Predatory Mortgage Lending Practices Reduction Act

I thank the gentlewoman, the Chair of the Housing Subcommittee who has worked so hard all year on a number of very important pieces of legislation. And I appreciate the kind words of the ranking member. I congratulate him on the newest addition to his extended family. And he correctly says, there is a lot in this bill that we agree with; there are some things that we disagree.

Now, the ranking member of the subcommittee, the gentlewoman from Illinois, the ranking member of the full committee. I should note, the gentlewoman from Illinois is no longer the ranking member of this subcommittee, she was recently moved, but she was during the pendency of this bill. They noted that last year a bill passed the House by 400 to a handful on the FHA, and that is true. And the reason is, that is the difference between us and them.

Last year, when they were in the majority, they came out with a bill that had some things in it that we liked, a couple things that we didn't like, so we were reasonable and conciliatory and voted for it. And now we are in the majority. And it is an odd argument to say that the bill that they passed when they were in the majority, having defeated some of our amendments, somehow now, because we were conciliatory last year and supported it, we are obligated to do the same thing.

The principle of deja vu all over again is not to be found in Jefferson's Manual. It is not binding. We built on what we agreed to last year and we added some things. Let me talk about where we disagree.

Oddly, the administration insists that when we do mortgage insurance for lower income people, we agree, that going forward, and even in fact in helping in the current crisis, FHA mortgage insurance should be available for people with weaker credit who are in the subprime category, now, if they can refinance at a steady rate in the future so they can go there in the first place.

But what the administration says is this: If you are a woman making $48,000 a year and your credit isn't great for a variety of reasons and you get mortgage insurance from the FHA, this administration and the approach of my Republican colleagues is to charge her more than any Member of this House would be charged for the same mortgage insurance, because what they say is, we will extend it to people with weaker credit, but we will charge them more, because people with weaker credit are likely to default. It is true people with weaker credit are likelier to default, but should everybody be penalized financially because some people with weaker credit will default?

What we say is, if you are in that higher risk category and you go forward and make your payments on time, you should be refunded that money after 5 years automatically, 3 years at the discretion of HUD.

So I reject the notion that we should make the person in the lower credit category who conscientiously makes her payments be the one who has to bear the cost of a loan loss rate that is higher for people like her. That is not her fault.

Secondly, we have in here tougher restrictions than last year on the ability of HUD to raise FHA rates. Members will note, the FHA has been making a surplus recently, and the administration likes that and they can use that to put into the general budget so Housing and the FHA subsidize the rest of the budget. And a couple of times on a fully bipartisan basis, through the appropriators and through our committee, we have written to HUD saying, no, don't do that. Don't raise FHA fees when you are already making a profit.

This bill, in fact, reduces the ability of HUD to raise fees unless they can document that they are going to go in the red, and that is one of the differences. If you vote for a substitute, you will be voting for a weaker set of restrictions on HUD's ability to raise FHA fees. That is why the home builders and the realtors have generally been supportive of the approach that we are taking, because we don't want HUD to have the freedom to raise the fees just to make a surplus for the rest of the government and make homeowners do that initial surplus.

In addition, by the way, we take the cap off home equity mortgages, and that is what generates the money. We don't generate the money for the affordable housing fund here by raising fees on mortgage insurance in general; in fact, we restrict HUD's ability to do that. We do take the cap off mortgage insurance. So what we are saying is, there will be more home equity mortgages granted. And, in fact, we put a restriction on the fee that can be charged by those who originate them. Not in the minority's substitute, I believe. And we say that extra money that comes not from raising anybody's fees but increasing the volume is what we can use for affordable housing. We also say that you should raise the limit.

Now, the administration had been opposed to it and they are parading it some but I believe not enough. We now have a situation in which the market is telling us that they will not do mortgages if they go above the FHA-GSE limit. And what this bill does is, A, to raise the limit based on the regional variation in house prices, but, in addition, says to the Secretary of HUD: If

the market freezes up as it now does, you have discretion, the discretion of the Secretary of HUD, to do a temporary increase in the limits. And I think that is a reasonable approach.

Finally, the Affordable Housing Trust Fund. Be very clear. Look at the bill. Not a penny can go to the Affordable Housing Trust Fund under the legislation before us today until the Secretary of HUD certifies that the FHA fund is fully solvent. That is, there is no way under this bill that a penny can go to the Affordable Housing Trust Fund if it would in any way cause an increase in FHA mortgage insurance or in any way jeopardize the fund.

The question is, if there is a surplus generated by the mortgage insurance rates, and remember, we are saying to HUD you can't charge as much as you want to. So at the lower rate we impose and with the increase in the volume of home equity mortgages that generates a surplus, does it go into the Treasury to do as they wish or can we set it aside for an affordable housing program? And for the first time, because you do not have now a lot, there are a lot of HUD programs, but there aren't any now that help build family affordable housing. We have some for the elderly; HUD tries to cut it. We have some for the disabled; HUD tries to cut it. We do not have a general program for helping to build affordable family housing, and that is what this bill would do. But only if by raising revenue. And, by the way, when we increased it, there was an odd statement in which they said don't raise the upper limit, have the program be focused on the lower income people. They are not competitive.

In fact, raising the upper limit makes money for the FHA. CBO has told us that when you raise the limit, that is a profit for FHA. In fact, raising the limit at the top is one of the reasons why we can avoid charging the people with weaker credit more, which the FHA wants to do, because we recycle some of that profit that they will make from right in the upper end into helping offset the higher loan loss rate from people at the lower end.

So the notion that in any way we are deteriorating our ability to help the moderate people is just nonsense. It is literal nonsense. Because raising the upper limit, all it does is provide more funds which can be used, because the alternative, and again this is in the Bush administration's approach: Yes, we will extend credit to people with weaker credit, but we will charge those individuals more than somebody who is richer even if that individual is making the payment. I don't think that is appropriate for the Federal Government.

There has been a lot of bipartisan cooperation on this bill. There were a couple amendments offered. One amendment is jointly offered by myself and the gentleman from California (Mr. Miller). There are amendments offered by the gentleman from Ohio (Mr. Tiberi) which we think is a good idea. Mr. Miller has another one dealing with down payment assistance. Mr. Tiberi's deals with the question of counseling. We are supportive of those. There is a great deal of bipartisanship here.

The realtors and home builders, two of the private sector groups strongly committed to helping with homeownership and home building, support this bill and support our versions of it. All the consumer groups, the people who advocate for low income housing do. I hope that the bill is adopted. There are some amendments that would kill it. I will say there is an amendment to strike the funds for the Affordable Housing Fund. Members might want to check. A virtually identical amendment was offered during the appropriations bill to prohibit any FHA money from going there. It was defeated by 2-1. It was a very large vote on this side, obviously, but a significant vote on the other side. We have debated all these issues. I hope by the end of the day we will send the FHA bill through.

And let me just close by saying I welcome what the administration did. We are moving closer. I hope by the end of today we will have sent this bill to the Senate, along with the GSE bill. And I have spoken to Secretary Paulson and I have spoken with Members of the Senate. If the Senate will then take up the GSE bills and the FHA bills, I know there are differences, we want a signature on both bills. We will have a genuine three-sided conference; ourselves, both parties; the Senate, both parties; the Secretary of Treasury, the Secretary of HUD. And I believe if the Senate will act well before Thanksgiving, we can have a good package in which the GSEs and FHA are made sounder and more solid and better able to serve the people.

Will the gentlewoman yield?

I would say that I really am very proud that on our committee, and the gentlewoman is right, there are some areas of disagreement, I think we have shown how you can have legitimate disagreements of governmental philosophy within a framework of some agreement and be able to deal with them so that the disagreements can be reasonably debated and don't spill over and don't interfere.

And the gentlewoman is right, we have been very active; but we could not have been active in a very constructive way if it hadn't been for that spirit, and I thank her for it. And obviously we will still be working with her, but we do want to acknowledge how helpful she was and how constructive in her role as the ranking minority member.

Madam Chairman, I thank the gentleman, and I thank the gentlewoman from Illinois. She is absolutely right. If I thought this would in any way impinge on our ability to help middle- and lower-income people, I would be opposed to it. In fact, if this works as we believe it will work, it will be the opposite. Because CBO has consistently scored, we haven't had this particular amendment scored, but prior amendments that have raised the limit at which the FHA can operate have been scored by CBO as generating a surplus, a positive number. That is some of the money that we are going to use. As the gentlewoman knows, while there is some controversy about this thing, we significantly increase in this bill the amount for counseling, because if there had been proper counseling, a lot of people wouldn't have been stuck at pre-prime. The counseling is aimed at people in the lower brackets. This is part of the money for it.

I would be willing, when we get to conference, to say, if, in any way, this would appear to be impinging on the ability to do the rest of the mission, we would cut it off. But the way it is going to work, it will, in fact, generate a surplus which we intend to use to help precisely the people whom the gentlewoman refers to.

I thank the gentleman. I appreciate his advocacy of this. He has been one of those who, from California, has been most vigorous in reminding us of the need to do it.

