[Congressional Record Volume 155, Number 79 (Thursday, May 21, 2009)]
[Extensions of Remarks]
[Pages E1257-E1258]
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

                         Tuesday, May 19, 2009

  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in strong support of S. 
896, ``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. This issue is 
now before this body again for consideration.
  Mr. Speaker, 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, S. 896 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.
  S. 896 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.

[[Page E1258]]

  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.
  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 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 debtors credit situation from worsening, potentially 
spiraling out of control, and result in the eventual loss of his or her 
home.
  The bill 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 bill 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 bill 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.
  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, Americans' 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.
  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 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.

                          ____________________