Congressman Patrick McHenry (R-NC-10) today voted against Rep. Barney Frank’s (D-MA) Mortgage Reform and Anti-Predatory Lending Act (HR 3915).

Based on a NC law that has proven harmful to families seeking to purchase homes, HR 3915 is intended to limit home financing options available to consumers.

“The housing market is facing tough times, and this bill will only make things worse for families who are working hard to own a home,” said Congressman McHenry.  “By restricting the number of options available to consumers, it will force more and more families into foreclosure by taking away their ability to pursue good refinancing options.”

“Instead of discouraging homeownership in these already trying times, we should be working on ways to make it more accessible and more affordable,” he added.

A widely-cited study conducted by ABT Research has demonstrated the perils of the North Carolina law on which this bill is modeled.  The study, which compared lending practices in North Carolina to those in South Carolina and Tennessee, found that after the North Carolina law passed:

• There was a 1.2 percent decline in overall lending in predominately minority neighborhoods in North Carolina, compared with a 5.2 percent increase in minority neighborhoods in the comparison states. Loans by subprime lenders declined by 8.1 percent and loans by prime lenders increased 0.7 percent. In the comparison states, loans by subprime lenders increased 4.6 percent and loans by prime lenders increased 5.4 percent.
• There was a decline of 11.4 percent in subprime refinance loans in North Carolina, compared to a 4.0 percent increase in the comparison states. However, subprime loans to purchase homes also grew at a much slower pace in North Carolina than in the comparison states, up 123.9 percent versus 145.8 percent. Thus, laws primarily aimed at refinance practices caused subprime lenders to withdraw completely from North Carolina and reduce credit available for purchasing a home.
  

In order to save homeowners nationwide from harmful components of the flawed North Carolina legislation, Congressman McHenry offered an amendment on the House floor to strike the bill’s most controversial and dangerous provision, Title III.

Title III changes standards under the Home Ownership and Equity Protection Act in a way that will severely impact the ability of many families to obtain financing and put homeownership out of their reach.  The amendment was not adopted.

Fortunately, Congressman McHenry was able to improve the legislation while it was under consideration in the Financial Services Committee, of which he is a member.

The amendment is based on legislation Congressman McHenry introduced with Congressman Al Green (D-TX) called the Mortgage Disclosure Simplification Act, and was unanimously approved in Committee.

The McHenry Amendment requires lenders to provide borrowers with a simple one-page summary of their loan, including an explanation of key loan terms and conditions.

“It is clear that borrowers need to be presented with a full disclosure of their mortgage obligations,” said Congressman McHenry.  “My amendment empowers consumers by introducing transparency to the process, and I am pleased it was passed in Committee.  As a former Realtor, I know firsthand how confusing the legal jargon can be on home loans, and my amendment will help people make sound financial decisions for their families.”

HR 3915 was passed in the House and now awaits consideration in the Senate.

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