Providing for Consideration of H.R. 1852, Expanding American Homeownership Act of 2007
Floor Speech
PROVIDING FOR CONSIDERATION OF H.R. 1852, EXPANDING AMERICAN HOMEOWNERSHIP ACT OF 2007 -- (House of Representatives - September 18, 2007)
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Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
I rise in reluctant opposition to this unnecessarily restrictive rule and to a number of the provisions included in the underlying legislation in its current form. While I appreciate and support the committee's effort to provide for the safety and soundness of our Nation's housing financial system and our broader financial system, this legislation has a number of avoidable shortcomings, and I hope that at least some of them would be corrected during the restrictive amendment process provided for by this rule.
The Federal Housing Administration was created by the National Housing Act of 1934 to broaden homeownership, protect lending institutions, and to stimulate the home construction industry. In addition to providing stability and liquidity to the mortgage market, the FHA's efforts have led to the creation of the 30-year mortgage product and mortgage instrument standardization, both of which have contributed to the growth of our modern housing financial marketplace. And, as one of the very few Federal Government agencies to operate entirely on fees derived from the program, the FHA has accomplished all of this with no taxpayer dollars or subsidy.
The legislation that has been brought to the House floor today includes a number of important modernization provisions that will help American families across this country to own their own homes, like: increasing the FHA loan limit for high-cost areas, providing for flexible down payment requirements, simplified and improved condo loan requirements, and an expansion of the ability to utilize home equity conversion mortgages.
This bill closely mirrors H.R. 5121, Republican legislation that passed overwhelmingly last Congress, and would also supplement the FHA Secure Initiative unveiled by President Bush at the end of August. This program, which is aimed at borrowers who have fallen behind on their payments after a mortgage rate reset, is projected to help a quarter of a million families over the next year. By helping first-time, owner-occupied home buyers refinance into mortgages that they can afford, this already implemented program will help families and stabilize communities, while targeting this support to the real families in need and away from speculators who do not need help from the Federal Government.
Unfortunately, despite all the positive elements included in this legislation, I do believe that this bill could be vastly improved. Chief among the problems with this legislation is its establishment of a new line of income for a poorly defined affordable housing grant fund linked to increased FHA receipts. FHA receipts are already recognized for future budgeting purposes to help determine subsequent affordable housing program appropriations at HUD, with any extra revenue from these programs deposited in the U.S. Treasury as a benefit to taxpayers. This legislation would divert this revenue to a housing fund with a poorly defined mission, reducing resources available for other existing HUD programs that already assist low-income families and individuals.
I believe it is bad public policy to tie the fate of families that need housing support to the success or failure of the FHA to bring in surplus revenue. Even worse, because the affordable housing funds would come from fees related to conforming loans and reverse mortgages, this bill levies a new stealth tax on the most modest home buyers and on seniors without even disclosing to them the costs associated with this new Federal mandate.
Other problems with H.R. 1852 include its failure to provide the FHA with the flexibility needed to implement risk-based pricing, which limits consumer choice as well as the FHA's ability to help additional home buyers. This bill's proposed 2 percent limit on home equity conversion mortgage loan origination fees proposed in the legislation, which attempts to protect senior citizens from potentially abusive lending practices, may also unnecessarily limit choice and flexibility in a changing marketplace.
Mr. Speaker, I would like to thank committee ranking Republican Spencer Bachus; subcommittee ranking Republican Judy Biggert; and the incoming ranking Republican on the Housing and Community Opportunity Subcommittee, my former Rules Committee colleague, Shelley Moore Capito, for all their hard work on this legislation.
Mr. Speaker, I will also insert in the Congressional Record the Statement of Administration Policy regarding this legislation and would like to take this opportunity to thank two people for their hard work from the White House, White House aides Chris Frech and Marty McGuinness, who have provided important information not only on this but worked with Members to make sure that they understood the White House's position on this issue.
Executive Office of the President, Office of Management and Budget,
Washington, DC, September 17, 2007.
