[Congressional Record Volume 155, Number 69 (Wednesday, May 6, 2009)]
[House]
[Pages H5185-H5188]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1215

  And so now worse, because before we really check and see whether the 
oversight was being done appropriately, we are going to dump a bunch of 
regulation on the marketplace, the very fragile marketplace, financial 
marketplace right now, which was the source of funds for mortgages that 
allowed many people to have homes.
  Now, some of these loans, quote, that were subprime, were not all 
predatory. And I think one of the things that we have done, we have 
lumped two things in there. Some of those subprime loans were not to 
normal underwriting standards but they were tailored so that that 
person could buy a home. You know what, Mr. Chairman, a number of those 
people still are in those homes and making those payments.
  And now we are going to take this category of a broad blanket, of 
throwing the big blanket over the whole mortgage market and saying, you 
know, it was predatory. But that's not the case.
  We ought to take thoughtful consideration about what we are doing to 
this secondary market because we are going to dry up mortgage funds for 
American families.
  I reserve the balance of my time.
  Mr. WATT. Mr. Chairman, would you advise how much time remains on 
each side.
  The Acting CHAIR. The gentleman from North Carolina has 9 minutes, 
and the gentleman from Texas has 3 minutes.
  Mr. WATT. Mr. Chairman, I yield 2 minutes to a valued member of the 
Committee on Financial Services who has been involved in the process 
throughout, Mr. Al Green of Texas.
  Mr. AL GREEN of Texas. I thank the chairpersons for the stellar job 
that they have done. I especially thank you, Mr. Frank, for the fine 
work that you have done in leading us.
  Mr. Chairman, this is not just a good deal, it really is a great 
piece of legislation. Because after the exotic products that were 
placed in the marketplace--3/27s, 3 years of fixed rates, 27 years of 
variable rates, 2/28s, prepayment penalties that coincided with teaser 
rates--after these exotic products, this bill is necessary. This bill 
addresses these exotic products. It makes sure that lenders are making 
loans to people who can afford the loans, they can afford to pay the 
loans back. A relationship between borrower and lender was fractured.
  This bill seeks to restore that relationship, but it does something 
else that is exceedingly important, and it was mentioned very briefly. 
It addresses the concerns of people who are paying their rent. Their 
rent is paid and they find themselves being evicted because the 
property they are living in is being foreclosed on.
  The foreclosure was no fault of the tenant, yet the tenant now has to 
move away from the school that the child attends. They have to move 
from the job where they work, the community that they reside in, simply 
because the owner was foreclosed on, and the tenant did not have 
anything to do with the foreclosure.
  This bill addresses it. It gives either a fair amount of notice or it 
allows the tenant to continue with the lease that has been in place. 
This is a good piece of legislation.
  I am going to ask that all of my colleagues please support it. Mr. 
Watt, I thank you for the fine job you have done. Chairwoman Waters, I 
thank you for the fine job that you have done. I beg that that 
legislation pass.
  Mr. NEUGEBAUER. I reserve the balance of my time.
  Mr. WATT. Mr. Chairman, I yield 2 minutes to the gentlelady from 
California, chairwoman of the Housing Subcommittee of Financial 
Services, Ms. Waters.
  Ms. WATERS. Mr. Chairman, I rise today in strong support of H.R. 
1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. I 
would like to thank Financial Services Committee Chairman Barney Frank 
for his commitment to bringing this legislation to the House floor.
  I would also like to recognize the leadership of Representative Mel 
Watt and Representative Brad Miller, who wrote this bill and who have 
been working towards reform of predatory lending practices since the 
last Congress.
  I am especially appreciative for them working on concerns that I had 
about prepayment penalties and the way that they have resolved them, 
targeting the subprime market and phasing out those even in the prime 
market.
  I am also appreciative for the work that they have done scaling back 
on any State preemption that was in the bill.
  My California attorney general now supports the bill, and we are very 
appreciative for that.
  This bill before us today will ensure that the subprime meltdown, 
which is causing 6,600 foreclosures each day, reducing the property 
values of 73 million homeowners, strangling the credit

