[Congressional Record Volume 154, Number 78 (Tuesday, May 13, 2008)]
[Extensions of Remarks]
[Pages E898-E899]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   FORECLOSURE PREVENTION ACT OF 2008

                                 ______
                                 

                               speech of

                          HON. THELMA D. DRAKE

                              of virginia

                    in the house of representatives

                         Thursday, May 8, 2008

  Mrs. DRAKE. Mr. Speaker, first, I would like to thank Chairman Frank, 
Ranking Member Bachus and the Committee for their hard work. They have 
presented a thoughtful and creative proposal.
  Housing is a very complex issue--it is also a very emotional one. We 
aren't just talking about abstract concepts, we are talking about a 
person's home. We're talking about real people with a real problem.
  Prior to Congress I was a Realtor for over 20 years. I have worked 
with many families to help them realize their dream of home ownership. 
I have also served as chairman of the Virginia Housing Study 
Commission. Housing is an important issue for me and something I feel 
very strongly about.
  I have seen good markets and bad. I have witnessed many changes to 
the mortgage market. I have struggled with how to define and protect 
against predatory lending practices. I have seen interest rates and 
loan products that seemed too good to be true--unfortunately, we have 
seen that in fact, many were too good to be true. I rise today to share 
my observations and concerns about the bill before us.
  There are many components of this bill which I think are excellent 
and fully support. First Federal Housing Administration modernization 
is long overdue. FHA must be streamlined and made more efficient. 
Government Sponsored Enterprise regulatory reform would also help 
stabilize the housing market. I support an amendment to be offered 
today that will create a first time home buyer tax credit for low- to 
mid-income buyers. This would increase the number of buyers in the 
market--increasing demand now for an oversupply of homes. The bill also 
increases funding for foreclosure counselors and financial education. I 
also appreciate the additional funding for law enforcement to prevent 
mortgage fraud, and that Department of Veterans' Affairs loan limits 
are raised, and the enhanced appraisal standards and appraisal 
independence.
  These are all well thought out, very important reforms that will help 
American families and the marketplace.
  However, my concerns with today's package include the establishment 
of a new affordable housing fund to create new grants that can be 
directed to organizations that work specifically on housing issues. The 
bill does contain a provision that will prohibit the use of these grant 
funds for political activities, the fact is that many of the possible 
recipients engage in partisan political activities and therefore should

[[Page E899]]

not receive funding to offset their costs. It is important to remember 
that money is fungible, so that if a group cannot use these grants 
specifically for political activities, it could certainly have more 
money freed up for political activities because of the injection of new 
grants funding.
  I am also concerned about a $300 billion federal loan guarantee. 
There are two important issues with this provision that I foresee. One, 
a lender with troubled loans could contact those homeowners and offer a 
federally backed loan--and refinance at a loss but now he has moved 
that loan from a potential total loss to 85 percent current value--and 
will be guaranteed by federal government should it foreclose. He now 
has no reason to work with that borrower should the borrower still face 
foreclosure. Two, this program has a huge impact on neighborhoods. 
Consider neighbor A who bought at the height of the market. This person 
struggles month to month but manages to pay his mortgage on time. 
Neighbor 8 and their lender agree to take advantage of the new program 
and negotiates their mortgage to 85 percent current value. Not only is 
fairness between the two neighbors and issue, but the new reduction in 
value can have a huge impact on the value of surrounding properties.
  While I understand this is a voluntary program. My question is why 
can we not develop incentives for the private sector to do this and not 
obligate the American taxpayers with $300B in loan guarantees?
  Furthermore, there are several things already in the works. FHA 
secure is a new FHA product allowing homeowners to refinance their 
resetting Adjustable Rate Mortgages. So far, there are 3 times the 
refinances this year as in previous years. HOPE NOW is an alliance 
between counselors, services, investors that is working to prevent 
foreclosure through outreach to delinquent borrowers. The program 
provides counseling and loan work outs based on buyers' ability to pay. 
From July 07 through March 08 1.4m avoided foreclosures through these 
efforts. Also, Fannie Mae is currently working on a streamlined short 
sale program to allow the sale of property that is over-mortgaged.
  Both the administration and the private sector need to do a much 
better job at explaining what is currently available. Neither has done 
a good job of explaining to the public these available options. As 
such, I can understand Chairman Frank's frustration and desire to take 
action.
  Again I thank the committee for their work and I would encourage us 
to institute the reforms in this package that I highlighted. However, I 
firmly believe we should take caution and allow ongoing efforts to work 
before we decide to go down the path of obligating American taxpayers 
for $300B in loan guarantees.

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