Madam Chairman, I rise to seek the time to discuss this, with a certain ambiguity as to my position.

To two aspects of it, yes, Madam Chair.

I yield to the gentlewoman from California such time as she may consume.

Madam Chairman, I claimed the time in opposition, but having listened to my two very persuasive colleagues, I have been converted and I now support this amendment.

Madam Chairman, I yield back the balance of my time.

Madam Chairman, I claim the time in opposition.

Madam Chairman, I did want to ask a question of the gentleman from New York. I have a concern about his amendment, only because it does not seem to me to go far enough.

One of the things we have tried very hard to do in our committee is to end what has been a kind of discrimination against manufactured housing, because if we are going to get to more people being able to own homes without getting into a subprime type of situation where people are induced to borrow more than they should, manufactured housing should be part of it.

The gentleman's amendment is properly, from his standpoint, addressed to a situation in his own district where fixed-foundation housing is involved. But my question here would be, and I realize it is under the rule not possible to change the amendment now, but I would have this question: If his amendment would be adopted, if as the process went forward some of us were able to work to expand this so it wasn't limited to fixed foundation, would the gentleman from New York have any objection to that?

And I will yield to him.

Madam Chairman, in the face of that degree of reasonableness, I withdraw my opposition.

I yield back the balance of my time.

Madam Chairman, I rise to sincerely seek time in opposition.

Thank you, Madam Chairman.

We have been debating this. It is a legitimate issue. We debated it when the gentleman from Georgia offered a version of it in the appropriations bill. We debated it previously. We debated a similar argument when we had the GSE bill.

The gentleman says there are 80 HUD programs and HUD money has gone up. The major reason the HUD funding has gone up, the single biggest one, has been in the section 8 rental program. There is a problem with section 8. Section 8 adds equity. But the current section 8 program provides rental assistance for one year at a time. No one can build affordable housing based on an annual grant. So what section 8 does, while it does provide some equity and I have been supportive of it, it increases the demand for housing without increasing the supply.

So in the current formation of Federal policies, the Federal Government puts upward pressure on rentals in the moderate- and low- income areas, because we give people billions of dollars to rent apartments in a way that does not lead to any construction.

This tries to make it a more balanced program. This and the GSE bill take money to begin the process of constructing affordable housing, which in the end could save us money, because it will then say that the rental levels which section 8 is driving up will no longer be driven up.

The gentleman says it is going to be a tax on the FHA. In fact, I hope the gentleman, given his concern about a tax on the people who get mortgage insurance from the FHA, will vote against the amendment to be offered by the gentlewoman from Illinois, because in this bill, unlike the gentlewoman's amendment, we have very tough restrictions on HUD's ability to raise the FHA fund unless it is necessary for solvency.

In a bipartisan basis last year, we wrote to them and we did it in the appropriations bill, because HUD was being told by OMB, not HUD, HUD made it very clear, this was an OMB directive, raise the FHA fees because FHA isn't contributing enough to the budget.

We put into our bill's restrictions, we have a restriction in our bill on the amount that can be charged for home equity mortgages by the originators. It is not in the gentlewoman from Illinois's amendment. We put caps on the FHA. So exactly the opposite is the case. And as far as this is concerned, the bill specifically says that no money can go to the Housing Trust Fund until the HUD Secretary has certified that the fund will be totally solvent and this will not endanger it.

The money that would go to affordable housing does not come from raising anybody's fee. It comes from an increase in volume. We capped the fees. I want to emphasize this. In the bill that we have, as opposed to the gentlewoman from Illinois's substitute, there are two separate restrictions on FHA's ability to raise fees that she doesn't have.

What we do is the law now says FHA can only do 65,000 home equity reverse mortgages a year. We say, no, there is no reason for that limit. We say do as many as the market will bear, with a restriction on what can be charged.

That is what generates the money. It is an increase in volume at a lower price to the consumer that generates the money; and if that increased volume and the lower price to the consumer results in there being a surplus that we can spend to build rental housing, as long as HUD certifies that that would not in any way require any increase in the FHA, we say, go ahead.

As to affordable housing, there is a severe crisis in rental housing in this country, and you had some of the people pushed into subprime situations because there wasn't enough rental housing. We think the Affordable Housing Trust Fund helps deal with that.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, I yield myself 30 seconds to say that I appreciate the candor of the gentleman from California. He is against Federal programs that help build affordable housing; I understand that. By the way, this is not, of course, the old forms of public housing. This is going to be a private corporation.

But I would say to my friends on the other side, I don't think that you can argue both that we already have enough programs to do this and that we shouldn't have any at all. In fact, we do not now have programs that help build family affordable housing. We think in cooperation with the private sector, and the gentleman mentions the market, every private market entity, the Realtors, the home builders who are involved in construction in the private market, support the creation of the housing fund.

Madam Chairman, I congratulate the gentleman's dexterity, on his ability to go 180 degrees opposite on his argument mid-amendment.

He started out saying we can't do this because it will jeopardize the FHA. We point out that in the bill that couldn't happen. This bill says this money cannot be used if it would in any way jeopardize an FHA situation. So he says okay, let's take the surplus and put it into the regular budget. That is a debate. Do we take surplus and put it into the budget to detract from other spending? I don't think so. I guess the question is this. If you take out an FHA mortgage and get mortgage insurance, and if our bill doesn't pass, this administration will raise that fee to make more money, should that go to the war in Iraq and for contractors in Iraq who are wasting money? Or should it go to build affordable housing in our cities, because that is where the money is going. The money is not going to reduce the deficit; it is going to be wasted elsewhere.

What we say is this. We should be building affordable housing. Some Members say don't give money to the States. No, I think that is a very good way to go. I think the States and the localities are best able to respond, and I hope the amendment is defeated.

I would say to my friend from Ohio, and we have worked together on a lot of things, I understand his purpose is a good one, but I share some of the concerns of the gentlewoman from Illinois.

I hope the gentleman understands that if this becomes part of the bill, as I believe it will, we haven't had a chance to consult with the FHA. We would like their advice. We could wind up strengthening the urging but allow for some exceptions. I would hope as we went forward the gentleman could work with us on doing that.

If the gentlewoman would continue to yield, there are some differences that we have of an ideological sort. There are a lot of general areas of agreement. Mr. Montgomery, the head of the FHA, has been, I think, a responsible and thoughtful administrator of the program. We have a common interest in this, and I would look forward to having him in on this conversation with us, and I think we can move in that direction with some of the flexibility that the gentlewoman asked for.

Madam Chairman, I yield myself 3 minutes.

The gentlewoman, incredibly, says this will jeopardize the solvency of the fund if we put money into affordable housing. I thought reading was one of the basic things we did around here. In the bill it says nothing can go to the Affordable Housing Fund if it would jeopardize solvency. Simply denying plain facts is not an appropriate way to debate.

In much of her argument she talks about another piece that represents the difference between us. We say that if you are someone with a weaker credible, a lower FICO score, the great god, FICO, that governs the lives of lower-income people, if you get your mortgage insured and you work hard and make all your payments, you should still be charged more than the gentlewoman from Illinois or I would be charged for a mortgage, because that is the insurance principle.

It is an appropriate principle for a private insurance company. For the Federal Government to say to hardworking people who are making their payments that they will be held accountable for the fact that other people didn't make their payments, and I won't be and the gentlewoman from Illinois wouldn't be, that is not appropriate.

So this principle of, yes, they say if you are healthy, you shouldn't get your money back, if you work hard and make your mortgage payments, why should you be charged more because somebody else like you defaulted? Let's all share that burden.

The gentlewoman said, well, it will be hard to give lower-income people loans. Those are crocodile tears. You are going to help these lower-income people by making them pay more for their mortgage than we would pay.

I would also note, and I wasn't in charge of the drafting, but we did adopt several amendments today. The gentlewoman's amendment would, of course, wipe all of them out because it would go back to last year's bill.

I understand there is regret on the part of many of my colleagues at the results of last November's election, and it is appropriate to try to undue last year's election. The appropriate time to do that is in next November's election, not by bills that passed a year ago with a differently constructed House and say let's not make any changes.

We made changes to accommodate refinancing for people caught in the subprime crisis. That is in this bill. It is not in the gentlewoman's substitute. Taking a year-old bill, with none of the improvements we have made, it goes beyond the philosophy.

Now, I understand Members don't want to do an affordable housing fund. That was the gentleman from Texas's amendment. I oppose it. That one makes some sense in terms of ideological division. But to say let's ignore everything that has happened in the last year, amendments adopted here today, several amendments by Members of both parties, the gentleman from California (Mr. Gary G. Miller); the gentleman from Ohio (Mr. Tiberi); the gentleman from Massachusetts (Mr. Tierney); the gentleman from New York (Mr. Bishop). We adopted their amendments. The gentlewoman wants to wipe them out. That is not an appropriate way to legislate.

I hope that the amendment is defeated, that we do not say in particular

that if you are someone in a lower-income category and you make your mortgage payments, the Federal Government will charge you more.