[[Page H5186]]

markets and crippling our largest financial institutions, will not 
happen again.
  First, H.R. 1728 would ban the abusive compensation structures, such 
as yield-spread premiums, that create conflicts of interest or award 
originators that steer borrowers into loans that are not in their best 
interest. This protection is needed because many struggling homeowners, 
especially minority or low-income homeowners, were intentionally 
steered into high-cost mortgages by unscrupulous lenders and mortgage 
brokers.
  Second, H.R. 1728 would require loan originators to hold at least 5 
percent of the credit risk of each loan that is later sold or 
securitized by requiring lenders to have ``skin in the game.''
  H.R. 1728 is a good bill. I would ask my colleagues to support this 
legislation.
  Mr. NEUGEBAUER. It is my pleasure to yield 2 minutes to the 
gentlewoman from Illinois (Mrs. Biggert).
  Mrs. BIGGERT. I thank the gentleman for yielding.
  Mr. Chairman, I would like to thank Chairman Frank and my colleagues 
from both sides of the aisle for working with me on this bill to 
improve it.
  Too many Americans are losing their homes. Some fell victim to 
unscrupulous practices and fraudsters. Some got into a loan they 
couldn't afford, and others are subject to traditional reasons for 
foreclosure. But this bill attempts to get at some of the root causes 
of these nontraditional reasons homeowners get into trouble, but by no 
means is it a finished product.
  For example, regulators testified that they don't know how the risk 
retention or ``skin in the game'' provision would work, so I think this 
provision needs to be better understood before becoming law. Also 
needing work is a provision that classifies new kinds of mortgages as 
subprime and unnecessarily replicates the Federal Reserve's new 
regulations set to take effect in October.
  And yet a third provision of this bill perhaps too narrowly defines 
which mortgages qualify for a safe harbor, which could result in an 
uptick in unfounded lawsuits and fewer options for creditworthy 
borrowers. It's important that we ``do no harm'' and carefully craft 
provisions that won't hamper our efforts to jump-start and restore our 
confidence to the housing market.
  At the same time, this bill does have some good provisions. Identical 
to a housing bill I have, title 4 expands HUD's coordination and 
capacity to offer grants to States and local agencies, which are at the 
forefront of helping homeowners.
  Section 106, which I authored with Congressman Hinojosa and 
Congressman Neugebauer, temporarily suspends HUD's new RESPA 
regulations and requires HUD to coordinate with the Fed to update 
mortgage disclosure regulations. Last August, HUD ignored a letter 
signed by 244 Members of this body requesting that the two agencies 
work together, so section 106 will require it.
  One of the major actors undermining the housing market is appraisal 
fraud. Titles 5 and 6, which I worked on with Congressman Kanjorski, 
will improve the integrity.
  Mr. WATT. Mr. Chairman, I yield myself 1 minute.
  Mr. Chairman, my colleague from North Carolina identified a whole 
list of things that had gone awry in the lending community that formed 
the basis for this bill, and we have tried to address them by requiring 
lenders to assess the borrower's ability to repay the loan by requiring 
borrowers to at least make sure that the lender is getting some kind of 
tangible benefit out of a loan that they make to them, by requiring 
lenders to verify the income of people that they are making loans to, 
and by setting up standards for appraisers to do responsible appraising 
and by creating broker responsibilities.
  Nobody can argue with those things and nobody should argue with those 
things. And if you support them, you should be supporting this bill.
  I reserve the balance of my time.
  Mr. NEUGEBAUER. I would ask the gentleman, does he have any 
additional speakers?
  Mr. WATT. We have a closing speaker. So if the gentleman is ready to 
close, he can go ahead, and we have one more speaker.
  Mr. NEUGEBAUER. Thank you.
  Mr. Chairman, Republicans are for good disclosure, open disclosure, 
easy-to-read disclosure. We are for responsible lending. We are also 
for making sure that the American people have low-cost mortgage 
choices.
  What we are not for is a legislation that limits those choices, that 
chokes a very fragile credit market and increases the cost of credit 
for American families all across this country.
  One of the things that is most important to American families today 
is, you know, the cash flow piece of it. And what we are going to do 
now is put so many restrictions on this market that people are going to 
build into that a cost for mortgages, and so mortgage rates are going 
to go up, choices are going to go down.
  And with this legislation, I am afraid we may never see a secondary 
market that was as good and as fruitful for mortgage lending as the 
previous one we had. That's the reason I am going to encourage my 
colleagues to vote ``no'' on this legislation. We can do better than 
that. We do not have to shut down the mortgage market, but we can make 
for responsible lending.
  Mr. WATT. Mr. Chairman, I recognize the chairman of the full 
Financial Services Committee for a closing statement and yield him the 
balance of our time.
  Mr. FRANK of Massachusetts. Mr. Chairman, I would say this: I note my 
Republican friends tell me they are opposed to predatory lending. At no 
point, however, have they taken any initiative in bringing any 
legislation to the floor to deal with it or to urge that it be done in 
a regulatory way.
  For 12 years they were in control, not a single bill came forward. My 
friend from Alabama did have a sincere interest here, and he had a good 
proposal. It wasn't until the Democrats were in the majority and we 
brought a bill to the floor that he was able to offer his bill, which 
we embraced. And even then, while he voted for the final bill, two-
thirds of his colleagues voted ``no.''
  Now, some have said this is going to do terrible damage to the 
mortgage market. I think Members would agree that no organization is 
more interested in having that well functioning than the National 
Association of Realtors.
  Mr. Chairman, I submit for the Record a letter from the National 
Association of Realtors dated May 5, 2009.


