[Congressional Record Volume 153, Number 109 (Tuesday, July 10, 2007)]
[House]
[Pages H7448-H7451]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SUPPORTING HOME OWNERSHIP AND RESPONSIBLE LENDING
Mrs. MALONEY of New York. Mr. Speaker, I move to suspend the rules
and agree to the resolution (H. Res. 526) supporting home ownership and
responsible lending.
The Clerk read the title of the resolution.
The text of the resolution is as follows:
H. Res. 526
Whereas home ownership is an important part of realizing
the American Dream;
Whereas home ownership is a powerful economic stimulus,
both for individual homeowners and for the national economy;
Whereas home ownership also benefits neighborhoods by
raising property values and by providing economic and social
capital in previously distressed communities;
Whereas in 2006, more than 75,000,000 Americans owned
homes, and the home ownership rate was nearly 69 percent, a
near record high;
Whereas the home ownership rate for non-Hispanic whites in
2006 was 76 percent, while the rate for African American
households was only 48.2 percent; Hispanic households were at
49.5 percent, and Asian, Native Americans, and Pacific
Islanders were at 60 percent;
Whereas this Nation experienced a housing boom from 2001 to
2006, due to historically low mortgage rates, rising home
prices, and increased liquidity in the secondary mortgage
market, all factors that led to the growth of the sub-prime
mortgage industry;
[[Page H7449]]
Whereas the sub-prime market has created home ownership
opportunities for lower-income people, families without
access to down payments and people with little or no credit
histories, but has also created opportunities for
``predatory'' lending in which unscrupulous lenders have
hidden the true cost of sub-prime loans from unsophisticated
borrowers;
Whereas during the past few months, it has become
increasingly clear that irresponsible sub-prime lending
practices have contributed to a wave of foreclosures that are
harming communities and disrupting housing markets;
Whereas higher cost sub-prime mortgage loans are most
prevalent in lower-income neighborhoods with high
concentrations of minorities (in 2005, 53 percent of African
American and 37.8 percent of Hispanic borrowers took out sub-
prime loans);
Whereas foreclosures are also costly from a legal and
administrative standpoint, with the average foreclosure
costing the borrower $7,200 in administrative charges;
Whereas lenders do not typically benefit from taking over a
delinquent owner's property, losing thousands of dollars per
foreclosure;
Whereas foreclosures can also be very costly for local
governments because abandoned homes cost districts tax
revenue;
Whereas a recent study calculated that a single-family home
foreclosure lowers the value of homes located within one-
eighth of a mile (or one city block) by an average of 0.9
percent and even more so (1.4 percent) in low to moderate-
income communities; and
Whereas the time has come to raise awareness about the
dangers of risky loans and to protect homeowners from
unscrupulous lending practices: Now, therefore, be it
Resolved, That--
(1) it is the sense of the House that Government action
should be taken that protects buyers from unscrupulous
mortgage brokers and lenders; and
(2) specifically, such action should--
(A) enforce rules to eliminate unfair and deceptive
practices in sub-prime mortgage lending;
(B) encourage lenders to evaluate a borrower's ability to
reasonably repay any mortgage loan;
(C) establish clear minimum standards for mortgage
originators;
(D) require that disclosures clearly and effectively
communicate necessary information about any mortgage loan to
the potential borrower;
(E) reduce or eliminate abuses in prepayment penalties;
(F) address appraisal and other mortgage fraud;
(G) raise public awareness regarding mortgage originators
whose loans have high foreclosure rates; and
(H) increase opportunities for loan counseling.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New York (Mrs. Maloney) and the gentlewoman from Illinois (Mrs.
Biggert) each will control 20 minutes.
The Chair recognizes the gentlewoman from New York.
General Leave
Mrs. MALONEY of New York. Mr. Speaker, I ask unanimous consent that
all Members may have 5 legislative days within which to revise and
extend their remarks on this legislation and to insert extraneous
materials thereon.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from New York?
There was no objection.
Mrs. MALONEY of New York. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I rise in support of H. Res. 526, a resolution that
supports both homeownership and responsible lending. This resolution is
on the floor today because we are facing, by all accounts, a tsunami of
defaults and foreclosures in the primary subprime market. In each of
our districts, our constituents are encountering payment shock as their
subprime loans reset to much higher rates. By some estimates, 2.2
million homeowners with subprime loans made through 2006 will lose
their homes.
