Dodd-Frank Bill
Floor Speech
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Mr. BROWN. Mr. President, during the financial crisis, $13 trillion in household wealth was erased. Nine million jobs were lost, and 5 million Americans, 5 million families and individuals lost their homes. The financial services industry has bounced back, and far too many American families have not.
While many in Washington may have forgotten the financial crisis, millions of Americans haven't forgotten how predatory lending practices contributed to the housing bubble and helped spark this crisis. For them, this was the crisis.
Unscrupulous lenders offered loans that required no documentation, loans with teaser interest rates that later spiked and undermined a borrower's ability to repay, and loans where borrowers never paid down their principal. Borrowers with these higher cost loans were foreclosed upon at almost triple the rate of borrowers with conforming 30-year fixed-rate mortgages.
The crisis revealed a host of other harmful practices, such as steering borrowers to affiliated companies, kickbacks for business referrals, inflated appraisals, and loan officer compensation based on the loan product that they peddled. These practices offered little benefit to the borrower. They were not about helping those families purchase a home they could afford. It is no coincidence that as borrowers' costs increased, so did loan officers' compensation.
These abuses didn't start in 2007 and in 2008. In many communities, predatory lenders began moving in a decade or more before the crisis.
In Ohio, the housing crisis was a slow burn rather than the boom and bust cycle that happened in States such as California and Arizona. From 1995 to 2009--think about this--my State of Ohio had 14 consecutive years where there were more foreclosures than the years before. For 14 years in a row, the number of foreclosures went up and up and up--14 years in a row.
My wife and I live just south of Slavic Village in Cleveland, ZIP Code 44105. I mention that ZIP Code because in 2007, that ZIP Code had the highest foreclosure rate of any ZIP Code in the United States of America.
This wasn't because of speculation. This was a declining industrial base, and this was the kind of predatory lending that tended to settle and sink its talons into communities like Slavic Village. Government policies favoring finance over manufacturing caused steel mills across Northeast Ohio and the rest of the country to shut down and force people to look elsewhere for work. Between 2000 and 2010, the population of Slavic Village dropped 27 percent, down to 20,000 people, and then the subprime lending industry moved in. By 2006 more than 900 of Slavic Village's 3,000 properties--900 out of 3,000--were in foreclosure. If the home next door to you is foreclosed on and abandoned, you can bet the value of your home begins to decline 2 percent, 3 percent, 4 percent, and then the one across the street and then one down the street. One can see what happens to this neighborhood. One in three Ohioans in the height of the crisis--one in three Ohioans' mortgages were underwater. One in every seven mortgageholders was 30 days delinquent or in foreclosure.
Behind every foreclosure is a painful conversation. We don't think much about that here. We think of numbers, policies, and statistics. But imagine if you are a mother or father, and you have a 12-year-old or 13-year-old son and daughter. First, the mother loses her job. Things change around the house. You begin to cut back on things. You begin to take money out of the college fund to send your kid to Cuyahoga Community College. Then the husband loses his job. Then you have to have that discussion. There were 5 million discussions like these that went on in these homes where there were foreclosures. You have to explain to your son or daughter: We aren't going to be living here. We can't afford this house. We are leaving the neighborhood. You are probably going to a different school. We don't know where we are moving. We are going to have to find a new place to live. Maybe we are going to have to give away the family pet. There is a shelter in Parma, OH, that went from 200 to 2,000 dogs and cats that they were housing because so many people gave up their pets because of the foreclosures that so many families endured.
We came together as a result to pass Wall Street reform so families would no longer be forced to upend their lives because a mortgage company preyed upon them. Dodd-Frank established a commonsense rule that requires lenders to ensure that borrowers have the ability to repay their home loans. We created a consumer protection bureau to make sure that never again would consumers be an afterthought.
Much of the CFPB's important work has centered around mortgage regulation. Their rule to streamline forms will help inform consumers to understand what is happening at the closing table.
The ability to pay. A qualified mortgage rule balances the need for mortgage credit with the need of documentation of income and other borrower protections.
We know there is more to be done. We must ensure that small lenders and community institutions can remain competitive. We know how bank concentrations become more and more of a problem. We must provide homeowners with protections from a broken servicing model that has harmed so many of our communities. We must ensure broad access to affordable housing--the right thing to do for families and communities. We must move forward. We know there will be a clear choice.
As we move forward, we know there are two paths to follow. We can accept the false narrative that inaccurately blames low-income borrowers in the Federal programs, FHA, VA, to maintain their underwriting standards during the boom. In other words, we can blame the victim. We can say: Oh, it was the homeowners who caused this. It was the people who got the mortgages. It was all their fault. They weren't smart enough and they were so irresponsible. And we can blame the government because it is always the government's fault or we can recognize there were flawed incentives encouraged by a lack of regulatory oversight at the heart of our Nation's financial system--flawed incentives that made risk-taking more profitable, flawed incentives that increased loan officers' compensation when they made loans they should not have been making.
We can maintain the 30-year fixed mortgage that has made homeownership more affordable and given so many families an asset upon retirement. We can preserve a strong government role in the mortgage market, but instead too many in this body want to undermine the reforms that we put in place 5 years ago. Republicans and their allies in the financial industry fought Wall Street reform every step of the way. They have been attacking these consumer protections since the day they began.
We have to remember what a top financial services lobbyist said. The day the President signed Dodd-Frank, the top lobbyists in the financial industry said: Well, folks, today is half-time. Today is half-time, meaning, OK, we lost in Congress, but we are going to keep pushing these agencies. We are going to keep lobbying Congress. We are going to try to roll back these rules. We are going to stop these rules. We are going to dilute these rules and make them ineffective.
The bill my Republican colleagues today on the Appropriations Committee brought in--Senator Coons will talk about that. The bill the Republicans brought into Senator Merkley's and my banking committee isn't a narrower targeted effort at reform for small banks. It is a sweeping overhaul that rolls back Wall Street reform. Once again, they want to undermine consumer protection. They want to use small Main Street institutions as cover, but in the end they want to allow special interests and their allies to undermine reform and leave the American people exposed to the problems that happened less than a decade ago. It is unconscionable that this abuse was ever allowed in the first place.
Senator Merkley, a leader on this issue, especially in the Volcker rule, will speak about his efforts and what he has seen in the past and particularly looking forward to the future about what we do about predatory loans and people and banks preying on consumers.
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