Live coverage here as long as it lasts on cspan3. [ banging gavel ] rules committee will come to order. And good afternoon. And welcome to another fun day at the rules committee. Today we have an exciting panel with two very experienced members who take time to visit the rules committee often. We welcome the young chairman of the Financial Services committee, the gentleman from dallas, texas, mr. Hensarling, as well as the gentlewoman, my dear friend, ms. Waters, from los angeles. And were delighted that youre here. The rules committee today will be considering hr3971. The Community Institution mortgage relief act of 2017. And hr477, the Small Business mergers acquisition sales and brokerage simplification act. Of 2017. And house joint resolution 123, which will be the second part of the hearing today, the continued appropriations act of 2018. M a brokers provide Necessary Services for small, private companies that are looking to merge. And or to be acquired. But m a brokers can face substantial Compliance Costs associated with a onesizefitsall regulatory schema associated with broker dealer registration. Costs that ultimately, once again, just get passed down to small, private companies and puts them in need of not only those services, but then having to pay those bills. Hr477 helps alleviate the most costly burdens on Small Companies by allowing m a brokers to have simpler, less costly regulation requirements. And doing so will facilitate liquidation in Small Businesses which help preserve and create small jobs and i think create we get wealth for people who have worked hard in the marketplace as they make transitions associated with the life of their company. The committee today will also consider hr397 1, the communit institution mortgage relief act of 2017, another piece of legislation out of the Financial Services committee. This legislation amends the truth in lending act and the real estate settlement procedures act of 1974. To modify the work requirements for Community Financial institutions with respect to certain rules related to Mortgage Loans and or other purposes. This bill benefits install Financial Institutions and Consumer Protections by allowing Community Banks to serve the local economy through relationship banking. It also ensures constituents continue to have access to various credit choices and allow other similar Community Institutions to enter the Mortgage Market without being deterred by the high cost of regulatory compliance. Once again, remembering that the costs get passed on to the consumer. The consumers that we want to be able to have not only the housing part of the american dream, but to be able to get the cost in the house that they can sustain over the long run. Rules committee will also be considering, as i spoke about, the continuing appropriations act of 2018. Its a relatively short, page or so piece of legislation that deals with the continuing resolution, which will extend government funding through, as we have all been told, december 22nd, 2018. I believe thats a friday night, mr. Chairman. So without objection, i would like to welcome the distinguished gentleman from texas, chairman hensarling, as well as the woman from california, Ranking Member waters, to the panel. And as always, youve been here a lot. Youre a star witness many times. Youll remember without objection anything you have in writing we would like you have for our awesome stenographer to complete the record accordingly, namely to support your testimony. However, before we move further, i would like to recognize the gentleman from florida, the Ranking Member of the committee, for any Opening Statements he would like to make. Thank you, very much, mr. Chairman. Im happy to see a bipartisan amendment offered that addresses many of the concerns that we have on both sides of the aisle. And i understand that miss waters, the Ranking Member, will support this bill if this amendment is made in order. And ultimately adopted. As it pertains to the continuing resolution, i would borrow from miss lowey and ask the question, what you believe you can accomplish in the next two weeks that you havent been able to accomplish in the last two months. But ill get a chance to ask that question. But principally, that two weeks from now were going to be here again discussing another fix. And ive already heard that we will be back to do another shortterm cr at the end of this year going through mid january. And my belief is, you ought to do that one now rather than be bouncing back and forth during the holidays. Thank you, mr. Chairman. Yes, sir. Well, the gentleman is correct. There are answers that abound. We have two star Witnesses Today that will work us through the two pieces of legislation. The most immediate from Financial Services and our third witness on the cr aint much of a guy. It will be me. But i will attempt to do my very best answer of the gentlemans questions to move forward so that we may have this on the floor and resolve, at least for the shortterm, these items. And i thank the gentleman very much. Mr. Chairman, were delighted. The chair is recognized. Thank you, mr. Chairman and