Portfolio Lending and Mortgage Access Act

Floor Speech

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Mr. ELLISON. Mr. Speaker, I thank the gentlewoman for the time.

Mr. Speaker, I just want to say that the fact is that 2008 was a horrendous time here in Congress, but it was even worse across America. You can go into neighborhoods not just in my district in Minnesota but all over the country--Florida, Arizona, and California--all over the country, and the foreclosure crisis was wreaking havoc from sea to shining sea. Why? Because of poor underwriting standards. Why else? Because we didn't require much of anything to prove that people could pay a loan back.

I remember these days, and I remember them so well that I am not really one to want to return to them right away. I think Congress has a duty to protect homeowners and protect consumers from predatory lenders. I vividly recall panic. I vividly recall the loss in property values, and I vividly recall the exploding unemployment numbers. I remember the calls from homeowners in my district facing foreclosure.

In Hennepin County, which is the county in which Minneapolis is located, we had more than 35,000 foreclosures since 2007. In many cases, these home buyers were sold loans with predatory terms even though they qualified for better mortgages. They were literally steered to bad mortgages.

I have talked to people both young and elderly, people who had English as a second language, and people who have been born speaking English their whole lives, in fact, a diverse group of people who were steered to cash-out refinancing that stripped them of their wealth and left them homeless.

We acted to stop these predatory practices, and I am proud that we did. Dodd-Frank was good legislation to try to stop these irresponsible practices. We passed the Dodd-Frank Wall Street Reform and Consumer Protection Act and created a standard mortgage, one that we call a qualified mortgage. This is a good step. It was wise to create a nice, boring mortgage loan product. It was a good idea.

Qualified loans must not at the time of origination be interest only or negatively amortizing, have a term longer than 30 years, be a no-income, no-documentation loan, also known as liar loans, be a balloon loan, have a cap on fees and points, and leave the borrower with a debt-to-income ratio of greater than 43 percent.

These are commonsense requirements, and if you get a loan like this, it is probably going to be fine. These commonsense requirements are going to enable sustainable homeownership and allow people to maintain that American Dream that they have been hoping for and saving for for so long.

The fact is, we remember when we had yield spread premium. We remember no-doc, NINJA loans. We remember these interest-only loans and negative amortization. These things were ruinous and harmed the American working and middle classes. These commonsense requirements--these commonsense requirements--are what we should do.

Here we are today. H.R. 1210 seeks to repeal these protections. They want to take us back in time. They want to put us at risk and tender mercies again. The fact is, it is a huge mistake.

H.R. 1210 would allow banks with assets up to $1 trillion to seek mortgage brokers to issue the kinds of exotic products which caused the financial collapse.

Even before the ink on the Dodd-Frank Wall Street Reform bill was dry, there were people trying to undermine it. Even before we even implemented the rules, all the rules from Dodd-Frank have not even been in place yet, we are trying to change it and undermine it, really to kick the door open so that the American working and middle class can be at the tender mercies of unscrupulous lenders again. That is not to say that all home lenders are unscrupulous. Many are good. But it doesn't take that many to really ruin the industry.

These changes that H.R. 1210 proposes would encourage lenders to make loans that are not in the best interest of the home buyer, and this I have to stand against. But I am not by myself. Not only does our ranking member know that this is a bad idea--and many Members of this body--but also the National Association for the Advancement of Colored People, the NAACP, is well aware this is bad legislation. The Leadership Conference on Civil and Human Rights knows it. Americans for Financial Reform knows it. And the Consumer Federation of America and dozens more are opposing this piece of legislation.

Some argue that because these loans will be held in the portfolio of the lender, they will be high quality loans. This is not true. This is a faulty assumption, and it is wrong. They miss the whole point of the qualified mortgage rule enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Mortgage rules are designed to provide safeguards that would create a safer mortgage product for the borrowers. Simply keeping a loan in a portfolio is not necessarily a substitute for the type of sound underwriting mortgage rules are designed to establish.

There is ample evidence that predatory loans can and have been held in portfolio. Some of the largest mortgage lenders that failed during the financial crisis were large portfolio lenders like Countrywide, Washington Mutual, and Wachovia. These lenders can still make money on defaulted loans. During the 3 years before the crisis, 70 percent of subprime loans were refinanced loans, Mr. Speaker, not purchased loans. With refis, borrowers bring the equity to the table. If the bank charges upfront fees and recovers the money from a foreclosure, predatory loans can be profitable even if they default. The same is true for predatory purchase loans when home values aren't falling. And that is why we are going to stand here and protect home buyers.

Mr. Speaker, I want to urge all Members of this body to vote ``no'' on H.R. 1210. And just remember, it has only been a few years since we passed Dodd-Frank. It has only been not even a decade since the financial crisis that really, really caused tremendous havoc to the American working and middle classes. After the Great Depression of the 1930s, at least it took them a couple of decades before they tried to dismantle all the financial protections. They haven't even taken a single decade. They are back at it again and fighting tooth and nail to leave the American working and middle class at the tender mercies of people who have nothing but the profit motive in mind.

Mr. Speaker, I urge Members to vote ``no'' on this piece of legislation. It is not worthy, and I urge a strong ``no'' vote.

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