[Congressional Record Volume 155, Number 69 (Wednesday, May 6, 2009)]
[House]
[Pages H5179-H5185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             MORTGAGE REFORM AND ANTI-PREDATORY LENDING ACT

  The SPEAKER pro tempore (Ms. Pingree of Maine). Pursuant to House 
Resolution 400 and rule XVIII, the Chair declares the House in the 
Committee of the Whole House on the State of the Union for the 
consideration of the bill, H.R. 1728.

                              {time}  1120


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 1728) to amend the Truth in Lending Act to reform consumer 
mortgage practices and provide accountability for such practices, to 
provide certain minimum standards for consumer mortgage loans, and for 
other purposes, with Mr. Ross in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time.
  The gentleman from North Carolina (Mr. Watt) and the gentleman from 
Texas (Mr. Neugebauer) each will control 30 minutes.
  The Chair recognizes the gentleman from North Carolina.
  Mr. WATT. Thank you, Mr. Chairman. I yield myself 5 minutes.
  Mr. Chairman, today could easily be a day toward a celebration for 
myself,

[[Page H5180]]

as an original cosponsor of this bill, and Mr. Miller of North 
Carolina, my colleague, who also is an original cosponsor of this bill, 
perhaps leading to a celebration of final passage.
  But I approach this day with two rather major concerns about 
celebrating. First of all, I approach it asking: What if 6 years ago we 
had passed the legislation that Mr. Miller and I proposed to the House 
of Representatives at that time? Isn't it likely that the major 
meltdown in our credit system would not have occurred, and there's the 
prospect that had that not occurred, the major economic crisis in which 
our country finds itself now, trying to dig our way out, may also have 
been avoided.
  So the decisions that we make have consequences. They have had 
consequences to our credit markets and they have consequences going 
forward, and have had consequences to our economy.
  So this is not a day for celebration. If we pass the bill and the 
Senate passes the bill and it gets signed into law, we will always 
wonder what if we had done this when we originally brought forward the 
bill and dealt with the issue when it should have been dealt with.
  Second, my observation is that this has been a very difficult and 
delicate bill to balance because we have tried to, on the one hand, not 
to dry up the credit--the money that is out there to be in the market 
for lenders to make loans to potential homeowners and to current 
homeowners to refinance while, at the same time, cutting back on the 
abuses that took place in the marketplace that led to the credit crisis 
and the economic meltdown that I just described.
  Balancing those two interests has been difficult and, unfortunately, 
those interests were balanced inappropriately in the past because 
credit obviously was made too readily available to too many people who 
could not afford to pay it back, who are now in foreclosure 
proceedings, now in bankruptcies, and we are seeing the negative 
consequences of an unrestrained market.
  So, obviously, the balance was not drawn appropriately in the past, 
and now we face the argument from a number of my colleagues that, 
``Well, we can just leave this alone and let the market take care of 
itself and we shouldn't be doing anything.'' We're going to hear those 
arguments throughout today's general debate and, no doubt, on tomorrow 
when we start dealing with the amendment process.
  That's a laissez-faire attitude that I would remind my colleagues is 
the same laissez-faire attitude that we faced 6 years ago when we first 
introduced this bill which, I would suggest to you, if we had acted 
then, we wouldn't be here.
  I reserve the balance of my time.
  Mr. NEUGEBAUER. I think we will have a good debate today because it 
is not about not doing nothing, but it's about a difference of opinion 
of what the right thing to do is, because that's really, bottom line, 
what the American people want us to do.
  They want to have a good mortgage and they want the right to have a 
mortgage that works for them. I think that the Republicans will 
articulate that we want them to have those choices.
  It is now my pleasure to yield 3 minutes to the gentleman from New 
Jersey (Mr. Garrett).
  Mr. GARRETT of New Jersey. I thank the gentleman. A day of 
celebration for this bill? I don't think so. The gentleman from the 
other side of the aisle indicated that we are going to be advocating 
laissez-faire and do-nothing reform. I don't think so as well. And if 
you look back at the track record at committee, our side of the aisle, 
Republicans offered a number of amendments time and time again to try 
