[Congressional Record (Bound Edition), Volume 151 (2005), Part 5]
[House]
[Pages 6923-6924]
[From the U.S. Government Publishing Office, www.gpo.gov]




           FEDERAL LEGISLATION TO PROHIBIT PREDATORY LENDING

  The SPEAKER pro tempore (Mr. Fortenberry). Pursuant to the order of 
the House of January 4, 2005, the gentleman from North Carolina (Mr. 
Miller) is recognized during morning hour debates for 5 minutes.
  Mr. MILLER of North Carolina. Mr. Speaker, the financial condition of 
American working and middle-class families is a mess. Wages are 
stagnant, health care costs are exploding, the individual savings rate 
for 2004 was 1 percent, and credit card debt is more than $800 billion.
  The bright spot is that 69 percent of American families own their own 
home. The equity that American families build in their homes by years 
of faithfully paying a mortgage is the bulk of the net worth, the life 
savings, of most homeowners.
  Homeownership is more than an investment. The deed to a home is a 
membership card to the middle class. Families living on the fringes of 
poverty can begin to get their footing when they own their own home and 
become part of a neighborhood where parents know their children's 
playmates. Financially vulnerable families are even more likely to have 
to borrow against the equity in their homes to provide for life's rainy 
days, however.
  Every American homeowner faces a mountain of documents when they 
borrow money to buy a home or when they use their home to secure a 
loan. Many vulnerable homeowners borrow knowing only how much their 
monthly payment will be, only to learn later that they signed away a 
big part of their home equity, of their life savings.
  There are lending practices that should offend anyone with a 
conscience. Let me give my colleagues one of the stories from North 
Carolina that prompted the North Carolina legislature, not generally 
seen as a hotbed of liberalism, to enact legislation to prohibit 
predatory lending 6 years ago.
  A lender approached an elderly school employee in Durham about 
refinancing her home to consolidate her debts. The lender charged her 
$17,542 in up-front costs on a $99,000 loan, including a $5,002 
origination fee, a $2,142 loan discount fee, and a $9,089 single-
payment, nonrefundable credit premium insurance. She would never have

[[Page 6924]]

written a $17,542 check at closing, but when she signed the closing 
documents, the charges came straight out of the equity she had built in 
her home, straight out of her life's savings.
  The North Carolina law enacted in 1999 has put an end to practices 
like that, and without hindering honest lenders from making loans to 
vulnerable families that need to borrow against their home. Sub-prime 
credit remains readily available in North Carolina.
  The gentleman from North Carolina (Mr. Watt), the gentleman from 
Massachusetts (Mr. Frank), and I have introduced Federal legislation 
based on North Carolina's proven law.
  Critics of our legislation argue that we would restrict consumer 
choice. Most consumers would like the choice of knowing they are not 
being taken advantage of; that when they borrow money against their 
home for a rainy day, they are not entering into a spiral that results 
in losing their life's savings, their home, and their membership in the 
middle class. That choice is not now available to many American 
homeowners.
  We look forward to working with others in Congress and in the 
financial services industry. We welcome proposals from others to 
prohibit abuses. But we also want to make sure that Congress does not 
pass legislation that permits new abuses. We must make sure that the 
protections of any new law are not easily avoided, and we cannot 
handcuff the States' ability to protect consumers. Sub-prime lending is 
now a $530 billion industry, and growing. Vulnerable consumers cannot 
afford to have to come back to Congress again and again for real 
protections against abusive sub-prime lending practices.
  David's victory over Goliath was considered an upset, and Goliath 
would have been heavily favored in a best-of-seven series. If Congress 
passes predatory lending legislation, we need to get it right the first 
time. Consumers cannot count on having a second chance.

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