[Congressional Record (Bound Edition), Volume 153 (2007), Part 7]
[House]
[Pages 10137-10138]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             {time}   2000
                            SUBPRIME LENDING

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from North Carolina (Mr. Miller) is recognized for 5 minutes.
  Mr. MILLER of North Carolina. Mr. Speaker, the best news for the 
American middle class is our home ownership rates. Wages are stagnant 
for the middle class. They are not keeping up with inflation. Health 
care costs just keep going up. Folks do not know what their health 
insurance is going to pay for until they get sick. They don't know if 
their pension is really going to be there when it comes time for them 
to retire, or their employers take a quick dip in bankruptcy so they 
can short the promises they made to their employees.
  Almost 70 percent of American families own their own homes. We heard 
Mr. Cummings speak just a few minutes ago, powerfully, of what it meant 
to his family when he was 10 years old and they bought a home for the 
first time.
  The deed to a home is the membership card in the middle class. For 
the middle class, the equity they build in their home becomes the bulk 
of their life savings. What they build by paying a mortgage faithfully 
month after month becomes the bulk of their life savings.

[[Page 10138]]

  When they need to borrow money, when they have one of life's rainy 
days, when they want to send the kids to college, or someone in the 
family gets sick, or they lose their job or they go through a divorce, 
or they need to repair their homes or they get in over their head in 
credit card debt, they have to borrow money against their homes. Too 
often when they borrow money against their homes, they are having their 
trust betrayed.
  Several Members tonight have talked about subprime lending as lending 
that goes to those who have problems with their credit. Some is, but 
more of it, more of it, has to do with who places it with which 
borrowers, which homeowners put their trust in the wrong people and 
have their trust betrayed. According to Freddie Mac, a quarter of 
mortgages, subprime mortgages, are made to people who qualified for 
prime loans, who didn't have problems with their credit, but they went 
to the wrong person and they had their trust betrayed.
  Subprime loans, or predatory loans, take fees and costs that cannot 
be justified by the cost of the loan or the risks that are posed that 
the borrower will not make their payments. Those loans strip equity and 
steal the life savings of the borrower. Lenders even pay more to 
brokers who bring them loans where the borrower has agreed to pay more 
than what they qualified for based upon their own credit history and 
what they own of their home, their equity in their home.
  They put borrowers in loans, in mortgages, they cannot possibly pay 
back. They will have to refinance again so they can flip the loan. They 
will have to come back again, often having to pay a prepayment penalty 
to get out of a bad loan so they can refinance again. They are teaser 
rates. They are only good for a couple, 3 years, and then the rates are 
adjusted.
  For many borrowers, they can qualify for the teaser rate, but they 
can't possibly pay their monthly payment when it goes up by 50 percent 
or more, as happens too often. They refinance again, and every time 
they refinance, they lose more of their equity in their home. They lose 
more of their life savings.
  People who are in the subprime market for as much as a decade, for as 
much as 10 years, they have an almost 1 in 3 chance of losing their 
home to foreclosure. When they lose their home to foreclosure, they 
lose their membership in the middle class. They fall back into poverty, 
probably for the rest of their lives.
  I have introduced in the last two Congresses, with Mr. Watt from 
North Carolina, my colleague, and Mr. Frank, the chairman of the 
Financial Services Committee, legislation that is based upon successful 
State laws that protect homeowners from those kinds of abuses, those 
kinds of predatory loans, and this has not prevented there being good 
availability of good mortgages, sound mortgages, mortgages that help 
folks build wealth, not steals their wealth from them.
  We need to do a great deal more now to help the people who are facing 
foreclosure right now, who are facing losing their homes, who are 
facing falling from the middle class for the rest of their lives. 
Businesses can go into bankruptcy. They can have obligations, promises 
they made with their eyes wide open, written. But a middle-class 
homeowner cannot go into bankruptcy and have a mortgage rewritten, 
adjusted, mortgages that they entered when their trust was betrayed.
  The American middle class needs someone to be on their side. They are 
facing an uncertain world. They are facing an insecure world where what 
they need to know is there for them, that they can own their home, that 
they can pay off their home and live out the balance of their lives in 
a home that is theirs outright. They need that certainty. They need to 
know health care is there. They need to know that their pension is 
there. They need someone on their side.
  This Congress needs to be on their side.

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