[Congressional Record Volume 153, Number 192 (Friday, December 14, 2007)]
[Senate]
[Pages S15620-S15622]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           FHA MODERNIZATION

  Mr. COLEMAN. Mr. President, I rise to add my voice to the important 
floor debate that has just occurred with respect to FHA reform and the 
subprime crisis.
  Mr. President, this subprime crisis is one that is affecting folks 
all across the country, including my State of Minnesota. This isn't 
just a one-State issue or a regional issue, this is a national issue. 
This is a serious problem for States from Minnesota to Ohio to Florida 
to Nevada. And when you look at the current foreclosure numbers and the 
mortgage reset projections for the next 2 years, it is clear that the 
problem is not just short term but also one that will become worse in 
terms of the additional number of homeowners who will be affected.
  Mr. President, when you consider my State of Minnesota, it may come 
as a surprise to some to learn that while Minnesota has consistently 
ranked as a leader in homeownership, Minnesota also unfortunately ranks 
up there in terms of the subprime crisis. For the third quarter, 
Minnesota ranks third in the Nation in terms of subprime mortgages in 
foreclosure. In this year alone, foreclosures are expected to increase 
by 84 percent to 20,573.
  In the State, the subprime crisis isn't just affecting folks in the 
Twin Cities. This is affecting people in the suburbs and in greater 
Minnesota. Just the other day, the Star Tribune ran a story, ``Mortgage 
Foreclosures Ripple into Rural Minnesota,'' about how rural Minnesotans 
are being hit by the subprime crisis.
  Behind all the terrible numbers are people like Ms. Shoua Yang, who 
spoke at last month's housing town hall forum I hosted in Minneapolis. 
Ms Yang spoke about how her mortgage payment has gone through the roof, 
from $800 to $1,300 per month, because her adjustable rate mortgage has 
reset. Now she and her three children are close to losing the roof over 
their heads.
  But it isn't just homeowners with adjustable rate mortgages who are 
suffering.
  It is renters, whose homes have been foreclosed through no fault of 
their own. It is construction workers--Minnesota has now lost nearly 
7,000 construction jobs over the year.
  One of those families who has been directly impacted by the housing 
downturn is the Buchite family of Zimmerman, MN. At last month's town 
hall forum, Audrey Buchite heart-breakingly spoke of how the loss of 
her husband's job as a house framer has left the family in dire 
financial straits, even though they have a fixed, 30-year mortgage. In 
order to make ends meet, they have dropped their health insurance and 
their college-bound daughter has decided to help with the family 
finances instead of going to college.
  And it is also folks in the timber industry. I was recently up in 
Aitkin in northern Minnesota, timber country, as part of my tour of all 
87 Minnesota counties this year.
  While I was up there, loggers were telling me how the housing 
downturn is hurting their business by depressing softwood lumber 
prices.
  Mr. President, as a former mayor, I strongly, believe that home 
ownership brings about a boat load of social good. So it goes without 
saying that if home ownership does so much good, anything that 
threatens this social good threatens the whole community, not to 
mention the economy at large.
  And so, Mr. President, with the worst still ahead of us, I approach 
this crisis with a sense of urgency and commitment to helping at-risk 
and distressed homeowners in a fair and responsible way.
  To that end I am pleased that we just passed FHA reform legislation 
to enlist the Federal Housing Administration in efforts to stem the 
surge in housing foreclosures and also prevent buyers from resorting to 
risky mortgages they may not be able to afford. This is an important 
step in addressing the subprime crisis--the legislation will increase 
FHA single-family loan limits across the board, at both the high and 
low ends and will help people refinance into safer mortgages.
  I am also pleased that the administration has rightly helped to bring 
industry together to come to terms on a voluntary, market-driven 
mortgage relief plan.
  Some would argue that the relief plan amounts to a bailout; that it 
violates free-market principles; that it merely kicks the can down the 
road. And others claim that it doesn't go far enough.
  Well, the way I see it, mortgage servicers and investors have a 
collective self-interest in preventing mass foreclosures from 
happening. No one wins in a foreclosure.
  Under the plan, as many as 1.2 million folks can be helped either by 
refinancing their mortgage or having their interest rates frozen for 5 
years, which for many should give them the time needed to keep their 
homes. To put this in context, 1.8 million subprime mortgages will 
reset in 2008 and 2009.
  It is important to also have the big picture in mind. If mass 
foreclosures happen, it isn't just the homeowner who has lost his or 
her house who is affected, but also the surrounding homeowners whose 
property values may decline, not to mention the impact on our 
communities. The key is to help folks who can be responsibly helped to 
keep their homes.
  So the way I see it, the administration's mortgage relief plan is an 
important, responsible step towards preventing what could be a 
foreclosure catastrophe.
  In no way however, is the administration's plan the entire solution. 
There is no one single solution. Rather it will require a comprehensive 
set of solutions including: the just passed FHA reform bill; making 
mortgage debt forgiveness tax free; allowing middle-income homeowners 
penalty-free access to their retirement savings in order to save their 
homes from foreclosure, as I propose through the HOME Act, the Home 
Ownership Mortgage Emergency Act S. 2201. This legislation is modeled 
after the Katrina Emergency Tax Relief Act of 2005; and providing 
temporary, middle-class mortgage bankruptcy relie as proposed by 
Senator Specter's ``Home Owners Mortgage and Equity Savings Act,'' 
HOMES Act, of which I am a cosponsor.
  We also clearly need better consumer safeguards, and to that end I am 
encouraged the Federal Reserve is planning to issue new rules relating 
to unfair or deceptive mortgage lending practices and mortgage 
disclosures.
  But as we work to address the subprime crisis, we need to be careful 
that we do not unintentionally do harm with policies that could 
restrict mortgage credit to future home buyers. We have to be mindful 
of the unintended consequences of the policies we pursue.
  I am just concerned that we could very well end up 5 years from now 
wondering why mortgage credit is not readily available to first-time 
home buyers.
  Mr. President, I want to take some time now to speak to one aspect of 
the

