[Congressional Record Volume 156, Number 168 (Friday, December 17, 2010)]
[House]
[Pages H8623-H8629]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1110
AIDING THOSE FACING FORECLOSURE ACT OF 2010
Mr. CAPUANO. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 5510) to amend the Emergency Economic Stabilization Act of
2008 to allow amounts under the Troubled Assets Relief Program to be
used to provide legal assistance to homeowners to avoid foreclosure, as
amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5510
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Aiding Those Facing
Foreclosure Act of 2010''.
SEC. 2. FORECLOSURE AVOIDANCE ASSISTANCE.
Section 109 of the Emergency Economic Stabilization Act of
2008 (12 U.S.C. 5219) is amended by adding at the end the
following new subsection:
``(d) Legal Assistance.--
``(1) Use of funds.--The Secretary shall make amounts that
were obligated under this title, through the financial
instruments for the Housing Finance Agency Innovation Fund
for the Hardest-Hit Housing Markets program of the Secretary
(in this subsection referred to as the `Hardest-Hit Fund'),
available to eligible entities, housing finance agencies, or
affiliates of such entities or agencies participating in the
Hardest-Hit Fund, upon request by such entities, housing
finance agencies, or affiliates, for the additional purpose
of providing assistance to State and local legal
organizations, including nonprofit legal organizations, whose
primary business or mission is to provide legal assistance,
for use for providing legal assistance to homeowners of
owner-occupied homes consisting of from one to four dwelling
units who have mortgages on such homes that are in default or
delinquency, in danger of default or delinquency, or subject
to or at risk of foreclosure, to assist such homeowners with
legal issues directly related to such default, delinquency,
foreclosure, or any deed in lieu of foreclosure or short
sale.
``(2) Prohibition on class actions.--No funds provided
under this subsection to a State or local legal organization,
including a nonprofit legal organization, may be used to
support any class action litigation.
``(3) Limitation on distribution of assistance.--
``(A) In general.--None of the amounts made available under
this subsection shall be distributed to--
``(i) any organization which has been convicted for a
violation under Federal law relating to an election for
Federal office; or
``(ii) any organization which employs applicable
individuals.
``(B) Definition of applicable individual.--In this
paragraph, the term `applicable individual' means an
individual who--
``(i) is--
``(I) employed by the organization in a permanent or
temporary capacity;
``(II) contracted or retained by the organization; or
``(III) acting on behalf of, or with the express or
apparent authority of, the organization; and
``(ii) has been convicted for a violation under Federal law
relating to an election for Federal office.
``(4) Authorization.--Amounts used as described under
paragraph (1) shall be deemed to be for actions authorized
under this title.''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Massachusetts (Mr. Capuano) and the gentleman from Nebraska (Mr. Terry)
each will control 20 minutes.
The Chair recognizes the gentleman from Massachusetts.
General Leave
Mr. CAPUANO. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days to revise and extend their remarks.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
Mr. CAPUANO. Mr. Speaker, I yield such time as she may consume to the
sponsor of the bill, the gentlewoman from Ohio (Ms. Kaptur).
Ms. KAPTUR. Thank you very much to my dear colleague, Congressman
Capuano of Massachusetts, for yielding me this time in support of
moving today H.R. 5510, the Aiding Those Facing Foreclosure Act, which
merely allows technical clarification language to existing legislation.
No authorization of funding or any expansion of existing funding is
included in this bill.
I would like to thank my colleagues on both sides of the aisle for
their support and for bringing this forth today. In particular, I would
like to thank Chairman Frank and Congressman Steve LaTourette for their
ongoing efforts on behalf of homeowners facing foreclosure.
Ohio is among those States labeled as the hardest hit in our Nation
by the foreclosure and economic crisis, along with 18 other States.
These states receive what is called ``hardest hit'' assistance funds.
Ohio, among other States, wants the discretion to use a small amount
of its existing funds under existing authorities to support legal
advice through not-for-profit legal organizations to individual
families facing foreclosure. However, Treasury interpreted that
existing law didn't allow that. That is why we are here today--to
clarify that, in fact, citizens of our Nation who are single-family
homeowners do have the right to proper legal advice in such critical
mortgage workout proceedings that affect their equity, that affect
their family's home and their future.
Millions of people have faced foreclosure across our Nation. Far too
many are losing their homes without proper, necessary legal
representation. Many even have no idea that they have legal standing in
such property proceedings. At such a critical and emotional moment in a
family's life, legal advice can help a family find the outcome that
works best for them in a foreclosure proceeding. In today's very
complex mortgage proceedings, it becomes daunting for affected
homeowners to gain the legal advice necessary to navigate the
increasingly complex world of distant banks and courts, which often are
much more easily navigated by the mortgagor. And certainly the
mortgagee should have similar legal rights as well.