                             National Association of Realtors,

                                      Washington, DC, May 5, 2009.
     House of Representatives,
     Washington, DC.
       Dear Representative: On behalf of the 1.2 million members 
     of the National Association of REALTORS (NAR), their 
     affiliates, and property owners, I strongly urge Congress to 
     vote ``yes'' on H.R. 1728, the ``Mortgage Reform and Anti-
     Predatory Lending Act of 2009''.
       REALTORS are acutely aware that there is a need for 
     mortgage reform, and NAR believes that H.R. 1728 strikes an 
     appropriate balance between safeguarding the consumer and 
     making sure consumers have access to mortgages at a 
     reasonable cost. NAR is a strong advocate of protections for 
     consumers in the mortgage transaction, and REALTORS support 
     the general principle that all mortgage originators should 
     act in good faith and with fair dealings in a transaction, as 
     well as treat all parties honestly.
       REALTORS have a strong stake in preventing abusive lending 
     because it erodes confidence in the Nation's housing system, 
     and citizens of communities, including real estate 
     professionals, are harmed whenever abusive lending strips 
     equity from homeowners. As consumer abuse in mortgage lending 
     increased, REALTORS sought to protect consumers and the 
     housing market by establishing a set of ``Responsible Lending 
     Principles'' that form the basis for our advocacy with 
     Congress. Since their creation in 2005, REALTORS have shared 
     these principles with Congress during discussions of current 
     and past anti-predatory lending legislation. NAR is extremely 
     pleased that H.R. 1728 embodies the REALTORS ``Responsible 
     Lending Principles''.
       Therefore, NAR strongly supports H.R. 1728, and asks that 
     you indicate to consumers and the housing market your support 
     for them by voting ``yes'' for this legislation. I thank you 
     for the opportunity to voice our support for H.R. 1728. And 
     as always, NAR remains at the call of Congress, and our 
     industry partners, to help in the recovery of the housing 
     market and the overall economy.
           Sincerely,

                                  Charles McMillan, CIPS, GRI,

                                                   2009 President,
                                National Association of REALTORS.

  The National Association of Realtors strongly urges people to vote 
for this. The National Association of Realtors--knowledgeable and 
committed to homeownership--strongly supports this.

[[Page H5187]]

