[Congressional Record Volume 154, Number 50 (Tuesday, April 1, 2008)]
[Senate]
[Pages S2254-S2256]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
HOUSING CRISIS
Mr. BOND. Mr. President, as I think we all know, far too many
families in America are seeing the American dream of owning their own
home slip away.
Over the Easter break, I toured the State of Missouri. In every
community around the State I met with people who are struggling under
the threat of foreclosure, neighborhood groups concerned about the
impact of foreclosure on their families and on their communities,
mayors, city council leaders who are seeing their communities
threatened seriously by this spate of subprime foreclosures, and most
of all mothers and fathers with children who are facing the loss of
their home.
I did not talk with speculators, investors, or the folks on Wall
Street, but the people I talked to did have a number of thoughts--
thoughts they believe would help them keep the promise of keeping their
home. They did not want a Federal bailout. But they were looking for
ways to make the system work for them.
Some of the suggestions they made were at the macro level and, among
others, they said there ought to be regulation--probably Federal
regulation--of those who originate mortgages. Now, many of the bricks-
and-mortar lending institutions--banks, and savings and loans in the
community--are regulated, but there are many mortgages, subprime
mortgages, that were sold over the Internet and by fax. Whenever I go
home, my fax machine is filled with 1 percent mortgage teaser rates.
They also want to see HUD be able to move more quickly in getting the
FHA secured loans. That is a good idea--to go in and to help homeowners
whose mortgages have reset and caused them to lose their homes--but it
is too narrow. They think that ought to be reformed.
I believe that through FHA, we, as taxpayers, should not be put at
risk by insuring loans where there is zero downpayment. Regrettably,
zero downpayment too often means the homeowner can't afford that
mortgage and they walk away. The often cited program, the Nehemiah
Program, which provides charitable contributions to take care of the
downpayment requirements, has an appalling 30 percent default rate.
That is a raid on the Federal Treasury. We ought not to be doing that.
Before people make a loan, they ought to have counseling and education
to make sure their finances, their income will support the mortgage
payments.
Also, when you buy a home, you might have to support the replacement
of a furnace that blows or a leaky roof, things that renters don't have
to pay. If they can't afford to buy a home, we want to see them in a
good home that could be a rental home.
But the most important thing they said we could do now is provide
counseling, to bring together those homeowners whose homes are in
foreclosure or who are facing foreclosure, to sit down with the lenders
and see if they can work out an agreement before they go to
foreclosure. Everybody says: Well, what interest does a lender have in
avoiding foreclosure? Well, foreclosures are expensive. They drive down
the value of the property and potentially put at risk the value behind
other mortgages they may own in the same community.
Last fall, Senator Dodd and I agreed to include $180 million in the
Housing and Urban Development Appropriations bill to begin counseling.
The first $130 million has gone out. We are beginning to see the
results of that. Those counseling dollars can help homeowners, if they
will go to a counseling entity such as The United Way or local
governments to get counseling, before they wind up on the courthouse
steps.
In addition, there need to be dollars available to buy down mortgages
where the mortgage rates have skyrocketed because of the subprime
crisis. That is why, in the SAFE Act which I have introduced with my
colleagues--the Security Against Foreclosure and Education Act--we make
sure there is money available through the State Housing Finance
agencies. I know well the Housing Finance Agency in Missouri--the
Missouri Housing Development Corporation--and they have a great plan.
If they can have more money, maybe $160 million to $180 million,
possibly $200 million in Missouri, they could go in and buy out
mortgages where the private mortgage holder has had to increase
substantially the rate because of the overall market conditions. If
these HFAs can sell paper, tax-exempt paper, they can bring back the
mortgage rates to the level that was affordable initially.
It is very important for fixed-income homeowners to count on a
certain mortgage payment. Some have seen it go up 50 percent, and too
many of them are being forced to the choice of walking away because
they can't meet it. We need to get HFAs to have the ability to go in
and refinance those mortgages.
In addition, with Senator Isakson, we have included in the SAFE Act a
measure to provide a tax credit for families willing to buy a home in
foreclosure or going into foreclosure. In other words, it would be a
$5,000 tax credit for each of 3 years for families who would move into
one of these homes either in foreclosure or facing foreclosure. That
not only gives a boost to first-time home buyers, but the most
important thing it can do for communities is avoid the problem of
having a community with 20 percent of the homes in foreclosure.
