[Congressional Record Volume 154, Number 112 (Wednesday, July 9, 2008)]
[Senate]
[Page S6494]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008

  Mr. ISAKSON. Mr. President, I rise for a moment to talk about the 
pending housing stimulus bill which we will vote on tomorrow and then, 
hopefully, it will quickly be delivered to the House where any 
differences we have can be worked out and agreed to. I come to talk 
about this issue because America faces a pending financial crisis that 
is founded in the housing market, with the troubled mortgages in the 
financial services sector, so much trouble that the current economic 
decline we have experienced and the current difficulties the stock 
market is experiencing are, in large measure, tied to the state of 
housing.
  I commend Senators Shelby and Dodd. I actually thank the 
distinguished Senator from New York for the help he gave me on the tax 
credit on this bill.
  This bill is not perfect, but it certainly improves tremendously the 
climate in the United States for housing. For a second I want to try 
and impress upon my colleagues how important this issue is and dispel 
some of the myths that have been put out there about this issue. First, 
unless we pass GSE reform, which means Fannie Mae and Freddie Mac, 
there is going to be little, if any, liquidity in the conventional 
mortgage market. This legislation is a good reform piece for Fannie and 
Freddie. It also provides provisions that will allow for forward 
commitments so that mortgage companies can make mortgages and fund them 
through Fannie and Freddie and get housing moving in the marketplace.
  Second, it changes the loan limits on conventional and conventional 
jumbo loans to levels that are reflective of the values of housing.
  Third, it provides for a housing tax credit, something I was proud to 
be a part of. I proved in 1974, the last time we had a crisis like 
this, that it is the one single thing we can do as a catalytic agent to 
drive buyers back to the housing market. So the solution is not a 
bailout but a stimulus to get buyers in there buying the inventory that 
was built over the last 12 months.
  Fourth, there is a significant reform of FHA. Within that provision 
there is the creation of moneys for the refinance of troubled subprime 
loans. There has been a lot of misinformation in the news media and 
misinformation in speeches on this floor, frankly, on whether this is a 
bailout or whether it is a good thing to do.
  For a second I want to explain why it is absolutely not a bailout and 
why it is absolutely the right thing to do. Any loan that is 
refinanced, any subprime loan in trouble that is refinanced has to meet 
the following qualification: Its equity has to be negative, meaning the 
house is worth less than what is owed against it; No. 2, the lender who 
holds the loan against that house has to agree to take the discount or 
take the hit on whatever the differential is in that negative value; 
No. 3, FHA will underwrite the new loan to refinance out the discounted 
balance of the loan to the lender, provided the individual is somebody 
who can qualify to amortize the loan. It forces the lender to take the 
hit which they are going to take eventually in a foreclosure, and it 
prevents the foreclosure. For the person in trouble, it gives them a 
chance to pay back over time and get their credit established and 
improve themselves and build equity in the house.
  Most importantly, it benefits the next-door neighbor. I have heard so 
many people say we should not be helping somebody in trouble on a 
subprime loan. What do we say to the people who are making their 
payments and are not in trouble? The answer is, in most neighborhoods 
today where there is a foreclosure, values are going down, not up. You 
have John Q. Public who has made the monthly payments, has good credit. 
The house next door to him is foreclosed on. The grass grows. The 
lender sells at a deep discount. What happens, his equity is gone or is 
greatly reduced.
  The combination of the housing stimulus in terms of the tax credit, 
combined with the ability to refinance out of the difficult subprime 
loan and the requirement that the lender take the deep discount they 
are going to ultimately have to recognize anyway, is a formula for 
rebuilding the housing market.
  I know everybody here has a difficulty. There was one amendment--we 
will not be allowed any amendments--that I was very interested in 
offering in terms of the tax package. But I know the tree is filled up. 
There will be a managers' amendment. We will not be able to get to it. 
But you don't get everything you want in the Senate.
  One thing we have to do is to improve the plight of the American 
people economically. There are two things overriding the average 
American and two things only: One is what they are paying at the pump 
for gasoline and, secondly, is the declining value of equity in their 
house. With passage of this bill, we can show hope for the housing 
market. We may stimulate the buying public to come back and solve it 
with good marketplace-based solutions rather than subsidies or a 
bailout and, most importantly, return to a more healthy mortgage market 
and a more disciplined mortgage market and a better underwritten 
mortgage market. Then secondly and most importantly, we can change 
attitudes. The attitudes of the buying public are pretty negative right 
now because the lenders can't make a loan. House values are going down. 
They want to buy, but they want to buy at the bottom. We have to send a 
signal that the lenders are back in business making loans. Freddie Mac 
and Fannie Mae are back in business in terms of securitizing mortgage 
money and putting liquidity into the market, and values are 
stabilizing. So for whatever differences some Members have over the 
bill they would like to have versus the bill we do have, we should be 
reminded that every day we wait is a protraction of the current 
economic difficulty in the housing market. We cannot afford to leave 
this week without agreeing to the motion tomorrow and sending it to the 
House so the House, when they come back next week, can pass the 
legislation and the President can sign it and, by the middle to the end 
of July, the mortgage market, the housing market, and the buying 
public's attitude will be turned around. By doing that, we can 
hopefully have a light at the end of the tunnel that is not a 
locomotive but, rather, is a prosperous, healthy housing market and a 
disciplined, well capitalized, and liquid mortgage market.
  It is critical that we pass this legislation. I urge my fellow 
Senators to come to the floor, vote for the motion, and then let us get 
it to the House and encourage House Members to do precisely the same 
thing. It is getting too late. If we wait too long, it won't matter 
what we do.
  I yield the floor.
  Mr. BURR. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Ms. Cantwell). Without objection, it is so 
ordered.

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