On November 5, the House Financial Services Subcommittees on Housing and Community Opportunity and Financial Institutions and Consumer Credit heard testimony on efforts to protect homeowners from abusive mortgage lending. Of particular interest to women and their families, Members of Congress and witnesses from the mortgage industry addressed the issue of financial literacy.
In his opening statement, Financial Institutions and Consumer Credit Subcommittee Chair Spencer Bachus (R-AL) discussed the importance of promoting financial literacy and commended Rep. David Scott (D-GA) for introducing the Prevention of Predatory Lending Through Education Act (H.R. 1865).
In discussing how to prevent abusive mortgage lending, Rep. Scott said that financial literacy “…is one of the most important components.” He outlined the major components of H.R. 1865 which would: 1) provide grants to states and nonprofit agencies for programs that educate low-income and senior consumers about lending laws and that counsel prospective homeowners about unscrupulous lending practices; 2) create a nationwide toll-free number to receive consumer complaints regarding predatory lending practices and a database of information for consumers; 3) coordinate government agencies and nonprofit organizations that provide education counseling to consumers who have been victims of predatory lending; and 4) establish a predatory lending advisory council within the Department of Housing and Urban Development.
Testifying on behalf of the Mortgage Bankers Association (MBA), Robert Couch said that the lack of consumer awareness and financial education is a major cause of predatory mortgage lending. He summarized MBA’s consumer financial literacy program, Stop Mortgage Fraud, which provides “useful guidance to consumers about how they can protect themselves in potentially abusive situations.” The program provides consumers with a “Borrower’s Bill of Rights” that lists a consumer’s rights during a mortgage transaction from his/her first contact with a lender or broker to the closing of the loan, the “10 Warning Signs of Predatory Lending,” and information on where to report suspected predatory lending.
A.W. Pickel of the National Association of Mortgage Brokers (NAMB) stated, “A major tool to combat abusive lending practices is to improve consumer awareness through education.” He lauded an Administration initiative to provide potential homebuyers with information to avoid abusive mortgage lending practices and industry efforts to educate homebuyers on selecting good-quality mortgage loans. Mr. Pickel explained that, “it is also essential for consumers to understand how to use credit and the significant impact their credit has on their ability to obtain a mortgage at the lowest cost.” He highlighted a program authorized in the No Child Left Behind Act (P.L. 107-110) that promotes economic and financial literacy among students from kindergarten through grade 12, stating, “Educating consumers in economics and personal finance in every stage of life, beginning in the younger years, is vital to our nation’s future.” Finally, Mr. Pickel announced NAMB’s support for financial literacy provisions in the National Consumer Credit Reporting System Improvement Act (S. 1753), which the Senate approved earlier this week.
