[Congressional Record Volume 155, Number 39 (Thursday, March 5, 2009)]
[Extensions of Remarks]
[Page E579]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009

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                               speech of

                            HON. BILL POSEY

                               of florida

                    in the house of representatives

                      Thursday, February 26, 2009

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 1106) to 
     prevent mortgage foreclosures and enhance mortgage credit 
     availability:

  Mr. POSEY. Mr. Chair, H.R. 1106 is a combination of several free-
standing bills, all of which touch on financial services and which are 
intended to address the mortgage situation. While I support some 
aspects of H.R. 1106, such as updates to the Federal Credit Union Act 
and a servicer safe harbor for loan modifications, the bill goes far 
beyond this by expanding the failed Hope for Homeowners program and 
allowing judicial ``cram downs'' in bankruptcy cases. ``Cram down'' 
will significantly raise the cost of mortgages for all borrowers by 
enabling bankruptcy judges to rewrite the terms of mortgages. The House 
Financial Services Committee has never held a hearing on the impact of 
``cram down.'' My amendment to the Committee's Oversight Plan, accepted 
unanimously on February 11, directed the Committee to investigate the 
potential impacts of ``cram down'' legislation including its effects on 
the cost of mortgages, the taxpayers and the secondary market for 
mortgages.
  Despite a dismal performance record, this bill throws more money at 
the Hope for Homeowners (H4H) program, which I am informed has helped a 
mere 43 borrowers. The Congressional Budget Office estimates that 
expanding this program will help no more than 25,000 borrowers at a 
cost of $23,000 each. We also know that the changes the bill makes to 
H4H will weaken important taxpayer safeguards, leaving taxpayers to 
foot the bill directly for additional defaults.
  A significant concern I have with H.R. 1106 is the cram-down 
provision. The ``cram down'' provision would allow bankruptcy judges to 
change the terms of a mortgage loan for a primary residence, 
overturning a century of bankruptcy code and practice. Proponents of 
``cram down'' are quick to argue that bankruptcy judges should have the 
authority to help everyone stay in their homes. Anyone with common 
sense knows that higher risk or greater uncertainty will raise interest 
rates. Opening the possibility of ``cram down'' across the board for 
all primary residences adds uncertainty in the market and it will lead 
to higher interest rates across the board for all home buyers. 
Everyone, including responsible buyers, will be forced to foot the bill 
for speculators and those who make poor purchasing decisions as the 
costs of those decisions are spread across all borrowers. For more than 
100 years primary residences have been exempted from ``cram down'' 
bankruptcy proceedings precisely to help keep mortgage interest rates 
lower and homes more affordable. At a February 11 House Financial 
Services Committee hearing, I asked the nation's leading lenders what 
would happen if Congress passed ``cram down.'' Their response was 
overwhelmingly clear: allowing bankruptcy judges to ``cram down'' 
mortgages would increase the cost of all mortgages and add an incentive 
for more people to declare bankruptcy.
  The adverse effects of this legislation will extend beyond the small 
percentage of people it is intended to help. The increased risk in the 
housing market, and increased interest rates, will result in much 
larger down payments and cost first-time buyers and lower and middle-
class families tens of thousands of dollars. The Mortgage Bankers 
Association predicts that ``cram down'' would increase interest rates 
from six percent to eight percent on a 30-year, fixed rate mortgage. 
For a $300,000 loan for example, this would cost the borrower nearly 
$5000 per year and over $144,000 for the life of the loan. H.R. 1106 
will encourage more homeowners to file bankruptcy as some homeowners, 
currently on the margin of bankruptcy but still making payments, could 
take advantage of ``cram down'' bankruptcy as opposed to seeking a loan 
modification with their lender. Is encouraging bankruptcies really a 
solution to our problems? For many filers it would only delay the pain 
of foreclosure. Just one-third of Chapter 13 filers actually complete 
the process, which is itself costly and time-consuming. If our goal is 
to unfreeze credit and improve the economy, H.R. 1106 is the wrong 
prescription.
  We can do better. We can craft solutions that give troubled home-
owners a ``time out'' and help them catch up on payments without 
burdening taxpayers, overturning a bedrock provision of our bankruptcy 
code that has benefited 90 percent of Americans who do not have 
troubled mortgages. If this bill becomes law, new responsible 
homeowners will be forced to make higher mortgage payments each and 
every month for 30 years. That is a significant ``tax'' on responsible 
middle class families. Forcing responsible Americans to subsidize bad 
decisions by others may not meet the technical definition of a tax 
increase, but I believe whenever you take money out of one person's 
pocket and give it to someone else it is a tax.

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