Madam Chairman, I reserve the balance of my time.

I think the gentlewoman confused a couple of issues. When I talk about not charging someone more because she has a lower credit score, and it is often a ``she'' that is in that category, it is not the no-down-payment category. What the bill does that the gentlewoman has is to say if you are someone with a lower credit score and get a loan with a down payment, you get charged more even if you make your payments.

By the way, the bill that she would replace with last year's bill would also knock out several protections we have in this bill against FHA fees being raised. The FHA doesn't want to raise fees. OMB has ordered FHA to try to raise fees. Congress has had to intervene.

There are in our version, unlike the version the gentlewoman is offering, protections against fee increases. We have an amendment that was advocated by the gentlewoman from Florida, Ms. Ginny Brown-Waite, and the gentleman from Georgia, Mr. Marshall, to limit the amount that can be charged to older people taking out reverse equity mortgages. That is in the bill that the gentlewoman wants to displace, and she would displace it with a bill that has no such protection for older people.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, I yield myself 3 minutes.

The gentlewoman has quite honestly joined this one issue. She says it is the principle of insurance. If you are healthy, you should pay less for insurance than if you are sick. That is not the principle we follow in the Federal Government. That is the point the gentlewoman misses.

Yes, if you go to a private company, they will do that. You don't pay more in a Medicare premium if you are sick than if you are healthy. That is apparently what the gentlewoman is advocating, that senior citizens who are sick should pay more premiums than senior citizens who are healthy.

The question is whether a principle that is necessary in a private insurance scheme is appropriate for the Federal Government. She says just because you are low income doesn't mean you have poor credit. True. Not in every case. She knows there is a correlation; that the weaker the credit, the likely the people are to have low income. She, again, is saying explicitly that she believes, and she doesn't deny it, that it is the principle of insurance.

You are a working woman making in the forties, you get FHA insurance, you make all your payments, and you have got weaker credit than somebody who serves in Congress and makes $180,000 a year. You have to pay more, according to the gentlewoman, than I would pay, even if you made all your payments.

What we are saying is at the outset it may be that you want to charge more. Yes, we will give FHA the ability to do that upfront. But you can earn your way out of that. If you have weaker credit, but you work hard, you are diligent and you make your payments, why should the Federal Government charge you more than someone far wealthier than you?

The gentlewoman is wrong to think that is the precedent. In the health insurance field and the Federal Government field, if you are under Medicare, you don't pay more in Medicare premiums if you were sick than if you were healthy. This is what we are saying, that you should not charge people more.

I would also point out, again, that she said we don't want to raise fees to people. Our bill limits what the FHA can be forced to charge by OMB. We have three separate provisions. I will point out again to the gentlewoman, we adopted a provision, there were negotiations between AARP and the originators of the home equity mortgages, the services, and we have in there a reduction, we put a cap on. We cut by one-third the maximum fee elderly people can be charged for an FHA-insured home mortgage.

We reduced the fee that elderly people can be charged by one-third. The gentlewoman's amendment, it is not her fault, she is not gratuitously trying to hurt older people; she just picked up this old amendment from a year ago, this old bill, and offered it without taking into account the progress we have made. That is not a good way to legislate.

I reserve the balance of my time.

Madam Chairman, let me ask the gentlewoman from Illinois: If someone has weaker credit and gets mortgage insurance but makes all the payments for 5 years, why does the gentlewoman think that she should be charged more? And how does it hurt the FHA's ability to go forward if, after someone has

made the payments for 5 years, she gets refunded the extra? I would yield to the gentlewoman to answer that question, a fundamental difference on the bill.

No. Answer the question. They are not refunded under your bill. They are under, the gentlewoman would not refund them. How does it hurt the FHA in their ability to lend to people with weaker credit if they say to people with weaker credit, if you make your payments for 5 years, we will refund the extra we charged you?

I yield.

I take back my time because the gentlewoman is simply, I understand her answer. It is, if there is a higher loan loss rate from lending to lower-income people, people with weaker credit, they have to subsidize each other.

We say, no; raise the jumbo limit, and let those people in California and Massachusetts and New York who are getting mortgages at $600,000 and $500,000, let them subsidize it. Nobody is subsidizing. You shouldn't have to subsidize if you are making your own payments.

National Association of Realtors,

Washington, DC, September 14, 2007.

House of Representatives,

Washington, DC.

Dear Representative: On behalf of the 1.3 million members

of the National Association of REALTORS, I urge you to

support H.R. 1852, the ``Expanding American Homeownership Act

of 2007'', when the bill is considered by the full House.

This is an important measure that will allow FHA to function

in the 21st century. Equally important and worthy of your

strongest support is an amendment to be offered by

Representatives Barney Frank (D-MA), Gary Miller (R-CA) and

Dennis Cardoza (D-CA) that is vital to improving the

stability of mortgage markets, a critical component of our

national economy.

The Frank/Miller/Cardoza amendment would increase the

Federal Housing Administration (FHA) loan limits beyond the

language originally included in H.R. 1852. Such an increase

is now needed in light of the significant housing and

mortgage market turmoil that has severely limited the ability

of families to refinance a problematic existing loan or,

alternatively, purchase a home in a high cost market with a

safe and affordable mortgage.

As you well know, many American homeowners now have

mortgages with payments that will soon increase dramatically,

putting them at risk of foreclosure. Raising the FHA loan

limits will provide many of these homeowners living in the

nation's high housing cost markets with a safe FHA loan

alternative. In addition, with the even more recent

tightening of the jumbo market, many homebuyers may not be

able to find a safe, affordable financing option without an

increase in the FHA loan limits.

Although the underlying bill would increase the loan

limits, we strongly believe that the Frank/Miller/Cardoza

amendment is needed to affect real change. H.R. 1852 creates

a new loan ceiling of $417,000. Many markets are

significantly higher than this limit. Median home prices of

communities in New York, New Jersey, Connecticut, California,

Massachusetts, and Pennsylvania are already far above this

limit. The Frank/Miller/Cardoza amendment creates geographic

fairness by raising the loan limit to 125% of the area median

home price. Under the amendment working families in Newark,

NJ can buy a home for $512,000, and families in Los Angeles,

CA can buy homes for $650,000--both median price homes for

their area.

FHA reform is needed now, more than ever. Please vote for

H.R. 1852 and the Frank/Miller/Cardoza amendment when these

measures come to the Floor.

Thank you,

Pat V. Combs,

President.

Mr. Speaker, I rise in opposition to the motion.

Mr. Speaker, I ask the Members to follow closely because there are some unusual twists and turns even to this.

In the first place, the gentleman talked about people getting FHA loans who weren't here legally, and he made a big point of that. As he later acknowledged, the bill, as reported, already deals with that.

The gentleman from Georgia is so enamored of this amendment that he's offering it twice to this bill. Now, he's making up for the fact that last week he wanted to offer it and couldn't. The gentleman from Georgia had filed in the Congressional Record a version of this amendment to offer to the Native American housing bill to prevent illegal immigrant Native Americans from sneaking in. And when we pointed that out, the gentleman from Georgia for once thought better of it and didn't offer the amendment. I think he was afraid that the Indians would have said, you know, sir, that's a good idea, why didn't we think of it?

But now, in the amendment, the gentleman offered this amendment in committee, so the illustration he gave of how they are getting FHA loans when they shouldn't, that's already in the bill. What he has done now is to say that this should apply to the Affordable Housing Trust Fund, which is not created by this bill. The bill does say that if we later, on the floor of this House, created an affordable housing trust fund, funds from the FHA excess, if there are any, will go into it. So there is plenty of time when we deal with the Affordable Housing Trust Fund.

So last week he couldn't offer the amendment to keep the illegal immigrants out of the Navajo housing. This week, he's already got it in the bill that covers the bill before us, but he has now got amendment envy in the worst way, so he's going to offer it to a program that doesn't exist yet, preempting our chance to do it. Even that wouldn't be a problem except that he could have said ``forthwith.'' He said ``promptly.'' It doesn't kill the bill; it significantly delays it.

If this comes back to the Committee on Financial Services, it is now wide open. The committee then has a markup, and any amendment can be offered. And I will tell my colleagues that there are Members, yes, there is your indication of what will happen, this will be filibustered again. Thank you for your honesty. I appreciate it. If this bill comes back to committee, it will be wide open.

We are in the midst of a crisis. The President said last month, please pass the FHA bill promptly. Even the United States Senate is now acting on this bill. If it comes back to committee, I have 3 days to notice a markup. How quickly could we do it? Well, I don't think I can have this markup on Yom Kippur. There may be a lot to atone for in this amendment, but I can't have it on Friday.

So we go over to next week. We have markups scheduled next week on HOPE VI and on flood insurance and other important issues, so we couldn't get to this for a couple of weeks. And then when we do get to it, the clappers over there are going to offer a whole bunch of amendments.

