is made to 
     refinance an existing loan that is made under this section or 
     guaranteed under this subsection, and that the Secretary 
     determines complies with the following requirements:
       ``(A) Interest rate.--The refinancing loan shall have a 
     rate of interest that is fixed over the term of the loan and 
     does not exceed the interest rate of the loan being 
     refinanced.
       ``(B) Security.--The refinancing loan shall be secured by 
     the same single-family residence as was the loan being 
     refinanced, which shall be owned by the borrower and occupied 
     by the borrower as the principal residence of the borrower.
       ``(C) Amount.--The principal obligation under the 
     refinancing loan shall not exceed an amount equal to the sum 
     of the balance of the loan being refinanced and such closing 
     costs as may be authorized by the Secretary, which shall 
     include a discount not exceeding 2 basis points and an 
     origination fee not exceeding such amount as the Secretary 
     shall prescribe.
     The provisions of the last sentence of paragraph (1) and 
     paragraphs (2), (5), (6)(A), (7), and (9) shall apply to 
     loans guaranteed under this subsection, and no other 
     provisions of paragraphs (1) through (12) shall apply to such 
     loans.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Iowa (Mr. Leach) and the gentleman from New York (Mr. LaFalce) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Iowa (Mr. Leach).
  Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, H.R. 3834, the Homeowners Financing Protection Act, 
would allow borrowers under the Rural Housing Service (RHS) single-
family program to refinance their mortgages to take advantage of lower 
interest rates with new RHS-guaranteed loans.
  Under the current law, RHS borrowers, under the direct or guarantee 
program, are precluded from refinancing their existing loan with a new 
RHS-guarantee loan. This anomaly affects low- and very-low-income 
families who originally qualified for RHS direct mortgage loans.
  While the direct loans were meant to provide temporary credit in some 
circumstances, borrowers were unable to successfully apply for mortgage 
credit without a government guarantee even though their financial 
condition had modestly improved.
  H.R. 3834 would remove the statutory prohibition from refinancing 
direct single-family housing loans using the guaranteed program. 
According to the General Accounting Office, as of May 31, 2000, 
approximately 9,100 RHS loans exist with an interest rate of 13 percent 
or higher; 65,000 loans exist with an interest rate of at least 9\1/2\ 
percent. It is clear that these borrowers would benefit from 
refinancing using the guaranteed program by lower interest rates and, 
therefore, lower monthly payments.
  At the same time, the Federal Government would maximize its resources 
by providing a more cost-efficient mechanism to ensure homeownership 
for those sectors of our community that are unable to obtain private-
sector financing and insurance.
  In conclusion, I would like to thank my friend and colleague, the 
gentleman from New York (Mr. Lazio), who is chairman of the 
subcommittee, the gentleman from Nebraska (Mr. Bereuter), the gentleman 
from New York (Mr. LaFalce), and particularly the gentleman from New 
Jersey (Mr. Andrews) for their work in this area.
  CBO has advised the committee that the bill is budget neutral.
  Mr. Speaker, I include for the Record the following letter from the 
Housing Assistance Council:

                                   Housing Assistance Council,

                                  Washington, DC, August 18, 2000.
     Representative Rick Lazio,
     Chairman, Subcommittee on Housing and Community Opportunity, 
         U.S. House of Representatives, Washington, DC.
     Attn: Joe Ventrone & Clinton Jones
     Re: Title V Rural Housing
       Dear Chairman Lazio: The Housing Assistance Council (HAC) 
     writes you to support a proposal by Rep. Robert E. Andrews to 
     amend Section 502(g) to permit refinancing of certain Rural 
     Housing Service (RHS) direct loans with guarantees under 
     Section 502(h) in Title V in the Housing Act of 1949. 
     Currently, there is no refinancing authority for the 502 loan 
     guarantees. Rep. Andrews' request is supported by a General 
     Accounting Office report, ``Shift to Guaranteed Program Can 
     Benefit Borrowers and Reduce Government Exposure'' (GAO/RCED/
     ALMD-95/63). We are informed that a change could possibly be 
     moved on the suspension calendar.
       HAC earlier responded favorably to the GAO report in a 
     letter to Associate Administer Czerwinski. We believe that 
     the issue is one that should be addressed by Congress and can 
     be done with very little budget impact. The adversely 
     affected families now have higher incomes and can afford 
     payments at current market rates, but are trapped in a 
     situation not foreseen when the legislation was enacted, and 
     which is beyond their control. It is difficult to justify 
     interest payments to the government at rates up to 13 percent 
     when private market rates are so much lower. The affected 
     families had low incomes when RHS helped them attain home 
     ownership. The very program which once helped them now causes 
     them to make excessive mortgage payments.
       It is our opinion that mitigating this problem is the right 
     thing for the government to do and that the issue is not 
     partisan in nature. We urge you to include a corrective 
     amendment in legislation you may be developing which 
     includes, or can include, Title V rural housing additions or 
     changes.
           Sincerely,
                                                      Moises Loza,
                                               Executive Director.

