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tv   Home Loan Practices Veterans  CSPAN  January 12, 2018 5:11am-6:31am EST

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>> [inaudible conversations] welcome to today's subcommittee on economic opportunity and the oversight hearing entitled home loan churning practices and how veteran homebuyers are being affected and how taxpayers can be affected. this is the second hearing was held in congress related to the loan guarantee program and the benefits provided to the american servicemembers and veterans on account of the program. as with the department of veterans affairs discusses in the testimony from the guarantee was over 23 million loans in excess of $2 trillion since the
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1940s that represents millions of veterans come servicemembers and their families who have may not have otherwise been able to achieve the american dream and while this program is one of the more well-run programs at the va and i have some thoughts about why it is. the lenders are involved and there are more people involved in administering it in the private sector. potentially unscrupulous lenders that have potential for the veteran homebuyers but for the mortgage industry and the taxpayer who guarantee programs like this that are ultimately on the hook. we have seen reports of what may be the practices that seem to be in some cases misleading
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veterans to refinance their homes in the idea they will have lower interest rates or be able to skip a mortgage payment or take the tasks out of their home that will save them money down the road and as our dads taught us if something sounds too good to be true, often times it is too good to be true. so, we have heard stories of individual veterans receiving dozens of solicitations from certain lenders in the immediately after closing on their homes leaving some of them to believe they would feel less cash each month if they just refinance their homes. there's other products like that but the veteran can end up paying much more than they ultimately can't afford or even remove all their equity in the home such that they end up upside down on their mortgage.
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they don't seem to have the best interest of the better in a minute. they can have a negative impact on financial institutions and the investors that support them and then most disconcerting to me is appreciating the value of guaranteed loans and the integrity of the program and potentially exposing taxpayers to greater risk. i understand many experience instances where refinancing in the interest rate reduction refinancing loan is necessary and appropriate for their own on financials of the circumstances would be unfair and deceptive practices and number two, the products are being offered consistent with safe and sound practices to protect the integrity of the home loan program.
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we are protecting the consumer and the taxpayer who by the way he hahas agreed to make this investment. thank you for helping to organize this to the minority staff for ensuring we are prepared. to enhance some of the challenges that face the program right now and specifically the veteran's for whom it is set up and administered and intended to benefit. as we've often done in the subcommittee that distinguishes it from the other working congress i would love to see us perhaps by the end of the
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meeting suggest the common sense solutions to va can either adopt administratively or that we will work on as literally an act of congress if necessary. i think that it's something we've been able to do in the meetings together with the participation of the members input and the wisdom that we gave from the panel. i want to hear what the experts have to say and then hopefully we can get on the same page about how to correct this in a way that is not burdensome and onerous that protects the veterans from fraud or duplicity or decisions that they may not be making in an informed way. so looking forward to the conversation and grateful that you brought us all together on this important issue and with that i would yield back. >> i share your sentiments and
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the desired outcome to find out where the problem lies and the tools the stakeholders need to solve the problem and then move forward with a better environment altogether for the veterans and taxpayers. let's make introductions of those that are here to testify with us. we have mr. geoffrey london director of the loan guarantee service and accompanied by mr. deputy director john bell of the loan guaranty service. the executive vice president chief operating officer at the government nationaof thegovernme association better known as jimmy may. thank you for being here. and testifying on behalf of the mortgage bankers association and important stakeholder no doubt in this discussion and finally, brock cooper children's accounts
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deleted -- general account and forward. good morning chairman, ranking member and other members of the subcommittee thank you for the opportunity to appear before you today to discuss the department of veterans affairs home loan guarantee program at the impact it can have on the veteran borrowers. making sure they're financed loans provides them the benefit and not future financial harm is a very important matter. when it ends in a foreclosure is also very important to ensure that the loans facilitate healthy mortgage-backed securities and continue the investment in the housing market and the assessment of the situation with the activities to assist veterans we've undertaken and in collaboration with our colleagues thus far in a
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sensible and tactful approach we've crafted to ensure program success. the vast majority of the refinance loans are providing veterans with benefits. for example, one living on social security income and va disability was able to reduce the interest rate and change terms for the $500 a month and to save over $400 a month they also show positive trends not only do they obtain two or four in a given fiscal year but approximately 80% year-over-year to a number of lenders engaging in a notable refinancing also declined from approximately a dozen in fy 16 down to only a
