Date: 2015-04-14
Speaker: MAXINE WATERS (democrat)
Chamber: H
State: California

Mr. Speaker. I yield myself as much time as I may consume. Mr. Speaker. I rise today in opposition to H.R. 685. the socalled Mortgage Choice Act. which would roll back protections for home buyers. make mortgages more expensive. undermine DoddFrank. and undo the important work of the Consumer Financial Protection Bureau. As its title indicates. the Mortgage Choice Act would affect choice. but in the wrong way. It would invite a return to a recent time when hardworking Americans were choosing whether to pay for medication or their mortgage. a time when they were faced with choosing between sleeping at a homeless shelter or spending one more night in the car. These choices were and still are being made by many of those who suffered as a result of the financial crisis. a crisis that was caused in large part by predatory mortgages. During this time. lenders often piled on excessive upfront fees by exploiting the opaque pricing and sales system for settlement services. like title insurance. which too often left borrowers without the information necessary to shop around or negotiate for lower prices. They cared little about whether the borrower had the ability to repay the loan over the life of the mortgage because they raked in upfront fees at the point of origination. Just to make it clear. anyone who has bought a home. who has got involved with negotiating for a mortgage would understand very clearly what we are talking about. We are going to focus on title fees. but there are a lot of fees up front that wouldbe homeowners are asked to pay for. including appraisal fees and inspection fees. So during the subprime meltdown and the crisis that we had. we determined that there were many of the mortgage lenders. the originators. who were just piling on these fees. This is in addition to the downpayments they were making. and so they were making more money. Because they were making more money. this is what caused many of our homeowners to lose these homes. because they were paying too much up front and they were being gouged with these predatory loans. In response. the DoddFrank Act entrusted the CFPB with the responsibility of ensuring that lenders and their affiliated companies were restrained from charging excessive fees. What are we talking about? We are simply talking about mortgage lenders and originators who owned other companies like title companies. or who were affiliated with other companies like title companies. And why were they affiliated? They were affiliated. or they owned these companies. so that they could make more money. because these affiliated companies would mark up the price of these fees and. basically. kick back to the originator some money. One way the CFPB achieved this was through a standard known as a qualified mortgage. which. among other things. placed a 3 percent cap on upfront fees. What they simply said was. You cant just keep charging any old thing that you want to. It doesnt make good sense that people are ending up paying 5 percent. 6 percent and on and on in these upfront fees. So we are going to put a cap on for 3 percent of upfront fees. These 3 percent fee caps include those paid to affiliates. Dont forget. these are these companies that are owned by the originator. or affiliated with them. This 3 percent fee cap includes. again. those paid to affiliates of the lender for services such as. again. property appraisals. settlement services. and title insurance. It is these fees that pose the greatest risks to consumers since they invite lenders to steer borrowers directly to their affiliates without open competition and with higher prices. So. simply. what the originators were doing was saying. okay. this is who we are going to get you to pay money to for these services that you need in order to get this loan. They didnt ask you if you knew a title company. They didnt invite the independent companies in to compete. They just simply steered the borrowers into these affiliated companies. In the past. creditors have offered incentives like reduced office rent. bonuses. commissions. or other financial perks in exchange for business referrals. Though DoddFrank banned these type of kickbacks. some creditors are circumventing them by buying or creating businesses so they can profit by referring their customers to their affiliated service providers. It is worse than referral. They just write it up. and the borrower doesnt even know that they had an opportunity to shop around. Others. like J.P. Morgan and Wells Fargo. recently settled cases of wrongdoing within the past year for engaging in a kickback scheme with an affiliated title company. But instead of strengthening this ban on kickbacks. today. this House considers legislation that would actually incentivize these cozy relationships which increase creditors profits at the expense of consumers. In some cases. these referral financial incentives are as much as half of the premiums home buyers pay. Buying a home is a complex venture. How many among us who own homes have really ever shopped around for title insurance? I imagine very few. Consumers should not have to be worried that their service providers are colluding to scam borrowers. Instead. they should be competing to provide them the best prices. H.R. 685 would undermine the CFPBs definition of affiliated services by removing title insurance fees charged by affiliates of