Randy Neugebauer

Mr. NEUGEBAUER

Mr. NEUGEBAUER. I do not object, but I would like for the gentleman to clarify what his amendment does.

Mr. NEUGEBAUER. Reclaiming my time, Mr. Chairman, the answer to that question is going to be ``no,'' because the people that are offering those are going to offer one or two choices because now they've got additional paperwork and they're going to have to be drawing assumptions of the cost/benefits. If we go back to the underlying bill, which says you've got to make a disclosure, and it's going to be in a simplified form hopefully, and with government that's a stretch to simplify anything, but if we do get HUD and the Fed together to come up with one form, then we're going to be able to offer them products where we have a uniform disclosure. So they're going to be able to draw their own conclusions and not rely on the lender or the originator to make some kind of assumptions on a spreadsheet.

Mr. NEUGEBAUER. Mr. Chairman, I appreciate the spirit by which the gentlewoman is introducing this amendment, but what we are all trying to do with disclosure, I think, is simplify it in a way that consumers actually understand the terms and conditions of the contract. I have worked with Representative Biggert and Congressman Hinojosa to ensure that HUD, for example, and the Fed work together to have a simple disclosure that is uniform and universal so that when people are taking credit out, they understand the terms and conditions of that and it's the same terms and conditions that they're presented when they get to closing. Now, what the gentlewoman's amendment says is that all products offered or discussed or referred by the originator must be put in this spreadsheet. What does that mean? Well, that means that in order to cut down on the amount of paperwork that an originator is going to want to do, they're not going to discuss very many options and they're going to be asked to make assumptions of what are the benefits of a particular product over the other product. One of the things that this bill does is it moves in a direction to begin to simplify that disclosure process, and now we're kind of truncating that with this new disclosure; so now we are going to add another piece of paper. I would submit to you that a lot of people took on mortgages that they didn't understand the terms and conditions of. I don't know that there was any predatory lending necessarily going on. In some cases there may have been. But in many cases the disclosures are very hard to read, they're multipages, and the terms and conditions, unless you read many, many pages, you didn't understand. One of the things that I believe is the best way to do that is that on a one-page form you have all of the more important conditions of this loan so that the person that's taking out that mortgage understands what they are getting. But I think we are going down a road here of what's going to happen in this legislation, if this amendment is passed is, we are going to tell the American people the government knows best what mortgage you should take out because we're going to make it so onerous for originators to display their products and to sit down and counsel with their prospective borrowers that they are going to only give them one choice. And, in fact, I think in many ways that's what this bill does. It begins to say, you know what, the Federal Government is going to tell you what kind of mortgage that you should have. That's not the role of the Federal Government. The role of the Federal Government here is to make sure there are fair and ethical practices going on and not for the Federal Government to force originators of mortgages to be telling borrowers what kind of mortgages they should take out because they're afraid that they will fall under some of the provisions of this bill. So I am very much opposed to this. I think it goes down the wrong direction. We are working in a bipartisan way to simplify disclosure for mortgages and we should stay that course. Mr. Chairman, I reserve the balance of my time.

Mr. NEUGEBAUER. Mr. Chairman, I rise in opposition to the amendment.

Mr. NEUGEBAUER. Mr. Chairman, somehow adding more forms doesn't sound simpler to me, and basically that's what we are doing here. In the underlying legislation, we're working together for a simple, uniform form. And by the way, what would happen in that case is, as the lender is talking about different products, they would have that simplified one-page disclosure for this product and that product, and then it's up to the consumer to be able to say, I'm going to look through this information and make a determination. And if the gentleman would like to answer this question: Do you believe that a lender that maybe has 15 or 20 products available to him for an individual borrower is going to display 15 or 20 products to you if he's going to have to do a spreadsheet that's 15 or 16 columns wide? I yield to the gentleman.

Mr. NEUGEBAUER. The gentlewoman offers a thoughtful amendment. Prepayment is an important option for mortgage holders. I appreciate her amendment, and we support that. Mr. Chairman, I yield back the balance of my time.