This isn't a problem for just the 20 percent of the families who are
facing foreclosure; that is a potential disaster for the other 80
percent of the homeowners because what it does to the value of their
homes and to the value of every house in that community is to drive the
values down significantly, so they may find their home is worth less
than the value of the mortgage.
Finally, we want loan transparency. As a former lawyer, I have had
the dubious pleasure of going through home purchasing documents several
times recently. They give you a stack of paper this high that has all
been written by lawyers, God bless them, and it has every contingency
spelled out. But most people who go through the purchase process spend
40 minutes signing the papers without knowing what is in them. What we
want is a very simple disclosure on top, which is binding on the lender
and on the borrower, that says what the rate will be, if it is
adjustable, how high it can adjust, when it can adjust, if there is a
prepayment penalty, and what are the other terms that might cause
significant economic distress to the home buyer. They need to know that
in advance. Also, there ought to be counseling to help those
prospective home buyers measure their financial ability, their ability,
through their income, to buy a home and to make sure they can afford
the mortgage they are seeking.
I hope this is the basis on which almost all of us in this body can
agree. We have heard a lot about what is going on at the macro level.
There are important things happening with the Fannie Mae and the
Freddie Mac, such as getting $200 billion more that they can loan, and
the Federal Reserve moving in. All these things are important on a
large national scale.
This is not only, however, a national and international problem; most
of all, it is a community problem. The proposals we have set forth in
the SAFE Act are designed to help build up from the community level the
solutions we need for home buyers and homeowners, particularly those
threatened with foreclosure. We are only going to solve
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this problem if we work community by community. The SAFE Act is
designed to help homeowners, counselors, and local government officials
deal with the problem in their communities and build, community by
community nationwide, the solutions to the problem that affects not
just homeowners but affects our entire country.
I invite our colleagues to look at this legislation. I hope we can
discuss it, as our leader has said, and come to agreement on some
things we can pass, and pass right now, because too many homeowners are
facing a crisis and need help.
I thank the Chair and I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Florida is
recognized.
Mr. MARTINEZ. Mr. President, I thank the Senator from Missouri for
his words. I was reminiscing, as I was listening to him, about my work
as the HUD Secretary, and many times getting good counsel and advice
from my main appropriator, a man who knows a great deal about this
whole problem and about this issue, and I thank him for his comments. I
think he is exactly right when discussing how the problem we are seeing
today is hurting families.
When I had the good fortune to be at HUD, it was in the good times.
We were talking about ever-increasing rates of home ownership,
particularly among minority families; more and more people getting into
home ownership. It was a good thing because as we were doing that, we
were building communities. Streets were getting stronger and families
were getting stronger and cities and communities were getting stronger.
Now we are seeing the reverse of that. That is why it is so important
to take the steps the Senator from Missouri suggested and to move
forward aggressively on this problem.
Let me talk a little bit about what I saw in Florida during the last
few days when I was there. I think in Florida it is a microcosm of the
problem. The state of the market is one in which we see increasingly,
at the level of the homeowner, that people are more and more distressed
and more and more in trouble about holding onto the home they have. You
drive around and see signs about a foreclosed home for sale. In
addition to that, you know people are having a problem making ends
meet.
The second situation related to that is the fact that many people are
now staying away from the market. They are simply not buying homes. The
reason for that is there is a sense of insecurity about where we are
today in this very difficult moment. So as a result, we find that homes
are not being purchased. This is having an impact on market prices,
where home prices are in a decline and fewer and fewer buyers are in
the marketplace. As a result of all these things, there have been
significant economic impacts on the State of Florida. So what begins as
a problem for a family--and a significant problem, a heartbreaking
problem--becomes a compounding problem when it impacts the entire
economy of a State such as Florida.
The State of Florida is greatly dependent on homebuilding for its
economy, and that is a fact. When speaking these past few days to
people in the industry, I am hearing from homebuilders who are saying:
I have had to lay people off. I had to lay off substantial numbers of
the workforce. Large homebuilders have laid off hundreds and hundreds
of people. The impact on the economy is significant.
