Mr. President,

I would like my colleagues to take a trip down memory lane. Go back to 2006, 2007, 2008 and the decade before.

Ohio had 14 years – nearly a decade and a half – of foreclosure increases leading up to the crisis.

Predatory, irresponsible lenders made dangerous, sub-prime loans – and often ignored whether borrowers had the ability to repay that loan.

Because of the lack of standards for underwriting, we learned a painful lesson that not all mortgage lending is created equal. Let’s look at some headlines from that time period. 

On September 18, 2008, the front page of the Wall Street Journal featured these three headlines,

  • Mounting Fears Shake World Markets As Banking Giants Rush to Raise Capital,
  • Bad Bets and Cash Crunch Pushed Ailing AIG to Brink, and
  • Worst Crisis Since ‘30s, With no End. 

On the same day, the Washington Post reported, “Markets in Disarray as Lending Locks Up.”

How did we get to that crisis?

Banks forgot the essential rule of lending – a borrower needs to be able to pay back the loan. 

Instead, lenders offered loans that required no documentation, loans with teaser interest rates that later shot through the roof, and loans where borrowers never paid down their principal or stripped their home’s value through cash-out refinances.

All of these practices had devastating results for families, communities, and the economy. 

As if those faulty mortgage products weren’t bad enough on their own, they were targeted to communities of color. In those communities in particular, even those who  qualified for a no-frills, no-surprises prime mortgage were often instead steered into a subprime loan. Even African American and Hispanic borrowers with higher incomes than other borrowers found themselves in subprime products.

These practices of discrimination stripped a generation’s worth of equity from communities that had fought hard for equal access to homeownership.

The household wealth of communities of color still hasn’t recovered. Middle class black and Hispanic families lost half their wealth from 2007 to 2013. Middle income black households wealth was $63,700 in 2007. In 2016, it was $38,300. The numbers are similar for Hispanic households – $85,600 in 2007 and $46,000 in 2016. 

While my colleagues talk about how hard the banks have it, I’d like to revisit what happens when banks stop following the rules.

Borrowers with these higher-cost loans were foreclosed on at almost triple the rate of borrowers with standard, 30-year fixed rate mortgages. Between 2006 and 2014, more than 9.3 million homeowners lost their homes through foreclosure, distressed sales, or surrendering their home to the lender. 

And it wasn’t just subprime loans. The crisis revealed a host of other harmful practices like steering borrowers to affiliated companies, kickbacks for business referrals, inflated appraisals, and loan officer compensation based on the loan product.

What does that mean? It means the worse the loan was for the borrower, the more money the lender made.

After the dust settled, and this country realized how twisted our mortgage lending market had become, Congress finally stepped in to do what the market and regulators had refused to do for far too long.

Wall Street Reform established a common-sense rule that lenders should evaluate whether a borrower has the ability to repay her home loan.  

The “ability to repay rule” means that lenders can no longer make a loan based on the home’s value, or ignore the fact that an adjustable rate mortgage will become unaffordable in a year or two.  

A mortgage is the largest financial transaction most families will make in their lifetimes.

Requiring that the mortgage process, services, and fees are transparent and understandable to borrowers is essential.

But the bill before us today chips away at that principle. It includes several provisions that, when taken together, weaken transparency, inclusiveness, and fairness in mortgage lending. 

The bill says some lenders need not consider whether a borrower can afford an adjustable rate mortgage, after the interest rate adjusts. 

It also allows the largest banks to acquire small banks, and retain these legal protections for the larger bank. 

Small banks often work with their customers – if they lose a job or face a sudden illness, the bank can try to work with them to figure out how to avoid foreclosure. But would a megabank help a family in Cleveland or Canton or Dayton? 

Based on the record of Secretary Mnuchin’s bank, OneWest, and others during the crisis, we can be pretty sure they won’t.

The bill before us also gives some lenders a pass on the requirement to escrow for taxes and insurance when making subprime loans.