Mr. NEUGEBAUER. That wasn't the question. The question was, do you think that someone is going to offer 15 choices if they're going to have to do a spreadsheet that's 15 columns wide?

Mr. NEUGEBAUER. Mr. Chairman, I rise to claim the time in opposition, although I am not opposed to the amendment.

Mr. NEUGEBAUER. I appreciate the gentleman offering this amendment. I think it does make the underlying bill better. Income verification is an important criteria in determining whether somebody qualifies for a mortgage or not and has the ability to repay. Providing a low-cost way to be able to do that, I think, is an important step in this process. And I commend the gentleman. With that, I yield back my time.

Mr. NEUGEBAUER. Mr. Chairman, I claim time in opposition, although I am not opposed to the amendment.

Mr. NEUGEBAUER. So instead of being mandatory, it's discretionary.

Mr. NEUGEBAUER

Mr. NEUGEBAUER. Mr. Chairman, I, again, rise in opposition to this amendment. One of the purposes of this legislation, again, we said, was to prevent predatory lending. But, unfortunately, the consequences of this legislation are going to be to increase the cost of mortgage financing for consumers. It's going to raise the monthly payments for many consumers over what their choices would have originally been. It's going to limit the choices that are available to them. It's going to force lenders to provide maybe only one choice. It's also, I think, going to continue to cause a major disruption in the mortgage system. As one of the speakers originally said, the market is very fragile right now, and some of the provisions in this amendment, I think, contribute to that. With that, I encourage Members to vote against this. I yield back the balance of my time.

Mr. NEUGEBAUER. Mr. Chairman, another provision in this that has caused concern is the tenant provisions. This amendment would require property owners to promptly notify any tenants or potential tenants upon becoming subject to foreclosure or defaulting on their mortgage loan. This language requires the owner to provide information on the circumstances with respect to the property and the effect of the default or foreclosure. Notice to tenants is important. However, in multifamily projects such as apartments, a receiver is typically put in place to manage the property so that residents can remain in their apartments with no disruption. Mandating a notice to residents, if not done correctly, could cause alarm and maybe not even needed alarm. I have a letter from the National Apartment Association where they have concerns about this very issue, that if you have got an apartment complex, the owner may be temporarily in default. You give notice to the tenants that you are temporarily in default. The tenants get scared, they start looking for other places to live, and, basically, creating vacancies, and, in fact, maybe making the default permanent by the fact that there will not be sufficient revenues to make the payments. So I have very large concerns about that. Additionally, the amendment allows HUD to step in to troubled properties, transfer a multiproperty project, if delinquent, at the risk of fault or disinvestment or foreclosure. This is a fairly major expansion of HUD's authority and could be considered to be a property taking. Property of this type may not be in foreclosure as yet, yet the provision would force properties into foreclosure or over into government control, again, a major expansion, quite honestly, a move away from what the original intent of this legislation was. The original intent of this legislation was to prevent predatory lending. And now we are prescribing how tenants are going to be treated, whether we are going to force property owners to make disclosures about their financial condition, a major diversion from what I think is the intent of this legislation, and, again, one of the reasons that I do not support this amendment. Mr. Chairman, I reserve the balance of my time.

Mr. NEUGEBAUER. I want to speak to the gentlewoman's provision in this bill, and one of the concerns I have, I mean, there is a lot of people that want to debate States' rights versus Federal rights. One of the concerns I have about the provision in the manager's amendment is that it says yes. It says, yes, there is Federal jurisdiction and, yes, there is State jurisdiction. What I am concerned about is that could cause some potential conflicts, and that States would think they had jurisdiction, the Federal Government would think they have jurisdiction, and that States might get the opinion that they might have jurisdiction on some of the other provisions in this bill. And so one of the things that I think we need to make sure of, as we move forward on this legislation, is we have, maybe, clearer lines on this preemption statute to make sure that everybody understands what the rules of engagement are, as this particular piece of legislation is being implemented. So one of the other pieces of opposition that we have to this is that we need a clear, I think a clearer preemption wording in this bill to make sure that we understand what the States' jurisdiction is over this bill and what the Federal jurisdiction is over this bill. I reserve the balance of my time.