So the Florida situation is somewhat revealing of what is happening
across the country, which is why I come back here more determined than
ever that we have to act; that this is a time for the Congress to take
strong and significant action to try to have an impact on what is a
deteriorating situation.
Everybody keeps talking about whether we have hit bottom or when the
housing market is going to hit bottom. Well, I am not sure if we have
hit bottom yet. I hope we have, and I hope we are beginning the
situation of ascending back. But the bottom line is we have to act, and
there are things we can do in certain areas where we must act.
I suggest we act in three areas. One is the area that impacts the
homeowners themselves. That is what Senator Bond was talking about:
About home counseling, about getting people help, about workouts. The
fact is, it is in the best interests of a financial institution to work
out a loan with a hurting homeowner rather than to turn that into
foreclosure. Nobody wants to have a foreclosed home on their inventory;
what they want is the homeowner continuing to make their payments.
We have to work on housing counseling. We also have to do FHA
modernization. I see the Senator from Connecticut, my chairman. We have
worked hard to get FHA done. We have to get that done. That is going to
help families by making the FHA a more active player in this current
marketplace. It is going to bring FHA into play by allowing them to do
larger loans, by allowing them to be more flexible in the loans they
do.
FHASecure is a good first step. We need more flexibility in
FHASecure. We need to make sure families who have already gotten in
trouble but who are not desperate yet--who have not gotten yet to
foreclosure but who have gotten behind--are able to utilize FHASecure.
Why do we do that? Because it will allow families to get into an FHA
mortgage that will allow them to be in a mortgage they can carry and
keep out of trouble.
We need to stabilize values. We need to make sure the decline in home
values stops, because as that happens, the equity in homes continues to
decline, and that is not good for the economy as a whole.
How can we help with these ideas? One I like a lot is Senator
Isakson's idea to provide a tax credit to try to lower the inventory of
unoccupied homes. If these homes are unoccupied, as has happened in
Florida--many were built that are today not being bought. We need to
get the market going again. We need to get people back into buying
homes. We need to make sure they have an opportunity to do so. The
encouragement of a tax credit I think will go a long way toward doing
that.
A second related problem is liquidity. I have talked to homebuilders
who are telling me they have some buyers who cannot find loans. Banks
are not lending money. Money has tightened. So as money has tightened,
we need to provide those things which will create more liquidity in the
marketplace. Which is why I am fearful that cramming down mortgages is
not a good idea; in fact, it will work against providing more
liquidity.
I also wish to look at the long-term effects. There is a need for
regulatory reform. I have talked about the regulation of the
government-sponsored enterprises Fannie Mae and Freddie Mac home loan
banks.
We need a stronger, more effective regulator. I have been preaching
this since I was at HUD. This is an important concept. We have
increased loan limits and lowered capital requirements to 20 percent.
As we have done that, it is necessary that we look at a stronger
regulator. The rules today are not up to par for what we need. These
are trillion dollar companies of incredible importance that will play a
significant role in getting us out of the market dilemma we are in. In
order for them to be stronger and for them to have the kind of investor
confidence they must have, I think a stronger regulator would be a
great step forward.
I commend the Secretary of the Treasury for the proposal he made on a
broader regulatory scheme for our financial world. I think some of
these ideas that are also being discussed in Congress are important. We
need to consider them and many need to be adopted. They may be on a
second tier.
I am looking at more immediate things we can do to prop up the
housing market and look forward in that regard. I want to touch on the
importance of working in a bipartisan fashion. Chairman Dodd and I have
had conversations. It is important we work together and come together
with something that will help the American people. The people of
Florida desperately need help. This is a problem not only relating to
the end consumer, the homeowner--the family who tasted that dream of
home ownership and got into a loan and is now seeing the nightmare of
losing it--but also to those people who have lost a job or are fearful
of losing one.
The economy depends so much on housing. That is what we need to
address. I hope we will come to some understanding of how to move
forward in a bipartisan fashion and work toward a solution that will
help the American
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people get back to the strong, vibrant economy we have known in recent
years, and also continue to grow that dream of homeownership for more
and more American families.
I thank the Chair and yield the floor.
The PRESIDING OFFICER (Mr. Tester). The Senator from Connecticut is
recognized.
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