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handful in fiscal year 2017. so yes, there have been instances not using this streamlined program for its intended purpose of the we believe that those instances are not indicative of the systematic problem to be a steadily had the value that reverberates to the investors and of course it is one better in too many so we are compelled to act and make an impactful change. our programs success is built on a long-standing history of policy actions that are appropriate for the given situation. we take measured approaches to the interventions in complex situations. the regulation has been drafted anin our overarching concern in developing the rule is to ensure the veteran borrowers receive the tangible benefit. in addition to analyzing the requirements appropriate for streamlined refinancing we examined the long-term cost they
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could face in obtaining them and meanwhile, we also collaborated with our colleagues in the consumer financed protection bureau to employ to predict reactions that could be quickly serving veterans. the team has focused a great amount of time and energy working with the joint task force that has resulted in the memorandum aimed at the frequency of the refinancing loans seriously collaborated on the order that provide veterans with important consumer and financial information. and the members discuss program policy and data related to the origination performance of the guaranteed loans. at the draft regulation makes its way to publication for comment return $to examining the
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impact in the recent market conditions on other segments of the business more particularly to refinancing program. we anticipate that in response to the market conditions lenders will shift their business models to originate the loans on the more refinanced loans as a result we will be keeping a close eye on the trend i trendse program to ensure that they are being underwritten to the established standards and the loans provided to the intended benefits for the veteran borrowers. members, despite the concern others may have expressed about what we followed him to the speed at which we traveled i'm confident that the road we have engineered its ace in the one and that it will have a net positive impact for the veterans, lenders and the broad origination. thank you for your unwavering commitment to serve the nation's
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veteran service members and they look forward to entertaining any questions that you may have. >> thank you, mr. london. and now will you yield-it's for your introductory statement? hi in the executive vice president and chief operating officer of the mortgage association. thank you for inviting me to testify on this issue. for background, a federal agency chartered by congress in 1968 responsible for providing liquidity to the market for mortgages and the veterans affairs federal housing administration and usda housing programs. we do this by applying the full faith and credit guaranteed to those that provide the delivery in the security. qualifying loans are those guaranteed.
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bigger then pulled into the mortgage-backed securities. the guarantee is globally recognized and trusted. the strong value of the grand leads to investment in the housing market from the asset managers, pension funds and central bank's across the globe all of which makes lending to low income first-time role in the veteran it would be difficult to oversee the consequences for the housing market for the usda did not successfully police the programs. global capitalist onto the market in part because of the strength of the united states and its creditworthiness. the program is abused or take advantage of committed capital can and will find other investment vehicles. that would drive up interest rates and make it available for more americans. it is imperative that we all worked together those of us here on the panel.
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we believe we are seeing abusive practices mainly by the refinancing of borrowers multiple times without significant economic benefit. we believe and d and the data ss that the practices that result ipractice is the resultof a rele of lenders but importantly it has become endemic enough in the markets that it threatens the health of this activity and action to curb the behavior is imperative. abusive lending practices in the market are alarming on so many levels. first as i mentioned before if the behavior persists we run the risk of losing the capital needed to fund the programs. second, to watch behavior that is borderline predatory return to the nation is terrifying. much of the behavior is reminiscent of the practice used by many in the industry prior to the financial crisis. and finally, the fact the behavior was targeted at the veterans should be sickening to all of us.
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the best way to stop the behavior is put in place stringent rules and say that it will not be tolerated. we've already announced we are putting in place the following requirements. no one can be refinanced and delivered into the multi-issue for security within six months of the first payment due date of the original loan. no one that is more than 150 basis points or 1.5 percentage points a as with the divine will be eligible for delivery into the multi-issuer security and number three, lenders that are demonstrably abusing the program will be put on notice. ultimately, some will no longer enjoy the benefits of the flagship security and instead will be forced into what we call custom pools. this is a powerful tool we can and will use. issuers that produced the pools of loans have performed different than the average each find their own investors. this action will help prevent some from filtering.
