Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Yes. I would say, and let me just read the language at the bottom of page 4 of the manager's amendment. Those payments ``do not vary based on the terms of the loan or the consumer's decision about whether to finance.'' So we have tried to make it very explicit: Flexibility in method does not in any way reduce the prohibitions that have been stated against an incentive to charge more. And if it is necessary for us to say that again more clearly, as some people may think it is, we will find new ways to say it.

Mr. FRANK of Massachusetts. Will the gentleman yield me 15 seconds out of his time?

Mr. FRANK of Massachusetts. Yes. And also, the total cost of the loan has to be the same.

Mr. FRANK of Massachusetts. Yes, yes, yes. I feel like I am in Ulysses here.

Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee do now rise.

Mr. FRANK of Massachusetts. Yes. That is absolutely what I believe the language says, and it is certainly our intent.

Mr. FRANK of Massachusetts. Mr. Chairman, first, this bill makes some substantive changes, including one of the things we came across was the problem of people who were renting who lost their right to live there when there was a foreclosure. We have compromised in this. I have had some conversations; I will have some further ones with the gentleman from Colorado. But we do try to preserve some protection for the renters in the bill. As passed by committee, we had 12 months. This reduces it some to 6 months as the maximum. We will talk more about it. Beyond that, there are two things that the manager's amendment clarifies, and I have found from some on the consumer side two objections in this bill, and we deal with these in the manager's amendment and we will deal with them further. One is the issue of preemption. I think a certain amount of preemption is essential if we are going to have a secondary market, but it is possible to read the language previously as preempting more than we meant to. What this amendment does is to make very clear that, no matter what the issue is, if the problem was based on fraud or misrepresentation, deception, or false advertising, there is no preemption. The ability of people to go after anything that was based on misrepresentation or fraud is fully preserved, whether or not it affected their ability to pay. Secondly, we have--and I am pleased to note that La Raza and the NAACP support this bill--we included at the insistence of the gentleman from North Carolina and the gentleman from California specific language about civil rights violations. No civil rights violation that a State may have would be preempted. So we have narrowed the preemption. We have made it clear it does not preempt anything growing out of fraud. The second issue that has led to some concern, and I am about to yield to my friend from North Carolina (Mr. Miller) has to do with compensation. It was our intention to say that no one who was originating a loan should be given an incentive to put the consumer in a loan that would charge that consumer more than he or she could otherwise get, and we dealt with that. The question then came about the way in which brokers are compensated, and we tried to provide two things: One, an absolute prohibition on any incentive to charge people more, but, two, not an interference with the way in which people chose to make those payments. We thought we had the language clear. Some people think it isn't clear enough. One of the things we will do is to make that clearer. And I would yield on this point to the gentleman from North Carolina.

Mr. FRANK of Massachusetts. Mr. Chairman, I offer an amendment.

Mr. FRANK of Massachusetts. I thank the gentleman. In my closing seconds, let me just reiterate an important point. Attorneys General have been concerned about their ability to prosecute and defend against certain abuses. Thanks to the gentleman from North Carolina (Mr. Watt), the effective date of this bill and all of its provisions will be the date of enactment. What that means is that any transaction that occurred before the bill becomes law, any loan that was made, will not be subject to the preemption. So we do want to reassure any law enforcement official out there that their rights to go against people who have been abusive will in no way, up until new loans are made, be in any way diminished.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the gentlewoman from New York (Mrs. Maloney), chairman of the Subcommittee on Financial Institutions of the Committee on Financial Services. (Mrs. MALONEY of New York asked and was given permission to revise and extend her remarks.)

Mr. FRANK of Massachusetts. I yield myself my remaining time to enter into a colloquy with my colleague from Alabama. Mr. Chairman, the gentleman from Alabama, this has been a collaborative effort in many ways. We have had some disagreements, but there has been a lot of agreement. And the gentleman from Alabama in particular took the lead in the language that went into the bill in committee and is being refined here dealing with nationwide registration requirements, a prerequisite for any kind of enforcement. Now, I appreciated the work he did and the committee benefited from it. Community banks are obviously very important in this. And, indeed, if only community banks had made loans for mortgages, we wouldn't have a crisis. But we don't want to interfere with their ability to help going forward. I would just yield to the gentleman in a minute to have him give his interpretation. My view is, and I defer to him as the spokesperson for the committee on this, because we are here talking about language which he developed and which we incorporated. We do have some regulatory requirements here that would affect not just the brokers but community banks. And I assume my colleague from Alabama, in drafting this, certainly intended and we meant to do this in the language, that the regulatory agencies would be able to show some flexibility in terms of the impact of these requirements on our community banks. I would yield to my friend from Alabama on that point.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. I now yield to another member of the subcommittee who has been very much involved, particularly in the area of manufactured housing, as well as others, the gentleman from Indiana (Mr. Donnelly).

Mr. FRANK of Massachusetts. The gentleman has been very tough on this issue, appropriately, and he is right. Some people can read ambiguity into 2 plus 2, and we will deal with that. We are lawyers. We are into redundancy. So in the colloquy I will be having with the gentleman from North Carolina (Mr. Miller) we will reaffirm the point that the gentleman from Connecticut is making. I guarantee that by the time this bill comes out of conference, no one will be able to raise any doubt about the prohibition on anybody being compensated for costing the consumer more.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Chairman, on the question of this GAO report, I believe it is a reasonable request because I am confident it will come back in support of our bill. And I think it is entirely reasonable to ask them to start, without waiting for passage of the whole bill in both Houses.

