[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE PROPOSALS FOR A
MORE EFFICIENT FEDERAL FINANCIAL
REGULATORY REGIME: PART III
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND CONSUMER CREDIT
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 9, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-68
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
31-324 PDF WASHINGTON : 2018
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannon McGahn, Staff Director
Subcommittee on Financial Institutions and Consumer Credit
BLAINE LUETKEMEYER, Missouri, Chairman
KEITH J. ROTHFUS, Pennsylvania, WM. LACY CLAY, Missouri, Ranking
Vice Chairman Member
EDWARD R. ROYCE, California CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
BILL POSEY, Florida DAVID SCOTT, Georgia
DENNIS A. ROSS, Florida NYDIA M. VELAZQUEZ, New York
ROBERT PITTENGER, North Carolina AL GREEN, Texas
ANDY BARR, Kentucky KEITH ELLISON, Minnesota
SCOTT TIPTON, Colorado MICHAEL E. CAPUANO, Massachusetts
ROGER WILLIAMS, Texas DENNY HECK, Washington
MIA LOVE, Utah GWEN MOORE, Wisconsin
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
C O N T E N T S
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Page
Hearing held on:
January 9, 2018.............................................. 1
Appendix:
January 9, 2018.............................................. 43
WITNESSES
Tuesday, January 9, 2018
Astrada, Scott B., Director of Federal Advocacy, Center for
Responsible Lending............................................ 7
Fisher, Robert, President and Chief Executive Officer, Tioga
State Bank, on behalf of the Independent Community Bankers of
America........................................................ 5
Gleim, Edward J., Executive Vice President and Chief Operating
Officer, Triad Financial Services, on behalf of the
Manufactured Housing Institute................................. 4
Shuman, Matthew J., Director, Legislative Division, The American
Legion......................................................... 9
APPENDIX
Prepared statements:
Astrada, Scott............................................... 44
Fisher, Robert............................................... 63
Gleim, Edward J.............................................. 69
Shuman, Matthew J............................................ 75
Additional Material Submitted for the Record
Delaney, Hon. John:
Written statement from the Association of the United States
Navy....................................................... 80
Article from CBS Boston entitled, ``WWII Vet Mistakenly
Billed $4K for Medical Care, Revealing VA Problem''........ 81
Article from Military Times entitled, ``Veterans Choice
program hurting some vets' credit scores''................. 84
Written statement from the Wounded Warrior Project........... 88
Emmer, Hon. Tom:
Written statement from the Consumer Bankers Association...... 89
Pearce, Hon. Stevan:
Written statement from the Coalition to Save Seller Financing 91
LEGISLATIVE PROPOSALS FOR A MORE
MORE EFFICIENT FEDERAL FINANCIAL
REGULATORY REGIME: PART III
----------
Tuesday, January 9, 2018
U.S. House of Representatives,
Subcommittee on Financial Institutions
and Consumer Credit,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:01 p.m., in
room 2128, Rayburn House Office Building, Hon. Blaine
Luetkemeyer [chairman of the subcommittee] presiding.
Present: Representatives Luetkemeyer, Rothfus, Posey, Ross,
Pittenger, Barr, Tipton, Williams, Love, Trott, Loudermilk,
Kustoff, Tenney, Clay, Maloney, Scott, Velazquez, Green, Heck,
and Crist.
Also present: Representatives Emmer, Hultgren, Pearce, and
Delaney.
Chairman Luetkemeyer. The committee will come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
This hearing is entitled ``Legislative Proposals for a More
Efficient Federal Financial Regulatory Regime: Part III.''
Before we begin, I would like to thank the witnesses for
appearing today. I appreciate your participation and look
forward to a productive discussion.
I also ask unanimous consent that the gentleman from
Minnesota, Mr. Emmer, and the gentleman from Illinois, Mr.
Hultgren, and the gentleman from Maryland, Mr. Delaney, are
permitted to participate in today's hearing. While not members
of the subcommittee, these gentlemen are members of the
Financial Services Committee, and we appreciate their
participation today.
Without objection, they are allowed to serve.
I now recognize myself for 4 minutes for the purposes of
delivering an opening statement.
Today, this subcommittee will continue on its quest to
advance legislation to improve customers' access to financial
services and products. Financial companies continue to face an
onslaught of Obama-era rules and regulations that do little
more than establish unnecessary hurdles to compliance and limit
access to credit.
The CFPB's (Consumer Financial Protection Bureau's) Home
Mortgage Disclosure Act (HMDA) rules are a prime example. Under
Director Cordray's tenure, the CFPB added some 30 new data
points to HMDA reporting requirements. These data points offer
little to no additional protection for consumers or the
financial system but expose banks and credit unions to
unnecessarily stringent examinations and liability.
While Acting Director Mulvaney has signaled a change in
HMDA reporting requirements, a move that is most welcome, this
committee will continue to pursue legislative efforts to make
permanent reforms in these important policy areas.
I want to thank the gentleman from Minnesota, Mr. Emmer,
for his continuing work on the HMDA issues and for leading one
of the bills we will discuss today.
I also want to recognize Mr. Hultgren, Mr. Williams, Mr.
Pearce, and Mr. Delaney for their fine work.
Mr. Delaney and Mr. Hultgren have introduced legislation to
ensure veterans don't take a hit on their credit scores because
of mistakes made by the VA.
Mr. Pearce has drafted legislation to safeguard the
availability of manufactured housing, something of vital
importance to his constituents across New Mexico, as well as
mine in Missouri, as well as the rest of rural America.
Mr. Williams has championed legislation to ensure our
Nation's small and midsize institutions aren't subjected to
standards and examinations designed for and more suited to the
Nation's largest financial companies.
And Mr. Hultgren continues to advocate for the development
and implementation of a short-form call report for our Nation's
smallest community banks.
As I have said in previous hearings, the regulatory
pendulum has swung too far. Rules and regulations are driving
financial institutions to merge, exit entire lines of
businesses, discontinue services to their customers, and, in
some cases, permanently close their doors. We see it every day
and hear about it not just from institutions but also from
their customers, many of whom have experienced increased
difficulty getting access to credit and other financial
products.
I recognize it is possible to have a regulatory regime that
protects the American people and financial system without
needlessly hindering consumer choice. The bills we will discuss
today will help to foster a more reasonable regulatory system
that frees lenders and sellers to do what they do best: Offer
financial products and services to their customers and grow
their communities.
We had a gentleman here who testified recently, Greg
Williams, the CEO and President of Gulf Coast Bank & Trust from
New Orleans. He made the comment, he said, ``The interesting
thing is everybody in Washington loves community banks, but
nobody loves them enough to do anything about that.''
Hopefully, today we can start the process of doing something
about that.
We have a distinguished panel with us today, and I thank
them in advance for their participation.
With that, the Chair now recognizes the gentleman from
Missouri, Mr. Clay, the Ranking Member of the subcommittee, for
5 minutes for an opening statement.
Mr. Clay. Thank you, Mr. Chair, and thank you for
conducting this hearing. At this time, I have no opening
statement. Hopefully, we can get right into the testimony. I
yield back.
Chairman Luetkemeyer. The gentleman yields back. That is a
first, that Mr. Clay has nothing to say. We will please note
that for the record.
The Chair now recognizes the gentleman from Minnesota, Mr.
Emmer, for 1 minute to deliver an opening statement.
Mr. Emmer. Thank you, Chairman Luetkemeyer, for allowing me
to participate in today's hearing.
More than one-third of counties in America don't have a
locally based financial institution. And lending rates in many
of the most rural parts of our Nation remain below 1996 levels.
Now, more than ever, Main Street banks and credit unions need
real relief from onerous Washington regulations.
Today, as this committee reviews the Home Mortgage
Reporting Relief Act, we are taking another step forward. This
bill gives community financial institutions additional time to
comply with excessive mortgage disclosure data collection rules
imposed by the Consumer Financial Protection Bureau to help
Main Street banks do what they do best: Help families across
this country achieve the American Dream.
It was great to see the CFPB's action last month to delay
enforcement of the 2015 rule, but Congress can and should do
more.
Again, thank you to Chairman Luetkemeyer for holding this
hearing and including H.R. 4648. And a special thanks to
Representative Hultgren for all of his work on this bill and
this important issue as well.
And I yield back.
Chairman Luetkemeyer. The gentleman yields back.
We will begin our testimony. And before we get started, I
would just like to also make note of the fact that we are
expecting votes about 3:30, so hopefully we can get as far as
we can. We will see if we can get the hearing completed. If
not, we will complete it after we return. But just to give
everybody a heads-up, we may have to call a timeout here at
some point.
With that, today we welcome the testimony of Mr. E.J.
Gleim, Executive Vice President and Chief Operating Officer of
Triad Financial Services, on behalf of the Manufactured Housing
Institute; Mr. Robert Fisher, President and Chief Executive
Officer, Tioga State Bank, on behalf of the Independent
Community Bankers of America; Mr. Scott Astrada, Director of
Federal Advocacy, Center for Responsible Lending; and Mr.
Matthew Shuman, Director, Legislative Division, The American
Legion.
We will recognize each of you for your oral statements.
I would like to yield to the gentlelady from New York, Ms.
Tenney, for the purposes of making a brief introduction.
Ms. Tenney, you are recognized.
Ms. Tenney. Thank you, Chairman Luetkemeyer.
It is my honor and privilege to introduce Mr. Robert Fisher
today.
Mr. Fisher is the President and CEO of Tioga State Bank,
which serves thousands of New Yorkers within my district and
throughout our State. Tioga State Bank is a great example of
how a community bank continues to serve our local communities
by offering consumers with credit to improve the quality of
life for our rural communities.
And we welcome him today and look forward to your
testimony.
Thank you so much, Chairman.
Chairman Luetkemeyer. I thank the gentlelady.
With that, we will recognize each of you for 5 minutes to
give an oral presentation of your testimony. Without objection,
each of your written statements will be made part of the
record.
Just for a brief tutorial on our lighting system, green
means go; you have 5 minutes. When you get to the 1-minute
mark, you will get a yellow light. I would ask you to hopefully
wrap up in that 1 minute. And when it hits red, hopefully you
can stop very quickly thereafter, or else you get the hammer
from me.
With that, Mr. Gleim, you are recognized for 5 minutes.
STATEMENT OF EDWARD J. GLEIM
Mr. Gleim. Thank you, Chairman Luetkemeyer, Ranking Member
Clay, and Members of the subcommittee for the opportunity to
testify.
I am the Executive Vice President and Chief Operating
Officer of Triad Financial Services, Inc. I am appearing before
you on behalf of the Manufactured Housing Institute (MHI),
where I serve on the board of directors and as Chairman of
MHI's Financial Services Division. Thank you for the
opportunity to present MHI's views on the important bills
before the subcommittee today.
Manufactured housing is the largest form of unsubsidized
affordable housing in the country, providing housing for more
than 22 million people across the country. The affordability of
manufactured homes enables first-time home buyers, retirees,
and families to obtain housing that is cheaper than renting or
purchasing site-built homes. New manufactured homes make up
approximately 9 percent of new single-family home starts.
The manufactured housing industry is committed to
protecting consumers throughout the home-buying process.
However, because of the small size of manufactured home loans,
the manufactured housing finance has been acutely impacted by
recent regulations.
Many lenders have exited the manufactured housing space as
a result of increased compliance burdens following the
implementation of the Dodd-Frank Act. Lending in the
manufactured housing space is simply too small and unprofitable
to cover the increased compliance costs. Reasonable
modification to the regulations are a critically important
element to restoring a robust market of manufactured housing
financing.
All small lending institutions are disproportionately
impacted on onerous CFPB rules. To the maximum extent possible,
we encourage you to ensure the legislation before you today
applies equally for those small lenders that are depository
institutions and those that are nondepository institutions so
that the legislation applies to those lending institutions that
make manufactured home loans.
My written testimony provides detailed comments on each of
the bills before the subcommittee. Let me briefly summarize
those views.
H.R. 1264 constrains the ability of the CFPB to adopt rules
and regulations that have the effect of limiting the ability of
small financial institutions to provide affordable mortgage
credit to consumers. Indeed, one-size-fits-all CFPB regulations
are causing small lenders to curtail financing for small-dollar
loans since compliance costs are increasing and challenging the
profitability of such loans.
One area that this has been quite acute is with respect to
loans for manufactured housing. In fact, some nondepository
lenders are turning down almost three-quarters of the
applications they receive, and, in the majority of cases, it is
due to CFPB rules and regulations. We would point out that H.R.