[[Page S15621]]

fallout from the subprime crisis which is near and dear to my heart as 
a former mayor, and that is the collateral damage that is being 
inflicted upon communities by the subprime crisis.
  The on-the-ground reality is that the subprime crisis is setting off 
a terrible chain reaction in our communities that, if not mitigated, 
has the potential to affect communities' standard of living for years 
to come.
  According to Mayor Tim Howe of Coon Rapids, a suburban community just 
north of Minneapolis, one of the greatest effects of the subprime 
crisis has been the vandalism of foreclosed homes and associated petty 
crime in the hard-hit neighborhoods. To give you a sense of how quickly 
a foreclosed home can become the target of crime and a problem for 
communities, consider that in Cleveland a home is looted and vandalized 
in just 3 days. I am sure this is a similar story for communities all 
across the country.
  I believe in the broken windows theory that it takes just one small 
act of crime to set in motion bigger troubles down the road. So the 
sooner we address the small problems, the better off we are.
  For some communities in particular, the subprime crisis also has the 
potential to reverse years of hard-won economic and community 
revitalization progress, and in no time at all. As mayor, CDBG grants 
helped fund the Main Street Program helped to revitalize St. Paul, 
creating thousands of jobs and bringing people back to the city. 
However, the current mortgage crisis threatens to undo this very 
progress.
  Another aspect of the subprime crisis is how renters, usually of 
modest means, are finding themselves without a home due to foreclosure. 
These are just one of the unintended victims of the subprime crisis.
  So in an effort to enable communities to better deal with the impact 
of the subprime crisis, I introduced this week with Senator Leahy the 
Community Foreclosure Assistance Act, S. 2455, which would provide 
emergency community development block grant funding.
  From the housing town hall forum to my conversations with community 
leaders, I have been told this funding will provide critical support to 
communities ranging from renter assistance to mortgage counseling to 
dealing with abandoned, boarded-up homes. Due to the unique flexibility 
of CDBG, communities will able to respond as they need do and quickly.
  CDBG is a program that has served our communities well overall, and 
in particular, during extraordinary economic distress. We turned to 
CDBG to provide $16.7 billion in response to Hurricane Katrina and $2.7 
billion to New York following 9/11. Back home, Minnesota was helped by 
CDBG following the terrible 1997 Red River flood.
  In a situation like this we cannot be penny-wise and pound-foolish. 
Bottomline, this funding can help limit the terrible chain reaction 
that can be set off by a foreclosure. For if we do not reach out and 
help communities in trouble today, the cost to communities will be far 
greater and far more expensive to deal with in the future.
  And so, Mr. President, as I have led the bipartisan fight against 
CDBG cuts in past years, I will fight to provide this emergency funding 
as a tool to help communities manage the mortgage crisis. Just because 
a foreclosure happens does not mean the entire community needs to 
suffer. That is the intent of this proposal.
  Mr. President I ask unanimous consent to have printed in the Record a 
letter of support from the U.S. Conference of Mayors, National 
Association of Counties, National Community Development Association, 
National Association for County Community and Economic Development, and 
the National Association of Local Housing Finance Agencies, and letters 
of support from the Minnesota Association of Counties, the League of 
Minnesota Cities, and Mayor Mark Voxland of Moorhead, and an article 
from the Star Tribune.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                  [From the Minneapolis Star Tribune]

