[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.

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