Now, if the gentleman just wanted to put this into the program that doesn't yet exist, and that he will have a chance to do it later, he could have said ``forthwith.'' Members are asked, when they rise on a recommit, are you opposed to the bill? The gentleman from Georgia honestly answered that he is. And he used the choice he had to substantially delay this bill. No, not kill it, but this will delay this bill by several weeks in the midst of this subprime crisis.

I would say to Members, preventing the FHA loans from going there, that's already in the bill. Read pages 54 and following. The Affordable Housing Trust Fund, it will be created later. I'm sure the gentleman will offer that amendment again and you will have a chance to vote on it.

So the sole effect of voting for this recommit is substantially to delay the bill on the FHA because the program that the bill covers, this amendment applies already from the committee. And the program that he would apply it to is not yet in existence and won't be in existence until we vote.

And for Members who worry about some cheap shot ad that says, oh, well, ``promptly,'' ``forthwith,'' too complicated, I hope people don't vote for this amendment. Many of them will. You will have a chance to vote for it. Long before the next election, the gentleman from Georgia will have offered this amendment four more times, at least. We've got more bills in our committee, and so you will have the chance to vote for it.

Please, if you support the low-income Housing Trust Fund as a concept and want the funding available when we set it up, if you support, in particular, the President's request that we move promptly to let the FHA be available for the subprime crisis, do not vote for a recommit whose sole effect will be to delay for several weeks passage of this bill. It won't kill it, but a several-week delay. I've got to hold off and call the hearing, we have to then have a long markup, they will be offering more amendments. It will substantially delay a very important bill, and I hope Members will defeat it.

Madam Chairman, I yield to the gentleman from Alabama (Mr. Bachus), the ranking member of the Financial Services Committee, for 7 minutes.

Madam Chairman, I yield 45 seconds to Ranking Member Bachus.

Madam Chairman, I yield myself 5 minutes.

Madam Chairman, I'd like to start out on a positive note, but I guess I must say that I'm disappointed about the bill, the way it is as we're considering it today.

While the bill has improved since its introduction, I had hoped that we could take up the same bipartisan FHA Modernization Bill, H.R. 5121, that passed House last year. And since we've been talking about it, I might say it was cosponsored by 54 Republicans and 51 Democrats and one Independent, so it was a good bill and a bipartisan compromise that was agreed to by Chairman Waters, Chairman Frank, and then Chairman Mike Oxley.

And given the overwhelming vote, and the exact number was 415-7 for last year's bill, I had hoped that we could take it up and move it quickly to the floor. But instead we have two bills this year. We have the bill, H.R. 1752, which I introduced, which was identical to last year's bipartisan bill, and we have Chairman Waters' bill. And so I think we're today considering a new bill with new provisions that are not bipartisan, and I think it has delayed the FHA modernization and will serve fewer borrowers than last year's bill. But it's an important bill.

There are some key differences between these bills. There is one that has caused the greatest concern for me and many of my colleagues, and that is the inclusion of a provision in H.R. 1852 that creates a funding placeholder and siphons off FHA funds to a brand-new government trust fund. And it's admirable, affordable housing. We all want affordable housing in all forms, whether it's section 8, whether it's public housing, whether it's FHA modernization. But I think that taking the funds out of FHA and using them for a purpose unrelated to its core mission of the FHA would threaten the solvency of the FHA fund and its ability to pay off the insurance claims. And we are reaching a crisis there, where we are going to have to have some credit influx into the FHA fund. So we'll hear more discussion on that during the consideration of Mr. Hensarling's amendment during this debate.

So it's my hope that we can work together to address Members' concerns through the amendment process so that a modernized FHA bill can help assist more low- and moderate-income Americans in buying and keeping their homes.

I'd like to just briefly talk about and thank Chairman Waters for offering a specific provision in this manager's amendment. The chairwoman's original draft only permitted first-time home buyers to participate in new low- and no down payment loan programs. But the amendment under consideration corrects that and mirrors the provision in the FHA modernization bill that allows any FHA qualified borrower to participate in the new FHA low and no down payment loan program. So clearly, the FHA has a role to play in the solution to this country's rising foreclosure rate.

And as I think I said on April 19, during our first committee hearing on this, this bill, one of the most important things that Congress can do, as we search for ways to help those that have been harmed by the subprime market, is to give FHA the tools it needs to be a viable alternative for the first-time and low-income borrowers.

And then I'd like to address an issue that Chairman Frank did bring up, and even though he's not on the floor. But the legislation that I have included another bipartisan agreement last year, and that was the automatic reduction of annual premiums in FHA to no more than 55 basis points for loans that remain active after 5 years. And automatic premium reductions can be a good thing. They can reduce refinancing and perhaps some defaults and foreclosures as well.

In contrast, I think that the Franks-Waters bill requires the refund of excess upfront premiums charged to higher-risk borrowers, those with FICO scores under 560. So I'm concerned that this provision would have the unintended consequences of limiting the number of borrowers that could be served by the FHA program because it requires initial premiums to be even higher. And I think that the refund provision would also be very difficult to implement.

This is an insurance program. And when you have car insurance, you don't get a refund if you don't have an accident. You might have your rate lowered, which is what was in the former bill. So I think that that is an issue that he talked about that I wanted to clarify.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, I would just like to thank the gentleman from Texas (Mr. Hinojosa) for all his hard work on our Financial Literacy and Education Caucus. I really enjoy working with him, and the counseling really fits right into the purview of financial literacy, so again I thank the gentleman.

Madam Chairman, I yield 5 minutes to my friend, the gentleman from California (Mr. Gary G. Miller).

Madam Chairman, at this time I would like to yield 3 minutes to the gentlewoman from West Virginia (Mrs. Capito), who is now going to assume the role as the ranking member of the Housing Subcommittee.

Madam Chairman, I have no further requests for time, and I reserve the balance of my time.

Madam Chairman, I yield myself such time as I may consume.

In closing, I would really like to thank Subcommittee Chairwoman Waters for her work on this bill. I am pleased that the FHA modernization bill is moving forward, and I think that the bill that we will vote on today is much improved from the original draft as a result of constructive input from Members from both sides of the aisle. It contains many bipartisan provisions that I support and still contains a few provisions that I do not support. But it is my hope that the provision siphoning money away from the fund will be struck and that true risk-based pricing will be implemented so that FHA can serve the maximum number of borrowers possible. But those arguments have been made and have been rejected by the majority, so it is my sincere hope that we can further improve the bill as it continues to move through the legislative process.

As I understand it, the Senate Banking Committee is scheduled to mark up its version of FHA reform tomorrow. So unlike last year, it appears that FHA reform is gaining traction in the Senate, and I hope that we can move this bill beyond the House during this Congress and that the Senate and the administration will work with us to reform this important program.

I think American families deserve a 21st-century FHA program to have a safe and secure mortgage product as an alternative to the dangerous products offered by predatory lenders. Qualified American families looking to keep their homes and refinance their bad mortgages, many of which are currently in default, deserve to do so through a modernized

Madam Chairman, I ask unanimous consent to reclaim my time.

In all my thanking, I forgot to thank the staff, which I would really like to do, the staff of the subcommittee, Cindy Chetti, Tallman Johnson, Nicole Austin, Robert Gordon and Jim Clinger for all the work that they've done on the minority side of the aisle. And also, to thank, on the other side of the aisle, the Democrat staff who have been so helpful to us: Scott Olson, Gail Lester, Jonathan Harwitz, Kellie Larkin, Tom Duncan and Himay Lazarga. I thank all of them for all the work that they've put into this bill. And also, one of our new members on this side, Jason Britt, one of our new members of the staff. Thank you so much.

Madam Chairman, I yield back the balance of my time.

Madam Chairman, I rise in opposition to the amendment.

With that, I yield 4 minutes to the gentleman from California (Mr. Gary G. Miller).

Madam Chairman, I recognize myself for 1 minute.

I really believe in the concept of this. I think that there are a lot of high-cost areas that will really benefit from this. I hope that this will not hurt some of the low-cost areas; in other words, I think that the administration has said something about the fact that some of the areas across the country would be hurt and would lower, go below the $419,000 limit. So I hope that that will be addressed. I see Mr. Frank getting up. Maybe he would like to comment on that.

Madam Chairman, I yield back the balance of my time.

Madam Chairman, I claim the time in opposition.

Madam Chairman, I have some concerns about what we would call unintended consequences. I am a big supporter of financial literacy, and I chair the caucus. It is so important home buyers know what they are getting into, and I think that counseling is very important. I think that if we have an educated home buyer, we might not see so many of these foreclosures or near foreclosures or bankruptcy with the counseling.

My concern is the mandatory counseling for FHA, and only because of something that has happened in Illinois, that happened in Chicago when this mandatory counseling was put in for FHA mortgages.

What happened was that the lenders withdrew from the area. It was put in first by a ZIP Code in the city of Chicago and then put in for all of Cook County. The lenders withdrew from the area so there were no mortgages or very few available for those in that area because they weren't able to get the counseling that was needed in time to get the mortgages.

