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Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies Appropriations Act, 2007

Location: Washington, DC



Mr. FRANK of Massachusetts. Mr. Chairman, I thank the gentlewoman for her leadership. She has been a consistent leader in helping cities' economic development. I want to point out this seems to me a particularly odd thing to do. Cities which use this are not getting additional funding. They pay it back.


Mr. FRANK of Massachusetts. Mr. Chairman, I thank the ranking member of the subcommittee for yielding.

I was hoping to be able to offer an amendment, but we ran into a CBO scoring problem and I was told that therefore it would not be supported. I deeply regret this.

There is in this bill a very good set of provisions in general, expanding the ability of the FHA to be responsive. It came from work we did in the authorizing committee. Frankly, I was surprised to see it plucked in part from the authorizing version and stuck into this bill. It is authorizing language. On the whole it is a good thing. The Appropriations Committee took from the authorizing committee much of what we did, but they did not take everything. Now, they are entitled, obviously, to pick and choose, but there is one grave omission here. One of the things this bill will do will be to give the FHA the authority the ability to extend loans to people who might be of lower credit risk. That is, it will try to help get to people who might not have been able to get loans by stricter standards. That is a good thing. And it says that those people will have to pay a higher upfront fee. It could be as much as double, from 1.5 percent to 3 percent of the loan, and they will also be forced to pay a higher fee going forward. With people who are just starting out, I will accept the need to do that.

What my amendment would have accomplished, and it was something we were ready to do in the authorizing process and we lost the ability to do that, it was to say that a low income borrower, a borrower with some credit risk, who was meeting his or her obligations after a period of 5 years would be eligible to get back the extra money. In other words, without that provision the Federal Government is going to be something of a predatory lender. It will lend money to the lower income people with the higher credit risk and charge them more for that loan. Now, as a starting point that might be a reasonable idea. But once a borrower in that category, having borrowed the money, has demonstrated over 5 years a capacity and willingness to make the payments, why does the Federal Government continue to penalize that person?

People have said, well, there might be some losses here. If there are losses, why should the responsible low income borrower be forced to bear all that cost? Why should that not be shared among all the borrowers? Why should the cost of paying for those loans that may default, a small percentage but there will still be some, why should that not go for everybody?

So right now if you are getting the maximum FHA loan, it is irrelevant to you if these people default. We are making the poor pay for the poor. You are making in this a predatory lender of the Federal Government. Without the amendment that I was told would not be accepted, so I will not push it here, low income people who borrow money from the FHA will be charged more upfront, they will be charged more going forward, and no matter how well they meet their obligations, no matter how responsible they are, they will continue to pay more for the loan. The poor pay more under this bill. And what the CBO said as well, there is a certain element of subsidy here for the low income borrowers, and this would increase the subsidy. That is right, for the low income borrowers.

I do think it is worth to trying to reach out to the lower income people, and I understand this means that some will default, but I do not understand why one low income individual or 10 or 20 low income individuals who meet their obligation ought to be the ones who bear the burden for those who do not. Now, as I said, I understand, because CBO said it was going to score it negatively, I was not going to be able to get it adopted. But I hope, to the committee, that this will not be the end of it.

Please, we are talking, Mr. Chairman, about ending predatory lending. Without the language I was talking about, we, the Federal Government, become an entity that charges you more if you are poor than if you are wealthy, that charges you more if you are in the low income bracket because you are asked to shoulder the burden of people in the same bracket who will default. That is unworthy of us. It also, of course, retards the very purpose of the bill because you say you want to expand home ownership by reaching out to people and then you charge them more because they have to pay not only the price of their own home but they are going to be saddled with the price of other people in their income level and their credit rating level who default.

That is an inappropriate thing for the Federal Government to do. And while I accept the fact that I cannot get this accepted now, I hope we can talk about this.

By the way, the overall bill will raise money for the Federal Government. This would simply reduce it by a small amount. That is the least we can do for low income people.


Mr. FRANK of Massachusetts. Mr. Chairman, like my colleague from New York, I am glad we are getting something additional. This is symptomatic of this bill. It will provide too little money for a lot of very important programs.

And we will be told, yes, it is a good program, but we do not have the money. I believe the members of the subcommittee did the best possible job. I commend them for doing the best possible job in the circumstances.

The problem is that the majority created the circumstances. This is the consequence of too many tax cuts with wars at the same time, and a budget that then leaves too little money. So in case after case after case, we will be told, you are right, that is a very important function, we do not have enough money.

This particularly troubles me because I would like to build the consensus in the country for the kind of vigorous law enforcement that we need to protect ourselves in the face of this new threat.

When the oversight board on civil liberties and privacy that the 9/11 Commission recommended is starved for money, you lose the opportunity to achieve that balance that would increase support for law enforcement.

And while no one says it is a bad idea, except maybe the Vice President, but he did not say that openly, I just guessed, no one says that it is doing a bad job. There is too little money left because the priorities are tax cuts, the war in Iraq, and then everything else gets stiffed.

And this is an example of a very good program. The committee did the best it could, and the amendment of the gentleman from Connecticut makes a bad situation somewhat better. I am glad that it is here, but we are in this situation because this is an example of the price the country is paying for a very distorted set of priorities.

Mr. Chairman, I thank the gentlewoman, who has been a leader in this fight.


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