1264 only applies to depository institutions and therefore does
not alleviate the host of burdensome compliance requirements
for nondepository manufactured home lenders.
H.R. 2683 is a balanced way to address the erroneous
reporting of adverse credit information due to an inefficient
VA repayment system. The bill protects veterans and upholds the
integrity of the credit reporting system. MHI's lenders believe
that the credit report should accurately reflect the repayment
history of individuals seeking credit to purchase a
manufactured home.
H.R. 4648 is an appropriate and measured response to the
concerns that have been raised about HMDA data reporting
requirements. The new HMDA data reporting requirements will
cause more lenders to stop making smaller loans because of the
cost of compliance and because the cost is too high to justify
remaining in the manufactured housing lender space.
With respect to seller financing, the ability to finance
homes is an important issue for many manufactured home
community owners who wish to ensure the manufactured homes
within their community are occupied. The legislation before the
committee would increase the number of loans they could make
per year before triggering the Truth in Lending Act from three
loans to five loans. The bill does this while retaining
essential consumer protections.
MHI stands ready to work with the subcommittee to make
regulatory changes to ensure individuals can get financing to
achieve the American Dream of home ownership through
manufactured housing.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Gleim can be found on page
69 of the appendix.]
Chairman Luetkemeyer. Thank you.
The gentleman yields back.
Mr. Fisher, you are recognized for 5 minutes.
STATEMENT OF ROBERT FISHER
Mr. Fisher. Thank you, Chairman Luetkemeyer, Ranking Member
Clay, and Members of the subcommittee.
I am Robert Fisher, President and CEO of Tioga State Bank,
a $475 million community bank in Spencer, New York. I am
pleased to be here on behalf of the more than 5,700 community
banks represented by Independent Community Bankers of America
(ICBA). We hope today's hearing sets the stage for legislation
needed to strengthen local economic growth and job creation.
Tioga State Bank was founded by my great-great-grandfather
in 1884 to provide the needed banking services to local
businesses and individuals. I am a fifth-generation community
banker, proud to carry on our commitment to local prosperity.
Many of the rural communities we serve in upstate New York
depend on us as the only financial institution with a local
presence.
I will focus my testimony on three bills before this
subcommittee, all of which include provisions recommended in
ICBA's ``Plan for Prosperity.''
First, H.R. 1264, introduced by Representative Roger
Williams, would exempt community banks with assets of less than
$50 billion from all prospective rules and regulations issued
by the CFPB.
Since the creation of the Bureau, community banks have been
forced to comply with rigid, arbitrary, and prescriptive rules
intended to target the abuses of nonbanks and larger banks.
These rules have limited community banks' ability to rely on
their best judgment in making credit decisions and to offer
customized products and services. CFPB rules reduce consumer
choice and end up hurting the very customers they are intended
to protect.
ICBA also supports H.R. 4648, introduced by Representatives
Tom Emmer and Randy Hultgren, which would provide temporary
enforcement relief from the new complex and burdensome data
collection and reporting requirements under the Home Mortgage
Disclosure Act. We believe that introduction of this bill
prompted the Bureau's recent announced policy of forbearance
under the new rule. H.R. 4648 will put this policy in statute
rather than at the discretion of the director.
Many lenders, core vendors, and mortgage software vendors
continue to scramble to bring their systems into compliance. We
are making a good faith effort to comply with the complex new
rule and should not be held liable for unintentional errors.
H.R. 4648 would also restrict the CFPB's ability to make
the new data publicly available. In the communities I serve,
where people are well-known to each other, published HMDA data
is a threat to consumer financial privacy. We believe the
ultimate solution is a HMDA exemption for relatively low-volume
mortgage lenders, as provided in Representative Emmer's earlier
bill, H.R. 2954. Raising exemption thresholds will protect
consumer privacy and provide relief for many more small
lenders, without a significant impact on the mortgage data
available to the CFPB.
Last, H.R. 4725, introduced by Representative Hultgren,
would provide for short-form call reports in the first and
third quarters for banks with assets of less than $5 billion.
Call report burden has grown sharply in recent years. When
I first started with the bank in the mid-1980's, the report was
18 pages long. Today, for my bank, that report is 51 pages and
80 pages for banks above a billion in assets. Yet my bank's
business model has not really changed significantly since 1884.
Call report preparation is a labor-intensive process that
involves drawing data generated by different systems and
manually reentering it into call report software. For all the
effort we put into it, only a fraction of the data collected in
the call report is actually useful for regulators in monitoring
safety and soundness or conducting monetary policy.
Recent agency efforts to streamline call reporting for
community banks are of little to no value. They merely
eliminated data that were not applicable to Tioga or other
community banks. From our perspective, the new short form is
essentially the same as the long form. H.R. 4725 is needed to
create real relief in quarterly call reporting that will allow
us to focus our resources on lending and serving our
communities.
Finally, I want to end this statement by asking the House
to promptly pass S. 2155 when it is sent over from the Senate.
This bipartisan bill is clearly a response to the numerous
hearings and markups held in this committee. It offers the best
opportunity for robust community bank regulatory relief this
Congress, and I urge you to not let it slip.
Thank you, and I look forward to answering your questions.
[The prepared statement of Mr. Fisher can be found on page
63 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Fisher.
Mr. Astrada, you are recognized for 5 minutes.
STATEMENT OF SCOTT B. ASTRADA
Mr. Astrada. Thank you.
Good afternoon, Chairman Luetkemeyer, Ranking Member Clay,
and Members of the committee. Thank you for allowing me to
testify today about legislative proposals regarding the
oversight of our financial institutions and the need to
maintain responsible and sensible consumer protections, which
are critical if we want to continue to build a strong and
inclusive economy.
I am the Director of Federal Advocacy at the Center for
Responsible Lending (CRL), a nonprofit, nonpartisan research
and policy organization dedicated to protecting home ownership
and family wealth by working to eliminate abusive financial
practices. CRL is an affiliate of Self-Help, a nonprofit
community development financial institution. And for over 30
years, Self-Help has focused on creating asset-building
opportunities for low-income, rural, and minority families by
providing more than $6 billion in financing to 70,000 home
buyers, small businesses, and nonprofits and also serving more
than 120,000 members through over 50 retail credit branches.
This important hearing addresses Federal financial
regulation in the context of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, which was signed into law in 2010
in response to the Great Recession 10 years ago. The law is a
pragmatic regulatory framework that corrected systemic gaps and
sought to prevent future market failures, all while
implementing crucial protections for consumers and the broader
economy.
As a result, today, consumer lending is strong, bank
profitability is at record levels, and financial markets are
stable, thanks in substantial part to essential legislative and
regulatory safeguards established by Dodd-Frank.
This hearing, entitled ``Legislative Proposals for a More
Efficient Federal Financial Regulatory Regime,'' has far-
reaching effects in terms of defining what we mean by efficient
regulation. Does efficiency mean blanket rollbacks of consumer
protection legislation? Or does efficiency mean targeted,
commonsense safeguards that ensure stable, transparent, and
equitable markets? At CRL, we strongly believe it is the second
choice. However, all of the bills considered today, with the
exception of H.R. 2683, rely on the first definition and roll
back consumer protections on a wholesale basis.
H.R. 1264 impedes the CFPB's ability to supervise and
regulate financial institutions by exempting those with assets
of $50 billion and under from all or new modified rules issued
by the CFPB and would push huge portions of the banking
industry and the consumers they serve outside of the entirety
of the legislative and regulatory system.
H.R. 4648 prohibits the sharing of public data on the
financial marketplace prescribed by HMDA, which is the best
tool we have to rout out market discrimination and
inefficiencies.
H.R. 4725 rolls back data-driven regulatory policy by
directing Federal banking agencies that have already initiated
streamlined processes to reduce reporting requirements for call
reports.
And Representative Pearce's legislation introduces
potentially dangerous and reckless mortgage loan products to
vulnerable home buyers by amending the Truth in Lending Act to
change the definition of mortgage originators to exclude
certain types of seller financing.
I want to stress it is the aggregate effect of these bills
that threatens consumers, harms banks, and exposes the overall
economy to risk by maintaining a belief that wide-scale
deregulation equals efficiency.
The notion is also at the foundation of an unsubstantiated
belief that Dodd-Frank has somehow stifled economic growth and
that deregulation is the solution. It isn't. The data does not
support this contention, and, as explained in my written
testimony, the evidence actually contradicts this belief.
The financial sectors have record profits. In 2016, the
financial institutions had annual profits of $170 billion, the
highest in years. The FDIC (Federal Deposit Insurance
Corporation) puts out these reports every quarter. The most
recent numbers are even higher, with industry net income for
the third quarter of 2017 at a 5-percent increase compared to
the previous year.
Community bank profitability has rebounded strongly and is
at pre-recession levels. At the end of the third quarter of
2017, community bank earnings increased by $513 million or a 9-
percent increase from that time earlier that year.
Credit unions have also continued to grow while recovering
from the financial crisis. In 2016, credit unions added almost
5 million new members, which amounted to the biggest annual
increase in history and four times the pace set a decade
earlier.
I will just conclude with a restatement that CRL opposes
all but one of these bills--H.R. 2683--being considered today.
Collectively, they widely scale back the CFPB's supervisory
authority and abolish important consumer protections. They also
abandon the approach of targeted and dynamic reform and,
instead, would be wholesale rollbacks on consumer protections.
I look forward to continuing to work with this committee,
community banks, and credit unions to work through the issues
raised today. And I thank you for the opportunity to testify.
[The prepared statement of Mr. Astrada can be found on page
44 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Astrada.
Mr. Shuman, you are recognized for 5 minutes. And I would
like just to take a moment to again thank you for your service,
as well, to our country.
Mr. Shuman. Thank you, Mr. Chairman.
Chairman Luetkemeyer. You are recognized.
STATEMENT OF MATTHEW J. SHUMAN
Mr. Shuman. After proudly serving 20 years in the United
States Army, Frankie Adams is continuing to this day to serve
his community as a police officer.
In December 2016, the VA authorized Mr. Adams, through the
Choice Program, to receive an outpatient procedure at a
hospital closer to his home. A few months later, he received a
bill in the mail instructing him to pay the remaining balance
for the procedure that his private medical insurance did not
cover.
While speaking with both the doctor and the hospital, Mr.
Adams advised them that the VA was responsible for the cost of
the procedure. Mr. Adams was unfortunately told that the VA had
not paid it and, in order to avoid the debt from being reported
to a credit collector and impacting his credit, he would need
to pay the $300 balance.
Chairman Luetkemeyer, Ranking Member Clay, and
distinguished Members of this committee, on behalf of the
National Commander Denise H. Rojan and the 2 million members of
The American Legion, I thank you for the opportunity to testify
regarding The American Legion's position on H.R. 2683, the
Protecting Veterans Credit Act of 2017.
The American Legion is our Nation's largest wartime veteran
service organization, with over 13,000 posts in every
Congressional district.
The story I told is a story that many veterans have lived.
The small difference is that Mr. Adams, from the great State of
Missouri, had the means to pay the charges. The simple reality
is no veteran should ever have to pay for services that the VA
is responsible for.
If passed, H.R. 2683 will afford veterans the necessary
protections by amending the Fair Credit Reporting Act to
exclude for 1 year information related to their VA medical debt
from being reflected in their credit report. This commonsense
bill will also provide veterans with the necessary tools to
dispute VA medical debt information reported to credit
reporting agencies. Bottom line, veterans will no longer
require assistance from attorneys and pay fees to resolve an
issue they had absolutely no role in creating.
Before continuing, I would like to give a brief history of
the Choice Program at VA.
In 2014, the VA wait-time scandal became a national news
story, describing veterans waiting long periods of time to see
a doctor to receive even the most basic of medical services.
Many blamed an overworked and understaffed VA system.
A solution was to allow veterans to receive care in the
community at the Government's expense. When the Choice Program
was created, it became the ninth community care program at the
Department of Veterans Affairs, meaning there were eight
similar programs already in existence, including the VA's
Office of Community Care.
Mr. Chairman, I share this with you purely to demonstrate
that veterans have been dealing with the consequences of VA's
actions even prior to the implementation of Choice.
While The American Legion supports H.R. 2683, we have a few
recommendations that would assist in making the bill even
stronger:
One, the credit reporting agencies will need a mechanism to
validate if someone is a veteran in order to process their
claim.