  My friend from Alabama alluded to some consumer groups, labor groups 
that had some problems. They have since largely been alleviated. I must 
say, if we would alleviate them further, he would hate the bill more. 
But the fact is that the groups he alluded to are, on the whole, 
pleased with the bill now.
  But, finally, I want to address the question of Fannie Mae and 
Freddie Mac. My colleagues have said, well, how can you do this without 
Fannie Mae and Freddie Mac legislation? Again, during the 12 years of 
the Republican rule, no bill passed for Fannie Mae and Freddie Mac and 
became law. In our 2 years, one did.
  Yes, I think further action is needed there. Where is their bill, Mr. 
Chairman? No Republican has offered, in the 2 years that I am aware of, 
as an amendment to this--or in any way--that bill. So they say you 
can't do predatory until you do Fannie Mae and Freddie Mac. They 
offered no such amendment. So it simply becomes as an excuse not to do 
things.
  Now let's talk about Fannie Mae and Freddie Mac and who is 
responsible for what. There have been some quotes. Let me quote from 
here.
  ``In 2004,'' Bush administration, Republicans in Congress, ``the 
Department of Housing and Urban Development revised these goals, 
increasing them to 56 percent of their overall mortgage purchases by 
2008, and additionally mandated that 12 percent of all mortgage 
purchases by Fannie Mae and Freddie Mac be `special affordable' loans 
made to borrowers with incomes less than 60 percent of an area's median 
income.''
  In 2004, the Bush administration mandates this. This is under 
Republican control.
  Then, let me go to line 20 on page 183. ``After this authorization to 
purchase subprime securities,'' which had come from the Clinton 
administration in 1995, ``subprime and near-prime loans increased from 
9 percent of securitized mortgages in 2001 to 40 percent in 2006,'' 
during the Bush administration.
  Yes, there was a great explosion in subprime mortgages brought by 
Fannie Mae and Freddie Mac and, in general, under the Bush 
administration. Earlier in that decade, I said I didn't think Fannie 
Mae and Freddie Mac were in crisis.
  By 2004, I agreed that they were pushed, in part, by the Bush 
administration. And in 2004, I criticized the decision that is 
mentioned here on lines 6 through 14 to increase what Fannie Mae and 
Freddie Mac did.
  Let me say, Mr. Chairman, if people think I am quoting selectively, I 
want to pay tribute sincerely, because it works out good for me in this 
case, to the illogical integrity of the gentleman from Texas.
  Because I am quoting from the amendment put in this bill by the 
gentleman from Texas, I urge people to read page 183 of the bill. It is 
language that was offered by the gentleman from Texas, Mr. Hensarling--
not Mr. Green, not Mr. Hinojosa, Mr. Hensarling--and we accepted it.
  It clearly documents that the explosion in subprime loans came under 
Republican control. The increase in Fannie Mae and Freddie Mac subprime 
loans came then.
  Yes, I was wrong to say earlier in the decade there wasn't a problem, 
because I didn't anticipate the extent to which the Republicans were 
going to push Fannie Mae and Freddie Mac into the hole. I then did join 
with Mr. Oxley in trying to get legislation through.
  In 2005, I voted for a bill in committee that Mr. Oxley had.

                              {time}  1230

  My colleague, Mr. Hensarling, voted against it in committee. Then we 
flipped on the floor because we had a disagreement about housing. And I 
got my way on housing in the committee, he got his way on housing in 
the floor, and we flipped. But the fact is that the bill then failed in 
2005. Not until 2007, when we had the majority, was any legislation 
dealt with, in an effective way, on Fannie Mae and Freddie Mac and was 
any bill even considered on subprime lending.
  Ms. JACKSON-LEE of Texas. Mr. Chair, I rise today in strong support 
of H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act. 
Additionally, I would like to extend my gratitude to my distinguished 
colleague, Representative Brad Miller from North Carolina for 
introducing this important legislation. This act is designed to prevent 
a recurrence of the problems in the subprime market that are 
responsible for harming many American homebuyers. If passed, this 
legislation will promote financially friendly terms throughout banking 
establishments and mortgage lenders which will help all American 
citizens in the current economic crisis. I urge my colleagues to 
support this important bill.
  H.R. 1728 will prohibit steering incentives in connection with 
origination of mortgage loans; this act will also direct the federal 
banking agencies to prohibit or condition terms, acts, or practices 
relations to residential mortgages loans that are abusive, unfair, 
deceptive, predatory, inconsistent with reasonable underwriting 
standards, or not in the interest of the borrower. These stipulations 
will ensure the people are not lured into mortgage loans for the wrong 
reasons or when they cannot afford the loan. We must establish a system 
of accountability in our country, and H.R. 1728 will enable a strong 
structure that will provide financial responsibility for both lenders 
and borrowers.
  H.R. 1728 also includes a number of other rules and regulations to 
help the mortgage industry. Some of these stipulations include:
  Permitting a consumer to assert a right to mortgage loan rescission 
as a defense to foreclosure
  Prohibits specific practices such as (1) certain repayment penalties, 
(2) single premium credit insurance, (3) mandatory arbitration, and (4) 
mortgages with negative amortization.
  Sets forth tenant protections in the case of foreclosure
  Requires a six-month notice before a hybrid adjustable rate mortgage 
is reset
  Establishes pre-loan mortgagor counseling as a prerequisite to a 
high-cost mortgages
  Prescribes mandatory disclosures in monthly statements for 
residential mortgage loans
  All these stipulations are set forth to protect the consumer from 
being uninformed and unknowledgeable and the process, procedures, and 
legal rules pertaining to their mortgage.