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i believe 2018 will be a critical year for this issue if we can't get a handle on the behavior a abusive lending may e create an environment where veterans are praying for aggressive lending. i would like to take a moment to also space for the veterans that you have the right to make unwanted calls or solicitations to stop. refinancing the loan multiple times likely has the consequence that you may not be aware of and if you see the terms on a loan that appear too good to be true, they probably are. veterans should feel free to contact me or any other official at any time they feel they are being harmed. thank you once again for bringing attention to this issue and we are here to work with all of you.
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thank you and i'm happy to answer any questions you have. to testify on behalf of the mortgage bankers association i am president of colonial savings a privately held family chartered in fort worth texas. for over 65 years we've been originating loans and the founder sold the opportunity to serve the veterans returning from world war ii. roughly 2% of the volume is to veterans and we service over 6,000 loans for borrowers. i'm also the chairman this year of the mba and i previously served as a board member of the texas mda and member of the community bank advisory council for the consumer financial protection bureau. i'd like to begin by applying
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the committee for their efforts to better understand problematic practices with respect to certain service members and veterans of the u.s. military. the program plays an important role in increasing the appeal of the party of the credit for service members and surviving spouses by guaranteeing a portion of the loan balance they enable them to have more favorable terms such as no required down payment. there's a full underwriting process and the interest rate reduction refinancing loan allows for the streamlined process that is often faster and entails lower cost. they lower the interest rate, mortgage and in doing so the barber incurs fees which are paid by the borrower and origination or ruled into the principal balancit to theprinciw loan. recently a small number of lenders have undertaken an
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aggressive and potentially misleading advertising campaigns to generate increased volumes and fees. in some cases this advertises target is recently engaged in convincing them to be financed yet again to lower their interest rates by a modest amount while adding even more fees to the principal balance alone. such serial refinancing strips the equity in the time to go for the cost to be recouped in lower payments. some also use this to lower the rate but only by moving the veteran from a 30 year fixed rate to a three-year adjustable-rate mortgage. many may not fully comprehend the economic impact of the decision to refinance. there are small reductions in the monthly payments and this is not for the program was intended to do and these practices should be put to the end.
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it also threatens to weaken the demand for the securities that are partially backed va loans. it increases cost and negatively impacts access to credit for a wide range of borrowers with. it isn't a widespread problem in the community that rather an activity confined to a small subset of lenders and fully supports the supervisory efforts to improve the policing of the market as well as the rules to remove the ability or incentive to engage. we applaud this for taking important steps for the study and address this issue however the problem cannot be solved by this alone. many practical options for within the existing authority and for example, instituting a maximum recoupment period would inhibit lenders from charging substantial fees in exchange for
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minor reductions in interest rates. similarly, requiring the tangible benefit test which is already required for the streamlined refinancing to more effectively and shorter terms of the term for borrowers. limits on the amount that can be added to the balance would reduce the stripping and finally, targeted consumer financial education can better inform the borrowers about the potential for abuse. it's important to focus on options to target while not impeding the ability of servicemembers and veterans to e members and veterans to obtain a beneficial refinancing. we recognize the program is a unique program and an entitlement program for veterans who served the country. as such while we support quick action to limit the uses it needs to be done thoughtfully to ensure legitimate low-cost refinancing options for veterans are retained. the mba is committed to the promotion of best practices and standards to generate healthy and responsible mortgage market
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and we stand ready to assist in developing the solutions to problemtheproblems we have dis today. thank you for the opportunity to testify and i welcome any questions. >> i will yield five minutes now for the opening remarks. good morning. chairman, ranking member and other members of the committee. i am the general counsel veterans home loans and would like to thank the members of the panel for being here today to address this issue. thank you for allowing me the opportunity to come here for you today tbeforeyou today to discug practices that can act to servicemembers and veterans. i've worked for veterans united for ten years and headed to the legal department of entire time. i'm a veteran myself and viewed the va several times. i have a va loan today and i've seen firsthand the aggressive
