Congress Seen Defeating Purpose of New Mortgage Disclosure Law
U.S. voters ought to be able to find out this week about the home mortgages of their senators and representatives, information required under a congressional ethics law enacted this year.
The results won’t be entirely satisfying. The two chambers looked at the same law -- known as the Stop Trading on Congressional Knowledge Act, or Stock Act -- and came up with two interpretations of what it requires. As a result, members of the House can reveal fewer details about their dealings with mortgage lenders than their Senate counterparts.
That means that for House members, the residential mortgage disclosure reports may not produce enough data to identify any sweetheart rates like those Countrywide Financial used to give to VIPs.
“Clearly, the purpose of this part of the Stock Act was to allow folks to understand if members were getting a special deal on a mortgage,” said Bill Allison, editorial director for the Sunlight Foundation, a Washington-based group that promotes increased disclosures in government. “The fact that the way the House has interpreted doesn’t allow you to do that kind of defeats the whole purpose of the act.”
Neither chamber updated the preprinted forms that members have to fill out to reflect that mortgages on personal residences must now be disclosed. Instead, the House and Senate ethics committees distributed separate memos instructing members to report their mortgages.
Senator Barbara Boxer, chairwoman of the Senate Ethics Committee, sponsored the mortgage requirement, which was offered as an amendment to a larger ethics bill. She said the “Countrywide fiasco” -- revelations that some of her colleagues were getting loans from Countrywide Financial Corp. at rates not available to the general public -- spurred her to draft the language.
“Because there’s no rule that personal mortgages be shown on the disclosure form, all of this was quite a shock when it all came out,” the California Democrat said on the Senate floor Feb. 1.
The loans were used by Countrywide, acquired by Bank of America Corp. in 2008, to “ingratiate” the lender to “politically influential people who could help the company,” former loan officer Robert Feinberg told House investigators. Bank of America shuttered the VIP program after the acquisition.
Among those named as having received preferential loans: Franklin Raines, the former chief executive officer of Fannie Mae; Democratic Senators Christopher Dodd of Connecticut, who is now retired, and Kent Conrad of North Dakota, the former and current Banking Committee chairmen; and California Republican Representative Howard “Buck” McKeon, the chairman of the House Armed Services Committee. Raines and McKeon have denied knowing that they were receiving preferential treatment. The Senate Ethics Committee cleared Dodd and Conrad of wrongdoing in 2009.
Boxer and her panel’s top Republican, Johnny Isakson of Georgia, wrote the compliance guidelines for the Senate, instructing their colleagues to list the name of the lender; whether they took out a mortgage, refinance, home equity loan or line of credit; the date of the loan; its interest rate and discount points; the term of the loan; and its value within a broad range.
“We did what we thought we should do,” Isakson said.
In the House, the Ethics Committee told members that the law requires less disclosure: just the creditor, type of loan, date incurred and amount. That’s the same information already required for mortgages on rental properties.
Dan Schwager, the House panel’s staff director and chief counsel, said he couldn’t discuss why the committee opted to require members of that chamber to provide fewer details than the Senate is demanding.
“We don’t comment on internal deliberations,” he said in an e-mail.
What the chambers have in common: Figuring out how much money lawmakers owe on their mortgages will still be a bit of a guessing game.
The lawmakers were require to report personal-residence liabilities in broad ranges. The forms tell them to disclose whether their mortgages are in the range of $101,000 to $250,000, $251,000 to $500,000, $501,000 to $1 million, and so on, with the top range being an unspecified amount greater than $50 million.
The offices of the House Clerk and the Secretary of the Senate distributed this year’s disclosure forms before the new ethics requirements became law on April 4. Along with what amounts to last year’s form, the ethics panels issued memos explaining the new requirements. To make it easier for staffers to notice the change, the House’s disclosure forms included one- sheet guidance on the new law printed in big letters on purple paper.
“If you require people to disclose something, you ought to be able to have a form that allows them to do that,” said Allison.
Lawmakers would be responsible for complying with the new law no matter what is printed on the form. And since both the House and the Senate voted to change the law just weeks before the forms had to be submitted, there shouldn’t have been much confusion, Isakson said.
“The law mentions that personal mortgages are required, and we sent out a memo to everybody in the Senate,” he said.
To contact the reporter on this story: Derek Wallbank in Washington at email@example.com
To contact the editor responsible for this story: Katherine Rizzo at firstname.lastname@example.org
Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.