Related Document(s):
	Statement

Below is Mr. Kittle’s oral testimony, as prepared for delivery.

“The bill before us, H.R. 5679, seeks to specify and require certain procedures to reduce the level of foreclosures. All of us are focused on the same goal: keeping people in their homes.  Such a goal serves the interests not only of borrowers, but also of our members and the communities where they do business.  That is why MBA is a founding member of the HOPE NOW Alliance, and as of the end of February we have helped nearly 1.2 million troubled borrowers to establish affordable mortgage payments. 

“Mortgage servicers have done this through informal forbearance, repayment plans and through loan modifications – all forms of loss mitigation.  As we seek to do more to help ease the crisis, MBA is eager to partner with Congress to finish work on FHA modernization, GSE oversight reform, housing tax incentives and expanding the use of tax-advantaged mortgage revenue bonds to include refinancing. 

“When Congress completes work on these important initiatives, it should avoid taking action that would inadvertently increase interest rates or borrowing costs, constrain the availability of legitimate offers of credit, or that would encourage borrowers not to make mortgage payments.

“While considerable effort is being made by lenders, borrowers and public officials to avoid foreclosures, we all recognize that there will be cases where this goal cannot be achieved.  Ultimately, the mortgage contract rests on two pillars: the promise of the borrower to pay and the ability of the lender to rely, as a last resort, on the value of the house that is pledged as security for the loan. 

“It is the pledging of the house as security that makes mortgage credit considerably less expensive
than unsecured consumer debt.  The rate of interest on mortgage loans is significantly lower than the rate on unsecured consumer loans.  If borrowers are deprived by legislation of the ability to reliably pledge their homes as security for mortgage loans, it is probable that the rates they pay for mortgage credit will approach the rates paid for unsecured credit.

“In evaluating this legislation, we believe that Congress should ensure it:  Enhances borrowers’ chances to remain in their homes, does not deprive investors of the value of their investments and preserves for all consumers the benefits of reasonably priced mortgage credit by maintaining the essential elements of the mortgage contract.

“Our review of H.R. 5679 revealed that there are a number of elements of the bill that fail one or more of these criteria. 

“First, the bill would authorize borrowers’ counsel to use “qualified written requests” to block foreclosure indefinitely.

“Second, the bill’s overly prescriptive loss mitigation provisions could increase the cost of mortgage credit to future borrowers.

“Third, mandating debt-to-income ratios on first loans would require holders of first liens to subordinate their economic interests to the interests of junior lien holders and unsecured creditors, which may be the source of the borrower’s inability to stay current on the mortgage payments in the first place.

“Fourth, prescribed and detailed mitigation procedures would deprive lenders of the flexibility required  to negotiate effectively with borrowers to achieve a manageable debt payment schedule.

“And, finally, the bill would impose expensive and time-consuming paperwork requirements on lenders without any corresponding benefit to borrowers.

“Though we are committed to working with you to improve H.R. 5679, the harmful provisions in this bill currently outweigh its potential benefits. “

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.