the lender from the 3 percent cap. As a result. creditors will actually be encouraged to direct borrowers to expensive affiliates. codifying a system of kickbacks in our laws. This is not only detrimental to consumers but to small businesses that provide unaffiliated title insurance. So what they are basically saying is. We dont like it that you have had reform in the law. We dont like it that you have discovered that these kickback schemes go on. We dont like it that you now know that some of these originators. these lenders. own some of these businesses. We want them to be able to charge as much in fees as they can get. Let them gouge. or let them simply write in companies that they know will pay them more money for getting this business. So we have said. in the Consumer Financial Protection Bureau. that this should be limited to 3 percent. That is enough. You dont need to take more from the consumers. Title insurance is already an uncompetitive market. and State protections are often weak and. at times. nonexistent. This measure will. ironically. ensure even fewer choices for consumers because consumers rarely know that other options exist. As a result. they will often simply rely on what they are kind of forced to do or made to do. or the recommendations of their lender. who. under H.R. 685. can simply refer them to affiliated entities who can then charge excessive fees without regard for the 3 percent cap. Mr. Speaker. a diverse coalition. ranging from the NAACP and the National Council of La Raza to the Center for American Progress and the Center for Responsible Lending. have all voiced their opposition to this socalled Mortgage Choice Act. The Obama administration has pledged to veto the measure because it "risks eroding consumer protections and returning the mortgage market to the days of careless lending." We need only reflect on the 2008 mortgage crisis to understand that lenders too often focused on profiting from upfront payments through points and fees. rather than taking care to originate loans whose value derives from longterm performance. I am alarmed at how short our memories have become. It has barely been 5 years since the worst of the crisis subsided. and we are already welcoming a return to the abusive practices that contributed to the subprime meltdown. This measure will drive up the cost of mortgages. limit competition. and ultimately hurt consumers. so I sincerely urge my colleagues to oppose it. Mr. Speaker and Members. I have spent hours with consumers begging for loan modifications. trying to save their homes. They didnt know what they were signing up for when they signed on the dotted line. for many of these mortgages were simply gouging them. simply telling them that they could get refis anytime they wanted. They didnt know that when they were told: Dont worry about how much money you make. we can fix that. dont worry about whether or not we are going to be able to not only refinance. but we can give you this for interest only. and on and on and on. with all of these exotic products. And they certainly didnt know about all of the fees that they were paying up front. They didnt understand that they should have had some options. They should have had some choices. but they didnt have. they didnt have because these lenders were just putting them into paying companies that they were affiliated with. that they were going to make more money off of. This is shameful. I dont know why we are spending our time in the Congress of the United States trying to gouge consumers and trying to put us back where we were with the subprime meltdown and the crisis that was created. We have a lot of things we should be attending to. There are a lot of concerns that our consumers have out there. Our consumers are concerned about jobs and job creation. They are concerned about pay equity. They are concerned about homelessness. They are concerned that we have the housing. to attend to those who have jobs that cannot afford to pay the price of rental housing. They are concerned that if they want to buy a home that they will be treated fairly. that they will not be gouged. that they will not be taken advantage of. We know that when you buy a home. you have a stack of papers this high to sign. We also know that if you are well off. you can get your lawyer. you can get your representatives to read through these papers and help you get the best mortgage. We know that Members of Congress know how to negotiate. know how to bargain. know how to get the best loans. know how to shop around. but not all of our consumers are that fortunate. not all of them are prepared. and they listen to what they are told by their lenders. I want to tell you. the business that we are involved in here with this bill where we are trying to say forget about that 3 percent cap. let these lenders charge as much as they can get. let them gouge the consumersthis is wrong. This should not be done by Members who are sent here to represent all of our constituents. all of our consumers. and more than that. the more vulnerable of them. those who dont have highpriced lobbyists in the Halls of Congress. those who cant even get their Members of Congress to return their telephone calls if they have a complaint. We should be here dealing with the real issues of the day. not using our influence and our time to simply fatten the pockets of those who would gouge our constituents. Mr. Speaker. I reserve the balance of my time.