[Congressional Record Volume 155, Number 42 (Tuesday, March 10, 2009)]
[Extensions of Remarks]
[Pages E622-E625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009

                                 ______
                                 

                               speech of

                        HON. SHEILA JACKSON-LEE

                                of texas

                    in the house of representatives

                        Thursday, March 5, 2009

       The House in Committee of the Whole House on the State of 
     the Union had under

[[Page E623]]

     consideration the bill (H.R. 1106) to prevent mortgage 
     foreclosures and enhance mortgage credit availability:
  Ms. JACKSON-LEE. Mr. Chair, I rise in strong support of H.R. 1106, 
``Helping Families Save Their Homes in Bankruptcy Act of 2009.'' I 
would like to thank Chairman Conyers of the House Judiciary Committee 
and Chairman Barney Frank of the Financial Services Committee for their 
leadership on this issue. I also would like to thank Arthur D. Sidney 
of my staff who serves as my able Legislative Director.
  Mr. Chair, I urge my colleagues to support this bill because it 
provides a viable medium for bankruptcy judges to modify the terms of 
mortgages held by homeowners who have little recourse but to declare 
bankruptcy.
  This bill could not have come at a more timely moment. This bill is 
on the floor of the House within weeks after the President's address 
before the Joint Session of Congress where President Obama outlined his 
economic plan for America and discussed the current economic situation 
that this country is facing.
  To be sure, there are many economic woes that saddle this country. 
The statistics are staggering.
  Home foreclosures are at an all-time high and they will increase as 
the recession continues. In 2006, there were 1.2 million foreclosures 
in the United States, representing an increase of 42 percent over the 
prior year. During 2007 through 2008, mortgage foreclosures were 
estimated to result in a whopping $400 billion worth of defaults and 
$100 billion in losses to investors in mortgage securities. This means 
that one per 62 American households is currently approaching levels not 
seen since the Depression.
  The current economic crisis and the foreclosure blight has affected 
new home sales and depressed home value generally. New home sales have 
fallen by about 50 percent. One in six homeowners owes more on a 
mortgage than the home is worth which raises the possibility of 
default. Home values have fallen nationwide from an average of 19 
percent from their peak in 2006, and this price plunge has wiped out 
trillions of dollars in home equity. The tide of foreclosure might 
become self-perpetuating. The nation could be facing a housing 
depression--something far worse than a recession.
  Obviously, there are substantial societal and economic costs of home 
foreclosures that adversely impact American families, their 
neighborhoods, communities and municipalities. A single foreclosure 
could impose direct costs on local government agencies totaling more 
than $34,000.
  I am glad that this legislation is finally on the floor of the United 
States House of Representatives. I have long championed in the first 
TARP bill that was introduced and signed late last Congress, that 
language be included to specifically address the issue of mortgage 
foreclosures. I had asked that $100 billion be set aside to address 
that issue. Now, my idea has been vindicated as the TARP today has 
included language and we here today are continuing to engage in the 
dialogue to provide monies to those in mortgage foreclosure. I have 
also asked for modification of homeowners' existing loans to avoid 
mortgage foreclosure. I believe that the rules governing these loans 
should be relaxed. These are indeed tough economic times that require 
tough measures.
  Because of the pervasive home foreclosures, federal legislation is 
necessary to curb the fall out from the subprime mortgage crisis. For 
consumers facing a foreclosure sale who want to retain their homes, 
Chapter 13 of the Bankruptcy Code provides some modicum of protection. 
The Supreme Court has held that the exception to a Chapter 13's ability 
to modify the rights of creditors applies even if the mortgage is 
under-secured. Thus, if a Chapter 13 debtor owes $300,000 on a mortgage 
for a home that is worth less than $200,000, he or she must repay the 
entire amount in order to keep his or her home, even though the maximum 
that the mortgage would receive upon foreclosure is the home's value, 
i.e., $200,000, less the costs of foreclosure.

