Today is the Committee's second hearing on Predatory Lending: The Problem, Impact, and Responses.
Yesterday, we heard some very eloquent statements of the problem from four Americans who worked all their lives to attain the dream of homeownership, to build a little wealth, only to have it slowly, bit-by-bit, loan-by-loan, taken away from them.
These people were targeted by unscrupulous lenders because they were elderly homeowners that had a lot of equity in their homes. In the case of one woman from West Virginia, she owned her home free and clear, paid off her mortgage with the proceeds of her husband's life insurance policy, only to end up losing her home altogether because of a series of 6 or 7 flips in the space of less than 2 years.
What struck me about these four stories was that many of the practices that harmed these witnesses - the repeated flipping of the loans, the high points and fees rolled into the loan, and the mandatory arbitration clauses that kept some of them from effectively pursuing a legal remedy - are all legal.
Let me reiterate what I said yesterday. I support actions by regulators to utilize their authority under existing law to expand protections against predatory lending.
I support stronger enforcement of current protections by the Federal Trade Commission and other regulators.
I applaud campaigns to increase financial literacy and industry efforts to establish best practices. I know a number of witnesses at this morning's hearing will tell us about such efforts.
But those who take the position that stronger regulatory and/or more aggressive enforcement of existing laws will be adequate have a special burden, particularly in light of yesterday's testimony, to make sure that regulatory and enforcement tools are adequate to the job.
To that end, in my view, they should support the Federal Reserve Board's proposed regulation on HOEPA, as Ameriquest has done. They should support the Fed's effort to gather additional information through an expanded HMDA.
And they should support the regulatory and enforcement agencies such as the FTC, the Treasury, and HUD in their recommendations for more effective enforcement.
I sincerely hope that today's witnesses will take these positions.
But I want to be clear: neither stronger enforcement, nor literacy campaigns, nor best practices are enough. Too many of the practices we heard about in yesterday's testimony, while extremely harmful and abusive, are legal. And while we must aggressively pursue financial education, we must also recognize that education takes time to be effective, and thousands of people are being hurt every day.
So, as I did yesterday, I want to recount what Fed Governor Roger Ferguson said in his confirmation hearing: "legislation, careful regulation, and education are all components of the response to these emerging consumer concerns." I ascribe to that view.
Before turning to my colleagues and the witnesses, I want to take a moment to explain that we have had far more requests to testify than we have openings, as I think the tightly packed witness table makes abundantly clear.
We have offered to include statements from these and other organizations in the record of today's hearing.