By definition, someone taking out a subprime loan is at higher risk of default. Escrow helps a borrower plan for the expenses of taxes and insurance, and it protects the lender from unexpected losses.

Former FDIC Chair Sheila Bair – who steered the FDIC through the worst of the financial crisis – raised her opposition to this provision in a letter to me.

And this bill also exempts 85 percent of banks from reporting the HMDA data they are collecting and reporting today. 

Without this data, we cannot monitor trends in mortgage lending, particularly in rural areas. Without this data, it will be even harder to see who has access to affordable mortgage credit – and who does not.

We know that a century later, redlining is still happening.

The latest report from the Center for Investigative Reporting analyzed tens of millions of mortgage records, and found that all across the country, people of color are far more likely to be turned down for a loan, even when you take into account factors like their income and the size of the loan.

But without this data, we won’t know when redlining is happening.

It will also make it even more difficult to show that community lenders go the extra mile for their customers.

That’s why the NAACP, National Community Reinvestment Coalition, Unidos, National Urban League, Rural Community Assistance Corporation, and more than 170 other state and national organizations have objected to this devastating new hole in lending data.

Mr. President, I ask unanimous consent that the letter from Former FDIC Chair Bair and the letters from civil rights groups in opposition to this provision be entered into the record immediately after my remarks.  

Any one of these provisions is bad enough, but taken together they add up to riskier loans, and more foreclosures on American families.

Think about this – if this bill passes:

  • A bank could make a subprime loan without considering if a borrower could afford the higher interest rate when the teaser rate expires;
  • A bank wouldn’t have to collect taxes and insurance on a monthly basis, making a loan look affordable when it may not be, and
  • The homeowner loses her right to take the bank to court for removing her from her home, even though the bank made her a loan it knew she could never repay.

That’s a recipe for disaster. It’s a recipe for more families ending up in houses they were misled into thinking they could afford.

Is it really too much to ask that a lender consider whether a family can afford the loan it’s getting? Are we back here already?

The cherry on top is that the bill eliminates data we need to determine if banks are targeting certain communities for these kinds of risky loans. 

We know that this Administration and the heads of Departments are not concerned about accountability for financial institutions, equity in lending, or inclusivity. 

We just learned that HUD is considering changing its mission statement to delete references to inclusive communities.

I’m also concerned that this bill will put more families at risk of poor housing conditions – particularly in the rural communities that are so often ignored in this town.  

The bill reduces the frequency of required inspections for units overseen by rural public housing agencies, or P-H-As, that administer 550 or fewer units of HUD public housing and Section 8 rental vouchers.  

For many of these PHAs, HUD will inspect their properties once every three years, rather than every one or two years. Similarly, the bill would allow these PHAs to inspect most voucher-assisted units just once every three years, rather than every-other year.

A lot can happen to an apartment in three years, which could put residents’ health and safety at risk.

I understand that PHAs face many challenges in maintaining high-quality housing for families. 

Due to years of underfunding, public housing alone faces an estimated $26 billion backlog of repairs.  

My Senate Democratic colleagues and I have proposed an Infrastructure Package that includes funding for public housing repairs and revitalization to help address these challenges. 

We have an obligation to make sure that these struggling families have safe, decent housing.

I have been clear throughout this process that I want to help community lenders and housing providers better serve their customers.

But we can’t do that by reducing accountability or returning to the free-wheeling housing market that led to millions of families losing their homes. 

We have to remember – when we talk about escrow and lending requirements, it might sound dry, it might sound boring, it might sound like legalese that doesn’t matter.

But it does matter to the biggest, most important purchase most Americans will make.

Weakening a standard here or granting an exemption there will cause real pain for real families.

Growth in the housing sector is only sustainable if families can afford their loans and homes are maintained.  I know families in my zip code can’t afford a repeat of the housing crisis. Some of them are still digging out.

Let’s stop listening to the big bank lobbyists, and start listening to the people we serve – the families all across this country who remember all too well what foreclosures and job losses mean.