Two, in addition to validating a veteran's status, the CRAs
will also need to validate that the debt in question is a VA-
approved service.
Last, in 1982, the Prompt Payment Act became law, which
forced the Federal Government to pay their bills on time. In
2014, when the Choice Program became law, section 105 of that
law required the VA to pay providers in a timely manner. The
American Legion strongly encourages this committee and the
entire Congress to pass legislation directing the VA to adhere
to the Prompt Payment Act, which will assist veterans who have
selflessly served their Nation.
Mr. Chairman, Ranking Member Clay, and Members of this
committee, I thank you for the opportunity to share with you
today The American Legion's position on the Protecting Veterans
Credit Act. In closing, veterans like Mr. Adams deserve only
the best, and The American Legion stands ready to assist you in
doing just that.
Thank you, and I am more than willing to answer any
questions you have.
[The prepared statement of Mr. Shuman can be found on page
75 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Shuman. Appreciate
your insights on those issues.
And so let me just begin with you. I will recognize myself
for 5 minutes here.
You cited somebody from Missouri, which Mr. Clay and I have
said, this guy is pretty sharp, he is hitting a very high note
here with us right off the bat. Can you elaborate a little bit
more on exactly what the details of that case were and how this
bill would impact that individual?
Mr. Shuman. Certainly, sir. Thank you for the question. It
is worth noting that Mr. Adams is watching right now from
Missouri.
He is a police officer. After serving in the military, he
decided to retire to become a police officer. And in 2016 he
was normal age to receive a colonoscopy. He found out that he
could have the service done--instead of at the VA, he could
have it done at a local hospital, which was only 10 miles from
his home. Surgery went well, just so you know.
About 5 months later, he began receiving bills in the mail
saying that he owed money. And though $300 is not a lot of
money by a lot of people's standards, it certainly is to
others. He informed them that the charges--well, first of all,
it is also worth noting that his personal insurance covered a
big chunk of the fees, which the VA was certainly responsible
for in the first place. After a while, finding out, and did not
want it impacting his credit, he personally paid the $300
himself.
If this happens, which has happened quite often, when
veterans pay the fees themselves, they never get that money
back from the VA. So let's just note that.
Chairman Luetkemeyer. So the bill's impact here would
minimize this individual's being charged any late fees or--
Mr. Shuman. It would, sir.
Chairman Luetkemeyer. --Any credit negativity with regards
to not paying his $300.
Mr. Shuman. Yes, sir. It would provide up to about a year
for them to be able to figure out this process. Realistically,
it should take roughly about 2 months for the VA to get those
payments made, so providing a little bit more time than that,
in case it doesn't, would be helpful to the veteran.
Chairman Luetkemeyer. Very good. Thank you very much.
Mr. Fisher, I was interested in your commentary here. I am
involved intimately with a bank, and they were giving me, the
other day, this real estate loan matrix. I realize you probably
can't see it from there, but this top part, there are 280
boxes. And the bottom part here, it is a timetable of 20
different provisions in there of the things you could or could
not do.
So you are looking at 300 different situations there that
you could be tripped up on and have one, what they call
technical exception, and then cause yourself, the bank, to have
some retribution by the CFPB or the FDIC or whomever on this.
And so would you like to elaborate just a little bit on the
complexity of this chart and the concerns that you have, as a
banker, with trying to comply with all this?
Mr. Fisher. Yes. Obviously, we are very concerned about the
additional data points and the information that is being
collected. So we are not asking to be--we would like an
exemption; that would be great. But a forbearance or at least a
temporary extension to get ready for some of the changes to
HMDA, which has been in place since 1975, would be great.
Chairman Luetkemeyer. How is Mr. Mulvaney--I know that he
is looking at this, and he has proposed a delay on some of
this. Give us a little briefing on what he is trying to do and
the impact it would have with regards to some of this stuff.
Mr. Fisher. I think they have just announced that they
would have a forbearance for, I think, the same period as the
bill to allow banks to get up to speed, so that they are not
going to aggressively go after banks if you have an error in
your data.
Chairman Luetkemeyer. I know the bill tries to say there is
a limit at which the things do not affect the banks, but there
is already a limit in place on a number of different issues
that affect banks. But it seems to me that there is an
experience here where the regulators will say, well, if it is a
good idea for the banks above this threshold, it is probably a
good idea for the banks underneath it. Would you like to expand
on that comment just a little bit?
Mr. Fisher. Yes, we are always concerned that there are
going to become best practices that will get pushed down upon
the banks.
As a $475 million bank, we are not subject to stress-
testing our assets or stress-testing loans, but we have
suggested at regulatory examinations that we should consider
stress-testing some of our loans. We don't have an enterprise
risk manager within our bank, but we have been told that we
should start thinking about having somebody in charge of
enterprise risk management for our bank. So--
Chairman Luetkemeyer. So they are using the guidance and
rules that are above this threshold to be forced on you or by
inference that it is a good idea, as you say, best practices
for you to implement these, as well, is what they are telling
you. Is that correct?
Mr. Fisher. Definitely, sir.
Chairman Luetkemeyer. OK.
Let me yield back here, and we will go to the gentleman
from Missouri, Mr. Clay. The Ranking Member is recognized for 5
minutes.
Mr. Clay. Thank you, Mr. Chairman, and thank all the
witnesses again.
Mr. Astrada, two of the bills we are considering today have
two very different thresholds to trigger regulatory relief.
H.R. 1264, the Community Financial Institution Exemption Act,
would exempt nearly all banks and credit unions from any new or
modified consumer protection regulation, and it uses a
threshold of $50 billion in assets. H.R. 4725, the Community
Bank Reporting Relief Act, on the other hand, would set a
threshold of $5 billion for providing reduced call report
requirements.
Putting aside the substance of the two bills for a moment,
could you please help put the impact of these different
thresholds into perspective in terms of which segments of the
banking sector would be covered and the potential impact on
consumers?
Mr. Astrada. Absolutely. And this is with the qualification
you said, ignoring the substance, but looking at the
thresholds.
If we consider $5 billion, it covers a large majority of
the industry, I think over three-fourths, that you are taking
out of the ability of regulators to assess data on the health
and soundness, to assess market trends, to assess where policy
should be targeted to attract private investment. So you are
really taking a large share of the industry outside of the
purview of data-driven policy.
And then when you times that by 10 and go to $50 billion,
you are talking essentially virtually all of the banking
industry, with the exception of a handful of the largest
organizations. And to take that out of the purview of the CFPB
is, I think, in line with our concern and our opposition to
bills like these that just define efficiency as complete
exemption from the regulatory system.
So I will just underline that the CFPB also is responsible
for the Equal Credit Opportunity Act, the Truth in Lending Act,
Fair Debt Collection Act. So you are ultimately placing a
majority of the banking, if not all of the industry, outside of
the purview of these regulations, with a very onerous--I am
sorry, I have to speak to the substance of 1264 real quick--an
onerous exception process that essentially just hamstrings the
only agency that is looking out for the consumer.
Mr. Clay. Then, when considering the appropriate asset size
to establish a threshold to provide regulatory relief for
small, community financial institutions, do you believe that
the committee should consider the FDIC's 2012 community bank
study that defined a community bank with a threshold of $1
billion in assets, along with other factors, such as whether a
bank had more than 10 percent of foreign exposure?
Mr. Astrada. CRL hasn't taken an official position on a
number. I will say that we do support the role of the Federal
regulators to assess that number. And it would make more sense
to leave it to the regulators, who are in the best position,
that have a collaborative relationship with those under their
purview, to assess those thresholds rather than have it
mandated from legislation.
Mr. Clay. Now, I am going to play devil's advocate. Look,
when the CFPB was created through Dodd-Frank, it was in
response to the Great Recession and those players in the
financial services industry that had been careless, that had
almost caused our financial systems to melt down.
And I am one who thinks that we pass no perfect laws here,
and so sometimes we overreach. And so let me ask you, with us
taking in all of these financial institutions, did we
overreach, as Congress, in this law? And why wouldn't the
CFPB's role be to focus on those players who did do wrong and
who almost caused a meltdown and not have such a wide swath and
take in everybody?
Mr. Astrada. I ran out of time, but am I permitted 30
seconds to respond to that?
So CRL and I don't think any one of our coalition members
have ever said that Dodd-Frank was perfect, and it very much
was in response to a once-in-a-generation crisis. But we do
believe and that legislation anticipated that, especially with
sections like 1022(b)(3), which gives the CFPB ability to
exempt classes of institutions from its rules--and it has used
that for smaller institutions and community banks.
While we are not of the view that Dodd-Frank is sacrosanct
and cannot be changed, the legislation today takes the complete
opposite approach and says let's just get rid of large parts of
this altogether.
Mr. Clay. I thank you for your response.
I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from Pennsylvania, Mr.
Rothfus, the Vice Chair of the committee.
You are recognized for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
Mr. Fisher, at this committee, we often discuss the degree
of consolidation in the banking industry and the ongoing
closures of community financial institutions. This, coupled
with the de novo drought, has caused many communities across
this country to lose their local bank or credit union.
You are testifying today as not just a bank CEO but as a
fifth-generation community banker. In your testimony, you
wrote, quote, ``Community banks thrive or fail based on their
reputation for fair dealing in the communities they serve.
Their business model is based on long-term customer
relationships, not one-off transactions.''
You went on to note that regulators often fail to take
community banks' business model into account when imposing
heavy-handed rules on smaller institutions.
Can you discuss what happens when a community becomes a
financial services desert, as described in your testimony? What
are the impacts for households on Main Street?
Mr. Fisher. It limits choice to consumers, it limits
choices to small businesses. The majority of our business is
done within our community. Ninety percent of the loans that we
make are done within the communities we serve. Without us in
Spencer, New York, which has a population of about 3,800
people, I don't think any other bank is going to step into my
community and open up an office to provide banking services.
Definitely, without community banks present, there is a loss of
financial services and choice for consumers.
Mr. Rothfus. And I have seen that in small towns and
boroughs across western Pennsylvania.
Can you discuss an example of CFPB overreach into a
community bank like Tioga?
Mr. Fisher. I think the increased--the biggest example
right now, and it is one of the bills we are discussing, is the
increased HMDA data points, going from 23 data points to 48,
more than doubling the number of data points, which--community
banks, there is--I made 253 first mortgage loans last year, out
of 10 million. So are my 253 loans statistically significant as
far as the numbers that the CFPB is collecting as far as these
data points? I don't think so, but--it is just--I don't think
it should be applicable to my bank.
Mr. Rothfus. It appears that they are pretty hungry for
this data.
On another report, some critics of the Community Bank
Reporting Relief Act might argue that the Federal Financial
Institution Examination Council (FFEIC) has already streamlined
call reporting. Yet, in your testimony, you wrote, quote,
``From our perspective, the new short form is essentially the
same as the long form. ICBA invested significant time and
resources in the FFIEC effort, and we were deeply disappointed
in the outcome.''
Can you elaborate on how the new short form fails to
provide community banks like yours with meaningful relief?
Mr. Fisher. The call report, the sections that they
eliminated were sections that weren't applicable to my bank.
Some of the derivative sections, some of the other off-balance-
sheet items that we were supposed to be reporting on a
quarterly basis, we weren't reporting on those things anyway,
so elimination of those data points doesn't save me any time.
Instead of maybe taking 40 hours a quarter to complete, it is
maybe a 39-hour process today.
Mr. Rothfus. Yes. I noticed in your testimony also you said
that when you first started in banking in the mid-1980's the
report was 18 pages long; now it is 51 pages. No change in your
basic business model since that time warrants--that is nearly
three times.
Mr. Fisher. Yes. My business model is essentially the same
as when my great-grandfather started the bank. We take in
deposits and lend it back out in the community.
Mr. Rothfus. Mr. Gleim, you discussed in your testimony the
importance of Chairman Pearce's bill for the manufactured
housing industry. This issue is of particular interest to me
since manufactured housing is a popular source of affordable
home ownership in my district. The manufactured housing
industry also employs 16,000 people in Pennsylvania.
I understand that restrictions on lending practices have
made it more difficult for prospective buyers and have already
adversely impacted the industry. Can you please elaborate on
how the Pearce bill would help prospective purchasers of
manufactured homes?
