|2:40 PM EDT||
Gary G. Miller, R-CA 42nd
Mr. GARY G. MILLER of California. Mr. Speaker, I rise in support of this bill.
A lot of people are losing their home in this country. In fact, in California, 500 families or more lose their home every day. And that not only hurts them, but the neighbors around them. Because of foreclosure, their home value drops weekly.
I don't support government bailouts. I consider this bill we're dealing with here far from a government bailout. If you look at the situation people are in today, people are suffering from shrinking paychecks, other things go wrong in their life. But this loan is the most expensive FHA loan you will get.
Normally, a person can go to get an FHA loan, put 3 percent down, and the government will basically be guaranteeing 97 percent financing. Under this loan, the lender has to be willing to take 85 percent of current market value. Let me explain that so it makes it understandable to most people.
Let's say you bought a house for $580,000. The first trustee gets $5,000, but current market value is $400,000 for that house. The people are upside down, they can't make the payment, it is going into foreclosure. The lender has an opportunity to allow another lender to buy them out with an FHA loan guarantee, and they're willing to take $340,000 for a loan they have that the market today is $400,000, and the new loan against that house will be $360,000. Now, that sounds really good. And we say
the person is going to make a lot of money, it's a bailout. But this is really more like a joint venture. And I don't think CBO even scores this portion. If you sell the home the first year, we either get 3 percent of the loan amount or 100 percent of the profit on the home, whichever is
greater. If they sell the second year, we either get [Page: H3298]
3 percent, or 80 percent of the profit, whichever is greater. The third year, 60 percent. And if you hold it for 30 years and you sell that home, FHA gets 50 percent of the profit on that home.
Now, I don't know how most people look at it, but that's the worst FHA loan you can get. It's not a bailout, but it's enabling a person who's losing their home and a lender who says, well, if I foreclose it on $400,000, I might get $380,000, $390,000. And what does that do to a neighborhood? That home that originally sold for $580,000, now the market value for that home in that neighborhood is now $380,000, $390,000 or $400,000.
This is more like a refi. It doesn't impact the value of the homes in the community. It basically helps a person get in position where they can retain ownership of their hone. And they're not going to make a windfall profit for it.
I would like to thank the chairman for introducing language in this bill that I worked on for 5 years, and that's raising conforming home limits in high-cost areas. Basically, Freddie and Fannie and FHA, in high-cost areas, you can borrow a maximum of a $730,000 loan from them today. The biggest problem we've had in the marketplace in recent years is people have been forced into jumbo loans. If you look at a GSE loan, that's Freddie and Fannie, compared to a jumbo loan today, you can generally
save about 100 basis points in interest rates. That's a huge amount of payment a person can save each year, enable a person to be able to put away money in the future for house payments if times get tough and basically own their own home.
Some people have said they don't trust the Refinance Program Oversight Board because they don't have any idea what the Board is going to implement as far as criteria to qualify for this loan. I have a problem believing that we can't trust the Secretary of Treasury, the Secretary of HUD and the Chairman of the Federal Reserve Board to come up with criteria based on income, assets, liability, payment history, other criteria, debt-to-income ratio. If we can't trust those three individuals to come
up with a reasonable criteria under which this loan is made, I think we're in trouble in this country.
The problem some people have is FHA exists. FHA loans are made today, and FHA is guaranteeing, through insurance premiums, these loans. Now, a normal FHA insured premium costs a borrower .55 percent per year, about half a percent. Under this new program, they have to pay 1.5 percent per year to FHA to underwrite this guarantee. That's far from a giveaway. I can't see anything in this FHA loan that's a giveaway.
I rise in strong support of this bill.