to improve this bill incrementally.
  If I remember correctly, the chairman and yourself voted against 
every single one of those amendments which would have improved that 
bill.
  Today is a day of uncertainty. It's uncertainty for the American 
family; the American worker, who can't pay their bills, uncertain 
whether they're going to pay their mortgage or their rent. They're 
uncertain whether they're going to have a job next week.
  It's a day of uncertainty for small businesses, whether they're going 
to be able to make payroll. It's uncertainty for the American public as 
they look at the wanton spending and debt that's coming out of this 
Capitol of Washington, D.C.
  It's a day of uncertainty for investors and Wall Street and business 
as they look at the rules being changed constantly, almost on a weekly 
basis, and they don't even know which way to go. And so they don't 
invest, they don't try to grow the economy, and that's why we're 
continuing with the recession that we're in right now.
  This underlying bill has a number of flaws in it. It has the right 
intent, and that's why we tried to amend it and make it better. But the 
flaws are egregious, and that's why I cannot support it.
  The idea, for example, that banks should have skin in the game is 
something that we all agree on. How they're doing in it the bill, 
unfortunately, is problematic in two areas: First of all, that the 
rules constantly change even as we go forward in the bill itself; 
secondly, the point that the language in the bill basically says that 
the other side of the aisle, the Democrats, don't care that they 
effectively would be crowding out part of the market that we need to 
grow.
  The small banks who may not be able to retain such a large portion on 
their balance sheet. They even testified in committee to that effect, 
that they don't know how this would apply to them and whether or not 
they might not be able to offer as many loans as they did in the past.
  So point two was that we have heard testimony that language like this 
would make it harder for people to get home loans and refinance. The 
first point was that it's changing the rules constantly.
  In the original draft of the bill, you said that we should set it all 
out in detail, that we should have 5 percent skin in the game and other 
criteria that was in there. But, at the last minute, they change it and 
say, ``No. Maybe under certain circumstances the regulators can change 
that.''
  Well, which is it? Wall Street, the investors want to know which way 
we're going to go. Is it this parameter or that parameter? That's, 
again, why our side of the aisle, as the ranking member indicated, we 
didn't have ``no ideas,'' or ``no solutions''; we had a solution to it.
  A number of us said let's strike that language. Let's turn it to the 
regulators. Let's actually do a little study here and see whether or 
not if we do these things, as some of us suggest, might actually do 
more harm than good.
  Not only as we suggest, but some of the experts suggested as well. As 
a matter of fact, the Fed basically said there would be unforeseen 
consequences if we go through with some of the language that we have in 
here.
  So it's not just this side of the aisle. It's not just us. It's the 
experts and Fed that say this bill is problematic and can cause real 
harm to the problem and the economy going forward.
  Mr. WATT. Mr. Chairman, I yield 5 minutes to the lead sponsor of this 
bill, the gentleman from North Carolina (Mr. Miller).
  Mr. MILLER of North Carolina. The financial industry's explanation 
for our financial crisis is it was a weird, unpredictable combination 
of forces, this perfect storm of macroeconomic forces that no one could 
have seen coming. Who could have known that all this would happen is 
the way that many economists mock that argument.
  Mr. Chairman, I don't claim that I saw the whole financial crisis 
coming. I didn't know that these mortgages and subprime mortgages made 
in 2004 and 2006 would be as toxic as they have proven to be for the 
financial industry. But I knew that they were going to be toxic for 
homeowners, and I thought that was reason enough to do something.
  In 2003, I introduced legislation that would have prohibited many of 
the practices that have led us to where we are. Mr. Watt joined me 
then. Two years later, we introduced it again as Miller-Watt-Frank.
  So, yes, many on this side of the aisle have been worried about 
trying to do something about the toxic loans for a long time, perhaps 
not to protect Wall Street--it's pretty remarkable to hear the minority 
still defending or worrying about the poor, poor pitiful boys on Wall 
Street--but to protect consumers, to protect homeowners.