Statement of Administration Policy
H.R. 1852--EXPANDING AMERICAN HOMEOWNERSHIP ACT OF 2007 (REP. WATERS (D) CA AND 13 COSPONSORS)
The Administration supports legislation to modernize and reform the National Housing Act (NHA) and to ensure that the Federal Housing Administration (FHA) continues to play a key role in serving low- and moderate-income homebuyers. The President has called on Congress to expeditiously pass the Administration's FHA Modernization bill to assist more homeowners during this period of stress in the mortgage markets. H.R. 1852, as reported by the House Financial Services Committee, includes provisions that are essential to maintaining FHA's core mission of expanding homeownership opportunities for borrowers who are underserved, or not served, by the existing conventional mortgage marketplace. The legislation makes critical improvements to the statutory scheme of the NHA, and these improvements have also been proposed by the Administration. Nonetheless, the Administration has a number of significant concerns with H.R. 1852, which the Administration looks forward to addressing with Congress as the bill moves through the legislative process.
As proposed by the Administration, the legislation authorizes an increase in FHA loan limits from $362,000 to $417,000 or 100 percent of the Federal Home Loan Mortgage Corporation (Freddie Mac) conforming loan limit in high-cost areas, and from $200,000 to $271,000 in lower-cost areas. These changes are needed to adapt the program to increasing home prices. The Administration strongly opposes amendments that would authorize FHA guarantees of loans greater than the conforming loan limit as the program should remain targeted to traditionally underserved homebuyers, such as low- and moderate-income families.
Additionally, the legislation authorizes FHA to utilize risk-based premium pricing to more appropriately match premiums to borrower risk, based on measures such as the size and source of their downpayment and their credit scores. Consistent with current mortgage lending practices, the legislation includes the option to extend the maximum mortgage term from 35 to 40 years. Finally, with respect to FHA's Home Equity Conversion Mortgage (HECM) Program, the legislation removes the statutory volume cap on the number of reverse mortgages that may be insured by FHA, while permitting HECMs for use in condominium units and purchase transactions. Each of these improvements enables FHA to serve a larger number of targeted homebuyers, in more areas of the nation, than are being served under the present program.
While the Administration strongly supports Federal assistance to individuals and families that lack the means to afford adequate housing, the Administration strongly opposes the establishment of a new Affordable Housing Grant Fund linked to increased FHA receipts. FHA receipts are already credited toward HUD appropriations and a new program that attempts to divert this revenue would reduce resources available for other HUD programs that assist low income families and individuals. Furthermore, tying financing for the fund to FHA receipts would be counter-productive since FHA receipts annually fluctuate based on housing market conditions and bear little relation to any potential program funding needs. Many of the proposal's details are also undefined and unclear; therefore, the specifics may raise additional policy concerns.
The Administration strongly supports flexible downpayment options, but opposes a provision in H.R. 1852 that limits their benefits to first-time homebuyers. Such a limitation would hinder the ability of some current homeowners to refinance into an FHA-insured loan. By removing this limitation, FHA could help provide existing homeowners with additional flexibility in managing the mortgage debt.
The Administration also has concerns that H.R. 1852 does not provide FHA with the necessary flexibility to implement risk-based pricing, thereby limiting consumer choice as well as FHA's ability to help additional borrowers. H.R. 1852 fails to raise the statutory cap on annual premiums from 55 to 200 basis points, nor does it permit caps on upfront and annual premium combinations that would allow FHA to offer borrowers a variety of premium structures. In addition, the provision for mandatory refund of ``excess'' premium to borrowers with FICO credit scores below 560 whose loans survive more than five years undercuts the insurance principle on which FHA is based. This provision also hampers FHA's ability to serve a greater number of the borrowers this provision is purported to benefit. Because of these provisions, H.R. 1852 would lower receipts by approximately $75 million relative to the President's budget.
Generally, the Administration supports the provision in H.R. 1852 that permits an increase in mortgage insurance premiums if HUD determines that, absent such an increase, the insurance of additional mortgages would require the appropriation of new budget authority to cover the costs of such insurance. However, the requirement to do so by rulemaking is process-laden and onerous and would significantly delay and hamper HUD's ability to respond to a changing market. The Administration will work with Congress to establish a process that efficiently and effectively allows HUD to increase mortgage insurance premiums as needed.
The Administration also has concerns with the two percent limitation on HECM loan origination fees proposed in the legislation. Although the Administration applauds the attempt to protect senior citizens from potentially abusive and predatory lending practices, any such limitations should be flexible enough to respond to a changing market. Accordingly the Administration believes that such limitations should be set by the FHA through Federal Register notice or other appropriate vehicle.
In addition, the Administration is concerned that the Act revises certain recently enacted asset disposition reforms for FHA multifamily programs. This would reduce receipts by nearly $40 million. The Administration is also concerned about a provision that would make it possible for correspondent lenders to use FHA without meeting audit and net worth requirements, which could allow participation by brokers who are inadequately capitalized or have internal control difficulties.