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and misleading the finance practices employed by some in the industry. veterans united is a full service lender headquartered in columbia missouri and we make being loans in all 50 states and district of columbia. our primary mission is helping veterans, service members and their families achieve the american dream of home ownership. the nation's number one pda purchase lender the past few years closing more than 37,000 purchase loans in 2017. veterans united now represents approximately one out of every seven purchase loans made in the country. if i could impress one thing upon you today, it is that the va loan is not like other mortgages. it differs from the fha loans and all other mortgage programs because it is in or service benefits to the veterans and active-duty personnel and surviving spouses. it's part of the deep bond between those who served and the
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nation the veterans pledged to defend. as we work to find solutions to the issues discussed here today i imported a committee to examine whether or not particular solutions may result in fewer earned benefits for veterans. the va loan program stands out as a true success story. before the mortgage crisis, the loan was a little used product but due to the unique underwrite the loans were the only shining light through the mortgage crisis performing better than any other program. today the loans represent about 10% of the mortgage market and featured the lowest interest rates for more than three years alone with the foreclosure rates about ten years. in particular, the program has helped hundreds of thousands of veterans save money on their monthly mortgage payment. unfortunately, members of the panel stated before some field to live up to the intent of the
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program. the idea is to put veterans in a better financial position today than they were yesterday. we are here today to discuss improvements on the program to ensure it's carried out from first-hand experience i can for you as soon as it is made of the refinancing companies are aggressively contacting veterans and families with misleading mortgage office and many don't care that will take the veteran a decade or more to recoup the cost and fees that smile off the loan balance. we have seen many harmed by this activity and in many situations they are left underwater and may have difficulty selling their home in the future. fofurther act of engagement on this issue going forward they
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are the best position to solve this issue without compromising the veterans benefits. however, they are inhibited from moving forward with solution due to administrative requirements that are a part of the program. other agencies such as ginny mae, fannie mae and fha can make changes more quickly. we support legislation that would empower va to make program changes in a similarly expeditious manner potentially including seasoning and recruitment period. additionally, policymakers should ensure the reasons are considered in the process to protect benefits of the deserving veterans. thank you again. i will now you recognize and yield myself to i would like to
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put my thoughts out there and ask you some questions. i spent four years as a regulator here in washington during the bush administration george w. but fdic and the regulation is that the best way to regulate any private market is full transparency and robust competition. so, the people know what they are getting and have choices. they are buying things if. i think mr. motley would understand about being in the industry. but this isn't a private market,
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it is a government market. explain that difference between. the competition the free marketeers like me believe in and rely on as the best way to weed out the riffraff. what is different about it ski within this dynamic. the purchasing government insurance on that loan in this case and purchasing another form of insurance throughout the mortgage-backed securities so you have actually two taxpayers involvements.
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from the va program was a policy decision to that we would want to make sure veterans in the loan from americans have access to the loans in terms of what they otherwise would not have. a double layer to government market. hispanics in the absence of the robust market forces we have to play a greater role of the stakeholders. i'm curious is this an issue of safety and soundness.
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it was an unfair and deceptive practice. so let me ask are they disclosing the folks we are talking about. are they disclosing everything that they are going to do or are they being deceptive and unfair in your opinion? they put them in a better financial position so they may be disclosing it, but we feel like they are being pressured to make these loans in certain situations.
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it's a mentally competent and mature, wise, these folks have borne tremendous responsibility and now all of a sudden it's about his disclosing things to them i have a hard time believing that there necessarily being taken advantage of. we have an active congress to do that, but to suggest they can fend for themselves when reading about what you're getting into my struggle that.
