PANEL II OF THE HEARING OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES
SUBJECT: LEGISLATIVE AND REGULATORY OPTIONS FOR MINIMIZING AND MITIGATING MORTGAGE FORECLOSURE
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REP. DAVID SCOTT (D-GA): Thank you very much, Mr. Chairman.
I'd like to go on a little different track here and to take a favorite phrase from the president, that perhaps we need to focus on how we can do some creative, preemptive strikes, because if we don't do some things to detect this before it happens, it repeats itself --- it repeats itself, and we learn nothing from this. So if we know that the heart of this problem is how to detect abusive lending practices for loans that are made to people with weak and bad credit, that's essentially it -- which falls into subprime lending.
In each of the testimonies this morning from Treasury Secretary Paulson, Housing Secretary Jackson and Fed Chief Bernanke, they each referenced -- I think one said a lack of information, another said not aware, and another said a lack of knowledge. Somewhere along the line each one hit the same chord, that what we have here, to paraphrase another great saying, is a failure to communicate with our most basic group. Those people that are targeted are targeted in the low-price homes and the low-income communities, where their sophistication and education is not as high as it ought to be. So we know that.
Where are we going to get the energy and the urgency to put together some very creative financial literacy and financial education packages, and, in addition to that, a way to preempt some of the predatory lending practices that's causing this? And my idea is --- and I'll throw this out and get your --- what I'm trying to do is get your reaction to this. I've been sort of preaching it for a while. It's not only just financial literacy programs, but to establish a 1- 800 number here, set up a machinery really out of the Treasury Department, with human beings on the other end. And then, not only as a conduit for information on a two-way street, but we get marketing programs, get them to NAACP, get them to ACORN, get them to the senior-citizens groups, the preachers and the churches, the people who relate to these people, with the universal message: before you sign on the dotted line, call this number.
But even more importantly, why not we go a step further and require by law a background check? I mean, we've got the technology. We're very sophisticated. Most assuredly, if we can do background checks and instant background checks at that on the purchase of firearms to make sure that people are not mentally incompetent or they're the proper age or criminal background, why can't we begin to look at that this way and say that for those subprime loans, particularly those that with low -- where the individual has bad credit -- I don't know, we could come up with a formula, we could come up with something -- but before that can go through, it has to have that instant check, that background check.
There's some way we can be preemptive and look at this. And what it will do, more than anything else, it will send a message out to those who practice these predatory lending practices and practice those abusive practices, who say, uh-oh, I better not do this because these kinds of loans with these kinds of communities, they're going to be doing a background check, or there's a way for them. I mean, have the communications pointed out where these people, obviously, before they sign on a dotted line, before they do anything, that they call. But also have it where we have the system in place that we can do some sort of checks on that, in addition to all of the other financial literacy points also.
But I'd love to get your response to this. Do you think it's a great idea? Is it something that --
REP. FRANK: Well, very quickly, because the gentleman's almost out of time.
MR. SYRON: Well, just very quickly, I think you need to do two things, okay? I think you have to enhance financial literacy for a whole lot of reasons beyond housing. But that alone, I'm afraid I disagree with some people that just -- the price of tomatoes thing just doesn't necessarily work.
REP. SCOTT: I don't mean alone. Just --
MR. SYRON: No, but I mean, disclosure alone won't do it. The plain fact of the matter that we found is if you originate it, someone will buy it. And I think what the mortgage brokers have talked about, about registering people and getting some mechanism to assure that people aren't hornswaggled and to -- even if they've been educated -- into a bad loan is essential.
REP. FRANK: We'll take one other response if there is one, but then we have to move on.
MR. : I have a short one if we --
REP. FRANK: Mr. Robbins?
MR. ROBBINS: This is what the licensing is all about, is background checks. We'd propose that if you have been convicted of a felony that you cannot get a license to originate mortgages, and that a national registry be kept so that you can track the bad players in the industry from state to state, city to city, company to company. So you would have your background check. They would be fingerprinted. They would -- it would require the passage of tests, educational responsibility. And that subsequently if they were convicted of a crime related to this that they would lose their license.
REP. SCOTT: Thank you.
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