As Chair of the House Subcommittee on Financial Institutions and
Consumer Credit, I have held three hearings on this important and
complex issue. At these hearings, we have heard from the Federal
regulators, including the Federal Deposit Insurance Corporation, the
Office of the Comptroller of the Currency, the Office of Thrift
Supervision, the National Credit Union Association, and the Federal
Reserve. Acting in a cooperative manner, the FDIC, OCC, OTS and the Fed
have issued joint guidance that require financial institutions under
their supervision to issue mortgages based on the customer's ability to
repay that mortgage.
This commonsense guidance includes underwriting loans to the fully
indexed rate and not just to the 2- or 3-year teaser rates that have
been so popular over the last few years, as well as allowing borrowers
a reasonable time to refinance without prepayment penalties. At these
hearings, we have also heard from consumer groups and advocates who
tell us that while this guidance is a good first step, 50 percent of
the mortgage market comes from lenders outside of the oversight of
these Federal regulators.
To effect real change, we need standardized rules over the entire
market. One option that has frequently been mentioned is for the
Federal Reserve to use its authority to stop unfair and deceptive
practices under the HomeOwnership and Equity Protection Act. I am told
that the Fed is looking into this. I fully support their using this
authority that the Congress has given them in this area.
Beyond HOEPA, we must work together here in Congress to ensure that
unfair lending practices are not rewarded and that our constituents
have access to credit. Over the coming months, I plan to continue
working with Chairman Frank and holding hearings on this issue and
drafting legislation to address some of the problems that have been
highlighted both in this resolution and at our hearings. Each and every
one of us here in Congress wants to ensure that the American Dream of
homeownership does not become a nightmare for our constituents. I
support this resolution. I urge its passage.
Mr. Speaker, I reserve the balance of my time.
Mrs. BIGGERT. Mr. Speaker, I yield myself such time as I may consume.
I rise to support House Resolution 526, recognizing homeownership and
responsible lending. As the ranking member of the House Committee on
Financial Services Subcommittee on Housing and Community Opportunity, I
want to thank the gentleman from Maryland, Representative Cummings, and
Chairman Frank and Chairwoman Maloney for working in a cooperative
fashion to ensure that the language protects borrowers while preserving
access to homeownership opportunities.
Over the past several years, the housing market has helped to drive
the national economy as Americans bought and refinanced homes in record
numbers. The benefits of homeownership are undeniable. For this reason,
there has been a significant focus on improving homeownership
opportunities for everyone, including the low-income borrower. At the
same time, the subprime market has flourished and provided credit to
many families that may not have qualified under conventional standards.
Today, this country enjoys record-high homeownership rates. More than
68 million Americans own a home. Of this 68 million, 50 million
homeowners have a mortgage, and 13 million of them have a subprime
loan. According to a recent Chicago Tribune article, ``Subprime loans,
often with adjustable rates, made homeownership possible for millions
of Americans whose credit ratings or income levels made them ineligible
for cheaper prime loans.''
However, of the 13 million subprime loans, roughly 5 percent of them
are entering foreclosure. According to the data released by the
Mortgage Bankers Association, these numbers are on the rise. These
mortgage foreclosure rates raise eyebrows and call into question what
actions are to be taken to help homeowners keep their homes, and I
would like to emphasize the word ``action.'' While I believe that this
resolution under consideration outlines many important facts, most of
which Americans have seen printed in the news for months, it does not
take action. The resolution tells the House something that we already
have authority to do, and that is to take action.
Americans are waiting for the leadership of this House to exercise
that authority. We can talk about the increase in foreclosure rates
until we are blue in the face, and why is the leadership in this House
waiting. The fact of the matter is, this body needs to join forces with
the folks in the public and private sectors to take action immediately.
What it is we should be doing right now is to ensure that the 650,000
homeowners and others who may follow can keep their homes. First we can
and should pass a Federal Housing Administration modernization bill. I
introduced H.R. 1752, the Expanding American Homeownership Act of 2007,
a bill
[[Page H7450]]
identical to the one that passed the House last July by a strong
bipartisan vote of 415-7.
