[Congressional Record (Bound Edition), Volume 155 (2009), Part 19]
[Extensions of Remarks]
[Pages 26460-26461]
[From the U.S. Government Publishing Office, www.gpo.gov]




   VARIABLE RATE MORTGAGE INSURANCE PREMIUMS: ARE THEY HOLDING BACK 
                         POTENTIAL HOMEOWNERS?

                                 ______
                                 

                            HON. DAN BURTON

                               of indiana

                    in the house of representatives

                        Monday, November 2, 2009

  Mr. BURTON of Indiana. Madam Speaker, although unemployment, now at 
9.8 percent, is expected to keep rising, and consumer confidence is 
down, the latest Federal Reserve report on economic activity shows some 
small signs that the recession may finally be starting to bottom out.
  In particular, I am encouraged that we are starting to see 
indications that a rebound in the housing sector may be developing. A 
few weeks ago, for example, the Commerce Department said new-home 
building rose for the third time in four months during September, and, 
the National Association of Realtors announced that demand for 
previously-owned homes surged in September.
  In late October, the Case-Shiller home-price indexes showed that U.S. 
home prices logged their third monthly increase in August. The indexes 
showed prices in 10 major metropolitan areas rose 1.3 percent from 
July. In 20 major metropolitan areas, home prices were up 1.2 percent 
from the previous month.
  However, if a housing rebound is starting, it is still very fragile. 
For example, applications for home building permits--a key gauge of 
future construction--fell in September by the largest amount in five 
months. And, according to figures recently released by the Commerce 
Department, sales of new homes dropped unexpectedly in September; the 
first such decline since March.
  The foreclosure crisis all but erased the gains we have made in 
increasing homeownership rates in the last 20 years. The financial 
gains families thought they had achieved through increases in home 
equity also disappeared, as now roughly 20 percent of homeowners owe 
more on their homes than they are worth.
  Nevertheless, homeownership remains the single most important wealth-
building tool available to families in this country. In fact, housing 
experts are saying that now is the time to buy. A sustained rebound in 
housing is therefore absolutely vital to Federal, State and local 
efforts to spark a broader economic recovery.
  Regrettably, I have spoken to a number of mortgage brokers in Indiana 
and they tell me that many first-time homebuyers, who could otherwise 
buy a home, are finding themselves locked out of the housing market by 
the very rules and regulations we put into place to protect consumers 
from the so-called predatory lending practices that created the sub-
prime mortgage mess in the first place.
  I am not suggesting that we should return to the unchecked lending of 
the last decade, where someone could put no money down, show no proof 
of income or employment and walk away with a million dollar mortgage. 
But I am suggesting that we need to be vigilant for circumstances 
where--either through legislative or regulatory action--the Federal 
government may have inadvertently swung the pendulum too far in the 
direction of restricting access to the mortgage market in the name of 
consumer protection.
  There are two letters I received from mortgage brokers in Indiana 
that point to one potential example. The issue relates to variable rate 
pricing of mortgage insurance for Federal mortgage loans.
  These letters show these two mortgage agents both believe that the 
Federal Housing Administration's shift in policy from charging a flat-
rate for mortgage insurance to charging a variable rate based on a 
person's credit score, has unfairly excluded some qualified buyers from 
the dream of home ownership.
  I am not a mortgage expert; Madam Speaker, so I will defer to the 
experts as to whether the shift from flat-rate pricing to variable rate 
pricing is truly preventing would be homeowners from buying a home; but 
I would like to cite for the record a 2007 report done by the 
nonpartisan General Accountability Office regarding the proposed 
changes to the Federal Housing Administration's lending standards, 
including the shift to variable rate pricing

[[Page 26461]]

of mortgage insurance premiums. The report reads, in part:
  ``. . . our analysis of data for FHA's home purchase borrowers in 
2005 showed that, under FHA's risk-based pricing proposal, about 43 
percent of those borrowers would have paid the same or less than they 
actually paid, 37 percent would have paid more, and 20 percent would 
not have qualified for FHA insurance.''
  In other words, GAO's analysis, based on my understanding of the 
report, seems to suggest that variable rate premiums, based on 
perceived risk, send little extra money into the mortgage insurance 
trust fund to protect the funds from increased defaults but deny 20 
percent of applicants FHA mortgage insurance--and by extension a 
mortgage.
  If GAO's analysis is correct, and I have no reason to doubt GAO's 
findings, it would seem to support the arguments offered by the 
mortgage brokers from Indiana I cited earlier. In that case, Madam 
Speaker, I would ask my colleagues on the Finance Committee to give all 
due consideration to investigating the policy of variable rate pricing, 
in order to ensure that truly qualified borrowers are not being 
unfairly pushed out of the housing market.


                                    All Star Mortgage Company,

                                                  August 19, 2009.
     Congressman Dan Burton,
     Rayburn H.O.B.,
     Washington, DC.
       Dear Congressman Burton: I am writing this letter as a 
     follow up in regards to our meeting last week. The American 
     consumer that desires to purchase a new home or refinance 
     their existing home is at a distinct disadvantage considering 
     Fannie Mae and Freddie Mac's unfair increased risk based 
     pricing and mandatory delivery fees. These excessive fees and 
     higher down payments are stifling the real estate market. 
     They are overly burdensome to consumers, even those with 
     perfect payment histories. This is not only stalling the 
     housing recovery, but also inhibiting the overall economy, as 
     many industries are housing related. This unfair practice is 
     excluding many well-qualified borrowers from the dream of 
     home ownership. It would be my hope that Congress would call 
     for Fannie Mae and Freddie Mac to revisit their current 
     policy of charging higher fees and requiring larger down 
     payments to certain qualified borrowers, than they would 
     charge an equally qualified borrower based solely upon credit 
     score without regard to the borrower's actual credit 
     repayment history.
           Sincerely,
                                                       Greg Evans,
     President.
                                  ____



                                1st Mortgage of Indiana, Inc.,

                                Indianapolis, IN, August 19, 2009.
     Congressman Dan Burton,
     Rayburn H.O.B.,
     Washington, DC.
       Dear Congressman Burton: Many American consumers that 
     desire to purchase a new home, or refinance their existing 
     home, are being discriminated against based solely upon their 
     Fico credit scores. We believe that Fannie Mae and Freddie 
     Mac's increased risk based pricing, and mandatory delivery 
     fees are unfair and excessive. These fees are overly 
     burdensome to consumers, including many consumers with 
     perfect payment histories. This is stalling the housing 
     recovery and also inhibiting the overall economic rebound, as 
     many industries are housing related. This unfair practice is 
     excluding many well-qualified borrowers from the dream of 
     home ownership. Please allow me to cite one real life 
     example. We recently attempted to assist a 1st time home 
     buyer who had a long credit history. Her re-payment history 
     was perfect! She never had a single late payment! She had 
     sacrificed and saved for years to come up with a 20% down 
     payment. However, due to the type of credit she had 
     established and had utilized (mostly revolving accounts vs. 
     installment loans), her Fico score was 679. Based on Fannie 
     Mae and Freddie Mac's risk based pricing, an additional fee 
     of 2.5% of the loan amount would have been due and payable 
     directly to Fannie or Freddie. With her loan amount of 
     $250,000, that equated to $6250 in additional fees. This 
     unfair additional fee caused her family to delay their dream 
     of homeownership, and also prevented the would-be seller from 
     selling their home and purchasing another. Sadly, this 
     scenario is being repeated over and over nationally. Please 
     call on FNMA and FHLMC to stop charging these excessive fees!
           Sincerely,
     J. Michael Strawn,
       VP.
     Catherine J. Strawn,
       President.

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