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the other issue is the safety and soundness whether they are disclosed fully completely transparent or not and know what they are getting into or not it puts a greater risk that is a problem for me regardless so what the panel just kind of opine on that. i would yield to the ranking member for his remarks. it's about reading and understanding so feel free to opine on everything i said. i have to start by saying spending four years was an oversight and compliance select
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your sentiments anand ifyou looe program has the numbers do not lie. the program is a sound program at mr. cooper mentioned with the lowest foreclosure rate into delinquency rate that is an indicator of the safety and soundness of the program and as i'm in and in my opening statement the actions we've taken over the years to ensure that we continue to have this te performances is exactly what we need to do for the issues today. it is true that the program had delinquencies and that is a testament to the va and a
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testament to the deal that officers and folks made themselves. it's a strong sense that this is a benefit that we have to continue to earn a type performing on the loan. we have some lenders who don't seem to be living up to that as well. there's a couple of concrete ways, first as not we wrap up the mortgage-backed security and our recourse meaning of a lender fails on time we have to make the payment for them, whether the borrower makes it or not the borrower fails to that is what oudo this withour guarantee is. the asset that we have recourse to in that case an institution feels. when we have the speeds that are
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inexplicable by any economic measure whatsoever what that does is drive down the value which means the collateral for taxpayer has is in the event counterpart fails to live up to their obligations and it is declining in value because the entire book turns over in six months and so it's a technical issue and absolutely 100% it has recourse and falls in value and the final point would be if you have lenders that are in the refinancing business and that goes away when they go insolvent that's when it kicks in. so this is a full ecosystem that
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we have going for it is separated in part. i yield five minutes to ask any questions and make any comments. thank the chairman and taking his point about ensuring that there is transparency and adequate information for the consumer in this case to make an informed decision as someone who purchased a home with my wife and i'm not a veteran or is she if the refinance the loan i do have to say you are battling a mountain of that transparency and information and i would be lying if i said i'd read every single page i signed. we trusted those for the sale of the mortgage and so, when you put the veteran against those who would practice churning
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through abusive lending and they've got their marketing team is and who and the folks i think we need to do more than just ensure that they have information. and i wonder if there's a way to prioritized disinformation. you and i about whether there is one page with four bullets on it in 16-point type that says this will be your principal with the refinancing costs that you will incur if you move forward in the process. this is the consequence. not 9.4 in addition to anything else a specialty of this is the second or third or 43 financing comes or is how the principal has grown over time and again if you want to make that informed
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decision to proceed, so be it. you've assumed the risk with the taxpayer backing that up and so i wonder if that might make it a little bit more of a fair engagement between veteran guard over. mr. moxle to a nazi understood e borrower and some more targeted consumer information. are we getting at the same thing in terms of this prioritizing like this is what you are about to take on. it may not be clear from the person trying to sell you on this originally told you. you. schenectady tangible test that is shown is the way to go
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because it will show what the actual cost associated is going to be in the timeframe it's going to take to recoup the costcostthrough overpayments. and so with that time horizon outside in the deal makes no sense for the veteran. it's a decision that he or she could make that there is the need to establish some kind of a net tangible benefit test similar to what the fha has to demonstrate that this refinancing makes sense and if we hav have been placed in you either abide by it or you don't come and if you don't, the. based on his circumstances and term of living in that house.
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.. >> for a decision i have already aid to ensure that that disclosure is provided up front.
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and the veterans administration will get a copy the same time the veteran gets a copy to partner and then to advise him or her to make their own decision. and then with any statutory changes. >> we have to make some system changes on what information that we need to make that happen my goal is to have that happen this year. >> it seems like a relatively easy -- easy fix to make. i love that doesn't require an act of congress. and the sooner the better. we would love to be kept apprised of your progress and maybe to the staff to have something that triggers a request within the next few
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months would be helpful. and sorry to be so specific but the larger that is made the less information the better chance the consumer will understand the consequences. and then to the chairman's point you'll have a much more informed and transparent transaction. that is good news. i will yield back but you say there are specific program changes. >> now we will yield back five minutes our experience has been tremendous we appreciate the service we have received.
