House Judiciary Subcommittee Holds 3rd Hearing on Subprime Crisis

David Goch, Washington Legislative Counsel | February 05, 2008

In its third hearing on the subprime mortgage issue on January 29th, the House Judiciary Committee?s Commercial and Administrative Law Subcommittee expressed a desire to understand the causes of, and solutions to, the growing mortgage foreclosure crisis.

Rep. S?nchez (D-Calif.), chairwoman of the subcommittee, pointed to House-passed comprehensive reforms prospectively setting higher standards for the mortgage lending industry as well as the Judiciary Committee?s reporting of H.R. 3609, the "Emergency Home Ownership and Mortgage Equity Protection Act of 2007". In addition, S?nchez pointed to Treasury Secretary Henry Paulson?s voluntary plan by which servicers and others in the mortgage industry could temporarily freeze the interest rates for certain homeowners who are current on certain mortgages and who have specified FICO scores.

Jack Kemp, Former Secretary of HUD, applauded members of the committee who supported H.R. 3609 "for striking the right balance through negotiation and producing a good bill." He said he was happy to support the narrowly targeted bill. He said current bankruptcy law is "wildly off-kilter in how it treats homeownership."

Wade Henderson, president and CEO of the Leadership Conference on Civil Rights, said the LCCR strongly supports H.R. 3609.

David Kittle, chairman-elect of the Mortgage Bankers Association, which strongly opposed 3609, identified several ?myths? concerning the bill:

? H.R. 3609 simply closes a loophole in the Code.
? Passing the Conyers-Chabot compromise will have little impact on servicers and the mortgage market.
? H.R. 3609 would not have a negative effect on mortgage market participants.
? Myth: Consumers? only benefit will be foreclosure avoidance.
? Myth: H.R. 3609 is needed because the mortgage industry is not doing enough to help borrowers in need.

In short, Kittle said that the bill will "increase rates significantly, dry up investor interest in mortgage-backed securities, and impose significant losses on the mortgage industry and bondholders."

There was also 4 other witnesses at the hearing primarily in support of the legislation.

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