[[Page H5181]]

  We know what caused this crisis. We know what was in the loans in 
2004 to 2006. Subprime loans went in 2003 from being 8 percent of all 
mortgage loans to 28 percent in 2006. Many people should never have 
gotten any loan. They didn't qualify for any loan.
  Actually, a clear majority of the people who got subprime loans, 
qualified for prime loans. They put their trust in the wrong person, 
and their trust was betrayed. Ninety percent of those loans had an 
adjustable rate, with a quick adjustment after just 2 or 3 years. They 
were 2/28s or 3/27s.
  Typically, the teaser rate hovered around prime. It wasn't much of a 
bargain in the first place and, in many cases, was above prime, and 
then would go up with an average typical monthly increase in payment of 
30 to 50 percent.
  Seventy percent had prepayment penalties locking the borrowers in, 70 
percent were originated by brokers that the borrowers thought were 
looking after their interest. There was a grotesque asymmetry of 
information. That's what economists call it. What it means is the 
lenders were writing all the fine print. Their lawyers wrote all that 
they gave the borrowers to sign and then the borrowers were stuck with 
it.
  They were counting on someone who was actually being paid, the broker 
who was being paid by the lenders, to get them the worst loan possible, 
while they were telling the borrowers they're trying to find for them 
the best loan possible.
  Now, throughout that period, we heard the same arguments then that we 
are still hearing after all that has happened. We're still hearing from 
the minority in opposition to this bill that all those terms that may 
look predatory were actually justifiably required to make loans 
available to people who otherwise would not qualify, to make 
homeownership available.
  This is financial innovation. This is the market at its best. We 
should celebrate. And we know what really happened during that period.
  Americans have heard a great deal about the vulgar compensation on 
Wall Street in the financial industry: the pay and the bonuses and all 
the perks, the million dollar-plus redecorations of the CEO offices, 
the corporate jets, and all the rest. Even after all of that, more than 
40 percent of corporate profits in America were in the financial 
industry.
  Mr. Chairman, their margins weren't really that tight. They really 
didn't have to put all those terms in mortgages in order to make them. 
The terms that appear predatory on their face really were predatory. 
They were not about making loans available to people who otherwise 
couldn't get credit. They were about making as much money as they could 
as quickly as they could make it.
  We still hear the same arguments, the same parroted arguments from a 
discredited industry we have heard for years. We have heard letters 
from the mortgage bankers held up and read aloud as if they were 
brought down on stone tablets from Mount Sinai. We have heard the 
concerns of the Wall Street boys. Like everybody in America still 
believes what they have to say.
  It is very clear that the members of the minority's view of the role 
of government is that government should hold the American people while 
industry goes through their pockets.
  The mortgages that got us in this mess were shameful. It is shameful 
that this Congress, that this government ever allowed those mortgages 
to happen. This bill will begin to put an end to it, to make sure it 
never happens again. It limits the upfront costs that strip equity from 
mortgages. It prohibits a prepayment penalty that traps people in bad 
mortgages so they couldn't get out of them. It forbids compensation to 
brokers that creates the conflict of interest that many brokers 
betrayed the trust of borrowers.
  The CHAIR. The time of the gentleman has expired.
  Mr. WATT. I yield the gentleman an additional 2 minutes.
  Mr. MILLER of North Carolina. The arguments on the other side remain 
the same that they have been: ``Oh, this will narrow choices for 
consumers,'' like they are really protecting the rights of consumers to 
pick mortgages like that. Like borrowers came into brokers or mortgage 
companies and said, ``You know, can you get me an adjustable rate loan 
that goes up after 2 or 3 years and the monthly payment goes up 30 to 
40 percent, with a prepayment penalty so it's harder for me to get out 
and have to pay something to get out, with an initial rate that's 
probably only about prime in the first place? And because I'm paying 
more at a higher interest rate than I qualify for, how about paying 
some extra money to the broker?''
  Mr. Chairman, no one asked for these loans. They were duped into 
taking these loans.
  Ned Gramlich, a member of the Federal Reserve Board's Board of 
Governors said that, ``For all its work, subprime lending actually made 
sense and helped people get loans, but the practices were 
indefensible.'' He asked the rhetorical question, ``Why is it that the 
most complicated loans, the most complex loan terms, end up in loans to 
the most unsophisticated borrowers?''

                              {time}  1130

  He said the question answers itself: They were duped into taking 
these mortgages. This bill will keep that from happening again. It 
should never have happened before. This will keep it from happening 
again.
  I reserve the balance of my time.
  Mr. NEUGEBAUER. Mr. Chairman, it is my pleasure now to yield 5 
minutes to the gentleman from Texas (Mr. Hensarling), who has been a 
strong advocate of making sure that Americans have plenty of 
opportunities and plenty of choices when they look at their financial 
products.
  Mr. HENSARLING. Mr. Chairman, I thank the gentleman for yielding.
  Mr. Chairman, this is a very, very serious topic. Unfortunately, it 
is being addressed with a very, very disappointing bill.
  I heard several of my colleagues on the other side of the aisle say 
this is all about protecting consumers. It is a piece of legislation, 
Mr. Chairman, which will protect them right out of their homes. I don't 
think that is the type of protection that the consumers or America are 
looking for.
  What this bill will do, if this Chamber passes this and ultimately if 
it is signed into law, it means the Federal Government will 
functionally be taking away homeownership opportunities from the 
American people. It will cause an increase in interest rates for people 
as they seek to either buy a home or keep the homes they have. It 
changes the rules to where once again those who follow the rules will 
end up having to bail out those who do not.
  Now, in the previous debate on the rule I heard the distinguished 
chairman of the full committee and others give us a history lesson 
about the cause, and it is important to learn the lessons of history. 
They were a whole lot less focused upon how this bill will impact the 
future.
  But if we actually look at our history lesson, there is no cause that 
looms larger--looms larger--in the mortgage crisis meltdown than the 
abuses of the government-sponsored enterprises, Fannie and Freddie, 
where government gave them a functional monopoly to go out, make 
profits that could not be achieved in a competitive market, and told 
them to finance loans to people who could not afford them.
  The demand for the subprime mortgage skyrocketed when Fannie and 
Freddie, the government-sponsored enterprises, demanded them. Many on 
the other side of the aisle wanted to roll the dice. Yes, the dice were 
rolled, and the American people lost.
  This is called the Mortgage Reform and Anti-Predatory Lending Act. 
There can be no mortgage reform, Mr. Chairman, without reforming Fannie 
and Freddie. And for those who claim that this has already been 
accomplished, well, now that they have been effectively nationalized, 
when their market share of new mortgages has gone from 50 percent to 
almost 90 percent, when the taxpayers are on the hook for hundreds and 
hundreds and hundreds of billions of dollars, which makes the bailout 
of AIG look cheap, I don't think this is reform, Mr. Chairman.
  With respect to the title of ``anti-predatory lending,'' the bill is 
almost completely silent on predatory borrowing. How can we take this 
as a serious piece of legislation, when we know that FinCEN, the 
Financial Crimes Enforcement Network, has said that over half of the 
mortgage fraud took place with borrowers, those who lied about