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or is he in tune of your strategies texting. >> speaking to the secretary about this very issue and then to meet with others to discuss this issue they are extremely supportive back i appreciate his leadership every day and that interest in these issues is a great complement. mr. cooper, talk about your company's ethics how you
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arrived at a place not to take advantage of these predatory examples. >> that is a great question. as a company, we are based on a set of values we work hard on as a group as do employees, to set how we want to act as a company. we carry that out every day we believe strongly to come up with the mission to get veterans into homes. we are very focused on that. we offer traditional offers but we don't that is something
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we felt we are looking out for the best interest of the veterans. we want to educate veterans and how they best make use of the program. >> have you seen a decline during your time in the industr industry? >> not a decline but there are a few actors out there and this isn't something new. it just becomes more prevalent when interest rates pick up slightly or tick back down at his interest rate dependent. >> what is your advice to model those ethics and values your company has taken so seriously in hopes others will
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adopt those as well? >> that in and of itself is very difficult from a congressional standpoint to model. i like with the chairman has said about veterans to make decisions for themselves. i like the idea of disclosures to be as transparent as we can be. there is always room for improvement. i like what mr. london said with the two step in they have been with servicing if they implement a similar process that could be helpful to rein in the activity. >> so hopefully those other companies will emulate those same values in that the very least from our hearing today we can publicize that to give a public hearing to hopefully
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some of your competitors to raise that threshold as well. i yield back. >> i yield five minutes to the gentleman from california. >> i just want to express my gratitude for this hearing. i'm impressed you are august on consumer protection making this distinction between a free marketplace and a government rocket place. marketplace it is defined by the taxpayers or subsidized so the question for the veteran to make a complete decision all by himself, that doesn't only solely affect his or her assets. just the taxpayer. so we have a duty to make sure the program is set up properly
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and i am forgetting the church but mom -- the term, there is a moral hazard because the risk has been reduced personally. so i hope we can hold hearings into another area of the government marketplace with educational benefits. i am disturbed there is a proposal to do away with it completely allow educational institutions to take 100%, 100% of the revenue including those student loans. but i want to ask this
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question i can't see your name but the guy on the end. mr. cooper. any action we take doesn't have any unforeseen consequences. like to copy the lender fees in time that for the veterans so the lender cannot collect fees in excess of what the veteran saves over a period of time. like those cap origination fees or du think as long as there any fees permitted lenders will still seek? >> i believe personally there are already restrictions in place with the amount of fees that can be charged. the difficulty is if you buy down the interest rate for the
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discount points then to be rolled into the loan. that is another disclosure issue. how far down did your rage go when he purchased those points? so i think it does fall in line with the other pieces we talked about already there may be other ways to handle that. i don't know specifics what the caps could look like in addition to what is already there but that could be one solution. >> mr. london have there been other organizations find for predatory behavior? is their ability to do that? >> we do have some ability some penalties we can apply that that is in reference to
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lenders who try to defraud the veteran or mislead the government through forgery. it is very specific. >> but for jenny may to have this capacity in this circumstance? >> we can police access to security that is the authority that we will continue to expand. >> have you actually find companies? >> we have. for violation. >> do you publish the names of those companies? >> no. >> why not? >> i don't know. but i will find out. i am happy to speak with you. >> mr. london would this be
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useful to the t2 if we could provide that authority? >> technical assistance for any legislation you think would be helpful in this regard. we will assist you. >> i would be interested in meeting with both of you off-line to discuss this furthe further. >> now another gentleman from california. >> thinks mr. chairman for having this hearing and the here as well. a little bit about my background as a licensed realtor former loan broker and this can be one of the dirtiest businesses there is. real estate and real estate loans. have you ever had to fire anybody? >> not personally, no.
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>> yes impressive because there is a lot of bad apples it doesn't matter about your mission statement the interest of making a buck outweighs the interest of following your mission statement. in reference to it my colleague brought up, do you put this online? if you have a doctor civilly find that goes online. automotive repairs, any violations go online. as a consumer if you have any issues you go online to who you are dealing with and that information is disclosed to the world. it's not rocket science. we can do this very easy. it is very hard to second-guess the economic financial motive for a veteran to refinance.