  Mr. Speaker, I reserve the balance of my time.
  Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 3834, the Homeowners Financing 
Protection Act, and I pay particular attention and give particular 
credit to the gentleman from New Jersey (Mr. Andrews) for highlighting 
this difficulty for the Congress and for initiating legislative action 
on this bill.
  The bill gives homeowners with existing Rural Housing Service 
guaranteed and direct single-family loans the opportunity to refinance 
such loans under the RHS guaranteed loan program.
  Permitting such loans would enable homeowners with high interest-rate 
mortgage loans, in some cases as high as 13.5 percent, to lower 
mortgage rates and therefore their monthly mortgage payments by a 
substantial amount.
  This is also good for the Federal Government since reduced mortgage 
payments reduce the default risk on such loans, thereby reducing the 
risk of foreclosure and payout by the Federal Government.
  The bill is drafted with a number of protections for both the 
homeowner

[[Page H7746]]

and for the Government. For example, the amount of the refinanced loan 
cannot be increased except by the cost necessary for the refinancing. 
This avoids over-leveraging the home. The interest rate on the 
refinanced loan cannot be higher than the mortgage rate on the existing 
loan. And the bill limits the Secretary's authority to guarantee 
refinanced loans to the extent provided in appropriation acts.
  Finally, I would note that, with passage of this bill, it is not the 
intent in the future that this new refinanced loan authority crowd out 
the issuance of new loan authority. The concern is that, if interest 
rates were to fall dramatically, homeowners could rush to utilize this 
new refinance authority, eating into loan authority for new guaranteed 
loans.
  However, this concern can easily be addressed in future 
appropriations bills through different approaches, including the simple 
act of providing a sufficient dollar amount of loan authority.
  In conclusion, I would again like to commend the very fine work of 
the gentleman from New Jersey (Mr. Andrews), and I urge adoption of 
this bill.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from New Jersey (Mr. Andrews).
  Mr. ANDREWS. Mr. Speaker, I thank my friend for yielding me the time. 
I rise in strong support of the bill.
  Mr. Speaker, one of the hallmarks of this Congress will be the 
bipartisan cooperation and achievements of the Committee on Banking and 
Financial Services.
  I want to thank the gentleman from Iowa (Chairman Leach), the 
gentleman from Nebraska (Mr. Bereuter), the subcommittee chairman, the 
gentleman from New York (Mr. Lazio), and the ranking member, the 
gentleman from New York (Mr. LaFalce). They have left their mark on 
this Congress in some significant and bipartisan ways; and it is a 
pleasure to serve with each of them. I thank them for their cooperation 
and the cooperation of the staff in bringing this bill to the floor in 
the spirit in which the committee has proceeded throughout this 
Congress.
  To understand the importance of this bill, we need to understand what 
it would be like to be a family with an income of $26,000 or $27,000 a 
year living in a modest home in a rural area of the United States 
struggling to pay the bills, struggling to keep up, and confronting a 
mortgage payment each month that reflects a mortgage of 11 or 12 
percent.
  Many people in those circumstances would take advantage of recent 
changes in financial conditions and refinance their mortgage. They 
would go out and get a loan and pay off their existing mortgage, and 
they would replace it with one that requires lower monthly payments.
  There are a lot of significant reasons why the citizens that I talk 
about cannot do that. First of all, they probably have a very low 
income, as I said; and secondly, they build up very little equity in 
their home, because the way they build up equity is to either live in a 
house that is appreciating regularly in value or by making early 
payments against their mortgage that would pay down the principle more 
quickly than they would interest.
  Neither of those happy developments is happening for many of the 
people who we are talking about affected by this bill.
  Presently, the law does not permit the United States Department of 
Agriculture to issue a loan guarantee or a direct loan in order to 
facilitate the refinancing of that mortgage loan. This bill changes 
that. It says that the United States Department of Agriculture can step 
in and, subject to its guidelines and to the other conditions set forth 
by the ranking member, can issue a loan guarantee or, where 
appropriate, a direct loan.
  What does that mean to the family that I talked about at the outset 
of my remarks? Well, it may mean up to about $100 a month in lower 
mortgage payments, $100 a month more for health care or for education 
or to meet the other demands of the household. This is a sensible, 
bipartisan approach to a problem that is affecting a lot of people.
  As we heard previously, there are 65,000 borrowers across the country 
who are paying interest rates in excess of 9\1/2\ percent, and there 
are 9,100 of those borrowers paying interest rates in excess of 13 
percent. This is a modest measure that will help those families in a 
significant way.
  I would like to express my appreciation to the staff on both the 
majority and minority side for their cooperation, to the United States 
Department of Agriculture for their steadfast support of this, to Geoff 
Plague of my office for his outstanding work.
  Let me again say to the gentleman from Iowa (Chairman Leach) and the 
gentleman from New York (Mr. LaFalce) and the gentleman from Nebraska 
(Mr. Bereuter), and, in his absence, the gentleman from New York (Mr. 
Lazio), and also the gentleman from Massachusetts (Mr. Frank) that I 
appreciate their cooperation.
  I urge the adoption of the bill.
  Mr. LEACH. Mr. Speaker, I yield 3 minutes to the gentleman from 
Nebraska (Mr. Bereuter), who has spent so much of his time in this 
Congress on the housing issues.
  (Mr. BEREUTER asked and was given permission to revise and extend his 
remarks.)
  Mr. BEREUTER. Mr. Speaker, I thank the gentleman from Iowa (Chairman 
Leach) for yielding me this time and for his kind remarks.
  Mr. Speaker, I rise today to express my strong support for the 
Homeowners Financing Protection Act which is being considered under 
suspension of the rules.
  First this Member would like to thank the gentleman from Iowa (Mr. 
Leach), the distinguished chairman of the House Committee on Banking 
and Financial Services, and the gentleman from New York (Mr. Lazio), 
the distinguished chairman of the House Subcommittee on Housing and 
Community Opportunity, for their collective role in bringing this 
legislation to the floor today.
  In addition, I would like to thank the gentleman from New York (Mr. 
LaFalce), the ranking minority member of the House Committee on Banking 
and Financial Services, and the gentleman from Massachusetts (Mr. 
Frank), the ranking minority member of the House Subcommittee on 
Housing and Community Opportunity, for their efforts on this measure.