However, on the same day, two of my colleagues on the other side of
the aisle introduced another FHA reform bill that includes a new and
controversial housing trust fund provision. This trust fund provision
has stalled the bill. So while the other side of the aisle is holding
out for a brand-new trust fund, millions of Americans may lose their
homes in 2007 because they did not have the refinancing option that a
modernized FHA could have offered them.
In testimony before the House Financial Services Committee, U.S.
Department of Housing and Urban Development Assistant Secretary for
Housing Brian D. Montgomery urged Congress to pass an FHA reform bill
and said FHA could help hundreds of thousands of additional borrowers
to secure a safe and affordable mortgage. He said that the best thing
to help subprime borrowers is to reform FHA, and he added that HUD is
prepared to immediately implement FHA reforms.
Second, this resolution mentions we can immediately increase
opportunities for housing counseling. It also says that we should raise
public awareness. I think that first by advertising available resources
we can both raise public awareness and increase opportunities for
housing counseling. It is crucial to promote financial literacy and
educate our youth and adults. This is the most direct way of ensuring
that consumers understand the terms of their loan so that they may
avoid predatory loans and foreclosure altogether.
I am pleased that on June 25, Neighborhood Works America and the Ad
Council launched a national ad campaign aimed at preventing home
foreclosures. Homeowners in trouble can try to save their homes by
calling a hotline, 888-995-HOPE, a number provided by the Homeowner
Preservation Foundation.
In addition, we have about 2,300 HUD-certified housing counseling
agencies across the country. Americans should know they can visit HUD's
Web site or call 800-569-4287 to find a HUD-certified counselor in
their neighborhood. HUD-certified counselors can give straightforward
and free or low-cost advice to potential or existing homeowners about
buying a home, refinancing a mortgage, or preventing foreclosure.
Third, we need to address the root problems resulting from predatory
or bad subprime loans. The Federal regulators have recently stepped up
to the plate and tried to address the increasing number of foreclosures
through interagency guidance on subprime loans. The guidance to
mortgage lenders focuses on loans in the subprime market, particularly
adjustable rate mortgage products. It specifies that a lender's
assessment or a consumer's ability to repay should be based on the
fully indexed rate, assuming a fully amortized repayment schedule. The
guidance also focuses on the need for clear and balanced communication
to the borrower with regard to mortgage loan benefits.
I support these efforts, but there is much more to do. I know that
the issue of mortgage fraud is hot in the Chicago area. We need to
ensure that law enforcement has the necessary tools and resources to
crack down on fraudulent activities.
Finally, I support this resolution because I agree with my colleagues
on the importance of shedding some light on actions that Congress or
Federal regulators can take to help homeowners enter into realistic and
affordable loans in the future. As we consider our options to take
action at the Federal level to help Americans keep and own their homes,
I would urge my colleagues to carefully weigh the potential
consequences of such actions.
We should allow secondary mortgage markets to adjust to the rise in
foreclosures accordingly and to continue to supply liquidity to the
primary mortgage market. Simultaneously, we should take immediate
action. We need to pass FHA modernization now, and we need to ensure
that people continue to have immediate access to financial education
and counseling, credit, and viable mortgage options so that people in
future generations can realize the American Dream of homeownership.
Again, I thank the gentleman from Maryland (Mr. Cummings) for his
hard work on this resolution.
Mr. Speaker, I reserve the balance of my time.
{time} 1515
Mr. FRANK of Massachusetts. Mr. Speaker, I ask unanimous consent to
manage the time in lieu of the gentlewoman from New York (Mrs.
Maloney).
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself 2 minutes.
The gentlewoman from Illinois decided to get into another bill, the
FHA bill, and made a couple of statements about it, one of which is
inaccurate and one of which is incomplete.
The inaccurate one is to suggest that it has been held up because of
the fact that we want to use some of the money that will be generated
by the bill, by specifically removing the cap on home equity mortgages,
for affordable housing. I understand her objection to our trying to
spend some money for more affordable housing construction, but that is
not what held up the bill.
