Portfolio Lending and Mortgage Access Act
Floor Speech
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Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself 5 minutes.
Mr. Speaker, I rise today in opposition to H.R. 1210. Today we are again wasting time on the floor discussing a bill that President Obama has already pledged to veto because it would undermine important financial reforms and put consumers and the economy at risk.
H.R. 1210 would allow lenders to deal in the same kind of risky loans that sank Washington Mutual, Wachovia, Countrywide, and eventually the entire economy in 2008. The bill undermines the antipredatory lending provisions of the Dodd-Frank Act and virtually eliminates one of the most significant consumer protection rules implemented by the CFPB.
The bill also revives an industry practice under which mortgage brokers can earn hefty bonuses by steering borrowers into riskier, more expensive loans regardless of whether they qualify for better rates. My colleagues seem to forget that we went through a terrible financial crisis.
While we did spend hundreds of billions of dollars to rescue the banking system, millions of victims of predatory lending were left to fend for themselves as they were displaced from their homes and saw their life savings disappear.
Many reforms in the Dodd-Frank Act ensure that the financial industry will never again be allowed to take the kinds of risks that drove us to national crisis, but the mortgage lending rules are designed specifically to protect families from financial crisis.
The fact is that many banks, whether they held loans on their books or sold them off to investors, were able to profit from loans they knew borrowers could not repay. Rather than perform careful underwriting, many banks demanded high upfront fees and relied on rising home prices and private mortgage insurance to protect them from losses when borrowers inevitably defaulted.
Banks also targeted families in financial trouble that owned their homes free and clear, offering them cash-outs, refinancing with high origination fees and unaffordable terms.
Refinances accounted for 70 percent of subprime lending in the 3 years before the crisis and ended up sapping the life savings from many families who relied on these products to pay for unexpected medical bills or financial hardships.
Department of Justice investigations found that lenders specifically targeted, again, minorities with predatory loans, destroying a generation's worth of wealth in many communities of color.
Under the new mortgage rules, it is illegal to pay bonuses to brokers for steering borrowers into loans with bad terms. CFPB rules establish sensible underwriting standards so lenders are incentivized to design products that perform over the long run and make sense for consumers.
In cases where banks want to make riskier loans with higher fees, they are allowed to do so, but the consumer will have extra protections if the loan goes bad. These include the right to sue for financial harm and a defense against foreclosure.
The mortgage rules make good sense by protecting consumers while still allowing them access to credit and ensuring the economy can grow. These are exactly the types of regulations we should want from our regulators, and the CFPB should be commended for its success.
Republicans continue to declare that the Dodd-Frank Act and the CFPB have been bad for the economy. During the last Republican Presidential debate, a rightwing group aired a commercial painting the CFPB as a communist bureaucracy and claiming the CFPB staff were responsible for denying loans to consumers. The facts show a much different picture.
Even the conservative Wall Street Journal recently reported that industry analysts and experts agree that compliance costs aren't the greatest challenge facing community banks. The same article notes that loan balances at community banks grew twice as fast as their large counterparts over the last year and that their profitability is much closer to larger banks than it was prior to the passage of the Dodd-Frank Act.
The Mortgage Bankers Association recently revised their expectations for 2016 and 2017 to expect even more growth in housing credits. And this week, at the National Association of Realtors' annual conference, industry economists pointed to a strong housing market, with high prospects for continued growth.
It is time for Republicans to realize that Dodd-Frank and the CFPB are not the problem. They are the solution.
Mr. Speaker, I reserve the balance of my time.
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Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker and Members, I just heard that these bankers have the ability to understand and know whether or not the consumers have the ability to repay. That is what they told us before 2008. Unfortunately, they are the same ones now that are telling us that they can determine ability to repay. They didn't do it then, and they won't do it in the future.
I yield 3 minutes to the gentleman from Michigan (Mr. Kildee), a member of the Financial Services Committee.
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Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such time as I may consume.
Proponents of H.R. 1210 argue that if banks keep loans in portfolio, they have every incentive to make sure those mortgages are sustainable and good for both the bank and the borrowers. Therefore, loans held in portfolio should automatically receive the CFPB's legal safe harbor under the qualified mortgage rule. This simply ignores the history of the recent crisis. How can banks benefit from loans that are unsustainable in the long term?
Let's look at how it really works:
Step one, underwrite a mortgage with high, up-front fees. Though an honest broker may charge a 1 percent fee, a Better Business Bureau study from just before the crisis showed mortgage brokers often making 5 percent in up-front fees. On a $200,000 mortgage, that is $10,000 just for one loan. Other examples are appraisal fees, escrow fees, settlement fees, homeowners insurance. These fees could go back to the loan originator on an unlimited basis, and originators could still have legal protection under H.R. 1210.
