This was a vote on an amendment offered by Rep. Schakowsky (D-IL) that required additional regulatory review of “reverse mortgage” lenders to protect senior citizens from abusive lending practices. Reverse mortgages are loans that allow borrowers over the age of 62 to borrow against a portion of the value of their home, and defer the repayment of the loan until they sell the home or die. The number of these mortgages had been increasing.
The amendment was offered to H.R. 4173, a bill designed to implement the most significant regulatory reform of the financial industry since the Great Depression. The amendment called for the new Consumer Financial Protection Agency, which H.R. 4173 created, to conduct the additional regulatory review.
Rep. Schakowsky began her statement in support of the amendment by saying that “all is not well in the reverse mortgage market.” She noted that a recent report by the National Consumer Law Center “found many of the abusive practices that were common in the subprime lending market before its collapse are also common in reverse mortgage transactions. Those practices include high fees, incentives for brokers that are harmful to borrowers, and lenders steering consumers to products that are more costly than necessary.”
Schakowsky then added: “Unfortunately, the complexity of the loans and the age of the typical borrower have made the reverse mortgage market ripe for scam artists. We have to make sure that seniors who use reverse mortgages are protected against unlawful and unfair practices.” She also noted that her amendment was supported by the AARP.
Rep. Garrett (R-NJ) led the opposition to the amendment. He began his remarks by acknowledging that that “reverse mortgages sometimes in the past have a history in certain cases . . . of causing problems for our seniors, and that is certainly something that regulators need to and have the ability to take a look at. But this (amendment) certainly is not the answer.”
Garrett then argued generally against the creation of the new Consumer Financial Protection Agency which was designated to conduct the additional regulatory review. He said that the result of establishing this agency and giving it broad powers would be the “contracting (of) consumer choice, putting limitations on the consumers' ability to buy products that they need and want . . . causing a cost to the overall system of credit . . . .” He said: Experts have shown that the Consumer Financial Protection Agency alone would add . . . about 1.5 percentage points to the cost of credit in this country . . . in the case of reverse mortgages . . . if you have a 6 percent loan now (it) would go up to around . . . 7.5 percent. Just the act of borrowing will be made harder by the cost of the underlying bill.”
Garrett added that “if the Consumer Financial Protection Agency was not omnipotent enough with their power to reach in basically every single corner of the economy of this country, now we are going to let them go even a little bit further (with this amendment).
The amendment passed by a vote of 277-149. Two hundred and fifty-one Democrats and twenty-six Republicans voted “aye”. The other one hundred and forty-nine Republicans all voted “nay”. As a result, language requiring additional regulatory review of reverse mortgage lenders was added to the bill designed to implement the most significant regulatory reform of the financial industry since the Great Depression.