We ran into a dispute between those people who do the home equity
mortgage servicing and the AARP over the fees to be charged. We adopted
an amendment; it was a bipartisan amendment. Our colleague from
Georgia, Mr. Marshall, and the gentlewoman from Florida (Mrs. Ginny
Brown-Waite) offered an amendment, and that led to a dispute. I asked
that the groups try to work this out, and they have done that, so we
are now able to come to the floor with that bill. But we then ran out
of time because of the appropriations process. But what held that bill
up was that dispute over funding.
Secondly, the gentlewoman said we passed this very good bill last
year. We passed a bill last year, and I voted for it because, with the
other party then in control, we couldn't make it better. But here is
the major difference between that bill and the bill we will bring
forward regarding subprime. Under the bill we passed last year and
under the position of the gentlewoman from Illinois, people with weaker
credit who make all of their payments will be charged more. I think it
is inappropriate for the Federal Government to do that.
The FHA, under the bill that was passed last year, would extend
credit to borrowers with weaker credit, would guarantee their mortgages
but charge them more. Under our bill, because we don't think that the
Federal Government ought to charge people more if they are meeting
their responsibilities, we cross-subsidize, and we say, if you have
weaker credit, your initial payments will be higher. But if you make
your payments for 5 years, you will get all of the money back, and I
look forward to debating that difference.
I don't think we should be penalizing people, and I don't think
people making $40,000 a year who are diligent in making their payments
ought to pay more than us.
Mr. Speaker, on this resolution, I yield such time as he may consume
to the gentleman from Maryland (Mr. Cummings) who was the main sponsor
of this important resolution.
Mr. CUMMINGS. Mr. Speaker, I want to thank the gentleman for
yielding, and I want to thank Mr. Frank for his leadership and the
assistance of his staff in helping us bring this resolution to the
floor. And certainly I also say thanks to the ranking member of the
subcommittee and the chair of the subcommittee.
Mr. Speaker, I rise today to encourage my colleagues to join me in
supporting the passage of H. Res. 526, which supports homeownership and
responsible lending. Specifically, this resolution expresses the sense
of the House that government action should be taken to protect home
buyers from unscrupulous brokers and lenders.
This resolution was inspired by the plight of the American people,
the people of Maryland, and my neighbors in Maryland's Seventh
Congressional District who have lost their homes to foreclosure or who
are currently facing foreclosure.
The dramatic increase in foreclosures is directly related to the
emergence of the subprime mortgage industry, which has grown from less
than 8 percent of the total mortgage market in 2001 to approximately 20
percent of the market today.
[[Page H7451]]
While subprime loans are not inherently dangerous, practices within
the industry are turning homeownership, an essential component of the
American dream, into a nightmare, costing many people their ticket to
the middle class and/or preventing them from passing property on to
their children.
Subprime mortgage loans are geared towards borrowers with low credit
scores. Other characteristics of the loans often include low initial
payments based on a fixed introductory or ``teaser'' rate that expires
after 2 or 3 years and then adjusts to a variable rate for the
remaining term of the loan; no payment or rate caps on how much the
payment amount or interest rate may increase on the reset dates; and
substantial prepayment penalties.
Terms of this nature present incredible risks to consumers who find
it impossible to meet the increased payment requirements. Furthermore,
the risk of foreclosure increases when borrowers are not adequately
informed of product features and risks. And I would say to this House,
we must be very careful not to blame the victim.
Many believe that the government should just allow the market to
correct itself. However, remaining idle while the situation continues
to get worse is unconscionable. According to the Center for Responsible
Lending, approximately one in five subprime loans issued in 2005 and
2006 will go into default, costing 2.2 million homeowners their homes
over the next several years.
RealtyTrac, a real estate research firm, estimates that foreclosures
have increased by 42 percent from 2005 to 2006, to 1.2 million. This
translates into one foreclosure for every 92 households. Most alarming
is the fact that new foreclosure events in May 2007 totaled over
176,000, an increase of 19 percent since April and of 90 percent since
May of 2006.
Recent reports estimate that 5,700 homeowners in Maryland were facing
foreclosure and over 36,000 were late on their mortgages in the first
quarter of the year. Most startling is the fact that, in June, Maryland
ranked 22nd nationally in foreclosures, up from 40th in 2006.
My congressional district alone had 466 foreclosures in the month of
May. This equates to a 570 percent increase since May 2005.
