Mortgage Reform and Anti-Predatory Lending Act of 2007
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Ms. WATERS. Thank you, Mr. Chairman. I would like to thank you and Mel Watt, Mr. Bachus and Mr. Miller and others who have worked so hard on this bill. It is a very complicated issue. You have done a spectacular job.
I rise in support of the Mortgage Reform and Anti-Predatory Act of 2007. Each month brings figures, new figures, that reinforce the importance of putting in place a Federal legislative and regulatory framework that prevents us from reliving this crisis in the mortgage markets. I have a keen interest in this legislation because of the disproportionate impact of the foreclosure wave on my home State. California's third quarter foreclosure rate of one foreclosure filing for every 88 households ranked second highest in all States and reflects a near quadrupling of the number reported for the same period last year. Five of the top 10 metropolitan areas in foreclosure filings are in California.
Clearly, we need to prevent the now widespread practice of getting people into loans they simply can't afford. H.R. 3915 takes critical steps in this respect, including, for the first time, imposing a Federal duty of care on all mortgage originators and setting minimum Federal standards on all mortgages. Anchoring the bill's approach are newly established minimum standards regarding the borrower's ability to repay and net tangible benefit to the consumer. This is a sound strategy given that federally regulated mortgage originators have long had to meet similar benchmarks, and not coincidentally, we have seen few problems in that sector of the market.
H.R. 3915 also seeks to reduce the incentives to market inappropriate credit products to borrowers. I am particularly pleased that H.R. 3915, again for the first time, removes the most destructive of such incentives, severing the link between the compensation of the originator and the terms of the loan. Minority borrowers have been disproportionately steered to costly loans, in part because the fees such loans generate for originators are higher than more appropriate products. H.R. 3915 correctly prohibits this practice outright.
I am proud to have been an operational cosponsor of this very ambitious legislation, and I urge my colleagues to support this passage today. However, I would not be telling the truth if I said I lacked any concerns about the potential impact of our ambition over time. Mr. Chairman, I certainly want to thank you, Ranking Member Bachus, Mr. Watt and others for your diligent work in the manager's amendment to address one such concern that I raised during the Financial Services Committee markup of the bill, namely, the extent to which the assignee liability and remedies this bill creates should preempt State law.
We want to make sure that consumers are protected to the greatest extent possible. Historically, many of these protections have been initiated by States, especially in the subprime market.
With that, I would like to conclude. I would like to be clear that this groundbreaking bill should be passed today, and I urge my colleagues to vote for H.R. 3915.
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Ms. WATERS. Mr. Chairman, I rise in support of the Mortgage Reform and Anti-Predatory Lending Act of 2007. Each month brings new figures that reinforce the importance of putting in place a Federal legislative and regulatory framework that prevents us from reliving this crisis in the mortgage markets. I have a keen interest in this legislation because of the disproportionate impact of the foreclosure wave on my home State. California's third-quarter foreclosure rate of one foreclosure filing for every 88 households ranked second highest among all States, and reflects a near quadrupling of the number reported for the same period last year. Five of the top 10 metro areas in foreclosure filings are in California.
Clearly, we need to prevent the now widespread practice of getting people into loans they can't afford. H.R. 3915 takes critical steps in this respect, including--for the first time--imposing a Federal duty of care on all mortgage originators and setting minimum Federal standards on all mortgages. Anchoring the bill's approach are newly established minimum standards regarding the borrower's ability to repay and net tangible benefit to the consumer. This is a sound strategy given that Federally regulated mortgage originators have long had to meet similar benchmarks, and not coincidentally, we have seen few problems in that sector of the market.
H.R. 3915 also seeks to reduce the incentives to market inappropriate credit products to borrowers. I am particularly pleased that H.R. 3915--again for the first time--removes the most destructive of such incentives, severing the link between the compensation of the originator and the terms of the loan. Minority borrowers have been disproportionately steered to costly loans, in part because the fees such loans generate for originators are higher than more appropriate products. H.R. 3915 correctly prohibits this practice outright.
I am proud to have been an original co-sponsor of this ambitious legislation, and urge my colleagues to support its passage today.
But I would not be telling the truth if I said I lacked any concerns about the potential
impact of our ambition over time. Mr. Chairman, I do want to thank you and Ranking Member BACHUS for your diligent work in the Manager's Amendment to address one such concern I raised during the Financial Services Committee markup of the bill, namely, the extent to which the assignee liability and remedies this bill creates should preempt State law. We want to make sure that consumers are protected to the greatest extent possible--and, historically, many of these protections have been initiated by States, especially in the sub-prime market. But we also don't want to shut down the secondary mortgage market that has critical to expanding homeownership nationally.
I appreciate the effort that the Manager's Amendment makes to better strike this delicate balance. The Manager's Amendment now clarifies that the bill does not preempt state laws such as fraud and civil rights statutes. In particular, I appreciate that the Manager's Amendment makes crystal clear that securitizers will be held to account when they directly participate in a fraud--as in the egregious First Alliance case I mentioned at Committee markup. However, attorneys who have been working on predatory lending issues in my district and State for decades, continue to be concerned that the legal meaning of this provision is unclear. As such, federal courts may impart this meaning in ways that roll back important consumer remedies under State law.
This, in turn, raises the question of whether we have yet reached the right balance of Federal rights and remedies in the bill, given that we may be displacing a lot of State and private activity in this financial sector. Certainly, national organizations representing consumers remain concerned about this, and many have declined to endorse the bill. As you have noted, Mr. Chairman, that industry groups seem equally ambivalent about the bill suggests that perhaps we are approaching the proper ``unhappiness quotient'' among the stakeholders. As this bill moves to the Senate and to conference, though, I urge that continue to take seriously and re-examine issues surrounding preemption and strength of remedies.
To conclude, however, I want to be clear that I believe this groundbreaking bill should be passed today. Accordingly, I urge my colleagues to vote for H.R. 3915. Thank you again, Mr. Chairman, for all of your work on this bill.
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