                              {time}  1045

  Furthermore, the gentleman from New Jersey (Mr. Andrews) deserves 
particular attention, commendation and congratulations for introducing 
this important legislation. It is important to American homeowners of 
modest or average income. The gentleman from New Jersey has just given 
us, very specifically, some of the reasons why it is important to the 
homeowners and how it affects their pocketbook.
  Among other important provisions, this legislation amends section 
502(h) of the Housing Act of 1949 to allow borrowers of the Rural 
Housing Service single-family loans to refinance either an existing 
section 502 direct or guaranteed loan to a new section 502 guaranteed 
loan, provided the interest rate is at least equal or lower than the 
current interest rate being refinanced and the same house is used as 
security.
  This Member supports the legislation because it facilitates the use 
of the RHS section 502 single family loan guarantee program. In fact, 
this loan program, which was first authorized with this Member's 
initiative, with the strong support of now the chairman of the Banking 
Committee, the distinguished gentleman from Iowa (Mr. Leach), some 
years ago and with the support of the distinguished gentleman from New 
York (Mr. LaFalce), has been very effective in nonmetropolitan 
communities by guaranteeing loans made by approved lenders to low-
moderate to moderate-income households. The program provides a 
guarantee for 30-year fixed rate mortgages for the purchase of an 
existing home or construction of a new home. It has been very good news 
for the taxpayer. Further the program operates with a minimum of red 
tape. The examples from my home State of Nebraska, where the program 
was slow to start, are illustrative of how popular and how important it 
is for low-moderate and moderate-income Americans.
  Mr. Speaker, in closing, for the aforementioned reasons and many 
others, this Member would encourage support for H.R. 3834 which is 
being considered today.

[[Page H7747]]

  Mr. LEACH. Mr. Speaker, I thank the gentleman from Nebraska (Mr. 
Bereuter). I would again stress what an extraordinary role he has 
played in this House on housing matters.
  Mr. Speaker, I have no further requests for time, and I yield back 
the balance of my time.
  Mr. LaFALCE. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Linder). The question is on the motion 
offered by the gentleman from Iowa (Mr. Leach) that the House suspend 
the rules and pass the bill, H.R. 3834, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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