It takes time for counseling, and I know that you put in, and I think this would help, is that people could get counseling on the Internet. I think it is a very important thing. I just worry about when it is mandatory that we are going to have less availability of FHA involvement than when it is discretionary as in the bill.

I think that it makes FHA less attractive. If you are a prospective home buyer and one lender, a non-FHA, offers to put you into a mortgage that day while the FHA loan requires you to go through a counseling course, which will you pick? People will leave FHA, and we don't want that to happen. I know it is important that we have counseling and get people into this type of loan. The whole thing is, FHA is much better than the more exotic subprime loans, and that is the whole focus of this bill. I would hope that we can promote FHA, and I hope as this amendment moves forward, we can take a look at.

I yield to the gentleman from Massachusetts.

I yield to the gentleman from Ohio.

Madam Chairman, with that, I withdraw my objection, and I yield back the balance of my time.

Madam Chairman, I offer an amendment.

Madam Chairman, I yield myself such time as I may consume.

My amendment strikes the bill in its entirety and inserts language that is identical to last year's bipartisan FHA modernization bill, H.R. 5121. Last year the bill had 54 Republicans, 51 Democrats, and one1 Independent cosponsor. Last year the bill was the bipartisan compromise that was agreed to by Chairman Waters and Chairman Frank and then chairman Mike Oxley. Last year's bill passed the House by a vote of 415-7 on July 25, 2006.

There are differences in the bills. This amendment, last year's bipartisan bill, I would like to highlight a couple of important differences. The Frank-Waters bill authorizes the FHA to implement risk-based pricing, but leaves in place the current, I think, outdated premium caps. My concern is that these limits on the premium caps will prevent FHA from serving riskier borrowers who could be prudently served by charging a slightly higher premium.

With the flexibility to charge slightly higher premiums, FHA would be able to serve borrowers with lower FICO scores who are currently being served only by the subprime market at very high interest rates. Just like last year's bipartisan House-passed bill, my amendment modernizes and updates premium caps, enabling FHA to reach down and serve riskier borrowers, but in a prudent manner. I think this is where growth comes in, because there will be more loans that FHA will be able to make.

Second, the Frank-Waters bill requires the refund of excess upfront premiums charged to higher-risk borrowers, those with FICO scores below 560. I am concerned that this new provision may treat your higher initial premiums and unintentionally limit the number of borrowers that could be served by FHA.

A refund provision also would be difficult to implement. Perhaps most importantly, refunds like this undercut the very concept of insurance. It is the logical equivalent of a healthy person requesting a 100 percent refund of his or her health insurance premium, or a driver who doesn't get into an accident demanding all of his car insurance back.

Just like last year's House-passed bill, my amendment includes another bipartisan agreement, the automatic reduction of annual premiums to no more than 55 base points for loans, and remains active after 5 years. Automatic premium reductions can be a good thing. They can reduce refinancing and perhaps some defaults and foreclosures as well.

Finally, the most significant difference between the bill I have introduced and the Frank-Waters FHA reform proposal, which has been of great concern to me and many of my colleagues, is the inclusion of a provision that creates a funding placeholder that you have heard talked about so much today that siphons off the FHA funds to create a brand- new government trust fund.

The other provisions that I mentioned are ones that represent significant differences between our introduced bills. Using FHA program funds to create a housing trust fund, to me, is where we have the most difference, and I believe it is not an appropriate use of FHA funds. Taking funds out of FHA and using them for a purpose unrelated to its core mission would threaten the solvency of the FHA fund and its ability to pay out the insurance claims. We don't want to have to come back here and do a bailout because FHA funds were diverted for other projects.

There is general agreement on the need for FHA modernization legislation. By modernizing FHA with my amendment, we can expand FHA and give a viable alternative to more low-income borrowers who may otherwise lose their home or be forced into the higher-cost subprime loans, or even predatory products. It is true that FHA cannot help all homeowners that are in the red, but it may help a good portion of them.

I would urge my colleagues to support my amendment, last year's bipartisan bill, the House-passed bill that many of my colleagues supported last year.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, we could have passed this bill 9 months ago, and then we would have added on to it. Unfortunately, this is my opportunity to do it, and this is the bill that I have had. I bring it up now.

As I said before, there are good things that have come out in the discussion today; there are some good things that have been added onto the bill that you have brought forward. The reason for bringing this up is I have some real concerns about some of the things that are in there, and this is my opportunity.

I don't think that we are penalizing low-income people that much. I know that in the discussion that we had in committee when this came up about no down payment, there are people that can't afford a mortgage with no down payment and can meet the monthly payments, but there was no risk with those people, no premium for FHA to ensure that kind of mortgage.

That isn't fair for other people that based on their credit scores are having to pay a premium. I would just disagree. If you are able to always meet those, then the risk should be dependent on what you do, not what somebody else does either. I would agree with that.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, just because someone is low income does not mean that they have poor credit. I think that is not where they are going to have to pay higher premiums, necessarily. It is inevitable in an insurance fund that lower-risk borrowers will subsidize higher-risk borrowers. Refunds of the nature that is in your bill would undercut the concept of insurance, as I said before, being the equivalent of a healthy person requiring a percent refund of his or her insurance premium, or a driver that does not get into an accident requiring their insurance back.

Madam Chairman, I reserve the balance of my time.

Madam Chairman, looking at the two bills, let's look at flexibility risk-based premiums. H.R. 1752 permits upfront or annual premiums or both. Premium rates may vary over loan term if basis for change is determined at origination.

Under your bill, the same: requires annual report on risk-based premiums and how they were determined, authorizes premiums based on product risk.

The maximum upfront premium amounts, H.R. 1752: 3 percent, or 1.5 percent if annual premium is at its maximum. Under your bill, 2.25 percent for standard-risk and higher-risk mortgages, 3.0 for zero and lower down mortgages for first-time buyers. And then the maximum annual premium amounts in H.R. 1752, 2.0, or 1.0 if upfront premium is at its maximum. Under yours, 0.55 percent for standard and high-risk mortgages, 0.75 for zero down mortgages. And then the limit on premium charged for certain mortgages. If a borrower has 3 percent cash contribution and a score of 560 or more, the upfront premium is limited to 2.25 percent and the annual 0.55 percent. And then, under your bill it is included by creation of the standard-risk and higher-risk mortgage categories.

I guess we disagree on this, but I think I want the same thing. I want FHA to be used. I want it to be used for low-income, first-time home buyers and those that are trying to refinance. This is critical right now, and I just think there is some differences in what we have.

Madam Chairman, I reserve the balance of my time.

I think under the bill, H.R. 1752, their premiums are reduced; they are not refunded.

If the gentleman will yield.

Because the FHA is self-funded. It is not funded by the government just putting money into it just so that they can do other mortgages. It is self-funded and it is an insurance program. Now, we haven't been able to use it because it has been so capped in the amount of what they can do.

I guess we will have to agree to disagree that last year's bill would have served more borrowers. And we are moving forward here, so I would urge Members to support my amendment.

Madam Chairman, I yield back the balance of my time.

Madam Chairman, I demand a recorded vote.

Madam Chairman, I rise in strong support of this bill. I'd like to commend Chairman Barney Frank and Ranking Member Bachus and Subcommittee Chairman Maxine Waters and Ranking Member Judy Biggert for their hard work. This has been a long time coming.

If you watch what the Federal Reserve is doing today, they're injecting short-term dollars into the marketplace trying to stabilize the marketplace. But what the marketplace and housing needs today is long-term dollars and revenues to ensure that people can own a home and get a long-term loan and pay that back.

When I talk to brokers and lenders in my district, it is clear that the FHA program as currently structured has not kept pace. In the past, moderate-income home buyers who could not qualify for conventional loans because of high loan to value ratios or high payment to income ratios could still achieve the dream of homeownership through the FHA program.

Today, the FHA program is no longer a useful product to home buyers. Instead, working families are faced with a situation where they are either unable to own a home, or they're forced to resort to a risky loan product that might make their ability to keep the home difficult.

With all this occurring in the subprime market, FHA reform is more critical today than ever. The need for this legislation is immediate.

Many times exotic products such as interest-only loans, negative amortizations are the only options available to working families to achieve homeownership. This is because the FHA program became virtually irrelevant for many home buyers.

Not only can the bill before us today provide a viable alternative for families seeking to purchase a home, but it can also help families facing uncertainty about being able to keep their current home.

The bottom line is to make the FHA program a viable mortgage option, we must ensure that the program's products are available across the country and they meet the needs of borrowers. This includes not only eliminating the geographic barriers to utilization of the program in high-cost areas, but also facilitating the purchase of entry-level homes, including condos and manufactured housing.

These forms of housing are an affordable option for entry-level home buyers, and they should be included under this program if we truly want to help families climb the first rung on the ladder of homeownership.

In addition to reforming what can be purchased under the program, we must also improve the competitiveness of the FHA product among the mortgage options available. In other words, we must address the problems in FHA programs that cause it not to be utilized when it is an available mortgage product for the potential home buyer.