Mr. Gleim. Again, let me again piggyback off of the HMDA
information. We have gone through, and basically our numbers
have come up with just over a hundred data points that were
required to be filled out for that. Now, these have to be
filled out on every application that is out there. It continues
to increase our cost, every application, regardless of what the
disposition is of that product. As a result, it continues to
increase our cost. It makes it very, very difficult to make the
smaller loans out there, and it continues to limit affordable
housing to many of our customers.
Mr. Rothfus. I yield back my time.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we recognize the gentlelady from New York, Mrs.
Maloney, for 5 minutes.
Mrs. Maloney. Thank you so much. And I thank the Ranking
Member and the Chair holding this hearing, and for all of the
panelists. And a very special welcome to Robert Fisher, a
fellow New Yorker, and thank you for your service to our great
State.
My first question is for Mr. Astrada.
What do you think of H.R. 2683, the Protecting Veterans
Credit Act? I personally am supportive of it, would like to be
a cosponsor, and thank my colleague Mr. Delaney for his hard
work on it. And I don't think that veterans' credit scores
should be harmed just because the VA fails to pay non-VA
healthcare providers on time.
Do you think this bill is helpful?
Mr. Astrada. Thank you. Yes, CRL does support this bill and
views it as a very productive and positive step to protect--
Mrs. Maloney. And do you have any concerns with excluding
this information from veterans' credit reports?
Mr. Astrada. No concern. As it is, like I said, we view it
as a very productive step to protecting our Nation's veterans.
The only thing I would underscore is that--we deal a lot in the
secondary debt market--is that these protections should be
expanded, to the extent possible, for veterans and to the
broader communities, especially when it comes to medical debt,
which is more than half of all collections across America.
According to CFPB publicly available data, over two-thirds
of the complaints of that debt centered around unverified debt
holding, incorrect amounts, or even the wrong debtor.
Mrs. Maloney. Thank you. And I think we can get bipartisan
support for this, I hope.
Mr. Astrada, you said in your testimony that H.R. 4648, the
Home Mortgage Reporting Relief Act, would undermine fair
lending efforts. Can you elaborate on how you think the bill
would affect fair lending? Would this bill make it harder to
crack down on unfair and abusive practices?
Mr. Astrada. Yes. We have strong opposition to 4648 on the
public disclosure prohibition. When we look at HMDA and its
three main purposes of helping to show whether financial
institutions are serving the housing needs of their
communities, to assist public officials in distributing public-
sector investment, and to assess identification of potentially
anti-discriminatory behavior or preventing anti-discrimination
laws, this data is essential.
And without it, the public, universities, policymakers,
professionals won't be able to have an accurate assessment of
the market, who is getting credit, who is not getting credit.
And this is particularly relevant for rural borrowers or
individuals who live in banking deserts that rely on very
limited choice of institutions.
Mrs. Maloney. I would also like to ask you about 2683. What
do you think about the Protecting Veteran--wait a minute. I am
going back to the wrong one.
I want to ask you about H.R. 1264, which would exempt all
banks and credit unions with under $50 billion in assets from
all rules and regulations issued by the Consumer Protection
Bureau.
I am all for tailoring rules to the size and business
models of banks and credit unions, but is it appropriate to
exempt banks and credit unions from consumer protection rules
based purely on size? Aren't all consumers entitled to be
protected? Shouldn't all financial institutions, regardless of
size, care about taking care of and protecting their
constituents or their consumers and customers? What does size
have to do with consumer protection?
Mr. Astrada. I think in this case, especially with 1264,
the number is significant, because it is virtually the entirety
of the industry. And to place that completely outside of the
CFPB's purview, not only with all the regulations that it is
responsible for now but in the future, is--
Mrs. Maloney. It would be how much of the industry did you
say?
Mr. Astrada. $50 billion in assets, I don't have the number
offhand, but it is well more than 90 to 95 percent.
Mrs. Maloney. Ninety-five percent? My word. Really? That is
interesting.
Mr. Astrada. So it is essentially saying that the vast
majority of the banking industry doesn't have to comply with
the CFPB--any regulations that it is responsible for now or
that might come up in the future.
Mrs. Maloney. And shouldn't every customer be entitled to
protection?
Mr. Astrada. We would strongly agree with that statement,
yes.
Mrs. Maloney. OK.
My time has expired. Thank you very much for your
testimony. And I thank all the other panelists for being here.
Chairman Luetkemeyer. I thank the gentlelady for her
questions.
With that, we go to the gentleman from Colorado. Mr. Tipton
is recognized for 5 minutes.
Mr. Tipton. Thank you, Mr. Chairman.
I thank the panel for taking the time to be able to be
here.
Mr. Fisher, prior to the creation of the CFPB, were there
protections in place for consumers through your banks?
Mr. Fisher. Yes, there have always been protections in
place for the consumers.
Mr. Tipton. Great. I was particularly interested in a
follow up to the Chairman's question to you when you were
talking about, actually, the trickle-down effect in terms of
regulations, the best practices and how they are going to be
impacting the ability to be able to create new businesses.
I, too, come from a rural area. We have not experienced the
recovery that the rest of the country has. Fortunately, I
think, now that we have had real tax relief legislation go
through, those opportunities to be able to grow businesses,
some responsible deregulation starting to go into place, we are
starting to finally see some real activity in some of rural
America now to be able to create it.
But I would like you to be able to speak to my colleague
Mr. Williams' bill, H.R. 1264. It will exempt community
financial institutions from prospective rules and regulations
from the CFPB. Could you speak to how this is going to be able
to assist creating those economic dynamics that a lot of rural
America, upstate New York, rural Colorado might really need to
have?
Mr. Fisher. I just think, obviously, our reputation is
critical to our success in our communities. So we protect our
consumers. We do what is right for our customers, as every
other community bank throughout this country. When you are
operating in a small footprint, you have to do what is right,
because your reputation is everything.
So I think the exemption from some of the purview of the
CFPB takes away some of the burden that we may have as far as
trying to serve our communities and trying to have a consistent
message to our customers.
Mr. Tipton. We had some real experience out of the State of
Colorado with some of our smaller financial institutions
stating that some of the regulatory burden was actually
inhibiting their ability to be able to make those small-
business loans.
I am a former small-business owner. Without that access to
capital, we weren't able to maintain or to be able to grow
jobs. Have you had some of that experience in your banks?
Mr. Fisher. Definitely. With the HMDA laws as far as
currently, I have two people in my bank out of a hundred people
that their main focus is on HMDA. I have one employee that is
solely dedicated to BSA.
So regulatory burden, which is why we are here today, not
to talk about bank profitability but to talk about reg burden
and how we can better serve our communities and serve our
customers and get loans out to small-business customers. And
that is really, I think, what we are trying to do, is relieve
some of the burden that doesn't make sense. Tier it to my
business model.
Mr. Tipton. I think that is a lot of the intent of Mr.
Williams' bill, to be able to have a responsible regulation, to
be able to create win-wins for our communities, for our
businesses, for our families, and to be able to have
institutions in place that can deliver that liquidity.
Mr. Gleim, I would like now to be able to turn to some of
the issues that you are bringing up.
In December 2017, the CFPB announced that it intends to
open a rulemaking to reconsider the various aspects of the 2015
HMDA rule, as well as its intention to assess penalties for
errors in data collected in 2018.
In your testimony, you called the compliance burden of the
CFPB HMDA rule stifling. Can you speak to how codifying the
CFPB's safe harbor and extending it through 2020, as Mr.
Emmer's legislation will do, how that will ease compliance
burdens for the CFPB and the rulemaking industry?
Mr. Gleim. Yes, sir. The safe harbor will help us for that
1 year because of the fact it won't provide--we will basically
have a safe harbor from those penalties. But it still doesn't
resolve the issues of all of the information that we do and we
are required to collect.
Again, while our organization, we are the second-largest
lender in the manufactured housing segment, we basically turn
down 74 percent of our applications. Every one of those
applications is required to have HMDA information. We have
found also that the cost of software for HMDA as well as
additional software to edit the responses for HMDA are
extremely expensive and make it difficult for more
organizations to enter this market for manufactured housing.
The other issue we have is, when a customer comes in and is
asked to provide that information, they can basically say they
won't, and, at that point, we need to make a best guess on
that. What the customer doesn't understand is there are so many
data points in there that we are then required to go into not
only his application or her application but a lot of other
documents we have received from them to complete that. In other
words, we are providing far more information than the customer
expected, which leads to privacy issues as well as identity
theft issues, as far as we are concerned.
This takes a number of people to do. We are looking at 5 to
10 minutes for every deal that we have.
Mr. Tipton. Thank you.
I yield back, Chairman.
Chairman Luetkemeyer. The gentleman's time has expired.
We go to the gentleman from Georgia, the distinguished
gentleman, Mr. Scott. You are recognized for 5 minutes.
Mr. Scott. Thank you very much, Mr. Chairman.
Mr. Gleim, let me ask you this, because I read your
testimony, and you pointed out something that disturbed me, the
fact that 1264 does not provide any relief to nondepository
manufactured home lenders. And that concerned me because there
are millions of American families who this would affect who do
not use the traditional lenders like banks or credit unions but
heavily rely on this alternative form of lending.
Could you share with us what this would do, what the impact
of this would be?
Mr. Gleim. I think one of the things that we have seen the
acting director do, particularly on the Safe Harbor Act, is to
go across the board on all lenders. And that is why we are
asking for that same protection on this.
One of the biggest issues we have out of this, sir, is the
fact that it creates an uneven playing field for manufactured
housing lenders and organizations like ours which do
significant amounts of manufactured home lending. The big issue
also is very few community banks and banks in general basically
work in this segment, just because of the fact it is so
difficult to make money off of the smaller loans.
Not only are we penalized by that, we would now be
penalized by basically a dual system out there that would treat
all of us lenders that are providing manufactured home loans
that are nondepositories following different rules.
Mr. Scott. And that is because the loan size of
manufactured housing is possibly too small to cover a lot of
that. So it puts it into an unprofitable position to even cover
compliance costs.
Is it possible that you might--I know my colleague Mr.
Roger Williams is a very fine gentleman, and he wouldn't want
to do anything that would hurt millions of American families
out there who don't use the traditional instruments in our
financial system, that perhaps you might make a few suggestions
to Mr. Williams that might do this.
In Georgia and throughout this country, there are an awful
lot of--millions of families would be affected, I think, by
this. Is that not true?
Mr. Gleim. That is definitely correct.
One of the things that would help this significantly goes
back to providing access to manufactured housing on points and
fees. These homes that are at $20,000 and $30,000 are almost
impossible to make a profit off of. As a result, you have
customers that cannot buy these homes at this level. As a
result, they end up having to go off someplace else. Again,
there aren't many alternatives outside of manufactured homes.
Right now, we are looking at numbers as far as originating
and processing that run anywhere from $1,800 to $8,800 to
process a loan. Because of that, more and more financial
institutions and lenders are not willing to do the lower end.
When the lower end isn't done, it also makes it very difficult
for the customer to be able to trade up to a larger
manufactured home or a better manufactured home.
There is no better affordable housing right now than
manufactured homes that, as I stated in my testimony, not only
are the costs less than traditional-built used or new homes,
but in many cases the cost is far less than it is for even
renting at this point.
Mr. Scott. Very good.
And if there is anything I could do to work with Mr.
Williams on that, we could maybe work together, get some
language that would ease that concern a bit, I am sure that Mr.
Williams would work with us.
In my remaining time, I cannot go by without giving a
compliment to Representatives John Delaney and Randy Hultgren
for the great work they are doing with House Resolution 2683.
This is no fault of our veterans, to get in this situation. And
this legislation will go a long way, Mr. Chairman, in fixing a
problem and correcting it. Because it is unfair for our
veterans to have to be saddled with this extra cost because of
the late payment structure in the VA. So I just want to commend
Mr. Hultgren and Mr. Delaney for a job well done.
Thank you.
Chairman Luetkemeyer. The gentleman yields back.
The Chair will recognize the gentleman from Texas, Mr.
Williams, for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman. And thank you for
holding a hearing on my bill, H.R. 1264, the Community
Financial Institution Exemption Act, and all of the important
legislation that we are discussing today.
It is not easy to force a regulatory agency to do what they
already should be doing, but H.R. 1264 seeks to put the burden
of proof on the CFPB. For new regulations, community
institutions will be exempt until the CFPB makes a written
detailed finding that they should not be included. In other
words, either keep community institutions out of these massive
rules or put pen to paper and tell us why they are including
community banks and credit unions.