Mr. Speaker, these are astounding figures, but when combined with the
impact that foreclosures have upon families and their communities,
there is little doubt that immediate action needs to be taken to
address this national crisis. We must do everything in our power to
protect the future of homeownership.
A foreclosure results not only in the loss of a stable living place
and significant investment for a family, but it also lowers the
homeowner's credit rating, creating barriers to future home purchases
and also hindering the ability to pay rent. It typically takes a victim
of foreclosure 10 years to recover and buy another house, which means
that more and more potential homeowners will be taken out of the home
buyer base.
For lower-income communities attempting to revitalize, the
consequence of increased foreclosures is often a substantial setback in
neighborhood security and sustainability. Areas of concentrated
foreclosures can affect the price that other sellers can get for their
houses. As higher foreclosure rates ripple through local markets, each
house tossed back into the market adds to the supply of for-sale homes
and could bring down home prices. In the last 2 years, foreclosures
have cost the city of Baltimore approximately $1.8 billion in reduced
property values.
Finally, the predominance of subprime loans in low-income and/or
minority neighborhoods means that the bulk of the spillover costs of
foreclosures are concentrated among the Nation's most vulnerable
households. These neighborhoods already have incidences of crime, and
increased foreclosures have been found to contribute to higher levels
of violent crime. Because of the inherent dangers posed by
foreclosures, we must act now to save families across this Nation and
preserve our communities.
Various pieces of legislation have been introduced in the House and
Senate to help homeowners refinance their homes, but congressional
action alone will not fix the problem. Earlier this year, I sent a
letter to Chairman Bernanke of the Federal Reserve asking that action
be taken to protect homeowners from predatory lending practices using
its authority under the Home Ownership Equity Protection Act. I am
pleased that the board and other regulators recently issued guidelines
to lenders that encompass many of the ideas expressed in the letter
sent in May and in House Resolution 526, which states that the
government action should do the following: enforce rules to eliminate
unfair and deceptive practices in subprime mortgage lending; encourage
lenders to evaluate a borrower's ability to reasonably repay the
mortgage over the life of the loan, not just at the introductory rate;
establish clear minimum standards for mortgage originators; require
that disclosures clearly and effectively communicate necessary
information about any mortgage loan to the potential borrower; reduce
or eliminate abuses in prepayment penalties; address appraisal and
other mortgage fraud; raise public awareness regarding mortgage
originators whose loans have high foreclosure rates; and increase
opportunities for loan counseling.
Mr. Speaker, in closing, I would like to reiterate that owning a home
is an essential component of the American dream. Simply put,
homeownership has the power to transform lives. Therefore, I urge all
of my colleagues to vote in favor of this resolution and continue
working to address this critical issue. Again, I thank Chairman Frank
for his leadership.
Mrs. BIGGERT. Mr. Speaker, I have no further requests for time but
would just ask one question of the chairman.
I think this is so important, and you mentioned that the FHA bill
will be coming up. I was curious as to when we would be considering a
subprime bill?
Mr. FRANK of Massachusetts. Mr. Speaker, will the gentlewoman yield?
Mrs. BIGGERT. I yield to the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. In the fall. As the gentlewoman knows,
this period is appropriations period, except for the voucher bill where
we had gotten in line.
But I would hope that we can work in committee on the subprime. I
would note, by the way, that 2 years ago, the current ranking member of
the full committee was the chairman of the Subcommittee on Financial
Institutions, and he was pretty far along in conversations with my two
colleagues from North Carolina, Mr. Watt and Mr. Miller. And frankly, I
think if we had not been interfered with from above, we might have
gotten a bill a couple of years ago, I think we can pick up where we
left off. I am optimistic we can do a bill this fall.
Mrs. BIGGERT. Mr. Speaker, I thank the gentleman, and I thank the
gentleman from Maryland (Mr. Cummings) for bringing this resolution
forward and outlining the important facts that will enable and make
certain that people can keep their homes.
Mr. Speaker, I yield back the balance of my time.
Mr. FRANK of Massachusetts. Mr. Speaker, I yield back the balance of
my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from New York (Mrs. Maloney) that the House suspend the
rules and agree to the resolution, H. Res. 526.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. FRANK of Massachusetts. Mr. Speaker, on that I demand the yeas
and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.
____________________