The answer is that the program in flexibility and burdensome processes have left many in the industry hesitant or, in the case of mortgage brokers, unable to offer FHA products.

The legislation before us today includes a number of reforms to make the FHA program relevant in today's marketplace. For example, today's mortgage brokers originate the majority of mortgage loans and, therefore, provide HUD with the most available and efficient distribution channel to bring the FHA loan products to the marketplace.

While mortgage brokers originate the majority of loans, many are not able to offer FHA products because of the cost-prohibitive and time- consuming financial audit and net worth requirements. This effectively leaves subprime loan products as the only option for many borrowers who would otherwise qualify for an FHA.

Now, let me say the subprime market is extremely beneficial and it needs to be relevant. But today you have many predators in that marketplace that are making loans to people that they know they cannot repay. The bill before us today includes language to replace FHA's net worth and audit requirement with a surety bond to allow more mortgage brokers to offer FHA products. This will ensure that the home buyers are given the option of a FHA product when they seek the services of a mortgage broker.

I would like to say a word about the affordable housing fund included in this bill. While I opposed a similar fund when it was attached to the GSE reform bill, I want my colleagues to know that I support this fund because an amendment I offered at the markup was accepted by Chairman Frank to essentially say, and these are arguments that have been made against this, that the HUD must ensure that FHA insurance premiums are, one, as low as possible; two, that the insurance fund is solvent; and, three, that any FHA needs are met before excess dollars are sent to the housing fund. Virtually it says that FHA has the dollars, they will use the dollars, and when it's not needed, then those dollars will be forwarded to the fund.

After that I firmly believe that the FHA funds should be dedicated to housing. We do this for the highway fund when we charge a gas tax. Those taxes are dedicated to repairing our roads and highways in this country. We should do this with the FHA too. The FHA money we are talking about is money that currently is going to the treasury.

Now more than ever Congress must pass FHA legislation so that we can remove the impediments to the utilization of the FHA and ensure that it once again helps working families across the country so that they have an opportunity to achieve and maintain homeownership. This is an important reform that will help many families avoid foreclosures.

Most of the people, and I would say, all the organizations in the industry who are looking to help people who are in trouble today support this bill. They also support the GSE reform bill that we put forward because it does one thing: It provides long-term stability and liquidity to the marketplace. The goal of this bill is to ease the burdensome problems people are facing today. They are looking at losing their homes. We are saying let's provide long-term liquidity and help them maintain their homes.

Madam Chairman, I'm rising asking for strong support of this amendment, so it's not really in opposition to the amendment.

This bill, and this amendment, particularly, is to encourage the FHA program and products and make sure they're available across this country to help working families to achieve and maintain homeownership through the FHA program.

The bill we are considering here today reforms the FHA single-family mortgage insurance program so that we can reach working families it was created to serve. I don't think there is any question that the FHA program, as currently structured, has not kept pace.

Today, FHA is no longer a useful product to prospective home buyers. The problem is that statutory limitations preclude the FHA from adopting a rapidly changing marketplace that we experience today.

As the private sector mortgage markets become more efficient, the FHA program's inflexible rules and requirements left it virtually irrelevant as a financing option. Under the current limitations, FHA products are not available for home buyers in high-cost areas of the country because the maximum loan limits are so much lower than the median home prices in that area.

We did something very similar to this when we did the GSE in the high-cost areas. And the only people arguing against raising this conforming loan limit to high-cost areas were those whose home median prices fell far lower than the median amount they were able to loan on. If your median home area is 200,000 and it isn't 435, you don't care. But in California and other areas, it is quite the opposite.

Now California's drop in FHA volumes have been nothing short of stunning. In 2000, FHA insured 109,074 mortgages in California, but last year it only insured 5,137. In my district, FHA insured 7,000 mortgages in 2000 and only 80 mortgages in 2005. These figures represent a 99 percent drop in what FHA is able to loan in these high- cost areas. That in and of itself states that there is a huge problem that this amendment is trying to cover and create the shortfall that currently exists in the program. Arguably, working families in high- cost areas of the country are just the kind of underserved populations the FHA program was originally intended to serve.

If we want to ensure that FHA is relevant for all those who need it, we must reform the program so it is available to low- and moderate- income families across the country, even those in high-cost areas.

On August 31, the President announced his goal to help an estimated 240,000 families avoid foreclosures by enhancing the FHA program. Under the President's plan, FHA will allow families with strong credit histories who have been making timely mortgage payments before their loan reset, but are now in default, to qualify for refinancing. Unfortunately, without an increase in the loan limits, this program will not help families in high-cost areas.

This amendment, supported by Mr. Frank, Mr. Cardoza and myself, would make sure that families can refinance in the FHA products by raising the FHA single-family loan limits in each local area to the lower of 125 percent of the area median home price, or 175 percent of the national GSE conforming loan amendments.

The amendment also gives HUD authority to raise these loan limit amounts by up to $100,000 ``if market conditions warrant.''

The NAHB, National Association of Home Builders, has written a very strong letter in support of what we are trying to do. Many builders are selling homes today, and the problem they have is the person buying their home cannot find financing to sell their home. And this will help those people who are looking for financing and dealing with liquidity shortages in the marketplace.

The National Association of Realtors has also written a very strong letter supporting what we're trying to do today. The problem they're facing today with people in the mortgage bracket that we're trying to deal with in this amendment, this will go a long way to providing liquidity and competition in the marketplace to ensure that American home buyers and families have the best and most opportunities that can be achieved through the marketplace through this amendment. So this is a very good amendment, and I would ask for an ``aye'' vote.

Madam Chairman, I offer an amendment.

I rise to offer an amendment to H.R. 1852, the Expanding American Homeownership Act of 2007.

My amendment would allow qualified down payment assistance providers to participate in the FHA program if certain conditions are satisfied to ensure that the down payment assistance program is legitimate and that the gift that is provided to the homeowner and the home buyer is truly a gift.

One of the primary barriers for many Americans to achieving the dream of homeownership is the lack of accumulated wealth and disposable income required to come up with the down payment and closing costs needed to purchase a home. While they can afford monthly payments, some families have not been able to accumulate enough to cover down payment and closing costs.

Fortunately, some charitable organizations have developed programs to help provide down payments to families that would qualify for the mortgage for the FHA program but for the lack of cash for a down payment. These down payment assistance programs have been successful in expanding homeownership opportunity for millions of families. The private sector has been working without government intervention to assist individuals and families who lack the necessary funds for down payments and other related costs become home buyers. In fact, Congress looked at the success of these

programs when it created the American Dream Downpayment Act, a government program passed in 2003 to provide up to $10,000 in down payment and closing cost assistance to first-time home buyers.

Similarly, H.R. 1852, the bill you are reviewing today, authorizes HUD to allow zero down payment FHA loans for home buyers who could not otherwise make the down payment required under the FHA rule.

In the past, HUD has permitted the use of charitable down payment assistance programs in conjunction with FHA insured loans. Recently, however, HUD issued a proposed rule that would effectively eliminate many legitimate down payment assistance providers from assisting in FHA programs.

We are hearing that just last week HUD sent a rule over to OMB for final approval. I am very concerned about the impact of this proposed rule on homeownership in our country.

Rather than going too far by eliminating all down payment assistance providers, all that is really needed is a reasonable and fair criteria by which these programs can continue to operate while also protecting the FHA insurance fund. If there are legitimate problems that have been identified by HUD, then we should absolutely fix these problems. In fact, the full House has agreed that we should strengthen the rules for down payment assistance providers rather than eliminate them completely from the FHA program.

In July, the House unanimously passed an amendment I offered with Housing and Community Opportunity Subcommittee Chairman Waters and Representative Al Green to the Transportation-HUD appropriations bill, which prohibited HUD from taking any action to issue its final rule or otherwise implement all or any part of the proposed rule.

The amendment prevented HUD from finalizing or implementing the rule to end participation of down payment assistance providers in the FHA program. Our argument, then, was that HUD's proposal was too harsh a step and we would work to include language in the FHA bill to fix the problems that HUD has identified with some down payment assistance providers.

This is what my amendment before you today seeks to do. The amendment I offer today is a followup on our work during the THUD bill to put the brakes on the HUD rule and instead address the problem HUD has identified with certain down payment assistance providers. This amendment would put the controls in place to weed out the bad actors while allowing those who help millions become homeowners continue to do the good work they are doing. Unlike the HUD rule, my amendment would preserve the down payment assistance programs' participation in FHA while ensuring they are legitimate and helpful to the home buyers.

As you know, H.R. 1582 already includes language to end the practice of inflated appraisals, which was a key argument HUD used against the down payment assistance programs. My amendment builds on this provision and says that down payment assistance providers may participate in FHA so long as the down payment they are offering is truly a gift; in other words, that it reduces the amount owed on the home. My amendment also imposes a net worth requirement on such providers to alleviate the quality and quantity involved within the activity. This provision specifically responds to HUD's complaints regarding the plethora of small, fly-by-night operators that open up and that close down on a regular basis to avoid regulatory scrutiny. Many of these groups are starting business one day, getting involved in things they should not, and closing down immediately.