The bill would also require the CFPB to consult with
primary regulators of community institutions as to whether a
new rule should go forward or if an exemption should exist.
Finally, nothing in the bill would prevent the CFPB from
revisiting current rules to determine if new exemptions are
justified.
My bill is simple; my bill is straightforward. And I hope
the committee will consider my legislation and that my friends
on the other side of the aisle, as my good friend--let the
record show, my good buddy, David Scott, has indicated, they
will work with us to create a workable exemption. And if not
and we don't do that, I am afraid our community institutions
are going to keep disappearing, and customers and borrowers
alike are going to suffer in the long run.
In my remaining time, I would like to ask a few questions.
Mr Fisher, first of all, congratulations on your fifth-
generation business. I operate a third-generation business. And
I want to thank you for being here today.
Community banks and credit unions are the backbone of Main
Street America. And in my 45 years of experience as a small-
business owner, I can say without a doubt that community
financial institutions are major drivers of this Nation's
economy. But the sad truth is one credit union or community
bank is going out of business each working today--it is
unbelievable here in America--because of incredible regulatory
burden.
I would like to ask you about my piece of legislation, the
Community Financial Institution Exemption Act, which you have
spoken about, and the effect that it could have on Main Street.
First, though, in your experience, would you say that in
the past 8 years the regulatory burden on your institution has
grown substantially?
Mr. Fisher. I would say it has definitely mushroomed. It
has expanded exponentially.
Mr. Williams. All right. And do you feel that the CFPB
should have included broader exemptions for smaller
institutions in that timeframe?
Mr. Fisher. Yes, I am not sure that the CFPB has
effectively used the section 1022 exemption to exempt different
financial institutions from the purview of some of their laws.
Mr. Williams. Do you feel like this legislation will have a
positive impact on Main Street?
Mr. Fisher. I think this would have a tremendous impact on
Main Street.
Mr. Williams. I have another question for you. I am
concerned that the CFPB, as it behaved under former Director
Cordray, actively sought to increase regulation, no matter the
cost to communities and the consequences of its actions. With
that being said, do you think that requiring a written finding
for new rules before they go into effect, if at all, would
force the CFPB to stop and think if these rules are truly
necessary for community institutions?
Mr. Fisher. Most certainly. They would have to prove--the
burden of proof is on the CFPB at that point.
Mr. Williams. Finally, will my proposal effectively help
community institutions to thrive and to grow in number rather
than be crushed under burdensome regulations they currently
are?
Mr. Fisher. I would find that to be very helpful, yes.
Mr. Williams. Thank you for your testimony.
Real quick, Mr. Shuman, I would also like to thank you for
your service to our country.
Mr. Shuman. Thank you, sir.
Mr. Williams. Yes, sir. I represent a large portion of Fort
Hood. You know where that is.
Mr. Shuman. I am quite familiar with--
Mr. Williams. So veterans issues are always at the
forefront of my mind. We should always find solutions which
honor the sacrifice and bravery of veterans who serve this
Nation. The current state of VA is alarming to me, and our
veterans deserve much better.
And I agree with The American Legion National Commander
Barnett that no veteran should ever receive a call or a letter
from a collections agency because the VA failed to pay the non-
VA provider in a timely manner. It is disappointing that a bill
like this is even needed, but I feel that this a step in the
right direction to righting this wrong.
Briefly, what else, with exception of this bill, can this
committee undertake to ensure that veterans are taken care of
once they have left the service?
Mr. Shuman. Thank you for the question, Congressman.
Outside of this committee voting on and in favor of
critical legislation--for example, the committees right now are
currently working on streamlining the community care bill, the
Choice bill, going forward, so that will be critical in the
coming months--but just continuing to vote in favor of veterans
legislation will be helpful.
Mr. Williams. OK.
In my small amount of time, Mr. Gleim, I will just ask you
this. My legislation that we have been talking about, in your
estimation--or, I am sorry, actually, it is Mr. Pearce's seller
financing legislation. In your estimation, will this
legislation help to provide the flexibility and access to
mortgage credit that moderate- and low-income families deserve?
Mr. Gleim. Yes, sir, I think it definitely will by creating
that level playing field.
Mr. Williams. So Mr. Pearce has a good bill.
Mr. Gleim. Yes.
Mr. Williams. OK.
I yield my time back. Thank you.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we will recognize the gentlelady from New York,
Ms. Velazquez, for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman, and thank you for
holding this important hearing.
Mr. Astrada, since 2015, the CFPB has taken numerous steps
to provide smaller institutions with flexibility from HMDA's
data collection and reporting requirements. Thus, H.R. 4648
seems somewhat unnecessary and has the potential to further
limit mortgage lending to lower-income and minority
communities.
Would you agree with that assertion? Please explain.
Mr. Astrada. Yes. And one of our main concerns with the
bill is the limit of public availability. And I think it would
be helpful to contextualize CRL and the Civil Rights
Coalition's views on why, I think, as the phrase was said, we
are ``so data-hungry,'' is that data really allows for a
critical assessment of policies and to decouple intent from
impact. And data and the quantitative analysis that relies upon
it has been one of the strongest tools of civil rights groups
and excluded communities to really speak truth to power.
And examples of this go far back, especially in the
mortgage industry, where FHA redlining was never with the
intent to be exclusionary. It was always to preserve peace in
the community or preserve the economic well-being of white and
black families. Or upholding constitutional contract law was
the basis for allowing or empowering landowners to not sell
their property to African-Americans.
So by no means am I comparing any of the legislation here
today to those bills. I am just solely saying that that is our
concern with scaling back data. That is why we are adamant
about protecting the public's ability to scrutinize data and to
really hold accountable the market.
And this is also not a statement that says we believe in
collecting data just for data's sake and that more data is
better, but that we do have processes through the regulators in
a collaborative approach with those under their purview and
that legislation that will completely supplant the regulator's
role in collecting that data or when should that be collected
or how it should be collected is extremely problematic.
Ms. Velazquez. Thank you.
Mr. Astrada, H.R. 4648 will restrict the CFPB's ability to
make any of the new HMDA data that is collected and reported
under Dodd-Frank publicly available.
Can you please discuss the importance of HMDA data in
allowing Congress and the public to monitor trends and
potential problems in the mortgage lending industry, and
elaborate on any concerns we should be aware of with limiting
the public access to this data?
What is the public good, what is the public goal in terms
of collecting the data and not allowing for the public
community-based organizations that have an interest in terms of
lending to all Americans not to have access to this data?
Mr. Astrada. Again, I think it is extremely important for
the public's access to this information. And one of the
earliest examples of this, of public information that would
improve industry practices is a 1988 series of stories of
redlining practices in Atlanta published by the Atlanta
Journal-Constitution called, ``The Color of Money.'' This
series was carried out not by a Federal agency or any type of
think tank but by investigative journalists relying on public
data. And the series itself transformed the public's
understanding of redlining and actually led to major changes in
the mortgage market.
So it is examples like these that--these data collections
are not telling institutions who to lend to, who not to lend
to, or giving any type of directive. It is really the
foundational, what I would believe is transparent markets
accountable to the public, accountable to policymakers. And the
real point of conflict of what I sense is that how much data
should be collected is a separate question of just prohibiting
the public's availability of even future data points.
And the expanded rule has race, ethnicity, interest rates,
borrower fees. So it is all these data points that might have
prevented the extent of the Great Recession if we had it before
2008 when the market was very dark and even financial
professionals trading at the desk had no idea what was going on
in terms of risk assessment.
Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
Chairman Luetkemeyer. The gentlelady yields back.
With that, we will go to the gentleman from North Carolina.
Mr. Pittenger is recognized for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
And thank each of you for being with us today.
Mr. Fisher, I want to say I applaud your work. I was on a
community bank board from the time we chartered to the time we
sold it. It was a great role that we played. Frankly, North
Carolina has lost 50 percent of our banks in the last 8 years
as a result of the Dodd-Frank bill and the regulatory
environment. So I commend you for hanging in there, and relief
is on the way.
Regarding Mr. Williams' bill, which I really commend, do
you have concerns that even with the ability that you have an
exemption that the best practice rules that are promulgated
through the larger banks could be passed down to the smaller
community banks?
Mr. Fisher. We do have concerns. And we have experienced
that, as I mentioned before, with some of the stress-testing on
some of our loans and even the suggestion that we have to hire
a person now to manage the risk for our bank versus having a
committee risk approach.
So we have seen the best practices already being pushed
down upon us from some of the larger institutions that we are
not even close to those thresholds, asset thresholds, for some
of those things. So we are concerned about some of those best
practices.
Mr. Pittenger. They have tried to carve out exemptions
built on the substantial differences between community banks
and the larger, more complex institutions. Do you feel like
these have worked well in the past? What should Congress be
considering in terms of a tiered regulatory approach? And what
has worked well? What doesn't? What would you recommend?
Mr. Fisher. I think a tiered approach can work well as long
as it is consistent and enforced. I think if we look at the
Durbin amendment, it is not perfect, but it still appears to be
working somewhat well as far as preserving the interchange
income for some community banks.
I think a tiered approach should be based--it should be on
the complexity of our business models, and we don't have the
complex business model that the mega banks have. ``It's a
Wonderful Life,'' just having been through the holidays, that
is our business model. We are the Bailey Savings and Loan.
Mr. Pittenger. Yes, sir.
Mr. Gleim, President Trump is expected to nominate a new
director for the CFPB. What specific steps could the new
director take that would reduce regulatory burdens for
manufactured home lenders?
Mr. Gleim. Actually, I think I can simply state and simply
respond by saying that we would like him to act on provisions
in H.R. 1699 which was basically preserving access to the
Manufactured Housing Act and do it on an administrative basis.
This would help to cut our costs significantly. It would make
it a lot easier and make affordable housing out there more
accessible to a lot of other lenders or a lot of other
customers.
I think one other point that it is important to make is we
have seen extremely good years over the last couple of years as
far as profitability goes, and that includes my organization,
but until these regulations are changed, we are not going to
get people being able to afford or being able to buy
manufactured homes.
I said earlier 74 percent of our applications are being
turned down, not because they are not good applications and
not, in many cases, because they are not good customers; it is
because of the regulations that are out there. And if, in fact,
the CFPB could basically follow the Preserving Access to
Manufactured Housing Act as it is, we would see more and more
people qualify and be able to buy manufactured homes that
deserve to have a home.
Mr. Pittenger. Yes, sir. To that end, would you just expand
some more in detail of the HMDA data requirements and the
concerns that you have regarding that?
Mr. Gleim. Our issue with the HMDA data is that the bill is
not scaling back data. The bill is protecting small lenders
from doubling of data being collected. And that is probably the
biggest issue, as far as we are concerned, as far as that goes.
We are not looking at eliminating HMDA collection. We are
looking at, do we really need estimates that go from 100 to 140
data points out there on that individual customer resulting in
significantly increasing cost, which means more and more
lenders will not, basically, go into manufactured housing
because of this and because of the small balances. Again, I am
talking $20,000, $30,000. Our average balance is $70,000.
Mr. Pittenger. Thank you.
I yield back.
Chairman Luetkemeyer. The gentleman yields back.
We go to the gentleman from Texas. Mr. Green, you are
recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the Ranking
Member as well. I thank the witnesses for appearing.
Let's start with something very basic. Mr. Fisher, sir,
would you tell us what the HMDA data is used for?
Mr. Fisher. HMDA data is used to see if a bank is
discriminating based on race, sex, ethnicity, other features
like that.
Mr. Green. And do you agree that this type of
discrimination still exists?
Mr. Fisher. It does not exist at my institution, but I
would say that there are probably some forms of discrimination
that still exist, yes.
Mr. Green. It exists at BXS. They just agreed to pay a
$10.6 million settlement because of their behavior. And I have
a list of others.
Is there anyone on this panel who believes that
discrimination doesn't exist? If so, raise your hand. Be
truthful.
I take it by an absence of hands, and I would ask that the
record reflect, that all of the members of the panel believe
that discrimination exists.
Now, Mr. Fisher, if it exists and you have acknowledged it,
but not at your bank, if it exists, how would you have us deal
with something that prevents some people from accessing capital
that are qualified to receive the capital?
Mr. Fisher. I think the current HMDA data that was put into
place in 1975 still adequately monitors that. It provides all
the relevant data points that you need to monitor that. I don't
think the expanded data points are significant--
Mr. Green. Tell me about your background, Mr. Fisher. Where
have you studied these issues such that you can give us an
authoritative opinion such as you have just announced? Where
have you studied this?