                                 Texas

  In 2007, Texas ranked fourth behind California, Florida, and Illinois 
in pre-foreclosures. Last year, Texas held the top seat for active 
foreclosures.
  We cannot continue to stand by as things get worse. Texas reported 
13,829 properties entering some stage of foreclosure in April, a 16% 
increase from the previous month and the most foreclosure filings 
reported by any state. The state documented the nation's third highest 
state combined foreclosure rate one foreclosure filing for every 582 
households.
  Many homeowners in my district are worried about missing their next 
house payment or their next home equity mortgage, or their interest 
rate going up. These families are under stress and in constant fear of 
losing their homes. While H.R. 1728 is not the last word in mortgage 
legislation, it is a great beginning.
  Phil Fontenot and his wife, Kim Monroe, qualified for a $436,000 
dollar mortgage although they ran a small day care center. A mortgage 
broker approached the Fontenots and offered to get them a loan. They 
told the broker the most they could afford was $2,500 a month, but with 
their adjustable mortgage it jumped to $4,200, a price nearly twice 
their monthly budget. Without a lawyer, the Fontenot's failed to 
realize the complexity and precedence of their mortgage.
  In contrast, Matt and Stephanie Valdez say they knew exactly what 
they were doing when they bought a small two-bedroom for $355,000. They 
could afford the initial payments and planned to refinance the mortgage 
before the interest rate jumped to 11 percent. But they couldn't do it 
because the value of the house had fallen below what they owed on the 
mortgage. They say they can afford the higher payments, but see no 
point in making them.
  One first-time home buyer, a Hispanic--minority, 760 credit score, 
which should make her eligible for the best loan products out there, 
got a subprime of 2/28, which is a loan that was fixed for two years, 
adjustable for twenty-eight, and with a balloon payment. 760 credit 
score should have the best product available. She lives in an 
apartment, and not even in the house, because she can get an apartment 
cheaper and still have extra money to help pay the mortgage on the 
house that she owns. And she's hoping to refinance, to do something 
before it adjusts in 2008.
  These are the atrocities that subprime mortgage crisis has brought 
upon the American public, and H.R. 1728 is a start towards alleviating 
these problems.
  Americans are taught to work hard and make money and to buy a house, 
but we are never taught about financial literacy. In these tough 
economic times, it is imperative that Americans know about financial 
literacy; it is crucial to our survival. Americans need to be

[[Page H5188]]

prepared to make informed financial choices. Indeed, we much learn how 
to effectively handle money, credit, debt, and risk. We must become 
better stewards over the things that we are entrusted. By becoming 
better stewards, Americans will become responsible workers, heads of 
households, investors, entrepreneurs, business leaders and citizens.
  I am reminded of how important this issue is to American society, as 
I was invited to attend a financial literacy roundtable panel on Monday 
evening at the New York Stock Exchange. The panel was sponsored by the 
Hope Literacy Foundation. The panel was moderated by John Hope Bryant. 
I was surrounded by some of the great financial literacy experts in the 
nation. At the roundtable, I discussed the importance of financial 
literacy for college and university students. It is important that 
students be taught financial literacy. The facts about students and 
financial literacy are astounding.
  Owning a home is the American Dream, but hundreds of thousands of 
people are on the brink of losing their homes and becoming the next 
victims of the housing crisis. Recently, I joined the Democratic 
Congress in passing the American Housing Rescue and Foreclosure 
Prevention Act of 2008, which will provide mortgage-refinancing 
assistance that will help keep families from losing their homes and 
protect neighboring home values.
  Through vital legislation such as this, and providing key resources 
and tools to my constituents, I will continue to fight and save homes 
and promote fair and informative mortgage policies in Houston as well 
as across this nation.
  The Acting CHAIR (Mr. McDermott). All time for general debate has 
expired.
  Under the rule, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Pastor of Arizona) having assumed the chair, Mr. McDermott, Acting 
Chair of the Committee of the Whole House on the State of the Union, 
reported that that Committee, having had under consideration 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, had come to no resolution thereon.

                          ____________________