[Congressional Record Volume 147, Number 126 (Tuesday, September 25, 2001)]
[Extensions of Remarks]
[Page E1740]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       THE HOME EQUITY LOSS PREVENTION AND ECONOMIC RECOVERY ACT

                                 ______
                                 

                           HON. MAXINE WATERS

                             of california

                    in the house of representatives

                      Tuesday, September 25, 2001

  Ms. WATERS. Mr. Speaker, I rise to introduce legislation which I 
believe is critically necessary at this time. My bill, the ``Home 
Equity Loss Prevention and Economic Recovery Act'' or HELPER, will 
restore the tax deduction for personal interest, such as that on 
automobile loans and credit card debt. It will also eliminate the 
limitations on the deduction of student loan interest.
  This legislation will help prevent the reprehensible practice of 
stripping home equity to pay nondeductible debt. I have been working on 
ways to stem predatory lending for years. These practices often end in 
families losing their homes. I decided to turn to the tax code to 
eviscerate this problem of predatory lending, known as home equity 
stripping.
  Home equity loans have historically been the privilege of the middle 
class and wealthy, who generally have high credit ratings, income, and 
home equity. However, beginning in the 1980s, non-depository finance 
companies--lending institutions other than commercial banks, thrifts, 
and credit unions--began to provide home equity loans to lower-income 
communities, which were not served by mainstream lenders.
  Persons in low-income communities typically have little disposable 
income, but may have substantial home equity as a result of paying down 
their mortgages or through the appreciation of their property values. 
This equity can secure sizable loans. While offering loans to low-
income and minority communities can benefit these communities, 
predatory lending practices, which oftentimes use the borrowers' home 
as collateral, have milked the last drops of wealth from many of these 
neighborhoods, leading to increased poverty and public dependence.
  When vulnerable persons incur substantial medical costs, suffer 
sudden loss of income, require credit consolidation, or need funds to 
maintain their homes, predatory lenders step in, offering loans secured 
by the borrower's equity. Unfortunately, predatory home equity lenders 
target the most vulnerable homeowners--the elderly and people in 
financial or personal crisis.
  The primary selling tools of these loans is the need to consolidate 
debt on which the interest is not deductible into a home equity loan, 
so that the interest can be deducted. Individuals with car loans, 
credit card debt and certain student loans cannot deduct the interest 
paid on these loans from their taxes. Often, these individuals will 
strip equity from their homes and pay high fees in an effort to 
consolidate this debt into one loan on which the interest is 
deductible. Frequently, these transactions involve high fees which 
offset any tax benefit that may be realized. Furthermore, after a loan 
consolidation, many consumers will accrue additional credit card debt.
  My bill will remove the greatest incentive for equity stripping by 
making the interest on personal loans deductible, meaning that people 
with car loans, credit card debt and student loans that fall outside of 
current parameters, will now be able to deduct the interest they pay 
for these loans. The deductibility of the interest will lower the cost 
of borrowing for individuals and will prevent many individuals from 
overextending themselves in an effort to reap tax benefits.
  I have been working on this legislation for several months, but 
decided that now is the appropriate time, because it has the potential 
to provide much needed economic stimulus. People will keep more of 
their money with these deductions, and will not be encouraged to pay 
high fees and risk losing their homes. I think that the time is right 
to restore the deductibility of personal interest and I would urge my 
colleagues to support this legislation.

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