Mr. Fisher. I have not studied this.
Mr. Green. OK.
Mr. Fisher. I--
Mr. Green. So you really don't know what you are talking
about. You really don't. People are suffering. They can't get
loans that other people get, and sometimes they are more
qualified than the people who are getting loans. It happens. It
is not their fault that we have this history of invidious
discrimination, something that I know we don't want to confront
and don't want to talk about, but it exists, and somebody has
to say it.
And this data is important to those people who are being
discriminated against. If someone can give us a better way to
do this, I would be honored to hear it, but we don't have it.
In fact, this is not enough. We ought to be able to test
banks. We ought to be able to send people into banks to try to
get loans, different ethnicities, and find out who is really
discriminating against people and to what extent.
Mr. Astrada, sir, tell us about this ``Color of Money.'' Is
that the article that you referenced?
Mr. Astrada. Yes.
Mr. Green. I read that some time ago, but my recollection
is that they found that there were some serious infractions. Is
that a fair statement?
Mr. Astrada. Yes.
Mr. Green. Can you articulate some of these infractions,
please?
Mr. Astrada. Yes. And I think this is a great example to
outline the spectrum of what you said, of just blatant,
obvious, all-out racism where borrowers were declined loans
based on the color of their skin, but also, through this data
requirement, the more complex system that we have of
discrimination.
And I don't want to get too academic, but I think that a
Supreme Court case in 1917 outlawed--or it deemed
unconstitutional racial zoning by a county in Kentucky. And the
research behind this article and that has been built on, shows
that how, because individuals who discriminated against ethnic
minorities, African-Americans, Latinos, couldn't outright
racially zone, that they made an economic correlation of all
the indicators that went along with the social class that they
were discriminating against.
So this article really sheds light on the more complex
sense of discrimination, when you talk about institutional
racism, all the way down to the individual teller that might be
discriminating against somebody just on the color of their
skin.
Mr. Green. Thank you.
I am going to yield back, Mr. Chairman.
Chairman Luetkemeyer. The gentleman yields back.
I would go to the gentleman from Georgia, Mr. Loudermilk.
Recognized for 5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman.
And I do appreciate every one of our panelists for being
here.
Before I start questioning, I want to thank Mr. Shuman and
Mr. Fisher both for your service to our country. Especially
from an Air Force veteran, as well, and from a member of the
Legion, as well, I appreciate your service to our country.
Back in our district, I created an advisory council, back
when I first was elected 3 years ago, and the advisory council
was made up of professionals in business, business owners,
small-business owners, managers, CEOs, community activists,
nonprofits, ministers. It was basically a snapshot of the 11th
Congressional District in Georgia.
The reason I have this advisory panel is we meet regularly
and we discuss issues that are important, and we bring ideas of
how can we serve the people better.
Recently, I asked them a question--actually, it was about 2
years ago. I asked a question as I went into the business
community there. I asked our advisory council, I said, ``If we
could only do one thing, if we were only able to accomplish one
thing to help your business, would you rather us address
corporate taxes and business taxes or reduce regulations?'' It
may not surprise you guys; it surprised me. Eighty-five percent
of them in the room said reduce regulations. It was the number-
one thing.
I followed up on that, and I said, ``Why?'' ``Because it is
not just the bottom line for us; it is servicing our customers.
And the current regulatory environment prohibits us from
actually servicing our customers.''
I had a young man, a member of our advisory council,
president of a small community bank, came to me later, and he
said, ``Let me explain to you the problems that we are facing
because of the current regulatory environment. A young man came
into my office, and he wanted a loan of $3,500 to buy a car. He
needed this car for his job. He had been struggling. This was
an opportunity. He got a job. But because of the current
regulatory environment, even though I personally knew this
guy,'' he said, ``I knew him, I knew he would be good for the
money, I was not allowed to make a loan to him.''
Mr. Fisher, you are in the banking industry.
Mr. Fisher. Yes.
Mr. Loudermilk. You make money by making loans to people,
correct?
Mr. Fisher. That is my core business. That is how we make
money every day.
Mr. Loudermilk. When you turn down someone for a loan, you
don't make money.
Mr. Fisher. Correct.
Mr. Loudermilk. When the Government tells you you can't
make a loan, even though you may know that it would be in the
best interest to do so, you don't make any money.
Mr. Fisher. That is correct.
Mr. Loudermilk. Who is hurt through that?
Mr. Fisher. The consumer ultimately is hurt--
Mr. Loudermilk. Ultimately.
Mr. Fisher. And we are hurt, as well, but--
Mr. Loudermilk. Regarding the bill that Mr. Williams has
introduced that would exempt the financial institutions under
$50 billion from CFPB regulations--still, it would allow them
to reinstate a rule if there were unique circumstances--I don't
see how this would actually increase the systematic risk. I
just don't believe that it would put that type of risk--what
are your thoughts on that?
Mr. Fisher. I don't think it would increase the risk at all
either. I believe there are consumer regulations. And as I have
said previously we do things that are right for our customers
and right for the community because our reputation is on the
line every day. And so we can't afford to do things that are
contrary to customer goodwill that would hurt us
reputationally.
Mr. Loudermilk. So if the CFPB--and you have touched on
this a little bit, but if this bill was to pass, what kinds of
consumer protections would be there?
Mr. Fisher. I think everything that the CFPB has put in
place and that the other consumer protections would still be in
place. It is new regulations going forward. And they could
still have it enforced upon banks as long as they proved that
the law needs to apply to community banks and other financial
institutions as well.
Mr. Loudermilk. And I agree with my colleague who spoke
before me, and there are forces out there that do discriminate.
But I have also learned, especially in this modern era, that
the market is one of the strongest forces. And I am sure that
your board of directors would--they would like to be able to
make more loans to more people. Because what happens is, for
this young man that was not able to get the loan to buy his
car, he had to go to another agency to get the loan that
required or made him pay a whole lot higher interest.
So thank you, and I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from Kentucky, the
Chairman of the Monetary Policy Committee, Mr. Barr. Recognized
for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman. Thanks for the important
hearing. I appreciate the opportunity to look at these
important legislative solutions to over-regulation.
And I wanted to follow up with Mr. Fisher and continue the
discussion about HMDA data and the collection requirements that
the CFPB is proposing for small institutions like yours.
My understanding is that this rule more than doubles the
number of data fields that you are required to collect. Is that
correct?
Mr. Fisher. Twenty-three to 48 data fields.
Mr. Barr. So 25 additional data fields. You are already
collecting and submitting and reporting 23 data fields right
now. My understanding is that Dodd-Frank requires you to
collect and report more, but the CFPB even goes beyond that. Is
that fair?
Mr. Fisher. I believe that is the case.
Mr. Barr. And so the gentleman from Texas was making the
point that you don't study this, but, in fact, community banks
like yours, you more than study it, you live it each and every
day, collecting it and reporting the data.
And what many community banks in central and eastern
Kentucky tell me is that the additional collection burdens in
mortgage lending is actually forcing these institutions to exit
mortgage lending altogether.
And so my question to you or any other community banker in
America is, how does exiting mortgage lending benefit any
prospective borrower, including minority borrowers?
Mr. Fisher. I don't think reduced choices is good for the
consumer.
Mr. Barr. The point here is that excessive, overzealous
regulation reporting requirements doesn't help consumers.
Ultimately, what it has forced community banks to do is
actually get out of the business of mortgage lending. In fact,
some community bankers have pointed out to me that they refer
to the QM rule as ``quitting mortgages.''
If this is what regulation has come to, that is not helpful
to low-income borrowers. That is not helpful to minority
borrowers. That is not helpful in any way in getting rid of
discrimination. In fact, I would argue that Dodd-Frank, the
CFPB is actually forcing banks to disadvantage disadvantaged
borrowers because of the tremendous burden that is now hoisted
upon community financial institutions and nonbank lenders and
nondepository lenders.
If there is discrimination that is going on in this
country, it is discrimination that is forced by regulators,
because they are literally forcing lenders out of the business
of helping low-income borrowers in America.
Mr. Gleim, I wanted to follow up with you, and, of course,
was delighted to engage in this debate on preserving access to
manufactured housing, the legislation H.R. 1699, which I
introduced. And I will note, as we were talking about this
legislation with some of our colleagues on the other side of
the aisle, that there were 27 Democrats, including my good
friend Mr. Scott, who voted in favor of that on the House
floor. That legislation passed the House 256 to 163. That was
bipartisan legislation that really does get at this issue of
preserving access to manufactured housing. Your testimony
references that legislation.
During that debate, some opponents of the legislation
criticized the depth of the market. They cited the existence of
a, quote, ``monopoly'' in manufactured housing lending as the
need for these CFPB regulations.
I would like for you to respond to that, but as you do,
isn't it the regulations themselves that created less
competition? Isn't the fact that these regulations are a
disincentive for banks and credit unions to get in the business
of manufactured lending, isn't that what is causing less
competition and choice within manufactured housing lending?
Mr. Gleim. There is no question about that. Again, the
issue that we are unable to do small loans keeps a lot of
lenders from coming into this business. The other issue we have
is the definition of a mortgage loan originator, which impacts
that as well.
But, all of the regulations that are coming in and the way
that they are doing it is driving more and more lenders out of
manufactured housing.
Mr. Barr. My time has expired, but I would just ask the
question, how in the world is the CFPB protecting consumers
when consumers can't get a loan for a manufactured home that
allows them to build equity and have a monthly payment that is
less than a rental payment?
And I yield back.
Chairman Luetkemeyer. The gentleman yields back. His time
has expired.
With that, we go to the gentleman from Washington, Mr.
Heck. You are recognized for 5 minutes.
Mr. Heck. Thank you, Mr. Chairman.
Mr. Astrada, thanks for being here today. I always
appreciate the CRL because I think you are not only thoughtful
but you think about things a little bit differently, and Lord
knows that we could use some out-of-the-box thinking here and
comments here on occasion.
I wanted to ask you some questions about the seller finance
bill. Now, let me put my cards on the table. I like this bill.
I think, frankly, it is a measured approach, Mr. Astrada, to
what is a genuine problem that we ought to address. And I can't
understand why the underlying law was written the way it was.
So let's put it like this. Dodd-Frank includes lots of
provisions dealing with mortgages, and rightly so, because it
came on the heels of an unbelievable mortgage crisis, and we
all get that. And almost all of these mortgage provisions
include some carveouts for small operators. The qualified
mortgage rule has an exemption for small creditors. The HOEPA
rule has an exemption for small creditors. The mortgage
servicing rule has an exemption for small servicers. The
mortgage originator rule has an exemption for small mortgages
but only if they are an LLC.
So I am trying to think of what the compelling public
policy rationale would be for having a small originator
exemption for LLCs and not natural persons, a disparity which
is corrected in the bill that I happen to like. Can you think
of a compelling public policy reason for treating those two
differently and not providing a small originator carveout?
Mr. Astrada. I just want to make sure I am answering your
question specifically. So what you are asking is if there is a
public policy reason for not extending the exemption to LLCs?
Mr. Heck. No. There is a small originator exemption--
Mr. Astrada. Yes.
Mr. Heck. --For LLCs, but it is not extended to natural
persons. And I am asking, is there a compelling public policy
reason for LLCs to have this small carveout but not natural
persons?
Mr. Astrada. I think that gets outside of our concern with
the bill, but I am more than happy to give you my--
Mr. Heck. So you don't have a problem with extending it to
natural persons.
Mr. Astrada. It is--I am--
Mr. Heck. Any more than you might LLCs? Are you saying you
don't think there should be a small carveout for LLCs?
Mr. Astrada. No. What I am saying is I think our concerns,
or at least from CRL's concern, with the bill is more in the
aggregate of what the bill puts out. So it is not just the
extension to real persons or LLCs; it is also the striking of
the fully amortized loans that would also follow that
exemption. It is also the increase of the property from 3 with
a 12-month period to 5.
So it is really just those factors taken together are our
concerns. That is ripe for potential problems not only for the
borrowers themselves but also for the risks that that causes,
especially for individuals who rely on manufactured housing.
Mr. Heck. To be clear, do you or do you not have a problem
with having a small originator carveout?
Mr. Astrada. If you want a yes-or-no answer, I will give
you a whole bunch of qualifiers, and then I will give it to
you. Just that question outside of the rest of the bill--
Mr. Heck. Just that question outside the rest of the bill.
