[Congressional Record Volume 153, Number 186 (Thursday, December 6, 2007)]
[Senate]
[Page S14829]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             LENDING CRISIS

  Mr. CASEY. Madam President, I rise today to speak about something 
that is on the minds of a lot of Americans, but also something that 
initially was addressed by the President and by Secretary Paulson today 
when they announced their loan modification program as it relates to 
the subprime lending crisis that is engulfing many American communities 
and so many families. Despite all the evidence of the size and scope of 
the subprime crisis, this administration today unveiled what I would 
argue is a tepid plan that would reach only a small number of subprime 
borrowers.
  I don't think it is too late for the President or Treasury Secretary 
Paulson to come up with a real solution, but this plan is far too 
little. It is my opinion that this plan will only affect a few 
borrowers, not enough to meet the need.
  That is not just my opinion, though, it is the opinion of some 
experts in the industry. One in particular, Barklays Capital, is 
estimating that this plan announced today will reach only 12 percent of 
all subprime borrowers.
  Mr. Eric Halperin, the Director of the Center for Responsible 
Lending, which institution is a leading expert in this area, was quoted 
in the New York Times as saying:

       I don't see anything that leads me to believe we will see 
     an increase in loan modifications.

  That is just two experts weighing in on something that is critical to 
so many families in America. The fact that the President and Secretary 
Paulson have put a kind of window dressing on these loan modifications 
and the problems that are caused by the subprime crisis doesn't mean 
that we can feel secure that they are meeting the need that we see 
across the country. I think the administration has to do more than just 
talk about this issue and take credit for having some kind of a plan 
because we know that more than 2 million subprime loans are about to 
reset at higher rates in the months ahead.
  This crisis has already slowed economic growth in America and has an 
impact the world over. It is threatening to push our economy into 
recession, and still the President and the administration are not 
willing to truly help homeowners on the brink of foreclosure.
  The Treasury Secretary has known about these problems for some time, 
as has the administration. I am afraid when Members of Congress weigh 
in on this problem, as so many have--with legislation, with 
suggestions, with ideas--the administration tends to ignore that advice 
or ignore that plea for help. Just this week I sent a letter to 
Secretary Paulson which was signed by a number of other Senators--
Senator Schumer, Senator Brown, and also Senator Dodd. We asked the 
Secretary to consider basically five considerations.
  Let me read what we asked him to examine as he and the President were 
preparing the plan they released today.
  No. 1, we asked he ensure the eligibility for modification not be too 
narrow and that people who are affected have every opportunity to 
ensure that they remain in their home. No. 2, we asked they make sure 
loan modifications are long enough to ensure the long-term 
affordability of the mortgages and not merely delay a foreclosure. No. 
3, we asked to waive all prepayment penalties. I think that is a 
reasonable request in this kind of crisis. No. 4, we asked the 
Secretary to guarantee the fair treatment of families that are not able 
to avoid foreclosure, even with modifications. No. 5, make sure the 
modification program must be transparent to allow for independent 
monitoring. Of these five key points, these five requests, really, it 
is only clear that one has been addressed. One has been addressed by 
freezing rates for 5 years.
  A plan that affects only 10 to 12 percent of borrowers, can that kind 
of plan qualify and can most borrowers have confidence in such a plan? 
I don't think so. Unfortunately, Secretary Paulson and the President 
have come up far too short on their recommendations.
  So many people here, not just in Washington but across the country, 
know the effects of this crisis on our country--obviously on families 
and their ability to make ends meet month to month, paying the bills, 
but also the effect on the economy, really on the world economy. We 
know, for example, the Joint Economic Committee, of which I am a 
member--the Presiding Officer is also a member, a proud member from the 
State of Minnesota. She knows when our committee had a chance to review 
this issue we issued a study, not too long ago, about how much this 
problem will cost. Just let me give you a couple of numbers which are 
relevant: 2 million foreclosures. We have heard a lot about that, but 
we know 2 million will occur by the time the riskiest subprime 
adjustable rate mortgages, the ARMS, will reset over the course of this 
year and next year. Many thought the crisis was behind us, that we were 
kind of over the hump. A lot of experts believe the worst is yet to 
come. That is why we needed a real plan by the President, not a half-
baked plan.
  No. 2, the Joint Economic Committee found that approximately $71 
billion in housing wealth will be directly destroyed--$71 billion in 
housing wealth will be directly destroyed. There is another $32 billion 
on top of that, $32 billion in housing wealth that will be indirectly 
destroyed by the spillover effect of foreclosures which reduce the 
values throughout a neighborhood.
  States across the country will lose some $917 million in property tax 
revenue because of this crisis. The 10 States with the greatest number 
of estimated foreclosures, of course, are some of the larger States: 
California, Florida, Ohio, New York, Michigan, Texas, Illinois, 
Arizona, and my home State of Pennsylvania. I am sure the State of the 
Presiding Officer, Minnesota, is probably close to the top as well. But 
there are several others close to that ranking.
  Finally, in terms of the findings of this particular report, on top 
of the losses due to foreclosure, this report also says there will be a 
10-percent decline in housing prices, which would lead to a $2.3 
trillion economic loss.
  We could go on and on about what the problem is, but we know there 
are some solutions on the table. I am one of the cosponsors, along with 
Senators Schumer and Brown, of the Borrowers Protection Act, which 
imposes obligations on some of the players in this market who have not 
been regulated, frankly, have not been cracked down on, the so-called 
unregulated brokers and originators. This legislation, the Borrowers 
Protection Act, would do that looking forward, but also in the present 
context we have pushed very hard, and the Senate has already passed 
legislation--of course, the President, like he is about a lot of 
things, is talking about vetoing this legislation--in which we do have 
$200 million set aside for foreclosure counseling, which a lot of 
families need and a lot of homeowners have a right to expect. There are 
some short-term and long-term things that we can do but, unfortunately, 
what the President and the Secretary did today does not meet that.
  I want to conclude by quickly moving to another topic for just a few 
moments before my time is up.

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