  Importantly, H.R. 1106 provides for a relaxation of the bankruptcy 
provisions and waives the mandatory requirement that a debtor must 
receive credit counseling prior to the filing for bankruptcy relief, 
under certain circumstances. The waiver applies in a Chapter 13 case 
where the debtor submits to the court a certification that the debtor 
has received notice that the holder of a claim secured by the debtor's 
principal residence may commence a foreclosure proceeding against such 
residence.
  This bill also prohibits claims arising from violations of consumer 
protection laws. Specifically, this bill amends the Bankruptcy Code to 
disallow a claim that is subject to any remedy for damages or 
rescission as a result of the claimant's failure to comply with any 
applicable requirement under the Truth in Lending Act or other 
applicable state or federal consumer protection law in effect when the 
noncompliance took place, notwithstanding the prior entry of a 
foreclosure judgment.
  H.R. 1106 also amends the Bankruptcy Code to permit modification of 
certain mortgages that are secured by the debtor's principal residence 
in specified respects. Lastly, the bill provides that the debtor, the 
debtor's property, and property of the bankruptcy estate are not liable 
for a fee, cost, or charge incurred while the Chapter 13 case is 
pending and that arises from a debt secured by the debtor's principal 
residence, unless the holder of the claim complies with certain 
requirements.
  I have long championed the rights of homeowners, especially those 
facing mortgage foreclosure. I have worked with the Chairman of the 
House Judiciary Committee to include language that would relax the 
bankruptcy provisions to allow those facing mortgage foreclosure to 
restructure their debt to avoid foreclosure.


                          MANAGER'S AMENDMENT

  Because I have long championed the rights of homeowners facing 
mortgage foreclose in the recent TARP bill and before the Judiciary 
Committee, I have worked with Chairman Conyers and his staff to add 
language that would make the bill stronger and that would help more 
Americans. I co-sponsored sections of the Manager's Amendment and I 
urge my colleagues to support the bill.
  Specifically, I worked with the Chairman Conyers to ensure that in 
section 2 of the amendment, section 109(h) of the Bankruptcy Code would 
be amended to waive the mandatory requirement, under current law, that 
a debtor receive credit counseling prior to filing for bankruptcy 
relief. Under the amended language there is now a waiver that will 
apply where the debtor submits to the court a certification that the 
debtor has received notice that the holder of a claim secured by the 
debtor's principal residence may commence a foreclosure proceeding 
against such residence.
  This is important because it affords the debtor the maximum relief 
without having to undergo a slow credit counseling process. This will 
help prevent the debtor's credit situation from worsening, potentially 
spiraling out of control, and result in the eventual loss of his or her 
home.
  Section 4 of the Manager's Amendment relaxes certain bankruptcy 
requirements under Chapter 13 so that the debtor can modify the terms 
of the mortgage secured by his or her primary residence. This is an 
idea that I have long championed in the TARP legislation--the ability 
of debtors to modify their existing primary mortgages. Section 4 allows 
for a modification of the mortgage for a period of up to 40 years. Such 
modification cannot occur if the debtor fails to certify that it 
contacted the creditor before filing for bankruptcy. In this way, the 
language in the Manager's Amendment allows for the creditor to 
demonstrate that it undertook its ``last clear'' chance to work out the 
restructuring of the debt with its creditor before filing bankruptcy.
  Importantly, the Manager's Amendment amends the bankruptcy code to 
provide that a debtor, the debtor's property, and property of the 
bankruptcy estate are not liable for fees and costs incurred while the 
Chapter 13 case is pending and that arises from a claim for debt 
secured by the debtor's principal residence.
  Lastly, I worked to get language in the Manager's Amendment that 
would allow the debtors and creditors to negotiate before a declaration 
of bankruptcy is made. I made sure that the bill addresses present 
situations at the time of enactment where homeowners are in the process 
of mortgage foreclosure. This is done with a view toward consistency 
predictability and a hope that things will improve.


                            RULES COMMITTEE

  During this time, debtors and average homeowners found themselves in 
the midst of a home mortgage foreclosure crisis of unprecedented 
levels. Many of the mortgage foreclosures were the result of subprime 
lending practices.

  I have worked with my colleagues to strengthen the housing market and 
the economy, expand affordable mortgage loan opportunities for families 
at risk of foreclosure, and strengthen consumer protections against 
risky loans in the future. Unfortunately, problems in the subprime 
mortgage markets have helped push the housing market into its worst 
slump in 16 years.
  Before the Rules Committee, I offered an amendment that would prevent 
homeowners and debtors, who were facing mortgage foreclosure as a 
result of the unscrupulous and unchecked lending of predatory lenders 
and financial institutions, from having their mortgage foreclosure 
count against them in the determination of their credit score. It is an 
equitable result given that the debtors ultimately faced mortgage 
foreclosure because of the bad practices of the lender.
  Simply put, my amendment would prevent homeowners who have declared 
mortgage foreclosure as a result of subprime mortgage lending and 
mortgages from having the foreclosure count against the debtor/
homeowner in the determination of the debtor/homeowner's credit score.

