Q: I am a House committee staffer in the process of refinancing my home. A friend referred me to a mortgage broker who recently got him a great rate on a home loan. I called the broker, and he told me that he thinks he can “pull some strings” to get me a special rate for which I might not ordinarily qualify.
My friend, who is not a Congressional employee, says the broker told him the same thing when he got his loan. I assume that the broker’s claims are just typical sales puffery and that my position as a House staffer has nothing to do with the rate being offered. However, the broker does know that I work in the House, so I wanted to make sure that accepting the loan would not violate House ethics rules. My committee does not handle anything that relates in any way to the broker or the lender. May I accept the loan?
A: The House gift rule — clause 5 of House Rule 25 — provides that you may not “knowingly accept a gift except as provided in this clause.” The rule’s definition of “gift” is very broad, and it explicitly includes a loan. This means that you may not accept a loan unless an exception applies.
Here, the relevant group of exceptions covers “widely available opportunities and benefits” that are available to individuals outside the House. One such exception allows acceptance of benefits “offered to members of a group or class in which membership is unrelated to congressional employment.” Under this exception you could accept, for example, travel discounts offered by the alumni association of your alma mater, but you could not accept travel discounts offered only to Congressional employees.
Within the category of exceptions for “widely available opportunities and benefits” there is a specific exception for loans. It covers “loans from banks and other financial institutions on terms generally available to the public.” The key here is what counts as being generally available to the public. In one sense, no specific loan rate is generally available to the public. Not every potential borrower qualifies for every loan. Rather, lenders approve loans based on a number of criteria unique to each borrower, such as credit score, loan-to-value ratio and lots of other things I don’t understand. In another sense, however, many loans are “generally available to the public” provided you meet these criteria.
What muddies the water even further is that a broker’s sales pitch often involves convincing the borrower that he is receiving an unusually good loan — i.e., something that by definition is not generally available to the public. In your case, the broker claims that you are receiving a rate for which you might not ordinarily qualify. Yet, the broker told your friend the same thing. It would seem contrary to the spirit of the “widely available opportunities” exceptions to deprive you of the same opportunity your friend enjoyed merely because you are a House staffer.
This puts staffers like you in a jam. On the one hand, like any rational borrower, you want to obtain the best rate possible. On the other hand, you don’t want to expose yourself to a potential ethics violation by accepting a loan that the Committee on Standards of Official Conduct would deem is “not generally available to the public.” Consider the recent reports of Members allegedly receiving unusually good loan terms under a lender’s “VIP” program. Would it matter if people outside Congress also were eligible for and received VIP loans? What if the lender did not consider a Member’s position in offering the VIP loans? What if the lender did take a Member’s position into account, but the Member was unaware of this? Would the mere appearance of impropriety require a Member to decline a VIP loan and pay a higher rate?
These theoretical questions aside, there is a more practical and pressing question for you: What should you do? Unfortunately, there is no official guidance addressing how Members and staffers can negotiate loans without running afoul of the gift rules. In the absence of such guidance, one reasonable approach would be to accept the loan so long as you have no reason to believe that you are receiving preferential treatment by virtue of your position as a House staffer.
Here, because your committee does not handle anything that would affect the broker or lender, it seems unlikely that your position has anything to do with the rate you have been offered. However, if you really wanted to be sure, you could even request written confirmation from the broker and lender that you are not receiving preferential treatment by virtue of your position in the House. This is probably not a necessary step, but it might give you peace of mind.
In fact, if your lender happens to employ in-house lobbyists (which many lenders do), your lender would have its own reasons to comply with the rules and to provide assurances that you are not receiving preferential treatment. Under the recent ethics reform, it is now illegal for businesses that employ lobbyists to violate the gift rules. Given that the rules’ definition of a gift includes a loan, every time a lender with in-house lobbyists lends money to one of the 15,000 employees of Congress, the gift rules are theoretically implicated. Therefore, your question is not just a reminder for staffers to take care when negotiating loans. It is also a reminder for lenders to do the same.
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