The Administration remains committed to modernizing and reforming FHA, and looks forward to continuing to work with Congress to ensure that concerns are addressed and that the necessary reforms are part of any final legislation.
Mr. Speaker, I reserve the balance of my time.
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Mr. SESSIONS. The gentlewoman is waiting for an additional speaker, and I appreciate that very, very much.
Mr. Speaker, you know, we are here this morning, almost 11 o'clock in Washington, D.C. I don't know of much else we've got going here on the floor today. I think we're going to have four suspensions in addition to this bill, and yet last night the Rules Committee, our friends in the new Democrat majority, decided that they would shut down debate by having this rule without it being an open rule, shut out a number of amendments and Members who would choose to come down and debate things today. And so I'm disappointed that, in a day where really not much else is going on, that we could not include the full discussion and take this day to talk about affordable housing and where the ideas are that each and every Member might have on how we're going to increase homeownership and protect these homeowners.
I find it interesting, however, with some of the speakers that we've had today, that just a few years ago we were, with full knowledge of this United States Congress, very pleased that homeownership was increasing all across America and that credit was being extended to a number of people, including lots of families who would have an opportunity to finally own their own home. And now we find out today that, in fact, it's a lot of people who are to blame, who are these greedy people who were the lenders, who were trying to get people and bring them in to buy houses when, in fact, it was the national will. It was a good thing that they would have, virtually at no cost down, an opportunity to come and be in a house. We heard testimony where people really could get in houses for cheaper than they could living in an apartment. So millions of Americans went and did that. And they willingly signed on the line, yes, I will take this low-cost loan right now, and in 5 years I will have to go to a market-based rate to borrow the money.
This wasn't a mistake. This wasn't somebody being greedy. This was someone who was out offering an opportunity. And as all of us would have to predict the future, we don't know what the future would be, but it got people in homes, and now we do have some problems. And dealing effectively with the problem is, I think, what we should be remembered for, not looking back and saying what a bad idea it was to make sure that millions of families could get in their own homes.
So I respectfully disagree with those that come to the floor here today to argue about greed and all these people who took advantage of these poor and low-income homeowners. I think it was a good thing. I'm sorry it has not worked out in every single case. But guessing what something is going to be like in 5 years means that you have a chance to plan and be prepared for it. And so now we will be judged on how well we do to make sure that we lessen the activity of the number of people who have to bail out of their houses because they can't afford them.
Mr. Speaker, I reserve the balance of my time.
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Mr. SESSIONS. Mr. Speaker, I had anticipated and hoped that the gentleman from Georgia (Mr. Price) might be here. I have been notified that he is in a meeting with constituents at this time.
One of the amendments which Dr. Price brought to the Rules Committee yesterday, which the Rules Committee rejected on a party-line basis, was part of really the debate and discussion that I think needs to take place as we talk about taxpayer money being involved with housing in this country. And the amendment which was rejected by the new Democrat majority universally across the line, every single Democrat said, no, they did not want to hear the debate on this, and it is as follows: the amendment said that it would require that any individual or household receiving money from the affordable housing fund must present verification of legal residency by a secure identification document.
Mr. Speaker, let's be forthright about this. We have had discussion after discussion, debate after debate about health care, about public housing, about housing funds, of virtually every single topic that we get into here on the floor of the House of Representatives where we believe, the Republican Party believes, that people who are seeking assistance and help from funds, whether it be taxpayers or public systems like this that do utilize the attributes of the government, that there should be a verification that somebody is in this country legally and has legal status.
Mr. Speaker, repeatedly this new Democrat majority, whether it's for health care or whether it's now for this new housing fund, they do not want to require that someone even has to present verification of who they are. And we disagree with that. And I am sorry that the Rules Committee made a determination and the Democratic Party decided that they do not want to have to have anyone present verification of who they are or that they are in this country legally.
We disagree with that. I am sorry that the Rules Committee did not allow that in order for the gentleman, Mr. Price, to be able to argue that as part of the debate today.
So, Mr. Speaker, I will be voting ``no.'' I will be voting ``no'' on this rule because I believe that what this new Democrat majority did was to shut down debate even in a day when we have lots of time to get the best ideas on the floor and to make sure that every single Member can be heard from.
Mr. Speaker, I yield back the balance of my time.
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