[[Page E624]]

  Specifically, my amendment language was the following:


           SEC. 205. FORBEARANCE IN CREATION OF CREDIT SCORE

  (a) In General--Section 609 of the Fair Credit Reporting Act (15 
U.S.C. 1681g) is amended by adding at the end the following new 
subsection:
  (h) Foreclosure on Subprime Not Taken Into Account for
  Credit Scores--
  (1) In General--A foreclosure on a subprime mortgage of a consumer 
may not be taken into account by any person in preparing or calculating 
the credit score (as defined in subsection (0(2)) for, or with respect 
to, the consumer.
  (2) Subprime Defined--The term `subprime mortgage' means any consumer 
credit transaction secured by the principal dwelling of the consumer 
that bears or otherwise meets the terms and characteristics for such a 
transaction that the Board has defined as a subprime mortgage.'.
  (b) Regulations--The Board shall prescribe regulations defining a 
subprime mortgage for purposes of the amendment made by subsection (a) 
before the end of the 90-day period beginning on the date of the 
enactment of this Act.
  (c) Effective Date--The amendment made by subsection (a) shall take 
effect at the end of the 30-day period beginning on the date of the 
enactment of this Act and shall apply without regard to the date of the 
foreclosure.
  The homeowners should not be required to pay for the bad acts of the 
lenders. It would take years for a homeowner to recover from a mortgage 
foreclosure. My amendment would have strengthened this already much 
needed and well thought out bill.
  I intend to offer a bill later this Congress to address this issue. I 
am delighted however that the Judiciary Committee has expressed their 
willingness to incorporate my language in the Conference language for 
this bill. Without a doubt, this issue is important to me and it is 
critical to Americans who are facing mortgage foreclosure and 
bankruptcy.


                            OTHER AMENDMENTS

  There were four amendments that were made in order by the Rules 
Committee. I will address my support or non-support for each amendment.


                           CONYERS AMENDMENT

  I support the Manager's Amendment offered by Chairman Conyers. The 
amendment makes sense and makes clear that H.R. 1106 is intended to 
help those that cannot afford to repay their mortgage without 
intervention. Indeed it is strength to the underlying bill by providing 
finality to the decisions worked out by the bankruptcy courts. These 
decisions would provide finality between lendors and borrowers. 
Moreover, the debtors are afforded certain protections by the Second 
Degree Amendment. The Second Degree Amendment provides that the lender 
could receive additional funding from the sale of the foreclosed home.
  The Manager's Amendment would do the following:
  (1) require courts to use FHA appraisal guidelines where the fair 
market value of a home is in dispute;
  (2) deny relief to individuals who can afford to repay their 
mortgages without judicial mortgage modification; and
  (3) extend the negotiation period from 15 to 30 days, requiring the 
debtor to certify that he or she contacted the lender, provided the 
lender with income, expense and debt statements, and that there was a 
process for the borrower and lender to seek to reach agreement on a 
qualified loan modification.
  The Conyers Amendment would require a GAO study regarding the 
effectiveness of mortgage modifications outside of bankruptcy and 
judicial modifications, whether there should be a sunset, the impact of 
the amendment on bankruptcy courts, whether relief should be limited to 
certain types of homeowners. The GAO must analyze how bankruptcy judges 
restructure mortgages, including the number of judges disciplined as a 
result of actions taken to restore mortgages.
  The Conyers Amendment would clarify that loan modifications, workout 
plans or other loss mitigation plans are eligible for the servicer safe 
harbor. Further, it would require HUD to receive public input before 
implementing certain FHA approval provisions.

  With respect to the HOPE for Homeowners Program: recasts the 
prohibition against having committed fraud over the last 10 years from 
a freestanding prohibition to a borrower certification. The Conyers 
Amendment would amend the National Housing Act to broaden eligibility 
for Home Equity Conversion Mortgage (HECM) or ``reverse mortgage.''
  Provides that the GAO must submit to Congress a review of the effects 
of the judicial modification program.
  Requires the Comptroller of Currency, in coordination with the 
Director of Thrift Supervision, to submit reports to Congress on the 
volume of mortgage modifications and issue modification data collection 
and reporting requirements.
  Expresses the Sense of Congress that the Treasury Secretary should 
use amounts made available under the Act to purchase mortgage revenue 
bonds for single-family housing.
  Expresses the Sense of Congress that financial institutions should 
not foreclose on any principal homeowner until the loan modification 
programs included in H.R. 1106 and the President's foreclosure plan are 
implemented and deemed operational by the Treasury and HUD Secretaries.
  Establishes a Justice Department Nationwide Mortgage Fraud Task Force 
to coordinate anti-mortgage fraud efforts. Would provide that the 
Treasury Secretary shall provide that the limit on the maximum original 
principal obligation of a mortgage that may be modified using EESA 
funds shall not be less than the dollar limit on the maximum original 
principal obligation of a mortgage that may be purchased by the Federal 
Home Loan Mortgage Corporation that is in effect at the time the 
mortgage is modified.