members of the rules committee. And as the chairman and Ranking Member of the house Financial Services committee, we have many stars on our committee on both sides of the aisle. And we are happy to represent them today. Mr. Chairman, thank you for the opportunity to appear before you yet again to testify on behalf of two bipartisan bills that were favorably reported out of the Financial Services committee, and have a strong track record of bipartisan support. Today well discuss hr3971, the Community Institution mortgage relief act. And perhaps spend a little less time discussing for the reasons articulated by the gentleman from florida, hr477, the Small Business mergers acquisition sales and brokerage simplification act of 2017. Hr3971 addresses concerns that the cfpbs rules implementing dodd frank act provisions on escrows and Mortgage Servicing are overly burdensome for our small banks and Community Credit unions and unfairly restrict consumers access to mortgage credit. All this bipartisan bill would do is simply relieve Smaller Banks certain Smaller Banks and Credit Unions of the obligation to provide escrow accounts if they have consolidated assets of 25 billion or less. And and hold the mortgages on their Balance Sheet for three years. Loans held in portfolio by Community Financial institutions should be exempt from such requirements, because when the loans are held in portfolio, lenders have every incentive to protect the collateral, by ensuring that taxes and insurance payments are made and kept current. A large majority of Community Banks do not do not currently escrow, because of the cost. And requiring them to do so will only stop them from making loans to many needy individuals. The Community Banker in missouri told us the cfpbs rule has forced his bank to limit inhouse real estate lending, end quote. Further, this is hurting the Housing Market in our community. A credit Union Official in pennsylvania told us that this bureaucratic requirement has caused his Credit Union Members to become, quote, very upset and confused as to why they were unable to pay their taxes how they always had. And he went on to write, quote, these members had managed their tax and insurance payments for years without institution interference. But suddenly feel like the government now told them they were not responsible enough to manage their own affairs. Unquote. The important corrections in hr3971 will give small Credit Unions and Community Banks greater flexibility to ensure that more of their members and customers can get a loan to buy a home and stay in their homes to ultimately make credit more available and less expensive than it otherwise would be. I have further comments prepared on hr477, but given that the Ranking Member and i are recommending to the rules committee, and should they see fit, to make an order, the sherman amendment, we will both support that amendment and if so, the Ranking Member, i believe, has informed us she is prepared to support the underlying bill. That is a recommendation we made to rules committee. So unless there are questions on hr477, in the interest of being efficient with the use of the time of the rules committee, i will not make introductory comments on that, and i appreciate again, mr. Chairman, the opportunity to appear before the rules committee and ill yield back. Mr. Hensarling, thank you very much. We appreciate not only your testimony, but bringing these bills forward that would allow listening to these Community Banks, bankers, Credit Unions, the needs that they needed to fulfill customer demands in the marketplace. Were delighted, maxine, that youre here and the gentle woman is recognized. Thank you very much, mr. Chairman, and members. On hr39721, this bill would allow a large number of mortgage servicers to drop important Consumer Protections and set the stage for a return of the harmful practices of the subprime meltdown and the worst financial crisis since the great depression. Specifically, the bill would harm consumers by raising the Consumer Bureaus exemption threshold on escrow account requirements by higher price Mortgage Loans. Mortgages are classified as higher price if the annual Percentage Rate or apr exceeds the average prime offer rate by 1. 5 . Higherprice Mortgage Loans often reflect riskier or subprime borrowers. Current Consumer Bureau rules require those with higher priced Mortgage Loans escrow their homeowners insurance, property taxes for at least the first five years of their mortgage. Escrow accounts are an important Consumer Protection mechanism, especially for higherrisk borrowers, because they ensure that homeowners have funds for these expenses, thereby reducing funds for defaults. Escrow accounts also keep homeowners from being blindsided by additional costs at the end of each year, and provides a more accurate monthly cost estimate for Home Ownership when the loan is originated. That frank task, the Consumer Bureau with implementing mortgage rules under the truth and lending act that would restrict the types of practices that led to financial crisis. That is why the Consumer Bureaus rules are designed to ensure that