These three improvements to the current situation, number one, prohibiting inflated appraisals; two, ensuring DPA providers offer an actual gift; and three, imposing a net worth requirement, will weed out the bad actors while not prohibiting all down payment assistance providers from participating in FHA, as the HUD proposal would have done.

With limited resources at the Federal level, Congress viewed the American Dream Downpayment Act as a complement, rather than a replacement, to the tremendous work down payment assistance providers were already doing to help build communities. There are simply not enough resources at the Federal level to do this alone.

To address HUD's concerns, we should implement the same underwriting criteria that would be used on the new zero down payment program within FHA and what HUD already uses on the American Dream Downpayment Act.

If we have come up with a reasonable system of underwriting to give Federal dollars to assist a family in buying a home, then we can certainly use the same criteria to allow the private sector to put forth people and moneys in these programs to allow people to own their homes.

If FHA can offer a zero down payment loan under a given underwriting criteria, as proposed by this bill, then the private sector down payment assistance programs should also certainly be subject to this same criteria.

To eliminate the possibility for a million families to own a home through down payment assistance providers but allow them to use the Federal Government for a down payment grant seems contradictory. If it works for the Federal program, then it should work for the private sector alternative, as well.

My amendment addresses the problems with certain down payment assistance providers that HUD has identified. Rather than eliminating all providers, as the HUD rule attempts to do, it puts the protections in place to ensure the home buyers are getting a legitimate helping hand from these charitable entities.

Madam Chairman, I ask for an ``aye'' vote on the amendment.

I reserve the balance of my time.

Madam Chairman, I want to thank Maxine Waters for her kind comments. I remember when we were debating the American Dream Down Payment Assistance Act, and we used the private sector down payment assistance program as the tool and the argument to expand upon and have government also get involved. These private sector groups have put over 1 million people in homes that could not otherwise be in homes.

This continues a program that has worked very well and eliminates the bad actors that HUD is talking about. I think if this is implemented, this bill will be a very strong bill, and I ask for an ``aye'' vote.

Madam Chairman, I yield back the balance of my time.

Madam Chairman, I yield myself such time as I may consume.

I rise in support of H.R. 1852, the Expanded American Homeownership Act of 2007. As you know, I introduced H.R. 1852 on March 29, 2007, and I want to take this time to thank Chairman Frank for his original cosponsorship. I also want to acknowledge each of my colleagues both on the Committee on Financial Services and in the House who have joined with me to see that this important legislation passes the House.

It has been a little over 4 months since the Committee on Financial Services considered this measure to revitalize the Federal Housing Administration, or FHA. On May 3, 2007, the

Expanding American Homeownership Act passed the Committee on Financial Services by a vote of 45-19.

The ensuing period has only made the need to enact H.R. 1852 clearer. We are all aware of the turmoil in the mortgage markets with the dramatic rise in foreclosures. Some predict as many as 2 million mortgage loan defaults by year's end. Equally troubling is the widening impact that the mortgage crisis is having within the domestic and global economy. We still don't know the full scope of that impact, but it is clear that we must take prudent steps to address the underlying issues in the housing markets.

H.R. 1852 is a necessary step in that direction. To be clear, this legislation will not by itself resolve the crisis. Indeed, later this week the Committee on Financial Services will hold a hearing to discuss the major players in government and the markets' other strategies to address this multi-faceted problem.

Revitalizing FHA, however, is an essential element of a comprehensive strategy. FHA is a federally insured loan program that for over 60 years has been a reliable source of affordable fixed-rate mortgage loans, especially for first-time home buyers.

At the end of funding year 2006, FHA had $338.6 billion of insurance in force on about 3.9 million loans. From 1934 through the end of funding year 2006, FHA had insured about $33.9 million home loans at a mortgage volume of about $1.9 trillion.

Once the preeminent provider of mortgage insurance to low- and moderate-income home buyers, FHA has seen a precipitous drop in its market share in recent years. In 1991, FHA loans accounted for about 11 percent of the market. By 2004, that share had dropped to about 3 percent.

Borrowers have increasingly turned to the private subprime market for loans, many of which contained adjustable rates that are now resetting, or will do so in the near future. In the absence of significant appreciation in the values of their homes, many of these borrowers will be unable to refinance to ensure affordable monthly payments into the future.

H.R. 1852 will enable FHA to serve more subprime borrowers at affordable rates and terms, recapture borrowers that have turned to problematic subprime loans in recent years, and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments in the midst of the current home price and mortgage market turbulence.

Specifically, this bill would authorize zero and lower down payment loans for borrowers that can afford mortgage payments but lack the cash for required down payment, a major reason that many low-income borrowers turn to private subprime markets rather than FHA-insured loans. It will increase loan limits to make FHA relevant in high-cost markets, direct FHA to provide mortgage loans to high-risk, but qualified, buyers; it will enhance the FHA reverse mortgage loan program, promote the sale of foreclosed FHA rental housing, loans to localities so that affordable housing can be maintained in local communities, authorize up to $300 million a year for the next 5 fiscal years from the bill's excess profits for an affordable housing fund instead of returning such funds to the general treasury.

Notably, H.R. 1852 also includes a number of important changes to the FHA bill that passed the House last year. First, it eliminates the fee increases from last year's bill for borrowers that continue to make a down payment, scaling back the maximum upfront fee from 3 percent to 2.5, and the maximum annual fee from 2 percent to .55 percent.

These reductions would reduce FHA closing costs premiums for a hypothetical family buying a $300,000 home by $2,250, and annual fees over a 5-year period by over $20,000 compared to last year's bill.

This bill also includes a provision authorizing loan limit increases for FHA rental housing loans in high-cost areas where current FHA loans do not keep pace with local construction costs. In this way we are ensuring that FHA contributes to the full range of affordable housing stock we so desperately need in this country, from homeownership to rental housing.

In that vein, H.R. 1852 also differs from H.R. 1752 in a final, absolutely critical respect. This bill recognizes the full scope of the affordable housing crisis facing the Nation by targeting up to $300 million annually for the next 5 years to an affordable housing fund for grants to provide affordable rental housing and homeownership opportunities for low-income families.

This measure is clearly needed. We can thank Barney Frank for all of the work and all of the attention and time that he put into making sure that this was a part of this bill. Simply put, this country faces an affordable housing crisis of epic proportions. According to Harvard University's State of the Nation's Housing in 2007 report, 17 million renters and homeowners are paying more than half their incomes in housing costs. There just isn't enough affordable housing stock to go around.

With that, and in closing, I have said for many years that there is an affordable housing crisis in America. In recent months that crisis has exploded beyond the poorest renters and homeowners, to threaten the domestic economy. H.R. 1852 is a necessary step, though not in itself a sufficient one, in walking us back from the brink and the direction of meeting the housing needs of all Americans.

Madam Chairman, I reserve the balance of my time.

I yield to the chairman as much time as he may consume.

Madam Chairman, may I inquire as to how much time we have left?

Madam Chairman, I yield 2 minutes to the gentleman from Texas (Mr. Green).

Madam Chairman, I yield myself 30 seconds to make sure that my colleague on the opposite side of the aisle, Mrs. Biggert, whom I've worked with so closely and enjoy working with so much, is clear on the fact that the housing trust fund does not take money from FHA. And I think Mr. Frank made it very clear before he left that HUD would have to certify that it is solvent before any of that money goes into the trust fund. I think that's very important.

Madam Chairman, I yield 2\1/2\ minutes to the gentleman from Texas (Mr. Hinojosa).

Madam Chairman, I yield 2 minutes to the gentlewoman

from New York (Mrs. Maloney), Financial Institutions and Consumer Credit Subcommittee Chair.

Madam Chairman, I yield 2 minutes to the gentleman from Minnesota (Mr. Ellison), who is focused on predatory lending.

Madam Chairman, I yield 1\1/2\ minutes to the gentlewoman from California, Ms. Barbara Lee.

Madam Chairman, I yield 1\1/2\ minutes to the gentleman from Maryland, Congressman Cummings.

May I inquire as to how much time I have remaining.

Madam Chairman and Members of the House, first I would like to tell the subcommittee ranking member how sad I am that we're not going to be working as closely together on this Subcommittee on Housing. I have truly enjoyed working with her. And even though she will remain on the committee, we perhaps won't have an opportunity to sit together and chat and not only make decisions, but just make fun of some people from time to time.

I yield to the gentleman.

I would also like to thank Mr. Bachus and Mr. Miller; Mr. Bachus, who has been so good to work with; Mr. Miller, who is an expert. We have been able to talk about things, to work out differences, and to move forward.

This is a very productive overall Financial Services Committee, a very productive Subcommittee on Housing and Community Development. With people working together on both sides of the aisle, we're getting things done.