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with the by downs or interest loans in points and fees and sometimes they will give you a discount on the points that then jack you up on the fees. at the end of the day you work at one way or the other. it is interesting to come up with an application somewhere so a consumer can punch in a couple of numbers if this is good or bad. also with those loan originators can you detect if there is a pattern of churning ? >> we do keep a record of every loan originated but i am glad you asked. because one of the things that mr. cooper mentioned we have on the backend for servicing
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our loans we have a comprehensive system on every single default with tremendous amounts of data to see exactly what the servicer is doing to intervene on the veteran's behalf if we need to. unfortunately we don't have that on the front end but we have a contract where we are reengineering the system to build that capability on the front and to get information on every single loan origination with the same type of intervention and monitoring so we are very close. >> i'm glad to hear that. put that on mine to direct the veterans to the website so they can be a better educated consumer. good faith estimates? if you give them that? >> the borrower gets a loan estimate with that type of
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information. >> again, i hope you keep a database so if they are out there originated loans and vcf pattern every two or three months they are churning alone whether for their own benefit or if the consumer benefits there is a lot of stuff we can do to protect our veterans. i yield. >> i think this has already proved to be a productive discussion and we should continue it. most of my thoughts and comments and questions were philosophical. i truly believe choice for the consumer and disclosure is generally the best way to regulate.
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but the market is skewed because government is intervening. without government, the taxpayer, there wouldn't be this market presumably. so now comes the question we should regulate to engage more readily on behalf of the taxpayer. certainly there are ways to have better disclosure with the simple or an easier way to digest the transaction they are about to engage in. by all means i hope you are reviewing that all often times the consumer ends up with more paperwork but i would like to see that new disclosure product you are working on and
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as the ranking member suggested, if you could submit that it would be good to look at that. but trying to regulate in this space those products that we deem bad for the veteran because they are churning or a definition that we agree is bad versus doing that without diminishing the opportunity for the real products they may need that are good and safe and sound and useful to the veteran so they can lower payments. maybe they need to. maybe they know exactly what they are doing. so tell me where is the line if it is a good product is useful or safe and sound? there is always a transaction
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cost if there is more risk than they have to charge commensurate with the risk. i know people have to go to the payday loan because the bank will not finance them. so what are your thoughts about the line the appropriate and sound? to find that. >> it isn't that easy to define because every situation is different. we try to look at all borrowers in terms of what is best for them. taking a lot of things into account, you want to have guardrails put in place with transparency so your point about proper disclosure is a
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good one. and having that done up front is good. but we have to balance additional regulation with the benefit of that and then to provide additional disclosures. but the main point is if we are sure the veteran is benefiting, and we can do that showing the cost and payment reduction, how long to break even, if that makes sense, then we should satisfy that tangible benefit test that we have done the right thing. >> assume that we can define a reasonable product or a transaction that allows the veteran to benefit and the
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cost is commensurate the fee is commensurate, let's say we can define that. do you along with t3 have the legal authority to define that in this space in that regard? i want you to appropriately but i don't want you to make it up. so if we do need to act to give you the legal authority that is the way this works. do you have the legal authority? feedback yes sir. we do have a draft regulation we believe is the approach to
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address this issue. one specifically subsection e also 3703 those of the references we believe give us authority to regulate this issue. >> summarize what that legal authority is. i can look it up but give me the best access that you would promulgate a rule to define thi this. >> i can provide more detail for the record but the one that i would choose the broadest authority is 38 u.s. 501 giving the secretary the authority to regulate across-the-board and the other
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were the specifics for the loan guarantee program. >> making a good point to overburden the lender. raining in the two big to fail institutions with that compelling case to make cap more expensive those that are so your point is very well taken. but and in terms of
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prioritizing that impact disclosure so it is really easy it doesn't seem that it does seem fair and workable. so i hope you can see that the industry would see that as well but your point is well taken to get the transactions completed. >> one of the last things we need to do that to there are no additional suggestions or ideas or proposals that have
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gone unheard or on implemented because in texas alone last year there were 60000 home loans 20,000 were a refinance we want to make sure we are advocating protecting those veterans they have done everything we have asked them to do and they have earned this to follow through. lastly, you are a breath of fresh air. the gao high risk list roundtable to implement corrections to improve access to care and some of the responses we would have a conference call or see something later this year in some cases we have seen no progress so the fact with action already undertaken with specific proposals moving up the information to the
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transaction is very refreshing. i love to see that i hope you will follow up by us informed of your progress. we all agree sooner rather than later but most importantly veterans with the efficacy of those efforts. thanks for what you are doing and i yield back. >> mr. london, when we say
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ginnie mae is able to find companies in this space is that basically the e2? v.a. that they operate in partnership? >> ginnie mae has the authority to issue rules to access security. we have broad statutory authority to write rules as we need to protect it. looking at the charter the top five mandates the first four make sure there is liquidity in the mortgage market. but once we issue the rule
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they hear the rule we need to abide by. if there are violations then we can issue penalties. the rulemaking ability is restricted to access for security and under what terms. we really can't issue so many penalties for violations of the v.a. program itself or for consumer protection laws. so what we have been doing in those cases if we think it is possible laws are violated we make referrals to the relative agencies. they pertain to violation for access of security. >> mr. cooper you said earlier that during the financial crisis, overall the v.a. held
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up the best. to what do you attribute that? >> thank you for the question. to the underwriting in place from well before the crisis and specifically the way the v.a. looks at it not just the payment that they are also looking at the backend. how much money do you have left over with residual income? . . . .