homeowners understand and can meet the full cost of Home Ownership. The Consumer Bureau has was careful to draft its escrow requirements to address the fact that large servicers and especially servicers that Service Loans they did not own for an extended period of time often did not adequately communicate with customers or approximately track paperwork. Appropriately, im sorry, track paperwork. During the crisis, this contributed to millions of unnecessa unnecessa unnecessary foreclosures and later on abusive and fraudulent business practices. Proponents of this bill say that it would provide relief from overburdensome regulation of small services. But currently, banks with less than 2 billion in assets that serve rural or underserved areas are already exempt from the Consumer Bureaus escrow requirements, which reflects the bureaus commitment to balanced and tailored regulations. This bill would make a dramatic leap from the Consumer Bureaus targeted relief and exempt banks up to 25 billion in assets from escrow requirement, regardless of whether they are serving underserved borrowers and without any evidence that this large exemption would increase access to credit for those who need it. The Consumer Bureau also provides other flexibilities through either exemptions too or just adjustments from the respa Mortgage Loan services and Escrow Account Administration requirements for small bank services. Provided they and their affiliates own the loans they service and service no more than 5,000 loans per year. Hr3971 would increase this exemption by 500 from 5,000 loans a year to 30,000 loans, allowing significantly larger Bank Servicers to avoid these important consumer safeguards. And only requiring the lenders to hold the loans in portfolio for three years. Lets be clear. Homeowners do not get to choose their own mortgage servicer. And the least we can do is ensure that they are adequately protected as they navigate the system, as we saw leading up to the 2008 financial crisis, servicers often choose profits over people, and that is why we need the Consumer Bureau to look out for the needs of consumers. The Consumer Bureau has continued to do its job, in spite of the unrelenting Republican Campaign to slow it down or eliminate it completely. Simply put, 3971 would enable larger servicers whose incentives are not aligned with the owners of the loans or the borrowers to be able to revive the abusive practices involved with predatory lending that contributed to the 2008 financial crisis. This is the second time in less than two weeks that ive come before you to discuss a bill that would erode vital Consumer Protections under the truth and lending act for borrowers with highpriced Mortgage Loans. I cannot support legislation that would keep consumers looking at highcost mortgages from the vital protections. And scrutiny they deserve. Although i understand that mr. Sherman will offer an amendment to lower the emgss provided for in in this bill, i continue to oppose the bill, because it would undermine the Consumer Protection in Home Ownership. I must note, this bill comes on the heels of the recent and unlawful takeover of the Consumer Bureau by the new omb director. Mr. Mulvaney is in the process of unlawfully restricting activities of the Consumer Bureau and will soon begin rolling back Consumer Protections. Congress should not be complicit in these acts by passing legislation that further erodes the rights and protections of americas consumers. For all these reasons, i oppose hr39721, and look forward to answering any questions you may have. Thank you, mr. Chairman. Yes, maam. Thank you very much. Mr. Chairman, there was a question that the gentle woman just brought up about the illegality of an action by the president of the United States to actually point the gentleman, mr. Mulvaney, as the acting director. Its my understanding that this went to court, and a court decided the remedy. Is that correct . Well, yes, mr. Chairman. And, in fact, the cfpbs own Legal Counsel, that was appointed by mr. Mulvaneys predecessor, mr. Cordray, agrees that the president gets to appoint the acting director. This is based upon a 20yearold statute. It is the opinion of the justice department. It is the opinion of the cfpb, and it is the opinion of the 1 circuit court, the 9th circuit, a very liberal circuit, that has opined on the matter of the vacancy reform act. And so the overwhelming legal precedent in this land says that the president gets to appoint the acting director. And what is also very disconcerting, mr. Chairman, even if the president didnt have have that authority, nobody debates that he has the authority to appoint the permanent director. And we also know that under the current conventions of the United States senate, that permanent director can be confirmed with 51 votes, not 60. And the permanent director could undo anything that the interim director did. So regrettably, this is not helpful to democracy. It is not standing on firm legal ground. It doesnt help democracy, it doesnt help our economy. Its not on good firm legal ground, and it is very, very unfortunate that it has happened. And