           Mortgage Foreclosures Ripple Into Rural Minnesota

                            (By Larry Oakes)

       Duluth.--Theresa Ross had reservations about the subprime 
     mortgage she was offered three years ago but took a chance on 
     the deal. It's a decision she regrets.
       A licensed practical nurse with an older, two-bedroom house 
     in Brainerd, Ross said the loan has wreaked havoc on her 
     finances and brought her to the verge of foreclosure. Her 
     monthly mortgage payment nearly doubled recently.
       ``I don't want to end up homeless because of this,'' she 
     said.
       Ross is part of a rural Minnesota demographic that might be 
     feeling the subprime mortgage crisis more acutely than their 
     urban counterparts.
       Until the housing bubble burst, surging property values in 
     rural Minnesota combined with lower, often-stagnant incomes 
     made many rural residents targets for subprime loans, 
     according to experts who have been analyzing foreclosure 
     data.
       In rural areas, many residents found themselves house rich 
     but cash poor--and took advantage of loan offers that allowed 
     them to convert some of their home equity to cash.
       ``It wasn't people buying homes they couldn't afford,'' 
     said Dan Williams, whose work as senior program manager for 
     Lutheran Social Service of Minnesota includes counseling 
     rising numbers of homeowners near or in foreclosure. ``It was 
     lake and recreational property demand driving up the [local] 
     property values, which created huge markets for cold-calling 
     and `cash-out' refinancing.''
       Although average overall foreclosure rates are higher in 
     the seven-county Twin Cities area, six of the seven counties 
     with the highest rates are in outstate Minnesota. Those six--
     Chisago, Kanabec, Isanti, Mille Lacs, Sherburne and Wright--
     are close enough to the metro area to be influenced by its 
     property values and exurban expansion.
       In those counties, an increase in younger home buyers with 
     less wealth may explain some of the foreclosure problem, said 
     Richard Todd, a vice president of the Federal Reserve Bank of 
     Minneapolis.
       Just as rural areas lag behind metro areas in fashion and 
     other trends, the subprime wave took longer to reach outstate 
     Minnesota, and it will take longer for the negative effects 
     to fully materialize, Williams said.
       And rural residents may have more difficulty getting back 
     on their feet because of their lower incomes and because 
     rural Minnesota has fewer housing options.


                       ``I acted on blind faith''

       While sheriff's foreclosure sales shot up 125 percent last 
     year in some metro counties, some of their rural 
     counterparts, such as Rock and Traverse counties, were hit 
     much harder, with increases of more than 200 percent, 
     according to a report by the Greater Minnesota Housing Fund 
     and Housing Link.
       In Brainerd, Ross traces her troubles to a decision to 
     price new vinyl windows and siding. When she said a 
     contractor's quote of $21,000 was too steep, he said that a 
     mortgage company he worked with could refinance her house, 
     improvements included.
       Ross, 49, who is single, balked at the adjustable 7.7 
     percent interest rate; at the time she had a fixed rate of 
     5.4 percent. But the contractor and lender assured her that 
     her home's rising value would allow her to refinance again in 
     a couple of years at a favorable and fixed rate.
       She said they also misled her about the projected payment 
     amount, saying it included taxes and insurance when it did 
     not.
       Home values stalled, and now Ross is stuck with a mortgage 
     rate at 9 percent, little equity and no chance of 
     refinancing. Her monthly take-home pay barely covers her 
     $1,300 payment, and she ruefully longs for her old payment of 
     $695. Though she quit driving, canceled her cable and 
     Internet service and line dries her clothes, she said she 
     still can't make ends meet.
       Even if she sells, the amount she's likely to get won't pay 
     off the mortgage, she said.
       ``I acted on blind faith that they were sincere and trying 
     to help me, but they were just out to make a buck,'' Ross 
     said. ``Now, if I don't sell the house or get a renter, I'll 
     be in foreclosure in the next few months.''