[[Page H5182]]

their income, they lied about their wealth, they lied about their 
occupancy; yet, the bill is almost completely silent. It only says, oh, 
by the way, if you are caught defrauding your lender, we are not going 
to allow you to sue him.
  Otherwise, there is a complete explosion of liability exposure on the 
lender side. And we know what happens in lawsuit abuse, Mr. Chairman. 
It gets poked into the price of every single mortgage. People will pay 
higher mortgages.
  Right now, the plaintiffs' trial attorneys, I have no doubt, are 
licking their chops over this legislation. We have such nebulous terms 
as ``net tangible benefit,'' ``reasonable ability to repay.'' Well, 
what is the net tangible benefit? If somebody wants to refinance their 
home and update their kitchen, is that a net tangible benefit? Maybe it 
is. How about if they want to refinance their home to put in a swimming 
pool? Is that not a net tangible benefit?
  If there is somebody on the other side of the aisle who would answer 
those questions, I would be happy to yield time.
  Well, seeing none, I think that buttresses my point, Mr. Chairman, 
that nobody knows how to define these terms.
  So, ultimately what we are going to have are fewer mortgages being 
made. This is Uncle Sam telling you, with a couple of exceptions, if 
you can't qualify for a 30-year fixed mortgage, then we are going to 
deny you the homeownership opportunity in America, because we are 
smarter than you. We know better than you. We have to protect you from 
yourself.
  If we want true protection, we need effective disclosure. Mortgage 
fraud needs to be treated equally on the borrower's side and the 
lender's side. And at a time of a national credit crisis, we need to be 
finding ways to help the American families with more credit for their 
needs, not less.
  This bill needs to be rejected.
  Mr. WATT. Mr. Chairman, I yield 2 minutes to the gentleman from New 
Jersey (Mr. Pascrell).
  Mr. PASCRELL. Mr. Chairman, I hope folks are watching and listening. 
We had a debate on credit cards. You heard the debate last week. Now 
you know who is on the side of the consumer and who is dealing in 
gibberish.
  Secondly, we have a debate today on the Anti-Predatory Lending Act. 
There is no doubt about this. To insinuate that the primary problem is 
with those who borrow the money is outlandish and cannot be backed up 
with any data whatsoever. So I rise in strong support of H.R. 1728, 
which would curb the abusive and predatory lending that led directly to 
the subprime mortgage crisis and the recession we now face.
  I want to thank Chairman Frank for his hard work on this legislation. 
In my county of Passaic, New Jersey, one out of every 21 homes is in 
foreclosure.