This may be one of the most important pieces of legislation to pass this House in this session. We will be able to help people with refinancing. We will be able to help people stay out of foreclosure. We will be able to revitalize FHA, that really knows and understands how to provide insurance for moderate- and low-income folks who are desperate to be homeowners. And I am just delighted that I've had an opportunity to play a role.

Madam Chairman, I yield back the balance of my time.

I appreciate Mr. Cardoza's amendment so much because it does have an important impact on high-cost markets like our home State of California. The FHA statute creates an artificial cap on the maximum home price, meaning that FHA does almost no loan business in certain high-cost markets. Now, this will put FHA back in the business of insuring loans in high-cost areas, not only in California, New York, Connecticut, Massachusetts, and other areas with a limited FHA presence. This amendment also puts FHA in a better position to help subprime borrowers and address temporary dislocations.

Even before the recent mortgage crisis developed, there was a bipartisan consensus shared by the administration that reformed H.R. 1852 would help get FHA back in the business of making loans at good terms and conditions to borrowers that turned to predatory loans in recent years. This amendment expands the extent to which this objective can be achieved. This is absolutely a great amendment, and I support it.

Madam Chairman, I hope that our chairman didn't confuse you with that convoluted definition of what the time is that we are claiming.

Madam Chairman, I am in strong support of this amendment. As a matter of fact, I would like to take this moment to commend and thank my colleague, Mr. Miller, for the work that he has done in helping other Members to understand what this is all about.

I can recall when we had the hearing and everybody said, well, this is such a wonderful idea. As a matter of fact, all of us voted for the American Dream Down Payment Act on both sides of the aisle. We can't understand why there would be any questions or any problems about the way that there is assistance being given to would-be homeowners by organizations such as the ones who were presented to us on that day of the hearing. So because of his expertise and his understanding and his appreciation, he has helped us all to come together, and it has support on both sides of the aisle.

As was mentioned, the amendment would allow qualified down payment assistance providers to participate in an FHA program if certain conditions are satisfied, that is, no obligation for the mortgagor to repay and net worth requirement.

The Secretary shall consider as cash or its equivalent any amounts gifted by a family member, the mortgagor's employer or labor union, or a qualified homeownership assistance entity, but only if there is no obligation on the part of the mortgagor to repay the gift.

I rise in support of this amendment. It is a major step in the direction of capturing the benefits of down payment assistance programs to over 1 million households since 1999, many of them FHA-insured borrowers, while safeguarding against bad actors in the field. The minimum capitalization requirement will protect borrowers from fly-by- night operations, which the explicit prohibition against requiring repayment of such assistance by the borrower will ensure that the benefit is indeed a gift.

Equally important, the additional measures to ensure the legitimacy of

appraisals in FHA-insured transactions contained in H.R. 1852 and the manager's amendment to the bill will help safeguard the entire progress. Inflated appraisals undercut the legitimacy of seller- financed down payment assistance.

Down payment assistance that is repaid from a seller's proceeds that derive from a borrower's ability to get a loan based on an inflated appraisal is no gift at all to the borrower. H.R. 1852 cracks down on such schemes, while preserving the field for legitimate down payment programs. Accordingly, I urge my colleagues to support this amendment.

Madam Chairman and Members, earlier today we talked about how we worked together so well in order to get the best possible legislation. And I am just a little bit sad that this substitute amendment would reform for the Federal Housing Administration's FHA single-family mortgage insurance activities and would allow FHA to base each borrower's mortgage insurance premiums on the risk that the borrower poses to the FHA mortgage insurance fund with slight variations.

Under this proposal, mortgage insurance premiums will be based on the borrower's credit history, loan-to-value ratio, debt-to-income ratio, and on FHA's historical experience with similar borrowers.

This amendment maintains FHA reserves within the insurance fund to preserve the future solvency of the FHA program. I just rise in strong opposition to this amendment for the simple reason that H.R. 1852 is a better bill than the FHA reform bill that passed the House last year. And I could go on and on and on talking about why this is a much better bill, but I think this would be a step backwards, and I would ask my colleagues not to support this amendment. It is not a good amendment.

Madam Chairman, the Federal Housing Administration, which we today call FHA, was created in 1934; and it is a very important source of support for first-time home buyers and for low- and middle- income borrowers. FHA provides mortgage insurance that protects lenders against losses when homeowners default on their mortgage obligations, as many of them are doing today. It also allows the lenders to offer their customers, American homeowners, low interest rates and low closing costs.

Since its inception, the FHA has insured nearly 35 million loans. That makes it the largest insurer of mortgages in the world. FHA's share of the mortgage market, however, has been steadily declining in recent years, falling from almost 20 percent 10 years ago, of the total mortgage market in America, to 5 percent today.

This sharp drop in FHA's market share resulted largely from the growing popularity of subprime mortgages, as more borrowers opted for loans featuring zero down payments and introductory teaser rates far lower than what was available from FHA.

The difficulties we are experiencing today by many subprime borrowers is as their initial low interest rates reset at a much higher level, it offers FHA an opportunity to reestablish its standing in the marketplace as a safe, low-cost alternative for American homeowners. It is also another reason that we should be here today reforming FHA, to ensure that that happens.

For that to happen, Congress does need to pass the reforms that we are considering today. I want to say that right upfront. There are important reforms in this bill. These same reforms were contained in legislation that Ranking Member Biggert of the Housing Committee and myself and others in a bipartisan way introduced in the 109th Congress. In fact, that legislation, Comprehensive FHA Reform, and that is in this bill today, and is very good provisions, passed with over 400 votes on the House floor, only to die in the Senate. I am sorry that happened.

Earlier this year, Congresswoman Biggert and I reintroduced legislation identical to that legislation. However, and I am sorry to say that rather than embracing last year's bipartisan approach, the majority has chosen to go in a different direction. I think they do that from honest philosophical reasons. We disagree with those reasons.

They have included provisions which we believe will divert surpluses generated by the FHA program to a new affordable housing fund established in separate legislation which this House and our committee passed earlier this year.

While a strong bipartisan consensus exists regarding the need for FHA reform, the reforms in this bill, the majority is insistent on linking the enactment of these reforms to the creation of yet a new multi- billion dollar housing fund has caused many of us on this

side of the aisle to hesitate from strongly supporting this legislation.

I admit, most of our Members are in a quandary. We like the reforms in this bill. We know that those reforms will go a long way towards addressing the crisis that we face today, the Affordable Housing Fund. And we realize at the same time that there is legitimate purpose behind Chairman Frank's Affordable Housing Fund, and one of those is to offer affordable low income rental property for Americans. And we understand that he honestly believes, and we have an honest disagreement as to the need for this.

We simply believe that a better approach is to dedicate the FHA surplus to shoring up the financial solvency of the FHA mortgage program, which was only recently removed from GAO's list of government programs at high risk for waste, fraud and abuse.

A portion of that surplus could also be returned to beneficiaries of the program. Who are they? They are the many people who have taken out FHA-insured reverse mortgages, many of them senior citizens, and we could do that in the form of lower insurance premiums for all Americans who have FHA mortgages.

Madam Chairman, the key reforms included in this legislation, lowering down payment requirements, increasing loan limits and mortgages that FHA is authorized to ensure, giving FHA more pricing flexibility, command broad consensus among Republicans, Democrats, the Bush administration, consumer groups and the industry, the realtors, the home builders and others. Indeed, in announcing several of these initiatives last month designed to contain the damage caused by the problem in subprime, President Bush stressed the critical role that FHA can play in assisting homeowners facing sharply higher mortgage payments and possibly foreclosure in reaffirming the administration's support for the FHA modernization legislation and many of the provisions contained in this bill.

However, the administration, as have many on our side of the aisle, also is strongly opposed to using FHA surplus as seed money for an untested, unrelated government housing program, one that is estimated to cost $3 billion or more.

Thus, by insisting that this bill carry that controversial provision, we feel like the majority is delaying, if not jeopardizing, the enforcement of important reforms that we need now to provide a lifeline for seeking to refinance out of high cost subprime loans.

Madam Chairman, accordingly, I urge my colleagues to support Republicans' amendments to strike the extraneous Affordable Housing Fund provisions opposed by the administration and allow us to move forward quickly with badly needed and long overdue reforms in the FHA program. If we are not successful in those amendments, many of the Members will vote for this underlying legislation, some will not. But, again, I want to acknowledge the sincerity and the good faith that the majority has worked throughout this process with the minority; and, Chairman Waters and Chairman Frank, we very much appreciate that. We appreciate the many fine provisions in this bill.

Madam Chairman, I would like to thank the chairman of the full committee. And I want to make it perfectly clear that this was a grandson, not a son or daughter who was born to Linda and I. So when you said proud addition, I just didn't want a rumor back home that we had had a child.

But I also want to acknowledge what you said. There are many important reforms in this bill. In fact, from last year's bill, much of what the chairman has said, I think we have worked together, groups have worked together, and as a result of the subprime crisis we have got an even better bill, and I acknowledge all that. There are many good things about this bill, and I commend him for his knowledge of the subject and his fine work. Thank you.