[Congressional Record Volume 154, Number 39 (Friday, March 7, 2008)]
[Senate]
[Pages S1728-S1729]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
HOUSING CRISIS
Mr. BROWN. Mr. President, I say to the Presiding Officer, it seems as
though every day in your State of Pennsylvania and my State of Ohio and
across the country the news brings us more evidence of the length and
the breadth of the housing crisis in this country.
Yesterday, the Mortgage Bankers Association released statistics on
the fourth quarter of 2007, and the news is grim. The rate of
foreclosure starts and the percentage of loans in the foreclosure
pipeline are the highest ever.
My State set a record for foreclosures last year of more than 83,000
foreclosures, according to the Ohio Supreme Court. That is more than
200 every day--Monday, Tuesday, Wednesday, Thursday, Friday, Saturday,
Sunday--more than 200 every day, and more than 300 a day for every day
the courts are in session.
Every week, 1,500 families in Ohio--just in Ohio--lose their homes--
week in, week out. Four percent of home loans in Ohio are in
foreclosure, the highest rate in the Nation. And the end is nowhere in
sight. In Ohio, there are another 120,000 home loans that are
delinquent. Nationally, one of the ratings agencies is now predicting a
50-percent--nationally, a 50-percent--default rate for subprime loans
made in the fourth quarter of 2006. That means the rates for those
loans will reset in the fourth quarter of this year.
Think about that: One of every two subprime loans made in the fall of
2006 will go bad. That is not lending; that is gambling with somebody
else's home.
The losses on these loans to lenders are substantial--on the order of
40 percent nationwide and about 65 percent in my State. That means only
35 cents on the dollar is preserved, if you will.
We have sheriffs' sales in Ohio that are attracting no bidders
whatsoever. And the trend lines have been straight down.
Congress must act in the face of this crisis. Majority Leader Reid,
to his credit, brought legislation--of which the Presiding Officer is a
cosponsor, and many others of us--before the Senate that would take
several steps to help homeowners faced with foreclosure and the
communities in which they live.
The needs of communities are critical because this crisis has an
impact far beyond just the people--as large a number as that is, as
tragic as it is for them--an impact far beyond just the people who lose
their homes. Whenever a home goes into foreclosure, the value of
neighboring properties is reduced. It is not confined to our large
cities or to our small towns. It is rural areas. It is inner ring
suburbs. It is outer ring suburbs.
In many areas, criminals move in quickly in these abandoned homes to
strip the copper pipe and aluminum siding from a home. A copper
processor in northwest Ohio told me the other day that copper prices
are now exceeding $3 a pound, which just encourages more and more
vandalism of these homes.
Crime goes up just when property tax revenues are plunging and the
resources of a city or town are stretched to the limit.
So Senator Reid's bill would include $4 billion in funding for the
Community Development Block Grant Program so communities that have been
hit hard could renovate or rebuild or, in some cases, raze those
properties. This legislation would also provide another $200 million
for supporting the efforts of nonprofit agencies across the country to
counsel homeowners on how to work with a lender to stave off
foreclosure. That part is so very important.
Senator Casey, the Presiding Officer, Senator Schumer, and I, a year
ago, on the Banking Committee, began to try to get money appropriated,
which the President initially vetoed, to these counseling agencies,
these not-for-profit groups in our communities that help people stave
off foreclosure--no bailout, no Federal dollars to pay the mortgages,
but simply to help them find a lender and trace their mortgage and help
to restructure their payments so they can pay it off. This is no easy
task.
Once upon a time, you took out a loan with your local bank to buy a
home. You knew the people at the bank. They knew you. They had just as
much interest in you paying off your loan as you did in paying off your
loan and staying in your house. Today, especially for subprime loans,
that doesn't happen. So help in navigating this mortgage maze is
essential.
Senator Reid's bill also provided bankruptcy judges the ability to
modify mortgage terms on a primary residence in the same way--get
this--that the judge today can modify a mortgage on an investment home
or vacation property or a boat. I heard one of my Republican colleagues
today talk about this whole issue of bankruptcy and how that is going
to be a problem, and that is why they seem to oppose this bill--because
of the bankruptcy provisions. But they never really answer the
question: Why can't a judge modify a mortgage in bankruptcy for a home,
for a personal home, when under the law they can on a vacation home in
Florida or Arizona? They can on a boat, they can on an investment
property.