                          PRICE, TOM AMENDMENT

  I oppose the Price amendment. The Price Amendment provides that if a 
homeowner who has had a mortgage modified in a bankruptcy proceeding 
sells the home at a profit, the lender can recapture the amount of 
principal lost in the modification.
  I oppose the Price amendment for the following reasons.
  First, the Price amendment would make homeowners into renters for 
life. It will lead to poorly maintained homes and lower property values 
for all of us. It takes away any incentive for homeowners to maintain 
their homes or insist on competitive sale prices.
  Second, the Manager's amendment already allows lenders to get back a 
substantial portion of any amount a home appreciates after bankruptcy. 
But it leaves in place incentives for homeowners to maintain and 
improve homes.
  Third, the Price amendment is opposed by the Center for Responsible 
Lending, Consumers Union, Leadership Conference on Civil Rights, 
National Association of Consumer Advocates, National Association of 
Consumer Bankruptcy Attorneys, National Community Reinvestment 
Coalition, National Consumer Law Center, National Legal Aid and 
Defender Association, National Policy and Advocacy Council on 
Homelessness, and USPIRG.
  For the foregoing reasons, I oppose the Price Amendment and I urge my 
colleagues to vote ``no'' on this amendment.


                         PETERS, GARY AMENDMENT

  I support this amendment. This amendment is straightforward and is 
intended to help the borrower by providing a last clear chance to 
garner much needed information. It is my hope that this information 
would be used to provide financial assistance and education to the 
consumer.
  In many cases, proper education about the use of credit and mortgages 
could have made all the difference in the consumers choices. Simply 
put, if the consumers made wise and informed credit decisions in the 
first instance, they might not have been in bankruptcy or facing 
foreclosure. I find this amendment incredibly prudent and helpful to 
debtors and consumers. I urge my colleagues to support this amendment.


                            TITRUS AMENDMENT

  The Titrus Amendment would require a servicer that receives an 
incentive payment under the HOPE for homeowners to notify all 
mortgagors under mortgages they service who are ``at-risk homeowners'' 
(as such term is defined by the Secretary), in a form and manner as 
shall be prescribed by the Secretary, that they may be eligible for the 
HOPE for Homeowners Program and how to obtain information regarding the 
program.
  The HOPE for Homeowners (H4H) program was created by Congress to help 
those at risk of default and foreclosure refinance into more 
affordable, sustainable loans. H4H is an additional mortgage option 
designed to keep borrowers in their homes.
  The program is effective from October 1, 2008 to September 30, 2011.


                         How the Program Works

  There are four ways that a distressed homeowner could pursue 
participation in the HOPE for Homeowners program:
  1. Homeowners may contact their existing lender and/or a new lender 
to discuss how to qualify and their eligibility for this program.
  2. Servicers working with troubled homeowners may determine that the 
best solution for avoiding foreclosure is to refinance the homeowner 
into a HOPE for Homeowners loan.
  3. Originating lenders who are looking for ways to refinance 
potential customers out from under their high-cost loans and/or who are 
willing to work with servicers to assist distressed homeowners.
  4. Counselors who are working with troubled homeowners and their 
lenders to reach a mutually agreeable solution for avoiding 
foreclosure.

[[Page E625]]

  It is envisioned that the primary way homeowners will initially 
participate in this program is through the servicing lender on their 
existing mortgage. Servicers that do not have an underwriting component 
to their mortgage operations will partner with an FHA-approved lender 
that does.
  Because I am committed to helping Americans obtain homes and remain 
in their homes, I support the HOPE for Homeowners Program and I support 
this amendment. I urge my colleagues to support this bill. Indeed, I 
feel personally vindicated that Congress has set aside $100 bill 
to address the issue of mortgage foreclosure, an issue that I have long 
championed in the 110th Congress.