Mr. NEUGEBAUER. Mr. Chairman, I appreciate the chairman's sensitivity to this because I think it is a very important issue that we need to resolve in this legislation before it becomes law.

Mr. NEUGEBAUER. Mr. Chairman, I yield myself such time as I may consume. There are some provisions in this amendment that I support and there are some that I don't. One of the parts of it that I do support is the amendment does call for a GAO study to analyze the effectiveness of the risk-retention provisions of this bill and make recommendations to Congress. My only regret is I wish we could have done a study before we implement this particular piece of legislation. As you know, section 213 of the bill requires creditors to retain an economic interest in at least 5 percent of the credit risk of each loan that is not a qualified mortgage that the creditor transfers, sells, or conveys to a third party. I think a lot of people feel that this skin in the game may be a good provision. I think the question that arises is what will be the impact on small lenders and small community banks across the country? One of the things that we want to make sure is that the bill is not really clear about the mechanism or the mechanics of how this provision would be implemented, and we're going to have to have regulatory clarification on that. I wish that, again, we could have had a study in advance of that so that we could then make sure that, as we are implementing this bill, that the regulators have some direction of how to go to make sure we implement this provision without causing major disruption in the mortgage process. Again, I wish we could have done that before. There are concerns that I have about the manager's amendment as well, Mr. Chairman. First of all, rather than clarifying provisions related to broker compensation, yield-spread premiums, and ensuring all types of mortgage creditors are covered by equal antisteering provisions, this amendment adds further inequity and confusion. Congressman Miller offered an amendment during the Financial Services Committee markup that would have preserved the careful balance of banning steering while preserving a consumer's ability to finance the closing costs and origination fees associated with their loan. In committee, Chairman Frank said he felt that he and Mr. Miller had agreed in principle about only banning incentivized compensation and not direct compensation. Mr. Miller withdrew his amendment, given the agreement by the chairman to work with him on details of the language. The manager's amendment does not reflect that agreement, and the Rules Committee did not make in order an amendment submitted by Mr. Miller. Really instead of clarifying the ability of consumers to finance closing costs and origination fees through rate or principal, the manager's amendment removes that option to finance through the rate completely. Additionally, the manager's amendment says all origination fees must be collected either up front or all fees shall be in the rate. This means consumers, again, will no longer have the option of paying some closing costs up front and some through the rate. Consumers should be able to finance closing costs and origination fees as they deem appropriate for their individual circumstances. Clarifications were expected to ensure the preservation of this option, but the only clarification made was that the bill will now only prohibit this option in the manager's amendment. What does that mean? Well, that means when an individual goes to their mortgage lender or to their local community bank, in the past they have had an option to say, you know, I would need to put a certain amount of my closing costs in the loan and maybe that would be reflected in the rate. Maybe part of it would be reflected in the principal balance. But now we're going to take away the option for the banker to offer that to the individuals. And I think that's what our opposition has been to this bill from the very beginning, that while we are trying to prevent predatory lending, and everybody is against predatory lending, at the same time we've started down a road where we are going to limit the available products to individuals. We're going to raise the cost of these mortgages to individuals, and, more importantly, we're going to cause mass confusion in the marketplace. There are some very punitive things in this bill that if someone is ``steering,'' that could result in a lawsuit. And steering could be, well, I think this mortgage, if I offered you this one, it would be beneficial to you but I also think if I offered you this mortgage. But I think it's going to deter a lot of mortgage bankers and community bankers from offering two different options to individuals because they're going to be afraid that somehow they are steering. I have some other concerns which I will express further into the debate here. At this time, Mr. Chairman, I reserve the balance of my time.

Mr. NEUGEBAUER. Mr. Chairman, I rise to claim time in opposition to the amendment.