                              {time}  1145

  In my hometown of Paterson, New Jersey, 2,700 mortgages are currently 
in default; that is one out of seven. And to hear the other side--or 
many on the other side, that is--is outlandish. You cannot support what 
you're talking about. My district office receives dozens of calls every 
day from my constituents who cannot pay their skyrocketing mortgages 
and fear imminent eviction.
  For years, as the housing bubble grew, unscrupulous brokers, in a 
quest for higher commissions and higher profits, preyed on the American 
Dream of homeowners by signing borrowers, many of them unqualified, up 
for risky, adjustable rate, subprime mortgages. That is what we are 
talking about today. That is what we are going to correct.
  Subprime, high-interest and high-fee mortgage lending grew from 8 
percent of the total mortgage lending in 2003 to 28 percent in 2006. 
Additionally, of the subprime mortgages originating in just 2004 to 
2006----
  The CHAIR. The gentleman's time has expired.
  Mr. WATT. I yield the gentleman an additional 30 seconds.
  Mr. PASCRELL.--in those 2 years, Mr. Chairman, 90 percent came with 
an exploding adjustable interest rate. How do you blame that on the 
borrowers? Seventy percent came with a prepayment penalty. How can you 
blame that on the borrowers? Seventy-five percent included no escrow 
for taxes and insurance, and over 40 percent were approved without 
fully documented income. They didn't ask it. They didn't even ask it. 
They are responsible to lenders.
  By 2007, according to the Joint Economic Committee, these subprime 
mortgages were being foreclosed at the rate of 10 times more than fixed 
rate mortgages.
  I hope we support this legislation, Mr. Chairman.
  Mr. NEUGEBAUER. Mr. Chairman, it is my honor now to yield 3 minutes 
to the gentleman from Minnesota (Mr. Paulsen).
  Mr. PAULSEN. I thank the gentleman for yielding.
  Mr. Chairman, this bill today has the word ``reform'' in it, the 
Mortgage ``Reform'' Act; but unfortunately, the reform that it is 
proposing would only further hurt the housing market and leave aspiring 
homebuyers with less choice, ultimately keeping them out of a new home. 
In short, this bill will do more harm than good.
  Rather than helping revive the economy, this bill will tie the hands 
of mortgage lenders and will do nothing to jump-start a flailing 
housing market. How can we expect more people to purchase more homes 
when we make it harder for them to get the mortgages that they need?
  Mr. Chairman, at a recent committee hearing on this bill I asked that 
very question to the director of consumer affairs at the Federal 
Reserve and also of the commissioner of banks for the Commonwealth of 
Massachusetts. Both of these expert testifiers said verbatim, they said 
unequivocally, that this legislation would in fact reduce the number of 
mortgages that are available to consumers.
  It is time for Congress to do a much better job of considering any 
unintended consequences of the legislation that it passes. That is why 
I offered an amendment to this bill that would require the Comptroller 
General to study the effect that this legislation will certainly have 
on the financial institutions that provide mortgages.
  But the reality is, this legislation here today, it still has too 
many problems. And the bill will now open up even safe mortgages to 
litigation by trial lawyers and activist groups. And now hardworking 
people that want to own a new home are going to have to pay the price 
in the form of higher mortgage interest rates. So this bill not only 
gives more opportunities for trial lawyers, it in fact is going to use 
taxpayer money to subsidize those lawsuits, about $140 million of 
taxpayer money subsidizing lawsuits.
  Finally, this bill is called the Mortgage Reform bill, yet it 
contains no reform of Freddie Mac or Fannie Mae, which have left the 
taxpayers on the hook for billions and billions and billions of dollars 
because of bad mortgage underwriting practices.
  We should oppose this legislation. We should get it right. We should 
do nothing that is going to hurt the availability of mortgages, 
especially to first-time homebuyers. And hopefully we will move in a 
direction that is going to help not increase costs, but also make 
credit more available. So I would urge opposition to the bill.
  Mr. WATT. Mr. Chairman, I reserve the balance of my time in an effort 
to equalize the time.
  Mr. NEUGEBAUER. Mr. Chairman, I yield myself 3 minutes.
  The example I would use here today, imagine taking your car to the 
repair shop and saying, you know, my car is not running very well, it 
is running rough. And immediately the service attendant reaches over, 
pulls up your hood, and starts taking the engine out. And you stop and 
you say, wait a minute, what are you doing? And they say we are going 
to put a new engine in, you said your engine wasn't running correctly. 
That is before we did any diagnostic work to maybe determine whether it 
needed new spark plugs, or maybe it needed a new valve, or something 
like that.
  And, really, we have started down a road here. We have had one of the 
most robust housing finance systems in the world. It has been the envy 
of the world. It has allowed record levels of homeownership for 
American families. Yes, it is running a little rough right now and we 
will need to get to the bottom of that, we need to diagnose what those 
problems are. The Federal Reserve is going down that road; they

[[Page H5183]]

