This was a vote on an amendment offered by Rep. McHenry (R-NC)  to delete the provisions in the Mortgage Reform and Anti-Predatory Lending Act that applied its regulations to “high-cost mortgage loans.” High cost mortgages are loans with high fees, which are taken out by buyers with less than perfect credit. Those loans are also covered by separate legislation passed in 2002, and by regulations issued by the Federal Reserve.

Rep. McHenry said the provisions in the bill covering high-cost loans should be deleted because placing those loans under the Act’s additional regulations would effectively eliminate the possibility that the loans could be offered, even though “they may be a reasonable option for a number of consumers.” McHenry went on to argue that “(M)embers need to ask themselves, if the marketplace for mortgages is going to become so heavily regulated, further regulated with so many new protections included in the rest of this bill, then why in the world do we need (the additional provisions covering high cost loans)?”  He referenced congressional testimony from the Massachusetts Bank Supervisor in which the supervisor expressed concern that expanding the number of high cost loans covered by the Act “will result in much fewer loans being made.”

Rep. Miller (D-NC), a leading sponsor of the Mortgage Reform and Anti-Predatory Lending Act, opposed the amendment. He referenced McHenry’s statement during the debate that “the bill will have the effect of outlawing certain kinds of loans and limiting choices”, and said: “( Y)es, we do intend to limit choices. The (supporters of the McHenry Amendment) say they would defend to the death the right of consumers to choose to get cheated blind, to get cheated out of their income, to get cheated out of their life savings. And we want to limit that choice because we don't think that consumers really choose that. When someone needs to borrow money to buy a house . . . they shouldn't have to swim in waters filled with fins. There should be some protections.”

Miller went on to note that, in 1999, North Carolina passed legislation much like the provisions the McHenry Amendment sought to delete, and “a study at the University of North Carolina . . . found there was no diminution in the availability or terms of mortgage credit in North Carolina.  Did people make fewer loans like this? Yes. That was the whole point; they got better loans.”

The amendment failed by a vote of 171-255, along almost straight party lines. One hundred and sixty-nine Republicans and two Democrats voted “aye”.  Two hundred and fifty-one Democrats and four Republicans voted “nay”. As a result, high cost mortgage loans were not exempted from the coverage of the Act.