[Congressional Record Volume 154, Number 44 (Friday, March 14, 2008)]
[Extensions of Remarks]
[Page E421]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page E421]]
   ESTABLISHING THE HOME OWNERS LOAN CORPORATION TO KEEP MILLIONS OF 
                    AMERICAN FAMILIES IN THEIR HOMES

                                 ______
                                 

                         HON. MARK STEVEN KIRK

                              of illinois

                    in the house of representatives

                         Friday, March 14, 2008

  Mr. KIRK. Madam Speaker, just this morning, The New York Times posted 
this headline: ``JPMorgan and Fed Bail Out Bear Stearns.'' The 
``subprime loan problem'' is mushrooming. Unless we take action with 
temporary relief targeted to keep families in their homes, we risk 
creating a patchwork ``bailout plan'' that will grow beyond our ability 
to monitor and will be impossible to dismantle.
  Despite today's headlines, the American residential mortgage market 
remains healthy overall. Homes worth $20 trillion secure just over $10 
trillion in mortgages, and over 90 percent of mortgage loans payments 
are not in default or foreclosure. However, one sector, subprime loans, 
is in distress. Over 7 million homeowners closed subprime loans between 
2003 and 2007. An estimated $1.3 trillion in subprime loans are 
outstanding, and half of these have adjustable rates. More than 20 
percent have fallen past due. Over half of pending foreclosures are the 
result of failed subprime loans. The worst is not over. During 2008, 
the interest rates paid by 1.8 million subprime borrowers with $362 
billion of adjustable rate mortgages will reset upward, sharply, and 
continue to rise every 6 months. Lenders have mortgage assets on their 
balance sheets they cannot sell at a fair price, and borrowers are 
wincing at the sharply higher reset interest rates they must face later 
this year.
  In today's Washington Post, Alex Pollack, former president of the 
Chicago Federal Home Loan Banks and now a resident scholar at the 
American Enterprise Institute, reminds us of ``A 1930's Rescue 
Lesson''--the Home Owners Loan Corporation, better known as ``HOLC''. 
This Government corporation was given the authority to purchase 
troubled home loans from lenders at a discount for 3 years, then 
liquidate when its ``workout'' mission was complete. HOLC's 
participation in the troubled 1934 mortgage market assured liquidity, 
restored confidence, and rescued 800,000 families from the threat of 
foreclosure. In 1951, HOLC completed its task, returning its initial 
capital contribution to the Treasury, with a profit.
  I am introducing legislation to re-establish the Home Owners Loan 
Corporation, capitalizing it with $25 billion that can be deployed 
immediately to purchase up to $300 billion in troubled home loans. The 
new corporation will have the mission of fulfilling HOLC goals 
established in 1933, in a way that: keeps borrowers in their homes, and 
foreclosures to a minimum; does not bail out careless lenders or 
speculative investors; limits the cost to taxpayers; is temporary.
  Its board of directors would include representatives from the 
Treasury, the Government Accountability Office, the FDIC, HUD, and the 
Office of Federal Housing Enterprise Oversight.
  HOLC21, like its predecessor, will limit its purchases to mortgages 
secured by primary residences. And, like its predecessor, it will 
liquidate when its job is complete. This temporary emergency program is 
meant to be a lifeline to subprime borrowers, preventing a downward 
spiral into recession. Its doors will not be opened to allow lenders to 
dump their assets on the Government without recognizing the cost of 
imprudent credit decisions. HOLC21 would purchase or guarantee 
mortgages on primary residences that are past due or in default, 
adjusted to a balance equal to 90 percent of a fair valuation of the 
collateral property as set by HOLC21. In markets that have seen 
property values drop, lenders will have the choice of recognizing their 
loss and selling a mortgage to HOLC21, or holding the loan and waiting 
for housing values to improve.
  Alex Pollack describes HOLC as ``sensible temporary actions'' 
designed to ``bridge the bust'' and ``be withdrawn as private market 
functioning returns.'' The private market needs temporary Federal 
support. Let's make sure it is temporary, efficient, and targeted to 
homeowners.

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