have promulgated some new rules. We have said that now people who are 
going to originate mortgages are going to have to be registered.
  But the problem here is that my friends are going down the road here 
without really determining all the places in the engine that could be 
causing the engine not to run correctly, they want to put a new engine 
in there--an untested engine.
  Quite honestly, I spent a number of years in the housing business. I 
built houses, I made mortgage loans, I have borrowed money, I have 
originated mortgages. And one of the things I know is that not every 
mortgage fits every situation. A lot of people were able to enjoy the 
American Dream because they were able to get a mortgage tailored to 
their financial needs. What this bill does is says, you know what, the 
government is going to tell you what kind of mortgage you get. And if 
you don't take the government mortgage, it might not allow you to get 
the house that you want. It is like, not only is the government going 
to put a new engine in your car, but, by the way, the government says, 
scoot over, now we are going to drive.
  We have seen, in the last few months, a major government intervention 
into financial markets, into automobile companies, into insurance 
companies. Last week, we saw that the Federal Government is going to 
tell you what kind of credit card you get to have now. And now my 
colleagues on the other side want to tell you what kind of mortgage you 
get, which is going to tell you what kind of house you get. That is not 
the American Dream; that's the Government Dream. Quite honestly, my 
colleagues are dreaming if they think this is not going to increase the 
cost of mortgages for families all across the country.
  And you know what happens when you increase the cost of the mortgage? 
It reduces the affordability for those American families. That means 
many of them have to buy smaller houses, or, in some cases, many people 
are priced out of the housing market because they can't get the 
mortgage that meets their needs.
  Let's let the American people have a choice to do that. Let's stop 
and look and give the regulatory measures that have already been 
proposed by the Federal Reserve time to work. And let's make sure that 
we are fixing the things that are broken before we throw out the whole 
engine and leave Americans without the ability to be able to have 
affordable mortgages and afford the American Dream.
  Mr. Chairman, I reserve the balance of my time.
  Mr. WATT. Mr. Chairman, I yield 3 minutes to the Chair of the Capital 
Markets Subcommittee of Financial Services, the subcommittee that has 
responsibility for making sure that there is money available, the 
gentleman from Pennsylvania (Mr. Kanjorski).
  Mr. KANJORSKI. Mr. Chairman, I rise in support of H.R. 1728, the 
Mortgage Reform and Anti-Predatory Lending Act. This bill aims to 
significantly reform mortgage lending and better protect borrowers. I 
have worked on these issues for some time.
  On that point, listening to the little debate before me, I am just 
absolutely amazed. Apparently, my friends on the other side of the 
aisle think we are rushing to judgment here and acting precipitously on 
a bill that is not quite ready to be completed or concluded. I would 
like to call their attention to the record.
  I held hearings in the Poconos, in my congressional district, on 
predatory lending more than 5 years ago. We came back and prepared 
legislation--I may say bipartisan legislation--in predatory lending 4 
years ago. It didn't succeed in passing, but in 2007, we put together 
and introduced another piece of legislation, a predatory lending bill, 
that encompasses many of the issues that are encompassed in this bill. 
That failed to get any action in the Senate, but did pass the House.
  I don't know how long we want to wait, in all honesty, on packaging 
and passing a new mortgage reform and antipredatory lending bill. Yes, 
we will stop too many loans that are bad from being made. Yes, we will 
discourage forms of loans that have caused us trouble in our system and 
have almost brought down our system. This is the beginning of many 
things that are necessary for this Congress to do to straighten out the 
economic woes of this country.
  The predatory lending problems that we have encountered in my State 
of Pennsylvania convinced me that we need to update the Federal law, 
and they convince me of that fact today. I, therefore, previously 
introduced legislation and have participated. And today, I would like 
to focus my comments on that part of the bill that is taken from a bill 
that I prepared over the last 7 years, and that is primarily the 
appraisal package of this bill.
  For the first time, we have established real standards. For the first 
time, we have geared up and provided payoff statements, we have 
provided information to the purchaser and to the entire market--and 
most of all to the lender--that we are not going to have favorite 
appraisers, we are not going to have preselected appraisers, we are 
going to have honest, independent appraisers. That is what this bill 
calls for.
  I think that if you take the bill in its entirety--and none of us, 
including myself, agree with every element or every part of the bill, 
some of it is quite onerous, quite frankly, but the fact of the matter 
is what we have done here today for the first time is create a bill 
that those of us that do not want predatory lending in this country, 
who want to have fair and honest mortgaging in this country, and want 
to attend to the economic problems of this country should adopt and 
pass this bill.
  Mr. NEUGEBAUER. Mr. Chairman, it is my pleasure now to yield 5 
minutes to the ranking member of the full committee, the gentleman from 
Alabama (Mr. Bachus).
  Mr. BACHUS. Mr. Chairman, and Members of the body, this discussion is 
a discussion that has been going on for 5 or 6 years. In fact, it 
predates that.
  In 1999, this body discussed the fact that Freddie and Fannie were 
being pushed into making loans without a down payment. And the New York 
Times, in an article in September, 1999, actually quoted Peter Wallison 
as saying that you are not requiring a down payment, and now the 
Clinton administration is pushing Freddie and Fannie to lower the 
credit standards. And he makes the statement in there that, if they 
fail, the government will have to step in and bail them out the way it 
stepped up and bailed out the thrift industry. In 2005, I made another 
statement that some people considered wild-eyed, and I said that if we 
don't reform the subprime lending market, we are going to have a 
similar situation that we faced with subprime lending.
  Mr. Kanjorski, listening to him reminded me that he and I pretty 
much, I thought, put together a bill--or he said bipartisan 
legislation, what he was talking about is, we were drafting it, and 
Chairman Frank was working on it. And I actually made the statement in 
2005, and I will read my statement: ``Uniform standards in the 
marketplace are essential if the primary and secondary markets are to 
continue to serve as a vital source of liquidity to make mortgages 
available to homebuyers with less than perfect credit. I am committed 
to finding ways to end predatory lending while also preserving and 
promoting access for all homeowners to affordable credit.'' That was in 
May of 2005.
  Chairman Frank said--and I think said accurately--earlier on the 
floor that he and I came awfully close to a consensus in 2005 for a 
bill. I don't, quite frankly, know what happened. I am reading a 
Charlotte Observer statement, and I know Mr. Miller was concerned about 
putting some things in the bill that even some Democrat legislators 
objected to and I felt would limit access to credit. It is striking 
that I look at this House bill, 1728, and I will say this, Mr. Miller 
and Mr. Watt, this is essentially what you were advocating back in 
2005. But at that time, I thought there was a bipartisan feeling--that 
I actually submitted in draft form--that didn't contain some of these 
things. Because I really sincerely believe that you will eliminate many 
worthy borrowers with this legislation because it is almost a one-size-
fits-all.

                              {time}  1200

  There's going to be a lot of loans that could be made and people 
could buy a home, and that's a delicate balance. That's a balance we 
obviously violated throughout the 1990s by putting people in homes that 
shouldn't be there. And

[[Page H5184]]

