Floor Statements

Mr. Speaker, I want to first commend the gentleman from California (Mr. Royce) for introducing this bill. This bill was actually introduced in the last Congress by the gentleman from California and passed almost unanimously. He has enlisted broad support for this bill, both in the committee and from the rank and file. It is also a bill which has bipartisan support. It has people who have sponsored it from both sides of the aisle.

It was drafted to be consistent with the previous recommendations by the Federal Trade Commission to apply the Fair Debt Collection Practices Act protections based on the nature of the overall business conducted by the party to be exempted rather than the status of individual obligations when the party obtained them.

H.R. 314 is actually even narrower than the FTC recommendation. It only exempts mortgage servicers from the Miranda warnings required by section 8071 on original first lien Federal-backed mortgages. All other borrower protections provided by the Fair Debt Collection Practices Act remain in full force.

I want to read a portion of a letter explaining why the Miranda warnings are clearly appropriate for third-party debt collection activities, but they are actually inappropriate for the type of situation addressed in this bill, and that is where a new servicer comes in and takes over the mortgage and the mortgage is in default.

What the letter says, first of all, is that by requiring these Miranda warnings, it actually does two things. It puts borrowers at greater risk in mortgage servicing transfers, and two, it impairs the ability of the new mortgage servicers to establish a strong customer relationship.

This letter was drafted by the gentleman from Pennsylvania (Mr. Kanjorski), has a signature of the gentlewoman from New York (Mrs. Maloney), the gentleman from California (Mr. Sherman), the gentlewoman from Ohio (Mrs. Jones) and the gentleman from New York (Mr. Meeks). Of course, the gentleman from New York (Mr. Meeks) is a cosponsor of the bill. These are all Democrats and all members of the Committee on Financial Services. They say this about the present state of the law and the need for this legislation which the gentleman from California (Mr. Royce) is offering.

One, the present Miranda notice misleads the borrower about the nature of the new servicers' relationship. The most important thing a delinquent mortgage borrower can do is call his or her servicer to work out options. The harshly worded warnings actually discourage borrowers from contacting the new servicer out of the fear that the company is simply another debt collector.

Two, the notice ``protects borrowers from providing information that the mortgage servicer already has in its possession. Mortgage servicers already possess detailed information about the borrower in the loan files.''

Third, the notice hurts customer relationships for the remaining term of the mortgage. The mini-Miranda is required in all subsequent contacts with the borrower, even after the customers have brought their loan current and maintained them that way for years.

In closing, as the gentleman from New York said earlier, mortgages now are transferred. They are assigned. They are bought. It is a normal course of action in a businessplace. When this happens, people need to know whether they are dealing with a debt collector or with their mortgage servicer. This new law will allow that.

So I would urge the membership to endorse this bill with a strong yes vote.