[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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