Mr. Miller, I think, and Mr. Watt have argued that if they have to pay 
a certain price, it just won't work, and many of my Republican 
colleagues agree to that. And as I said, I submitted draft legislation 
for consideration, but we couldn't get there.
  If you will recall, the other body said they were not going to take a 
provision on securitization. They weren't going to take it. And here we 
are today, 4 years later, and we all agree that there needs to be skin 
in the game, but this legislation before us is not the legislation that 
Mr. Kanjorski has talked about that I was ready to move in 2005 or 
2006, that Mr. Frank talked about, and it was essentially the 
legislation of Mr. Watt. I believe it was wrong then; I believe it's 
wrong now.
  The Acting CHAIR (Mr. Pastor of Arizona). The time of the gentleman 
has expired.
  Mr. NEUGEBAUER. I yield the gentleman an additional minute.
  Mr. BACHUS. Let me tell you what I believe, and I believe Mr. Watt 
and Mr. Miller are sincere. According to the Charlotte Observer, we 
were close to an agreement. I have no idea what happened.
  But let's talk about today. Let's talk about today, and let's assume 
and I assume, and I think I'm right, that we have all been very 
concerned about this. The legislation today, I think all the testimony 
in the hearings has been that poor origination standards plagued the 
mortgage industry and we need origination reform. We did something last 
year. We started proposing in 2005 registration of all brokers.
  The Acting CHAIR. The time of the gentleman has again expired.
  Mr. NEUGEBAUER. I yield the gentleman an additional 2 minutes.
  Mr. BACHUS. To register all mortgage originators, and that has been a 
tremendous success. We have got a lot of people committing fraud in 
starting those loans, and I think we are putting an end to that through 
legislation.
  We need to work on something else, and I think we all agree. I have 
an amendment that I'm going to the Rules Committee to propose, and I 
think there are some Democratic amendments. There are now people coming 
in and promising people they'll work out these foreclosures, and they 
are defrauding people who are actually going through a foreclosure, 
which is outrageous; and this bill needs a strong provision on that.
  But here's what it doesn't do: Chairman Frank and I supported in the 
last Congress H.R. 3915. Look at that bill and look at this bill. That 
included licensing and registration of originators as the first title. 
That's what I had proposed. The Senator from California proposed a 
similar thing and introduced it in the Senate. I introduced it in the 
House. That's now passed. It was approved by a large bipartisan 
majority.
  But H.R. 1728, the bill before us, it strikes a far different 
balance, and I believe it's one that will undermine the mortgage market 
at the worst possible time. We are just starting to see preliminary 
signs of a possible housing recovery. Look at the numbers. Loans are 
being made. But H.R. 1728, the bill before us, it lacks clarity needed 
to provide, I think, meaningful protection to consumers. That was the 
testimony in the hearings from a coalition of consumer advocacy groups 
and labor groups. It manages to punish both responsible industry 
participants and worthy borrowers at the same time.
  The Acting CHAIR. The time of the gentleman has again expired.
  Mr. NEUGEBAUER. I yield the gentleman an additional minute.
  Mr. BACHUS. I am going to go fairly quickly, Mr. Chairman.
  Rather than focusing on basic underwriting standards we were doing in 
2005 and 2006 and in Chairman Frank's bill last year, we are not doing 
that anymore. Now, part of that is the Federal Reserve has adopted 
comprehensive antipredatory lending regulations. Mr. Garrett mentioned 
that. And those are going forward, and it's almost like this bill 
doesn't realize what has happened over the last year or two. It will 
expose the mortgage financial industry to substantial litigation risk. 
There was plenty of testimony on that. The cost of these inevitable 
lawsuits are going to be passed on to consumers.
  I actually proposed in my draft an individual right of action if 
people violated the standards that we were close to agreeing to. Many 
lenders have said they'll stop offering certain mortgage products that 
people are taking now. They're successful in paying them back.
  The Acting CHAIR. The time of the gentleman has again expired.
  Mr. NEUGEBAUER. I yield the gentleman an additional 1 minute.
  Mr. BACHUS. Consumer advocates, Federal regulators, Members on both 
sides of the aisle expressed reservation on the bill before us. Margot 
Saunders, and I'm going to quote here again, National Consumer Law 
Center, we worked with her, the gentleman from North Carolina and I, on 
trying to fashion a bill. She was for the bill last year. She says that 
this bill is ``convoluted and virtually impossible as a mechanism to 
solve the current problem.'' Now, she was testifying on behalf of a 
coalition of consumer advocacy groups.
  The administration is working out a plan right now to resolve 
troubled mortgages, and we shouldn't make it more difficult for worthy 
borrowers to get home loans while they're doing that. A ``yes'' vote 
will do exactly that. It will raise the cost of mortgage credit, limit 
the availability to millions of Americans. It won't give the certainty 
that our mortgage market needs. It's poorly crafted and ill defined.
  Mr. WATT. Mr. Chairman, I yield 2 minutes to the gentlewoman from 
Illinois (Ms. Schakowsky).
  Ms. SCHAKOWSKY. I thank the gentleman for yielding to me.
  Mr. Chairman, I rise today in strong support of the Mortgage Reform 
and Anti-Predatory Lending Act.
  According to a recent report, foreclosures in Chicago doubled from 
2006 to 2008 and continue today. It was Chicago's 50th Ward, a solidly 
middle class community where I grew up, that saw the highest increases 
in foreclosures, 360 percent in just 2 years.
  When most people walk into a mortgage closing, they bring with them 
the hopes and dreams of their futures and those of their children and 
the full intention of being responsible homeowners. But actions by 
unscrupulous and downright predatory lenders put many Americans into 
loans that they couldn't afford, and the consequences are clear.
  This bill offers protections for homebuyers that are long overdue. 
I'm one of many to have worked for years on this issue, including our 
late and beloved Stephanie Tubbs Jones. We wrote legislation that would 
stop predatory lending in the mortgage industry, including requiring 
certification of brokers and enactment of basic consumer protections. 
And this critical bill builds on those efforts to create standards for 
lenders and mortgagers.
  I'm also pleased that this measure includes Mr. Ellison's bill to 
provide additional protection for tenants of foreclosed property. The 
foreclosure crisis for renters has been mostly a hidden consequence, 
but in States like Illinois, New York, Nevada, foreclosures on rental 
properties have represented nearly half of all foreclosures, uprooting 
families and wreaking havoc on communities.
  I want to thank Chairman Frank and Mr. Watt and Mr. Miller, and I 
urge all my colleagues to support swift passage of this measure.
  Mr. NEUGEBAUER. Mr. Chairman, I reserve the balance of my time.
  Mr. WATT. Mr. Chairman, I yield 2 minutes to the gentlewoman from 
Illinois, a member of the committee, (Ms. Bean).
  Ms. BEAN. I thank the gentleman for yielding.
  Mr. Chairman, I rise today to urge my colleagues to support H.R. 
1728.
  As an original cosponsor, I want to commend Chairman Frank for his 
leadership and also thank Mr. Watt for working with Congressman Castle 
and me to refine the qualified mortgage safe harbor to ensure that 
traditionally safe, stable loans are included.
  Today's bill follows up on the important work this House did early 
last Congress. Unfortunately, despite the strong bipartisan support of 
that bill, the Senate failed to act. I am hopeful that this year's bill 
will more swiftly move through the Senate and to the President's desk 
for signing into law.
  H.R. 1728 brings mortgage lending back to reality. It will ensure 
that mortgages are fully underwritten, income is properly documented, 
and borrowers have the ability to make their payments.