Mr. FRANK of Massachusetts. I appreciate the gentlewoman coming forward. She has on this and other occasions played a very constructive role in helping us work things out. We have already done this for the Veterans Administration, Department of Veterans Affairs. Yes, in fact, it is our hope to get more people into the FHA program as an alternative to subprime. One of the things we've done, and the Senate is now doing it, is to extend the FHA's reach to people with subprime; although I do want to remind my friends in the Senate, I feel very strongly that when we do that, it would be terrible social policy to make people with weaker credit who are faithfully making their payments pay more than other people, and we will deal with that as we work out the two bills. But for purposes of this bill, the gentlewoman is absolutely correct. So I intend to support her amendment. And that leaves me with some extra time, so I would now yield 2 minutes to the gentleman from California, a member of the committee. (Mr. BACA asked and was given permission to revise and extend his remarks.)

Mr. FRANK of Massachusetts. Yes. Well, actually, final passage of the bill is going to, I hope, happen in a couple of hours in the House; but before it gets to the Senate, without waiting for the Senate, yes.

Mr. FRANK of Massachusetts. I will say on this, as on a number of other issues, I will say very sincerely that the gentleman from North Carolina has persuaded me. I think he has clearly identified an issue that needs some further work. And as we go forward, ultimately to get this bill done, I would hope that we can work together on this.

Mr. FRANK of Massachusetts. Let me take back the time. The gentleman has underlined an important point. We are going to see this back again in somewhat buffed-up form. It goes to the regulators, so this isn't going to lead to court. It is not an explosion of litigation. It would allow a range of people to bring it, including State Attorneys General, but it would be brought to the regulator, someone familiar with that business model and an entity able to discriminate between good and bad practices. I ask unanimous consent to withdraw the amendment.

Mr. FRANK of Massachusetts. Madam Chairman, I rise in opposition.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield my remaining time to the gentleman from Oregon.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentlewoman yield?

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I will address much of the substance of the bill in the general debate. I do want to say we are here dealing with an issue, subprime mortgages, that is the single biggest contributor to the greatest financial crisis the world has seen since the Asian crisis of the late nineties. We are in a very difficult situation now in the financial markets; and wholly unregulated subprime mortgages, unregulated by the originator and then unregulated in the secondary market, has given rise to this. The previous speaker talked about the danger we could do with our liability for the securitizers. I would note that one of those who volunteered to our committee that we should do something, he wasn't specific about what, but something to put some liability there was the Chairman of the Federal Reserve, Mr. Bernanke, who has talked about what he called the originate-to-distribute model, i.e., people who give mortgages who are not themselves subject to regulation who then in turn sell into a secondary market, and what has been lost in that is the responsibility to worry about repayment. Now, we will talk more about this. There is a delicate balance here. I am not in favor and this bill does not in general preempt the rights of States to do what they think is necessary in the consumer protection area. But in the matter I just talked about, when we are talking about a national secondary market, we did believe some preemption is necessary. We have tried to define it precisely and hold it to a minimum necessary to have a functioning market. As I said, I will address some of those more. The bill, I believe, does strike a balance that can be a difficult one to achieve, particularly in that area of some preemption so that you have a functioning secondary market, but not to the point where you intrude on the rights of States to make these decisions. I do want to address the rule. At my request this rule does make in order a number of amendments from both parties. Several of the amendments offered by Republicans will be, I hope, accepted. The manager's amendment itself is a genuinely bipartisan amendment. Much of the manager's amendment, in fact, came from the minority; and, indeed, in our committee the ranking member had a major input into this. This bill did pass committee by a vote of 45-19, which was the Democrats and, not a majority, but a significant number of Republicans. We have, I believe, a rule that allows most of the issues that are at stake to be voted on. There are amendments that would strike major parts of the bill. The gentleman from North Carolina has one. The gentleman from Georgia has one. There is a third, the gentleman from New Jersey. Three amendments that would strike very much at the heart of the bill. I believe they should be debated and I would hope defeated, but they are made in order. I did consult very much with the ranking member, and I believe we have a procedure today that doesn't cover everything, but will have the major issues before us. At the end of today, I hope we will have passed a bill and it will be a bill which I must say will probably leave all parties at interest a little bit unhappy. I'm not pleased with that, but I think given the competing interests here, that is the best we can do, particularly on this issue of whether or not we preempt. I would note that while some of the groups that I work with in the consumer area are disappointed because they wanted no preemption at all, passage of this bill is supported by the Conference of State Bank Supervisors. They think there are some things they would like to see changed further on. It's supported by the NAACP and La Raza. And it has, we believe, the essential elements. The core is this: loans made by banks as originators subject to bank regulation have not been the problem. The problem has come when loans were originated by unregulated people, not that they were morally deficient, but there was no regulation. Here is the core of this bill: we have tried talking to the bank regulators and others to take the principles that the bank regulators have applied to loans originated by regulated depository institutions and apply them to the unregulated originators, the brokers. And it is not the case that the brokers were morally deficient. In all of these professions, we have an overwhelming majority of honest people. But the problem is, in the absence of any regulation and the availability of a secondary market with no rules, that minority that was not scrupulous caused us problems. This bill fixes that.

Mr. FRANK of Massachusetts. Mr. Speaker, will the gentleman yield?

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on H.R. 3915 and to insert extraneous material.