[Congressional Record Volume 154, Number 128 (Wednesday, July 30, 2008)]
[Extensions of Remarks]
[Pages E1604-E1605]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               HOUSING AND ECONOMIC RECOVERY ACT OF 2008

                                 ______
                                 

                               speech of

                         HON. CAROLYN McCARTHY

                              of new york

                    in the house of representatives

                        Wednesday, July 23, 2008

  Mrs. McCARTHY of New York. Mr. Speaker, I would like to thank 
Chairman Frank for his hard work on this housing package.
  What began with a housing bubble, predatory and subprime lending, and 
loose regulatory enforcement has resulted in a record number of 
foreclosures across the country, the failure of financial institutions, 
a reduction in tax revenue for states and local government, a credit 
crunch, and a lack of confidence in our market that is affecting 
millions of individuals and families both directly and indirectly.
  Families reliant on the continuously increasing housing market 
entered into loans they could never afford or adjustable-rate mortgages 
with the assumption they could refinance at a later date.
  Loose regulatory enforcement allowed mortgage lenders and originators 
to engage in predatory lending practices and the housing bubble 
provided an incentive for lenders to reduce underwriting standards to 
encourage the creation of new loans.
  Furthermore, the failure on the part of the regulators allowed 
financial institutions to package and sell these risky new loans on the 
secondary market with the highest ratings from the rating agencies.

[[Page E1605]]

  All these events contributed to what we are now facing: increased 
foreclosure rates, large write-downs by financial institutions that 
hold a large number of mortgage-backed securities, vacant, foreclosed 
homes across the country, reduced tax revenue for states and local 
governments, and a lack of confidence in our financial and housing 
markets.
  This bill, H.R. 3221, the American Housing Rescue and Foreclosure 
Prevention Act, will address the causes of our current crisis through 
reform and attempt to assist communities dealing with the current 
crisis.
  Although there are many provisions in this package that are worth 
noting, I would like to highlight several provisions that are 
absolutely necessary to ensure the success of this package.
  This bill increases the high-cost loan limits for the Federal Housing 
Administration, FHA, and conforming loan limits for Fannie Mae and 
Freddie Mac. These increases will allow those in high-cost areas such 
as my district, the Fourth Congressional District of New York, to take 
advantage of the FHA home loans program. Although many of us would 
prefer a larger increase in these limits, I believe the limits in this 
bill reflect a compromise that will make eligible middle-income 
families in high-cost areas who are currently precluded from taking 
advantage of the FHA home loan program. I thank Chairman Frank and 
would like to recognize him for working with those of us who represent 
high-cost areas to ensure that our constituents are not left out.
  This bill also allows Fannie Mae and Freddie Mac the flexibility to 
hold or sell jumbo loans on the secondary market. This flexibility will 
ensure Fannie and Freddie are not unnecessarily restricted in how they 
choose to deal with jumbo loans, and will ensure that loans will 
continue to be available to moderate-income families in high-cost 
areas.
  Although reform is necessary to prevent another subprime crisis, we 
must also act to limit the effect that this crisis is having on our 
communities. Over half of the people who lose their homes stop 
communicating with their lenders within 30-60 days of missing a 
payment. This may happen for a number of reasons, including the fact 
that many homeowners are embarrassed or do not know their rights when 
they are unable to make their mortgage payments.
  For these reasons, it is so important that organizations willing to 
reach out to borrowers at risk of foreclosure utilize in-person 
counseling and outreach. This is the only way to guarantee that 
families who need assistance are aware that assistance is available. 
Consequently, it only makes sense to provide organizations engaging in 
practices, such as in-person counseling, that are proven to be 
effective the resources they need to continue to provide these 
services.
  I thank Mr. Baca and Mr. Mahoney for working with me to ensure that 
language to this effect is included in this bill.
  I also strongly support the almost $4 billion in this bill for state 
and local governments for the purchase and re-development of vacant, 
foreclosed homes.
  It has been estimated that a home decreases in value by almost one 
percent if a home within one city block has been foreclosed. This 
figure is even higher when more than one home in the area has been 
foreclosed. In my home district, a home price would result in more than 
a $4,000 decrease in value if one home is foreclosed.
  Additionally, tax revenue is severely affected when homes are left 
vacant or there is a decrease in their assessed value. The vacancy or 
home value decrease results in a decrease in tax revenue which burdens 
the budgets of state and local governments. In many cases, this 
shortfall then results in cuts in services to those most in need, 
including our children and seniors.
  Again, I would like to thank the Chairman of the Financial Services 
Committee and the many individuals who have worked to ensure that this 
bill reforms FHA and the GSEs, and tackles the increase in the rate of 
foreclosures and the devastating effects that vacant, foreclosed homes 
have on our communities.

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