                     HOUSING, FORECLOSURES, & TEXAS

  Texas ranks 17th in foreclosures. Texas would have faired far worse 
but for the fact that homeowners enjoy strong constitutional 
protections under the state's home-equity lending law. These consumer 
protections include a 3 percent cap on lender's fees, 80 percent loan-
to-value ratio (compared to many other states that allow borrowers to 
obtain 125 percent of their home's value), and mandatory judicial sign-
off on any foreclosure proceeding involving a defaulted home-equity 
loan.
  Still, in the last month, in Texas alone there have been 30,720 
foreclosures and sadly 15,839 bankruptcies. Much of this has to do with 
a lack of understanding about finance--especially personal finance.
  Last year, American's Personal income decreased $20.7 billion, or 0.2 
percent, and disposable personal income (DPI) decreased $11.8 billion, 
or 0.1 percent, in November, according to the Bureau of Economic 
Analysis. Personal consumption expenditures (PCE) decreased $56.1 
billion, or 0.6 percent. In India, household savings are about 23 
percent of their GDP.
  Even though the rate of increase has showed some slowing, 
uncertainties remain. Foreclosures and bankruptcies are high and could 
still beat last year's numbers.
  Home foreclosures are at an all-time high and they will increase as 
the recession continues. In 2006, there were 1.2 million foreclosures 
in the United States, representing an increase of 42 percent over the 
prior year. During 2007 through 2008, mortgage foreclosures were 
estimated to result in a whopping $400 billion worth of defaults and 
$100 billion in losses to investors in mortgage securities. This means 
that one per 62 American households is currently approaching levels not 
seen since the Depression.
  The current economic crisis and the foreclosure blight has affected 
new home sales and depressed home value generally. New home sales have 
fallen by about 50 percent.
  One in six homeowners owes more on a mortgage than the home is worth 
raising the possibility of default. Home values have fallen nationwide 
from an average of 19% from their peak in 2006 and this price plunge 
has wiped out trillions of dollars in home equity. The tide of 
foreclosure might become self-perpetuating. The nation could be facing 
a housing depression--something far worse than a recession.
  Obviously, there are substantial societal and economic costs of home 
foreclosures that adversely impact American families, their 
neighborhoods, communities and municipalities. A single foreclosure 
could impose direct costs on local government agencies totaling more 
than $34,000.
  Recently, the Congress set aside $100 billion to address the issue of 
mortgage foreclosure prevention. I have long championed that money be a 
set aside to address this very important issue. I believe in 
homeownership and will do all within my power to ensure that Americans 
remain in their houses.


                               BANKRUPTCY

  We have come full circle in our discussion today. The bill before us 
today is on bankruptcy and mortgage foreclosures.
  I have long championed in the first TARP bill that was introduced and 
signed late last Congress, that language be included to specifically 
address the issue of mortgage foreclosures. I had asked that $100 
billion be set aside to address that issue. Now, my idea has been 
vindicated as the TARP that was voted upon this week has included 
language that would give $100 billion to address the issue of mortgage 
foreclosure. I am continuing to engage in the dialogue with Leadership 
to provide monies to those in mortgage foreclosure. I have also asked 
for modification of homeowners' existing loans to avoid mortgage 
foreclosure. I believe that the rules governing these loans should be 
relaxed. These are indeed tough economic times that require tough 
measures. Again, I feel a sense of vindication on this point, because 
this bill, H.R. 1106 addresses this point


                             Credit Crunch

  A record amount of commercial real estate loans coming due in Texas 
and nationwide the next three years are at risk of not being renewed or 
refinanced, which could have dire consequences, industry leaders warn. 
Texas has approximately $27 billion in commercial loans coming up for 
refinancing through 2011, ranking among the top five states, based on 
data provided by research firms Foresight Analytics LLC and Trepp LLC. 
Nationally, Foresight Analytics estimates that $530 billion of 
commercial debt will mature through 2011. Dallas-Fort Worth has nearly 
$9 billion in commercial debt maturing in that time frame.
  Most of Texas' $27 billion in loans maturing through 2011--$18 
billion--is held by financial institutions. Texas also has $9 billion 
in commercial mortgage-backed securities, the third-largest amount 
after California and New York, according to Trepp.
  Mr. Chair, my amendment would have helped alleviate these problems. 
Although my amendment language was not included in the bill, I am 
confident that it will be included in the Conference language.
  All in all, I believe that this bill is important and will do 
yeoman's work helping America get back on the right track with respect 
to the economy and the mortgage foreclosure crisis. I wholeheartedly 
urge my colleagues to support this bill.