Step two, protect your bank from consumer defaults by requiring expensive private mortgage insurance.
Step three, underwrite a large number of loans so that the fees add up--volume churn, volume churn. This has the added benefit of keeping regional home prices high by flooding the market with buyers.
Step four, refuse to offer loan modifications. Banks can divest from loss mitigation processes and keep the profits from the high up-front fees and mortgage volumes.
Step five, foreclose on the borrower and prevent them from suing the lender for lending violations. Once the borrower defaults, the lender can then repossess the collateral. If home prices have risen, they can sell the home for a profit all the while keeping their up-front fees. Meanwhile, H.R. 1210 would provide the lenders with a legal shield against CFPB enforcement or private fair lending litigation.
Over and over, Republicans have attacked the CFPB and the important protections it provides to American consumers. Yet again, we are wasting time on the floor considering a bill the President has already pledged to veto when we could be doing other important business.
What this bill does is very simple. It forgets all of the lessons of the financial crisis of 2008 and allows the country's biggest banks to put consumers and the economy at risk by bringing back complex, high-cost mortgages. The bill resurrects a practice that allows mortgage brokers to receive bonuses from the big banks in exchange for steering consumers into expensive, risky loans.
After the financial crisis, the Department of Justice investigated these practices and found that minority communities were sought out by mortgage brokers and targeted for risky loans, even in the cases where the borrowers were qualified for prime loans. These are the same types of loans that destroyed the life savings of millions of Americans that ended up in foreclosure.
And then when I studied foreclosure practices at the largest banks, I discovered that the same banks that made these mortgages were also guilty of robo-signing. Remember that? Robo-signing, wrongfully foreclosing on families that were up to date on their payments and fabricating paperwork to defraud consumers.
The Dodd-Frank Act and the CFPB have reined in these predatory practices, yet I have had to come down to the floor over and over again to defend our work eliminating fraud in the financial system. We have already seen what happens when regulators do not do their jobs: consumers are left on the hook. We must defend the work we have done in the Dodd-Frank Act and the important work that CFPB continues to do. So certainly I urge a ``no'' vote on this legislation.
It has been said over and over again by this side of the aisle that it appears that my colleagues on the opposite side of the aisle are forgetting the lessons of 2008, forgetting what happened when we brought this country to a recession, almost a depression, forgetting the communities that have been destroyed with these foreclosures, forgetting these lessons, and coming back to the Congress of the United States disregarding all of the harm that we have caused to families and communities and presenting legislation that could put them back in the same position.
Well, we wonder why our constituents and consumers
don't trust us anymore. They don't trust us because of these kinds of attempts to present public policy that again could harm our economy and harm these families and these communities. They wonder why it is we continue down this path.
We bailed out the biggest banks in America. We bailed out big insurance companies in America. We took the taxpayers' money, and we literally said to the people who had caused the harm: We forgive you. It is okay. We are going to make sure you stay in business. We are going to make sure that you have the ability to make money.
And while the taxpayers watch this, still many are reeling from the loss of their homes. And homelessness has increased in my own city of Los Angeles, over 12 to 15 percent increase in homelessness. Some of those families are there because they are victims of the predatory practices that we allowed our regulators to turn their heads and bring harm to these families and these communities.
I don't understand why you don't understand simply ability to repay. I don't understand why you would simply say let the biggest banks in America have portfolio loans if they don't have to be worried about qualified mortgages. I don't get it.
Why don't you err, if you are going to err, on the side of the consumer? What is it about the biggest financial institutions in America that can promote this kind of public policy and have so many Members, particularly on the opposite side of the aisle, doing their bidding? I don't get it. I don't understand, and I don't understand why many of your constituents don't really know what is going on.
Mr. Speaker, this is not easy work. As you know, working on the Financial Services Committee is extremely difficult and time-consuming work.
Here we are divided: one side of the aisle going back to the risky days, another side of the aisle protecting the Consumer Financial Protection Bureau and saying that we have to protect that Bureau no matter how much you attack it.
Again, I want to remind you, before Dodd-Frank and this centerpiece that was organized for reform, where we created the Consumer Financial Protection Bureau, think about the name--Consumer, Financial, Protection, Bureau--protecting those who had been dropped off the protection agenda by our own regulators.
So we created something, and we named it in such a way that consumers and our constituents would understand that we are sorry for what happened to them and we don't like the fact that we almost destroyed this economy. We support the Consumer Financial Protection Bureau. We will not go back to those days prior to 2008; and, whether you like it or not, this Bureau is here to stay, and we are going to defend it with every ounce of energy that we have.
I yield back the balance of my time.
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