                        The worst is yet to come

       In St. Louis County, which contains Duluth, records show 
     the Sheriff's Office handled 325 foreclosure sales in 2006, 
     up from 219 the year before.
       Duluth real-estate agent Michelle Lyons said that since 
     March she's been inundated with requests by banks to sell 
     properties in foreclosure.
       ``I went from two or three [requests] a month about a year 
     ago to two or three a week now,'' said Lyons, of Port Cities 
     Realty.
       She predicts the numbers will only get worse in the next 
     two years as even more loans adjust to their higher rates and 
     borrowers find themselves unable to refinance.
       ``Yes, there were predatory lenders,'' she said. ``But it 
     also involved people living above their means, as well as 
     divorces and medical problems.''
       Some of those in foreclosure ``deserve to be foreclosed 
     on,'' she said, including owners of a Duluth property who 
     trashed their house before vacating. When the bank finally 
     took possession, even the copper pipes had been ripped out, 
     presumably for scrap value.
       But others, she said, are good people who were misled by 
     unscrupulous lenders or overtaken by forces beyond their 
     control.
       As an example, she cited her clients Dave and Marykay 
     Andert, a rural Duluth couple who are trying to sell to avoid 
     foreclosure.

[[Page S15622]]

       Dave Andert, 46, is perhaps an unlikely victim of the 
     subprime trap; he once worked as a loan officer, writing 
     mortgages for Beneficial Corp.
       So in 2005, when the Anderts sought a $215,000 loan to buy 
     a nearly new home tucked on a wooded lot in Solway Township, 
     he spent four hours carefully reading the terms of the loan, 
     offered by a now-defunct company called New Century.
       In particular, Andert said, he made sure he was getting a 
     fixed rate and disability insurance, which was important to 
     him because he suffers from neurological condition that had 
     been giving him chronic headaches.
       Confident that he knew the terms, Andert didn't closely 
     read the documents he signed at closing. He now believes a 
     dishonest mortgage loan officer substituted new documents, 
     giving him an adjustable rate and no disability insurance.
       Now on long-term disability and bringing in only 40 percent 
     of his previous income, Andert said his family will never 
     afford the $2,300 mortgage payment that will start next year, 
     up from $1,500 when they first got the loan.
       Since then, the loan has been sold twice, and he's worked 
     with the latest bank to get extensions to gain time to sell 
     the house.
       ``We didn't plan on moving again,'' Andert said. ``It's 
     beautiful out here. It gets very emotional some days, to 
     stand looking out my window and seeing the deer and thinking 
     we have to leave.''
                                  ____

                                                December 11, 2007.
     Senator Norm Coleman,
     Senate Hart Office Building,
     Washington, DC.
       Dear Senator Coleman: The undersigned organizations of 
     local elected officials and housing and community development 
     practitioners write in support of the Community Foreclosure 
     Assistance Act of 2007. The legislation would provide $1 
     billion through the Community Development Block Grant (CDBG) 
     program to local governments and states to address the impact 
     of foreclosures. Foreclosure-based rental assistance would 
     also be provided to renters through the legislation.
       Local governments are experiencing the growth in sub-prime 
     mortgage foreclosures with dire predictions for citizens, 
     neighborhoods, and local economies. With the mortgage crisis 
     predicted to get worse over the next year, local governments 
     are poised to tackle the issue on multiple fronts: support of 
     strong federal anti-predatory and bankruptcy legislation, 
     support of reform and modernization of the Federal Housing 
     Administration (FHA), and through legislation such as the 
     Community Foreclosure Assistance Act, assistance to citizens 
     who have lost or are losing their homes.
       We commend your legislative initiative which not only 
     provides additional funding for CDBG, but allows more 
     flexibility in the program by increasing the public services 
     cap from 15% to 25% and lowers the current low- and moderate-
     income requirement from 70% to 50%. In addition, the bill 
     allows local governments and states to request a general 
     waiver to further provide foreclosure assistance. We would 
     also request that the legislation permit 10% of the funds be 
     used for administrative costs.
       We look forward to working with you to pass this important 
     legislation.
           Sincerely,
       U.S. Conference of Mayors.
       National Association of Counties.
       National Community Development Association.
       National Association for County Community and Economic 
     Development.
       National Association of Local Housing Finance Agencies.
                                  ____