Mr. NEUGEBAUER. Thank you. Mr. Chairman, at this time it's my privilege to yield 2 minutes to the gentlewoman from West Virginia (Mrs. Capito).

Mr. NEUGEBAUER

Mr. NEUGEBAUER. Mr. Chairman, it is my pleasure now to yield 5 minutes to the ranking member of the full committee, the gentleman from Alabama (Mr. Bachus).

Mr. NEUGEBAUER. I think we will have a good debate today because it is not about not doing nothing, but it's about a difference of opinion of what the right thing to do is, because that's really, bottom line, what the American people want us to do. They want to have a good mortgage and they want the right to have a mortgage that works for them. I think that the Republicans will articulate that we want them to have those choices. It is now my pleasure to yield 3 minutes to the gentleman from New Jersey (Mr. Garrett).

Mr. NEUGEBAUER. Mr. Chairman, it is my pleasure now to yield 5 minutes to the gentleman from Texas (Mr. Hensarling), who has been a strong advocate of making sure that Americans have plenty of opportunities and plenty of choices when they look at their financial products.

Mr. NEUGEBAUER. I yield the gentleman an additional minute.

Mr. NEUGEBAUER. I yield the gentleman an additional 1 minute.

Mr. NEUGEBAUER. Mr. Chairman, it is my honor now to yield 3 minutes to the gentleman from Minnesota (Mr. Paulsen).

Mr. NEUGEBAUER. Mr. Chairman, I yield myself 3 minutes. The example I would use here today, imagine taking your car to the repair shop and saying, you know, my car is not running very well, it is running rough. And immediately the service attendant reaches over, pulls up your hood, and starts taking the engine out. And you stop and you say, wait a minute, what are you doing? And they say we are going to put a new engine in, you said your engine wasn't running correctly. That is before we did any diagnostic work to maybe determine whether it needed new spark plugs, or maybe it needed a new valve, or something like that. And, really, we have started down a road here. We have had one of the most robust housing finance systems in the world. It has been the envy of the world. It has allowed record levels of homeownership for American families. Yes, it is running a little rough right now and we will need to get to the bottom of that, we need to diagnose what those problems are. The Federal Reserve is going down that road; they have promulgated some new rules. We have said that now people who are going to originate mortgages are going to have to be registered. But the problem here is that my friends are going down the road here without really determining all the places in the engine that could be causing the engine not to run correctly, they want to put a new engine in there--an untested engine. Quite honestly, I spent a number of years in the housing business. I built houses, I made mortgage loans, I have borrowed money, I have originated mortgages. And one of the things I know is that not every mortgage fits every situation. A lot of people were able to enjoy the American Dream because they were able to get a mortgage tailored to their financial needs. What this bill does is says, you know what, the government is going to tell you what kind of mortgage you get. And if you don't take the government mortgage, it might not allow you to get the house that you want. It is like, not only is the government going to put a new engine in your car, but, by the way, the government says, scoot over, now we are going to drive. We have seen, in the last few months, a major government intervention into financial markets, into automobile companies, into insurance companies. Last week, we saw that the Federal Government is going to tell you what kind of credit card you get to have now. And now my colleagues on the other side want to tell you what kind of mortgage you get, which is going to tell you what kind of house you get. That is not the American Dream; that's the Government Dream. Quite honestly, my colleagues are dreaming if they think this is not going to increase the cost of mortgages for families all across the country. And you know what happens when you increase the cost of the mortgage? It reduces the affordability for those American families. That means many of them have to buy smaller houses, or, in some cases, many people are priced out of the housing market because they can't get the mortgage that meets their needs. Let's let the American people have a choice to do that. Let's stop and look and give the regulatory measures that have already been proposed by the Federal Reserve time to work. And let's make sure that we are fixing the things that are broken before we throw out the whole engine and leave Americans without the ability to be able to have affordable mortgages and afford the American Dream. Mr. Chairman, I reserve the balance of my time.