[Congressional Record Volume 154, Number 128 (Wednesday, July 30, 2008)]
[Extensions of Remarks]
[Page E1602]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               HOUSING AND ECONOMIC RECOVERY ACT OF 2008

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                               speech of

                             HON. JOE BACA

                             of california

                    in the house of representatives

                        Wednesday, July 23, 2008

  Mr. BACA. Mr. Speaker, the foreclosure crisis is hurting communities 
all across the Nation and my district has been especially impacted: In 
San Bernardino County, 11,817 notices of default were recorded in the 
first quarter, 130 percent more than a year earlier.
  Everyone pays when there are foreclosures. Crime increases, home 
values decline, schools are affected, and cities run deficits which 
impacts revenues for local police, fire, and social services.
  Last Wednesday, I came to the floor in support of a legislative 
package that would stimulate our Nation's struggling economy and help 
prevent foreclosures. The House passed the American Housing Rescue and 
Foreclosure Prevention Act of 2008 with bipartisan support on that same 
day and the Senate approved it last Saturday, sending the bill straight 
to the President for his signature.
  I am particularly pleased that the final package included an 
important housing counseling provision which I offered with support 
from Reps. Mahoney from Florida and McCarthy from New York. This 
provision directs the Neighborhood Reinvestment Corporation to give 
greater consideration to counseling agencies that have a demonstrated 
track record in working with servicers and that provide in-person 
contact and in-person [face-to-face] housing counseling to borrowers in 
trouble when awarding their grants. It evolved out of the growing 
concern that despite all of the media attention given to the 
foreclosure crisis, as well as the creation of the HOPE Now Alliance, 
many homeowners were still not receiving assistance they needed to 
avoid entering foreclosure. According to a Freddie Mac study, 56 
percent of homeowners don't even know free counseling exists. Also, 
counselors across the country have reported delays and challenges 
connecting with telephone counseling. Counselors that receive referrals 
from hotlines often have to start fresh with the client, and language 
minorities report having difficulty reaching a live counselor.
  Whenever possible, in-person foreclosure counseling is preferable 
over telephone counseling alone. In fact, one-on-one counseling is 
shown preference in the HUD Housing Counseling Program--one that has 
demonstrated enormous success.
  Of course, the intention of this provision is not to exclude any 
struggling family. If telephone counseling is the only means of support 
available, the family should absolutely have access to it. The 
intention is to promote first the most effective and efficient services 
to families, then ensure a back up is in place. Telephone counseling 
should augment and supplement in-person counseling when it is 
unavailable or work is overflowing. Not the other way around.
  The intent of the effort which I have described is to make housing 
counseling dollars as effective as possible and to reach as many 
borrowers in trouble as possible. Providing in-person outreach to 
homeowners in trouble and in-person housing counseling is more 
effective than just sending a default notification in the mail. Having 
someone individually reach out to these borrowers to work through their 
options to avoid foreclosure by analyzing their specific situation, 
including their loan document, is a necessary line of prevention and 
defense.
  My amendment simply directs some of the counseling funding in the 
American Housing Rescue and Foreclosure Prevention Act (H.R. 3221) to 
organizations that already promote this proven method.
  It is our hope that the lenders, servicers, and federally regulated 
and federally chartered institutions like the GSEs and HUD would also 
do everything possible to include in-person outreach and in-person 
counseling in their efforts, including working with organizations that 
have the demonstrated capacity to reach out to homeowners needing 
assistance. Increasing this type of outreach and assistance is 
especially critical in non-judicial foreclosure states where notice of 
default and foreclosure is limited.
  We also hope the language in this bill will help level the playing 
field to ensure organizations with established servicer partnerships 
and the demonstrated experience and capacity to offer more in-depth 
service through in-person counseling and outreach can receive grant 
funding so that they have the resources they need to assist those hard-
to-reach borrowers.
  This is good public policy and good business because it will increase 
loan modifications and decrease foreclosures and thereby minimize the 
adverse impact on local communities. It will also strengthen 
relationships between counseling agencies, servicers, and lenders to 
enhance outreach out to borrowers who are behind in their payments. 
More importantly, it will help keep struggling families in their homes.
  Mr. Speaker, I am also pleased that the American Housing Rescue and 
Foreclosure Prevention Act contains another provision I authored in my 
bill, H.R. 4019, the Mortgage Disclosure Improvement Act and I want to 
thank Senator Reed (RI) the author of the companion bill, for his 
leadership in shepherding this provision in the Senate. This provision 
will ensure that consumers are provided with timely and meaningful 
disclosures in connection with not just home purchases but also for 
loans that refinance a home or provide a home equity line of credit. It 
requires that mortgage disclosures be provided within 3 days of 
application and no later than 7 days before closing. This should allow 
borrowers to shop for another mortgage if they are not satisfied with 
the terms. If the terms of the loan change, the consumer must be 
notified 3 days before closing of the changed terms.
  If consumers apply for adjustable rate or variable rate payment 
loans, there will now be an explicit warning on the 1-page Truth in 
Lending Act form that the payments will change depending on the 
interest rate and an estimate of how those payments will change under 
the terms of the contract based on the current interest rate. The bill 
also provides a new disclosure that informs borrowers of the maximum 
monthly payments possible under their loan.
  The bill provides the right to waive the early disclosure 
requirements if the consumer has a bona fide financial emergency that 
requires they close the loan quickly and increases the range of 
statutory damages for TILA violations from the current $200 to $2,000 
to a range of $400 to $4,000.
  Finally, it requires lenders to include a statement that the consumer 
is not obligated to purchase the mortgage loan just because they 
received the disclosures. This will give consumers the opportunity to 
truly shop around for the best mortgage terms for the first time ever. 
They will be able to compare the payments and costs associated with a 
certain loan product and decide not to sign on the dotted line if they 
do not like the basic terms of the loan.
  This will help prevent foreclosures in the future especially given 
the fact that many consumers facing foreclosure on their homes who have 
adjustable rate mortgages never understood how their loan products 
worked or how high their payments would be once their loans reset.

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