[[Page H5185]]

  The subprime mortgage crisis that we continue to deal with today 
wouldn't have happened if we had not relaxed bedrock principles of 
sound lending and underwriting. The bill requires lenders to keep some 
skin in the game for the loans they originate by requiring them to 
retain 5 percent of the loan value when they seek to securitize a 
mortgage in the secondary market. This concept of risk retention was 
endorsed by the New Dem Coalition as part of our Reg Reform Principles 
in February of this year, and we're pleased to see it included in the 
bill.
  I'm also pleased that it maintains a provision I wrote last Congress 
regarding the disclosure of negative amortization loans. Negative 
amortization occurs when unpaid interest gets added to the principal 
balance of a loan. Some borrowers enter into products with negative 
amortization not realizing that they're adding to the cost of their 
mortgage each month instead of paying principal down. The underlying 
bill requires lenders to disclose to borrowers if their loans allow the 
practice and requires credit counseling from a HUD-certified credit 
counseling agency for first-time borrowers considering such a loan.
  All of our constituents want better consumer protections and simpler 
disclosure of mortgage terms. They want homeownership to mean qualified 
borrowers make their payments, build equity, and keep their homes.
  I urge my colleagues to support it.
  Mr. NEUGEBAUER. Mr. Chairman, I yield myself 2 minutes.
  Mr. Chairman, I don't think that there's any disagreement in this 
House, and certainly not on our side, that predatory lending is bad, 
and we have taken steps to do that. The Fed has taken steps to do that. 
We want to make sure that people have the right choice of mortgage to 
be able to take a mortgage out that allows them to own a home.
  The problem with this bill is that it really starts to mess up the 
conduit of how mortgages are made. And a little bit of history on that 
is a mortgage is made in your local bank or a mortgage banking company. 
It is then sold into the secondary market. Investors buy those 
mortgages so that those banks and mortgage companies can originate more 
loans, and that's how we have built this great housing market in this 
country.
  What this bill does is it begins to put liability and uncertainty at 
a time there's already a tremendous amount of uncertainty in the 
secondary market. In fact, the secondary market in this country right 
now is shut down because of uncertainty, and now we want to dump a 
whole bunch or more of contingent liability and uncertainty on the 
secondary market to the point where I'm not sure whether we'll ever be 
able to start that engine.
  So what I think what our colleagues are trying to do is to say 
somehow that Republicans are not against the predatory lending. Of 
course we're against predatory lending, and steps have been taken. But 
what we are for is making sure that there is a mortgage market left 
when this all blows over. Yes, the market has had a hiccup and people 
are now trying to ascertain what the new rules are going to be. They've 
seen the government take over banks and get involved in all kinds of 
businesses. So there is a lot of uncertainty out there. And the 
question is, was a lot of this a lack of oversight or was it a lack of 
a bunch of regulations? I would submit in many cases this was a case 
where there was not appropriate oversight.
  The Acting CHAIR. The time of the gentleman has expired.
  Mr. NEUGEBAUER. I yield myself an additional minute.

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