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mr. london, again, do you have any other thoughts on appropriate regulation or appropriate authority that you might need to police that actors that we are talking about today more effectively? we have a draft regulation that we believe will take into account the recommendations that you heard from other panelists today. all the panelists agree we are talking about a relatively small number that are involved in th
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this. not only the small number of actors but it's also going to impact the veterans potentially the access to his or her own benefit. they will participate in the program and as others say it will also have a downstream effect on the mortgage investors, so not just one answer that we look at it holistically. >> is there a kind of comment period that has to be undergone before it's implemented? >> if it is drafted as a rule there will be the opportunity for public comment. >> he would've taken input from the industry on crafting the
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rule? >> analyzing and thinking about the role, we met with the mortgage bankers association and any other stakeholders as we are contemplating and evaluating the actions we need to take under this regulation. we will welcome additional comments that anyone has to offer. the rule is in a final draft and that is a good indication we are very close to having it publicized. thank you very much and i will shield back mr. chairman. thank you very much for the
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spirit of this hearing i congratulate you and hope you can continue to work on just the same some of these products could be useful to some veterans and we don't want to be overly aggressive in their regulation, but again we are talking about taxpayer resources that we have to protect. >> it's good that we can agree like this. is somebody recording disc? >> because of the full faith and credit, we need to strike that balance and asks the question of defining it because if somebody was charged any fees they may be say i shouldn't be charged for this but there's a cost for that transaction so what is the
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threshold but that is unreasonable and abusive and not a tangible benefit? on a field that the stakeholders including the industry can strike that and have and i give you credit and joined the ranking member and his praising you and team for the way you've conducted the business it is best fo that the regulator engas the stakeholders prior to public comment. it seems like we are talking about a few potentially bad actors and maybe not that actors. maybe they are playing with the tools that exist between the two tighten them up for what we expect on safe and sound practices and the protection if you will and minimal standards for fair practices.
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in this space, the ftc should be able to regulate the practices. has therhave there been any cass referred where there's been unfair and deceptive things going on that could disclose better there is safet. safety and soundness for the taxpayer in the program but then there is the deception and on the scrupulousness by offering one thing and have it be another thing. have those been referred and how they acted upon those mr. london? what we've been doing is collecting solicitation materials generally from brokers bought lenders themselves but
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they originate and then sell them to a lender. what i would love to do is we've got a pile of them so we collect these solicitation materials and i will share them with you. we will sit down and talk to them. i'm trying to be careful in this hearing because the ftc ought to pursue that and bring the full force of the law and then where we need to tighten it up where there is some vastness and looseness and then again for me ultimately the safety and soundness of the program this is offered because the taxpayers allowed this to happen and if they wantheywant them to have tt that they wanted it in a safe and sound and fiscally
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responsible way. >> your question was specific. we've been working very closely on veteran complains that we have received about the substitution that they received and we want to make the distinction that we have provided information but not specifically to the ftc. >> thank you, colleagues. great discussion. let's continue in your efforts as you described to tighten up in this space and let us see what i've are draft documents just for our information as the ranking member requested a few words and continue to notify us where you need the authority.
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that's not your job, it's the united states congress job article one. but i feel good about what i've heard today. so good hearing this now. this concludes the hearing and i ask unanimous consent all members have five legislative days and include any extraneous material on today's hearing. without objection, so ordered. thank you all again for being here today. great heari
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