Lenders and their servicers cannot keep up with the flood of
foreclosures they are facing. Much has been made of the number of loans
that have been changed as a result of voluntary efforts. That is a good
thing; I don't discount those efforts at all. But tacking late fees and
penalties on the back end of a loan doesn't do much to help a family
make their monthly payment.
One woman who called my office recently reported a loan modification
she had gotten to reduce the interest rate on her loan from 11 percent
to 10 percent. With the late fees and the penalties folded in, her
monthly payment barely changed.
Modifications such as these simply aren't going to help. It is
essential that we permit bankruptcy courts to serve as a backstop.
So with the housing crisis spreading across the country and Senator
Reid's proposal before us, what did the Senate
[[Page S1729]]
do? My colleagues in the minority again chose to filibuster--filibuster
again and again. Fifteen hundred families in Ohio every week are losing
their homes, and over 100,000 are facing foreclosure. Multiply this all
over the country, and almost half the Senate chose to filibuster.
What could possibly be the reasoning for this decision? The
administration threatened a veto of the bill because it believed it was
too costly and that the bankruptcy provisions were unwise. I don't
agree, but can't we have a debate on that to make those decisions? I
would love to discuss why we can afford to spend $3 billion a week on
the war in Iraq--$3 billion on the war in Iraq--but we can't find $4
billion in 1 year, $4 billion in 1 year to help the towns and the
cities, including Burlington and Philadelphia and Pittsburgh and
Cleveland and Steubenville and Erie--why we can't find $4 billion in 1
year to help communities in this country that are being carpet-bombed
by foreclosure. We can spend billions of dollars on Halliburton to
rebuild Iraq, and we can't spend a few billion dollars on local
businesses in my communities in Ohio to rebuild our communities.
My Republican colleagues apparently think it is OK for a bankruptcy
judge to modify the mortgage on a multimillion-dollar vacation home,
but it is not OK to provide the same relief to a family facing
bankruptcy in a $100,000 home. When lenders are recovering only 35
cents on the dollar in my State--the national average is higher but not
a lot higher--35 cents on the dollar on a foreclosed property, I don't
think they have anything to fear from an alternative process supervised
by bankruptcy courts that may result in avoiding foreclosure. The
bankruptcy provisions are a significant change in our law, to be sure,
but they are a responsible reaction to some extraordinarily
irresponsible underwriting.
I understand the importance of protecting contract rights, but think
for a minute about the contracts that are in question. The vast
majority of subprime loans went to refinance homes, and they were
designed to do three things: generate fees, strip out equity, and
quickly become unaffordable. That is what they were designed to do.
That is why so many people were able to take the money and run--the
mortgage brokers--and, unfortunately, that is what happened. Do we
really want to take the position that those contracts should be beyond
the reach of a bankruptcy judge?
I may have answered my earlier question. I guess maybe a filibuster
would be easier for my friends on the other side of the aisle than an
actual debate on these issues. I know lenders want to avoid becoming
real estate owners, but they don't have the capacity to deal with the
problems that their lax underwriting standards have created. They are
obviously not in the business of rebuilding the communities this crisis
has devastated. That is why Senator Reid's legislation is so important.
I hope my colleagues on the other side of the aisle will reconsider
their tactics and will allow us to proceed on the legislation the
majority leader has introduced and which I am proud to cosponsor. Maybe
we will not have the votes in this body. In a fair and full debate,
maybe we will not have the votes to maintain all of the provisions.
Maybe there are alternative approaches. I am open to that. I want to
see this solved. But let's at least vote, and let's do it quickly.
Every day we delay, 200 people in my State--200 people--twice the
membership of this body--every single day 200 people in my State lose
their homes. They deserve more from us.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Vermont is recognized.
Mr. LEAHY. Mr. President, I was impressed with what the Senator from
Ohio said, and I commend him for what he said. We talk about the cost
of the President's war in Iraq and we have been in Iraq longer than we
were in World War II and the cost just in interest of the huge deficits
and the tripling of the national debt under the Bush-Cheney
administration; if we take the money we pay on interest on the national
debt and the money we pay in Iraq, it comes to somewhere around $1
billion a day, every single day of the year.
Think what we could do with that $365 billion a year: health care for
everybody, dramatically improve our schools, research on Alzheimer's,
diabetes, AIDS, cancer, so many things. Instead, we are sending
interest payments overseas and money to Iraq.
So I commend the Senator from Ohio for speaking out as he did.
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