Mr. Astrada. I do not have a problem.
Mr. Heck. And taking the next step, do you have a problem
with that carveout being extended to natural persons in
addition to LLCs outside the rest of the issues that you have
alluded to within this bill?
Mr. Astrada. I don't have a problem with it, no.
Mr. Heck. Good. I take that as a ringing endorsement of
that part of this legislation.
Mr. Astrada. I--
Mr. Heck. And I thank you for it.
Mr. Astrada. Well--
Mr. Heck. That said--
Mr. Astrada. I will withdraw that endorsement--
Mr. Heck. Reclaiming my time, to quote the Ranking Member.
Just to remind you, I really appreciate when your
organization is here. I genuinely do.
I don't know that I have enough time left to ask this
question, but I did want to ask you about why you are concerned
with respect to manufactured housing and the provisions of this
bill. Because I find that, in that regard, not an issue that
you alluded to earlier, that there are actually protections
included, not only in the underlying law, but also some
additional protections that are included within our proposed
legislation.
With that, my time is up. And I certainly appreciate it
every time CRL is here, and I genuinely mean that.
I yield back, Mr. Chairman.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from Michigan, Mr. Trott.
You are recognized for 5 minutes.
Mr. Trott. Thank you, Mr. Chairman.
I want to thank the panel for being here.
I also want to thank Mr. Shulman and my friend from
Maryland, Mr. Delaney, for offering H.R. 2683. It is a good,
commonsense solution to fix a problem affecting our veterans,
and I appreciate your bringing it forward. And I think it will
pass with strong, bipartisan support. And if you have other
suggestions on easy fixes we can do to problems that we are
creating here in Washington for our veterans, we would all love
to hear about them.
Mr. Shulman. Thank you, Congressman.
Mr. Trott. Mr. Fisher, I would want to talk about something
that my friend from New York, Mrs. Maloney brought up. She
asked a rhetorical question. I assume it was rhetorical. She
said, ``What does a bank size have to do with whether a
consumer should be protected, and shouldn't every consumer
deserve protection?''
And my response--and she is not here, but my response to
that question is this chart. This is the regulatory scheme
affecting banks. And this is the consequence of that.
So my question, I would rephrase it a little differently.
Shouldn't every consumer have the opportunity to have a bank
nearby to give them a home loan or a small-business loan, or
should credit just be limited to those who live in big cities
or those who are well-healed or well-connected?
So my question to you, sir, is, if some of these bills that
we are considering today are signed into law, what is going to
happen to your bank back in Spencer, New York? What are you
going to do for your customers?
As an aside, sitting here, listening to you today, I
thought maybe you should consider a career in politics. You
were so diplomatic and patient in response to Mr. Green's
question, where he suggested that after five generations of
running a community bank you know nothing about discrimination.
I would have been a little more confrontational in my response
and said, ``I have been serving our community for five
generations, and I know a whole lot more about discrimination
and its consequences than a bunch of bureaucrats crunching
numbers in Washington.''
But back to my question, what is it going to mean for your
community back in Spencer, New York?
Mr. Fisher. I think relieving regulatory burden, if we
could get some relief from this huge list that you have up on
the wall there, I think it would allow me to focus more on
serving the customers, getting loans out into the community,
and helping revive the upstate New York community.
Congresswoman Tenney has left the room, but I thank her for
some of her efforts to introduce some legislation. And just the
relief--upstate New York, where I live, is still fairly
economically depressed. We have not had the recovery that the
rest of the Nation has had since the Great Recession. So it
would allow me to really focus my efforts and focus externally
on the community and our customers and in doing what is right
for the community and putting loans back out there.
Mr. Trott. Think you would be able to eliminate a job in
compliance potentially?
Mr. Fisher. I doubt that I will be able to eliminate a job
in compliance, but I may be able to redirect those forces
elsewhere more in line with a customer-facing--
Mr. Trott. Now, Mr. Astrada, in his testimony, would have
us believe that what is going to ensue if some of these bills
are enacted is fair lending violations and discrimination and
abuse and instability.
Is that a likely scenario for your community bank? Are you
going to go back and tell your loan officers, ``The Federal
Government is off our back now, we can start discriminating
against all those folks that we never liked''? Is that what is
going to happen?
Mr. Fisher. No. And I think even the rollback, we would
still be subject to the HMDA requirements from 1975, so we
would still be reporting the 23 data points. Obviously, as a
community bank, we are doing what is right for our customers
and the community. And it is all about being there for the
customer. And if we tarnish our reputation, it is hard to
recover that in a community of less than 5,000 people.
Mr. Trott. So let's talk about the data points. Mr. Gleim
and Mr. Fisher, either of you can respond to this.
So I was recently visiting an organization in my district,
and they are very actively involved in the Head Start program.
And they indicated to me that the Federal Government has 3,000
different things they measure with respect to how the Head
Start program is administered, and they have to provide so much
data, it is just overwhelming to them. I can't imagine what you
would measure with respect to Head Start and kids and 3,000
data points.
But you mentioned 100 data points. So do you have an
example--and if you don't, it is fine. Either of you or anyone
can chime in. But do you have an example of just a ridiculous
data point that you have to provide that just provides no
possible utility whatsoever?
Mr. Gleim. I think it is a matter--for instance, one of
those data points that the customer doesn't know that we are
reporting is the fact that they are getting a manufactured
home. It is a little hard for me to understand the
discrimination side of that.
I am not saying, do away with HMDA. That is not the
intention--because, as everyone knows, there have been issues
along those lines. But as we go through those points, as we go
through everything from numbers of children to the type of
home, to the color of the home, to the location of the home,
things along those lines, it is a matter of basically how many
points are necessary.
Mr. Trott. Great.
Thank you for your time. My time has expired, but the idea
of leaving the bureaucrats to determine the size of
institutions that should be exempted is a bad idea. And that
was my last question. I will yield back, though. Thank you.
Chairman Luetkemeyer. The gentleman yields back. His time
has expired.
We go to the gentleman from Maryland. Mr. Delaney is
recognized for 5 minutes.
Mr. Delaney. Thank you, Mr. Chairman.
And I want to thank all of our witnesses for being with us
here this afternoon.
I want to direct my questions to Mr. Shuman, related to a
particular piece of legislation. But before I do that, sir, I
want to thank you for your service to our country and your
continued service to so many men and women who have served our
country who need someone to be looking out for them. So I thank
you for that.
Mr. Shuman. Thank you, Congressman.
Mr. Delaney. My question relates to the bill I cosponsored
with my good friend Mr. Hultgren, H.R. 2683, the Protecting
Veterans Credit Act of 2017, which I know you made some very
positive comments about in your introductory remarks, which I
appreciate.
This bill has also been endorsed, obviously, by The
American Legion, but by the VFW, the Military Officers
Association of America, the Wounded Warriors Project, the
Paralyzed Veterans of America Association, the Association of
the United States Navy, the National Consumer Law Center, and
the Consumer Federation of America.
Mr. Chairman, I would like to ask for unanimous consent to
submit letters to the record for these groups that are
supporting the bill.
Chairman Luetkemeyer. With no objection.
Mr. Delaney. Thank you.
And the bill does, as you know, sir, two things. The first
thing it does is it freezes the ability of negative credit to
be reported to credit agencies related to medical care that is
provided to a veteran outside of the VA system, whether through
the Choice Program or some other provider. And so to the
extent, because of bureaucratic delays that we know have
existed in the system related to making these payments once the
veterans are out of network, what the bill does is effectively
says that if bad debt is incurred because these bills haven't
been paid, then that debt cannot be reported for a year to the
credit agencies, so as not to impair the credit of our
veterans. That is the first thing it does.
And the second thing it does is it makes it much easier for
our veterans to actually adjudicate credit impairments that are
actually put on their credit, so to the extent these even
happen after that first year, they can be dealt with.
And we have two articles that, Mr. Chairman, I would also
like to ask for unanimous consent to submit to the record, the
first from CBS, which was titled ``World War II Vet Mistakenly
Billed $4,000 for Medical Care, Revealing Problems at the VA,''
and this resulted in a credit impairment, and from the Military
Times, ``Veterans Choice Program Hurting Some Vets' Credit
Scores.''
Chairman Luetkemeyer. Without objection.
Mr. Delaney. Thank you, sir.
Mr. Shuman, can you give me a sense as to the scale of this
problem, in your judgment, and how you think this bill is a
specific prescription to the problems that our servicemen and
women are encountering as they go out of network?
The Choice Program is a really good idea, but the
implementation of it has been spotty, particularly as it
relates to working through the bureaucracy of getting these
bills paid. Can you give us a sense as to how prevalent this
situation is?
Mr. Shuman. Thank you for the question. And I also thank
you for introducing the bill. I think it is a great step in the
right direction to protect veterans.
The simple reality is that VA no longer shares the actual
real number with the VSOs anymore, so I cannot give you an
exact number. I can tell you, when they set up a phone number
to call, thousands--I think somewhere roughly in the estimate
of 74,000 calls came in in the course of 14 months.
That is 74,000 veterans who have been impacted to an extent
where they ask for help. And I think if anybody knows, veterans
hardly ever ask for help. So if 74,000 called, I could only
imagine the number that, like Mr. Frankie Adams, whose story I
already told, didn't call.
Mr. Delaney. Right. They just deal with it.
Mr. Shuman. Right.
Mr. Delaney. Yes.
Mr. Shuman. So this bill is a step in the right direction,
particularly as there are seven different community care bills
currently in process of trying to figure out and streamline the
Choice Program. Particularly in the midst of a new bureaucratic
process, this going into effect could help protect them during
that transition.
Mr. Delaney. And we all know what happens, is once a bad
debt is reported and it is reported in a credit reporting
agency and the debt is sold to a collection agency, oftentimes
our veterans are harassed for the payment of these bills, which
are, in fact, not their obligations.
Mr. Shuman. That is correct, sir.
Mr. Delaney. And I assume you have heard of specific
examples of that occurring.
Mr. Shuman. Absolutely. The American Legion, we travel the
country and audit about 15 VA medical centers every year. And
the night before we do that, we host a townhall. And a good
portion of our townhall visits, which takes place in every one
of your Congressional districts, our members tell us of the
massive frustration from this issue.
Mr. Delaney. Right.
And just a quick yes-or-no answer because we are running
out of time: Do you think this bill goes a long way to solving
the problem?
Mr. Shuman. Yes, sir.
Mr. Delaney. Thank you, sir.
I yield back.
Chairman Luetkemeyer. The gentleman yields back. And we
thank his participation in our committee this afternoon.
With that, we go to the gentlelady from Utah, Mrs. Love.
Recognized for 5 minutes.
Mrs. Love. Thank you.
And I know some of these questions have been asked, but I
just need to make sure I get this information. I wanted to talk
about the CFPB and Representative Emmer's bill, H.R. 4648.
I would like to ask a few questions just very quickly about
the Home Mortgage Disclosure Act and Reg C. And I have been
really concerned for some time about the CFPB's HMDA rule added
new mortgage data points that needed to be collected, reported,
including borrower's age, ethnicity, race, sex, credit score,
among others. We even talked about over 100 data points.
How do you expect the new data to be used by the CFPB and
others interpreting the data to scrutinize the mortgage lending
industry in community banks, Mr. Fisher?
Mr. Fisher. They are already utilizing the data that we are
currently submitting to look for discrimination and things like
that. So I am not sure what the enhanced data points do,
because a lot of the data points are already out there. I think
that the current data points already allow them to find
discrimination and things like that.
Mrs. Love. Mr. Gleim, you look like you wanted to chime in.
Mr. Gleim. Yes. I feel the same way. I think the
information is out there. And we really don't know what they
expect to do with the expanded information that they have and
exactly how it will be used, which is the concern again about
privacy, identity theft. There is another group now that is
going to have all of this additional information.
And as I said earlier, the customer doesn't necessarily
realize that they are giving as much information as they think
they are.
Mrs. Love. Yes. OK.
And last question. Do you believe that the HMDA data, both
new and old, is sufficiently accurate to form a basis of
enforcement actions such as purported fair lending violations?
Mr. Gleim. I think it is in some cases. But keep in mind,
the customer doesn't have to fill out this information, and if
he doesn't, the people that are taking the application will
make a best guess as to what they are doing.
Mrs. Love. So best guess doesn't actually equal accurate.