                                                December 11, 2007.
     Senator Norm Coleman,
     University Ave., West,
     St. Paul, MN.
       Hon. Senator Coleman: The Association of Minnesota Counties 
     (AMC) would like to commend you for authoring the Community 
     Foreclosure Assistance Act of 2007 and voice our support for 
     your efforts to combat the effects caused by the recent trend 
     of rising home foreclosures across the state of Minnesota. 
     Although counties play a minor role in the homeownership 
     process when consumers buy a home and choose a means of 
     financing such a significant investment, counties do play a 
     significant role when things go wrong for the homeowner.
       Local governments are experiencing the growth in sub-prime 
     mortgage foreclosures with dire predictions for citizens, 
     neighborhoods, and local economies. With the mortgage crisis 
     predicted to get worse over the next year, local governments 
     are poised to tackle the issue on multiple fronts: support of 
     strong federal anti-predatory and bankruptcy legislation, 
     support of reform and modernization of the Federal Housing 
     Administration (FHA), and through legislation such as the 
     Community Foreclosure Assistance Act, assistance to citizens 
     who have lost or are losing their homes.
       We commend your legislative initiative which not only 
     provides additional funding for CDBG, but allows more 
     flexibility in the program by increasing the public services 
     cap from 15% to 25% and lowers the current low and moderate 
     income requirement from 70% to 50%. In addition, the bill 
     allows local governments and states to request a general 
     waiver to further provide foreclosure assistance. We would 
     also request that the legislation permit 10% of the funds be 
     used for administrative costs.
       When a home slips into foreclosure there can be significant 
     implications for the family who is losing their home, their 
     neighbors and their community. AMC believes that Congress 
     should take action to minimize the impacts of foreclosures on 
     our communities and preserve the vitality of our 
     neighborhoods.
           Sincerely,

                                              James A. Mulder,

                                               Executive Director,
     Association of Minnesota Counties.
                                  ____



                                   League of Minnesota Cities,

                                  St. Paul, MN, December 12, 2007.
     Hon. Norm Coleman,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Coleman: The League of Minnesota Cities 
     supports measures incorporated into the Community Foreclosure 
     Assistance Act of 2007 that you introduced today to address 
     the growing problems and increasing costs that cities face to 
     retain and protect vacant homes in foreclosure.
       Cities, both large and small, face deteriorating conditions 
     in many locations and are undertaking the often difficult and 
     costly challenge of preserving neighborhoods and affordable 
     housing stock threatened by growing numbers of foreclosures. 
     The loss of housing for families and individuals who are 
     often renting homes that are in foreclosure is another 
     troubling source of neighborhood instability and personal 
     hardship.
       The Community Foreclosure Assistance Act proposes to 
     address the impact of these foreclosures on local units of 
     government through emergency appropriations to be added to 
     the FFY 2008 funding for the Community Development Block 
     Grant (``CDBG'') Program. League support is also offered in 
     view of the fact that funding for the Community Foreclosure 
     Assistance Act will not be off-set from the critically 
     important resources committed to current and future CDBG 
     activities.
       The proposed provisions offer communities flexibility in 
     addressing the most pressing problems resulting from 
     residential foreclosures at the local level by raising the 
     CDBG cap for public service expenditures to 25 percent and 
     targeting the most at risk populations by lowering income 
     requirements to 50 percent of area median income, but also 
     allowing cities to request waivers from those requirements to 
     address their specific circumstances.
           Sincerely,
                                                  James F. Miller,
     Executive Director.
                                  ____



                                                 Moorhead, MN,

                                                December 13, 2007.
     Hon. Norm Coleman,
     U.S. Senate,
     Washington, DC.
       Dear Senator Coleman: I am writing to you today in support 
     of the Community Foreclosure Assistance Act of 2007. The 
     legislation would provide $1 billion through the Community 
     Development Block Grant (CDBG) program to local governments 
     and states to address the impact of foreclosures. This 
     legislation would give tools to cities across the country to 
     address the negative effects of foreclosures on neighborhoods 
     and communities.
       Your support of innovative legislation such as the 
     Foreclosure Assistance Act exemplifies your continued 
     commitment to local units of government. As Mayor, I can 
     speak firsthand to the positive impact that programs such as 
     CDBG have on cities and our residents, and I would like to 
     thank you for advancing this important piece of legislation. 
     Your continued support of communities throughout Minnesota 
     and the nation is very much appreciated.
       I look forward to continuing our work with you on this and 
     other matters in the future. Thank you.
           Sincerely,
                                                     Mark Voxland,
                                                            Mayor.

  Mr. COLEMAN. Mr. President, I yield the floor and suggest the absence 
of a quorum.
  The PRESIDING OFFICER (Mr. Webb). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HARKIN. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________