Mr. Gleim. For such things as ethnicity, as well as just a
number of the questions there, because we still are required to
report that information if it is observed.
Mrs. Love. OK.
Mr. Fisher. And to complicate that, some applications are
done via the phone, not in person. So you may be making a best
guess based upon last name, some things like that. So if the
person chooses not to fill it out, the banker has to make a
best guess.
Mrs. Love. OK.
I am going to yield the remainder of my time to Congressman
Pearce.
Mr. Pearce. I thank the gentlelady for yielding.
Mr. Chairman, I would ask unanimous consent to put a letter
in from the Coalition to Save Seller Financing, titled ``CFPB
Can Change Seller Financing Rules.''
Chairman Luetkemeyer. Without objection.
Mr. Pearce. Mr. Gleim, I have a question for you.
Mr. Astrada, I am going to come back to you and see if we
can't find middle ground on this whole balloon note. I read
your testimony here.
And so 50 percent of the houses in the Second District of
New Mexico that I represent are manufactured housing, so it is
probably as big an issue to me as anyone in the country. And
seller financing, Mr. Gleim, if we eliminate the seller
financing, what options do people have at that point?
Mr. Gleim. Eliminating the seller financing becomes a major
issue as far as being able for customers to, obviously, obtain
that home, to be able to get them those homes, but it also
gives them very few, if any, alternatives outside of that.
Again, it is almost impossible to basically provide good
affordable housing for a cost less than a manufactured housing.
So if you are looking primarily at seller financing, as far
as that being the case, it makes--there is one less opportunity
for this customer to receive that financing.
Mr. Pearce. Sure. And the movement from 3 to 5, is that
going to upset the market in any way? Because what happens as
people buy, they buy--
Mr. Gleim. We don't see that as upsetting the market,
because, it is in the interest of that community owner to be
able to add those additional, those two homes, and is he
really, or is she, going to be making a bad loan? The only way
they make money off of this is the customer continues to pay.
Again, the idea of making a bad loan just to get somebody else
into that home just doesn't make an awful lot of sense.
Mr. Pearce. OK.
Mr. Astrada, I will have some time coming here in just a
minute. We will finish, but I really want to engage in a little
bit of a discussion on those things.
I yield back, Mr. Chairman.
Chairman Luetkemeyer. The gentlelady's time has expired.
With that, we go to the gentleman from Illinois. Mr.
Hultgren is recognized for 5 minutes.
Mr. Hultgren. Thank you, Chairman Luetkemeyer. And I want
to thank the subcommittee for allowing me to join with you
today and to be a part of it. Thank you so much.
And I want to thank each of our witnesses for your time and
expertise and willingness to help us to navigate through this,
so thank you so much.
I want to focus on, first, the Community Bank Reporting
Relief Act. Mr. Fisher, if I can address maybe a couple
questions to you first.
Mr. Fisher. Sure.
Mr. Hultgren. How often are there significant quarter-to-
quarter variations in an individual community bank's call
report data? In other words, do Federal banking regulators need
all this data every single quarter?
Mr. Fisher. I don't believe they do. If I look at my
balance sheet from a quarter-to-quarter basis, we are very
consistent. There are no major discrepancies. And if there were
a major discrepancy, the regulator would pick up the phone and
call me. That is the relationship we have. And there are not
that many banks that they couldn't do something like that.
Mr. Hultgren. Right.
In the event of market distress or other extenuating
circumstances that may atypically affect the financial
stability of a community bank like you are talking about, are
Federal banking regulators able to communicate with leadership
of your bank to get that information they need? You mentioned
they do. Do they actually take that--
Mr. Fisher. They do that today, even in a nonstress time.
Mr. Hultgren. And how does that go? Is that usually where
you are looking to be helpful or you are open to giving the
information that they are asking for?
Mr. Fisher. Yes. They are doing some--a lot of it is
offsite testing, looking at some of our numbers. And so, if
they have a question, they don't hesitate to pick up the phone
and call.
Mr. Hultgren. OK.
As you know, under the Economic Growth and Regulatory
Paperwork Reduction Act, Federal banking regulators recently
made some changes to the call report requirements for
institutions with less than a billion dollars in assets.
I wonder if you could please explain why this was not
meaningful regulatory relief. And do you believe notice-and-
comment rulemaking would require Federal banking regulators to
be more responsive to the reporting burden concerns raised by
community banks?
Mr. Fisher. Many of the sections that were eliminated
through the EGRPRA process, they were not applicable to my bank
or most other community banks in the country. They had sections
on derivatives and other things that are just not in our
business model. So they eliminated those sections, so instead
of spending 40 hours a quarter preparing the call report, maybe
we spend 39 on the short form.
Mr. Hultgren. Yes. OK.
The Community Bank Reporting Relief Act limits the
regulatory relief to institutions with $5 billion in assets.
Can you please explain why the current reporting burden under
the call report is most acute for the smallest financial
institutions? And do you believe this asset-sized threshold
covers the community banks that do have the economies of scale
to efficiently cope with the regulatory burden?
Mr. Fisher. Five billion would be great. I think if you
look at most community banks that are $5 billion and under, we
don't have the processes as far as--all the systems don't speak
to each other, so we have a lot of manual processes. We have to
pull multiple reports from different systems, manipulate the
data to fit the request of the Government to fit into the call
report data. We have to manually reenter that.
And so I think $5 billion is a good threshold, although we
would prefer $10 billion. But, $5 billion would be great.
Mr. Hultgren. OK. Thank you.
I am going to shift over. I just have a little over a
minute left. Mr. Shuman, I echo my colleagues in thanking you
for your service. Twenty years, is that what you had said, in
the Army?
Mr. Shuman. No, sir, I served 4 years. Mr. Adams' story,
which I told, was 20 years.
Mr. Hultgren. Oh, there it is. Sorry about that. I misheard
that. But thank you. I was going to say, man, how did you--you
must have started when you were 10.
Mr. Shuman. I look really good.
Mr. Hultgren. But, anyhow, thank you for your service. I
appreciate it. And thank you for your continued service with
The American Legion.
I want to just talk a little bit about the Protecting
Veteran Credit Act of 2017. Veterans' Affairs Committees in
both the House and Senate are considering proposals to
consolidate the different community care programs. In the long
run, the expectation is that this will yield better care and
service for our veterans and improve the ability for the VA to
pay its bills in a timely manner.
As these changes are implemented, do you have any concerns
in the short run regarding bill processes? And how important is
it for legislation addressing consumer credit concerns, such as
H.R. 2683, to move in tandem with any major reforms to the VA's
community care programs? Would you recommend the Financial
Services Committee work closely with the VA Committee on this
issue?
Mr. Shuman. Thank you for the question, Congressman, and
thank you for your support.
I will also say that the VA does not have a 21st-century
style of processing claims. They are still doing it by paper
and hand. Until we have a process that is modernized, it is
going to continue to be slow.
That said, yes, the Veterans' Affairs Committees, in
addition to other of your colleagues, have proposed bills to
streamline the nine community care programs. However, in the
interim, in the massive bureaucratic process, that would be
streamlining those programs. In the interim, veterans are still
going to be impacted in their credit.
So moving this piece of legislation prior to those bills,
there could certainly be a case that would be made that would
help veterans in that situation.
Mr. Hultgren. Great.
My time has expired. Thank you again, all, for being here.
I do want to also give a shout-out to colleague from
Maryland, Congressman Delaney, for his hard work on this
legislation. I am proud to be working with him on this. Again,
anything we can do for our veterans is so important.
But thank you all.
And thank you, Chairman. I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
And we do want to thank the gentleman from Illinois and the
gentleman from New Mexico for their participation in the
hearing today. They are not normal members of our subcommittee,
but they are members of the full committee, and we certainly
welcome their addition to this.
With that, we recognize the gentleman from New Mexico, Mr.
Pearce, for 5 minutes.
Mr. Pearce. Thank you, Mr. Chairman.
Mr. Astrada, it is my district that we are dealing with.
And all we are just trying to do is find a way for people who
want to get in out of the cold to finance manufactured houses.
And so your testimony is very articulate in opposing
balloon notes, but that is one of the more critical things. And
the banks explain to me that we don't change the amortization,
we just have a balloon note every 5 years because you can tear
up a mobile home in a matter of days. And so we just want to
look at it. We want to go ahead and look at it. We don't jack
them when we see it.
And I recognize your objections, and I don't really have a
problem with trying to stop what you are doing. But on page 3,
the top paragraph, we are trying to address what it is that you
were objecting to and other people object to, the people who
are just predatory. But then when CFPB implemented the balloon
note restriction, suddenly the banks just quit loaning because
they couldn't go and inspect.
And so we have to find the sweet spot that gives the
protection you are looking for without the punishment on the
people that are trying to solve a problem and get out of the
cold.
So address that one. Because you mentioned that if they
don't fully amortize--and I am sensitive to that, and that is
the reason we put this paragraph in here that says they can't
go up, the amount of finance can't be increasing during the
term of the note under this bill. Is that offering any
protection at all to what you are concerned about on the
amortization question?
Mr. Astrada. And I did read that and do appreciate the
nuances of the additional consumer protections. But I think on
the amortization issue specifically, although it can't
increase--and this is something that probably our coalition
partners will be much more of experts than I am in the
secondary market--from my research and my discussions is that
the refi or resale ability of manufactured housing is very
different than nonmanufactured housing.
In worst-case scenarios, a borrower who gets at the end of
that loan either has to take a loss for selling below market
value or take--
Mr. Pearce. Yes, that is a balloon note that is punitive.
Most balloon notes, they roll it--they do it for 5 years and
they keep a 30-year amortization going. So all they are doing
is doing the 30 years and they roll it, then they reset it. And
I agree with you on those that get you to the end of the deal
and the only thing that you can do is dump it. I am sensitive
to that.
Also, I think you expressed concern about the people who
manufacture them. And then the Ranking Member and I had the
discussion on the floor. I don't want that either. So if you
construct the manufactured house, then you are not going to
come under the terms of this bill.
And so we are just--we are trying to find where we can get
financing from traditional--if we get the balloon notes back
in, I think that the major institutions will get back in,
except anything--again, Dodd-Frank said, if you are going to
hold it in portfolio, we consider that to be a prejudicial loan
too. And secondary markets typically don't want manufactured
housing.
We are just trying to solve these problems. So talk a
little bit more from your perspective. And I guess let's see,
because I really am--I want the consumer protections you are
talking about, but we have to have a market somewhere.
And CFPB was so punitive, there were only three, and people
were getting out of the market because they were afraid that
they were going to get tagged in even though they were
technically within the law. It was just too restrictive. And so
everybody quit, and it was a big penalty in my district.
So talk a little bit about that.
Mr. Astrada. And I understand and appreciate those
concerns. In talking with our coalition members, I think just
to the extent of the issues raised in my testimony is where
CRL's main concern is. But we have worked with our coalition
partners, who have done a much more line-by-line, thorough edit
of or redlining of the bill and what consumer protections would
counterbalance some of the issues that we have expressed.
So I won't pretend that I can solve them now in the next 25
seconds, but I will commit--
Mr. Pearce. Yes. If you will be in touch with our staff,
then--we really do want the protections, but we want the market
there too. And that would be very functional for us. And so my
commitment to you is that we will get in touch with you and we
will follow through on this, because I do want to hit that
sweet spot.
I appreciate the things you are commenting on, and we are
trying to stop those. But we have to have a market somewhere,
and balloon notes are key for the lending institutions. But
then the seller financing people, they buy six or seven of
these during their lifetime, and then they sell one at a time,
and that is their retirement income.
By the way, the banks said that the best-performing loans
in all their books are always manufactured housing. People
there are serious about staying in out of the cold, and this is
one of the few shots they have had. So let's work together on
it.
Mr. Chairman, I have gone a little bit over, but, I
appreciate your indulgence.
And thank you very much, Mr. Astrada.
I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
Mr. Astrada. Could I have 15 seconds to just--I will
verbally commit to working with your office from CRL and to
bring our coalition partners alongside us. Thank you.
Chairman Luetkemeyer. Both the gentlemen's time has
expired.
With that, we would like to thank the witnesses for being
here today. You have helped us discuss very thoroughly these
five different bills that are before the committee. I
appreciate your expertise, your time.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
With that, this hearing is adjourned.
[Whereupon, at 4 p.m., the subcommittee was adjourned.]
A P P E N D I X
January 9, 2018
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