We appreciate the fact that the Treasury is sending a letter of
support in furtherance of our efforts. Thus, I introduce this
legislation as a legislative fix, H.R. 5510. For those States already
receiving hardest hit funds, H.R. 5510 increases the State's ability to
serve only single-family owner-occupied units that are facing default,
delinquency, foreclosure, deed in lieu, or
[[Page H8624]]
short sale by permitting, if the State so chooses, to use hardest hit
funds to support legal services offered by not-for-profit legal aid
organizations.
In sum, the bill does not require States to use funds to support
legal aid or services. So there's no requirement. This language is only
permissive. The bill does not permit funds to be used for class action
lawsuits. It only applies to single-family owner-occupied units. The
bill does not permit any organizations like ACORN or others that are
not not-for-profit legal assistance groups to receive funding. Further,
the bill does not take money away from any State that is already
administering its funds. And the bill actually will help relieve
pressure on the States that are not hardest hit as other funding
becomes available in related housing programs in the future.
So, let me be clear. There's no new money involved here. This is only
giving the hardest hit States a new tool, if they so choose to use it,
to fight foreclosures in their States and give proper legal standing to
all parties involved. Nothing could be more important than allowing
families facing foreclosure to be afforded proper legal assistance to
rework their loan where that is possible.
Please support passage of H.R. 5510, the Aiding Those Facing
Foreclosure Act.
The SPEAKER pro tempore. Without objection, the gentleman from
Massachusetts (Mr. Frank) will control the time.
There was no objection.
Mr. TERRY. Mr. Speaker, I yield myself such time as I may consume.
I rise on behalf of Ranking Member Spencer Bachus, the minority in
opposition, strong opposition, to H.R. 5510.
Mr. Speaker, here we go again. The American people have rightly
demanded an end to the bailouts, but this outgoing Democratic majority
just can't seem to let go. Just this past October, Secretary Geithner
put out a lengthy report proclaiming the expiration of TARP, but it
seems that the $700 billion bailout isn't quite dead yet.
Just a week away from Christmas Eve, the Democratic majority is today
attempting to bring the bailout back to life for the sole purpose of
showering taxpayer money on community groups that provide legal
assistance. The premises of reopening TARP for this purpose is
troubling enough, but perhaps even worse is that we are bypassing any
form of regular order to consider this this morning.
We first received the text of this language, which is substantially
different from the introduced version, at 9 a.m. this morning. No
hearings were held on this legislation. No subcommittee or full
committee markup. No CBO score has been produced. We have yet to
receive any feedback whatsoever from the Department of Housing and
Urban Development or from the President.
We have heard that there's a letter of support, but simply the letter
we've received from the Treasury is one outlining why they can't do it.
In fact, there's been newspaper articles about how Secretary Geithner
has blocked this from occurring. In fact, the General Counsel recently
wrote that the proposed legal aid services are not necessary to the
implementation or effectiveness of the hardest hit fund because
Congress has provided other specific appropriations that funded the
same type of legal aid processes or services proposed by the State and
Federal; that legal aid services are not necessary or essential to the
implementation of a loan modification program. The case has not been
made that there are inadequate resources for legal assistance.
{time} 1120
The American people expect better.
The legislation before us today could conceivably result in billions
of taxpayer dollars being pumped into community groups similar to the
now defunct ACORN. That was not the purpose of the hardest-hit housing
market's program nor was it contemplated by the original emergency TARP
bailout. Even Treasury Secretary Geithner agrees with that point. TARP
was designed to return all unspent funds directly to the taxpayer so
that legislative efforts like today's wouldn't be possible. In theory,
this legislation could prevent more than $7 billion from being returned
to the taxpayers.
Our goal should be to return as much taxpayer money to the taxpayer,
not to invent new ways to make sure that we spend it. TARP was not
designed to be a perpetual slush fund.
The drafters of the 2008 TARP clearly understood how tempting it
would be to have a $700 billion pot of money lying around, so they
installed a firm expiration date for the program. That hasn't stopped
this majority from attempting to use the emergency stabilization money
for other purposes; but today's poorly crafted, non-vetted, redundant,
duplicative, and perhaps unnecessary bailout is particularly egregious
due to the process they followed.
I urge my colleagues to reject this suspension, and if additional
legal assistance moneys are required, go through regular order to prove
it.
I reserve the balance of my time.
Mr. FRANK of Massachusetts. I yield myself such time as I may
consume.
Mr. Speaker, I salute the ``good soldier'' attitude of my friend from
Nebraska. In the absence of any member on the Financial Services
Committee, he agreed to stand up and read what was written. He has no
way of knowing how silly it is. Nobody explained to him how inaccurate
it was.
For example, he says this has not gone through regular order. It is,
in fact, exactly the same legislative language that was debated,
amended and adopted in the House Financial Services Committee and then
in conference during financial reform. It is exactly that.
There is language in here that the gentlewoman from Ohio sensibly
agreed to that makes it clear that organizations that have been
convicted of criminal abuses can't be here, that only genuine legal
services organizations can get this money and that there can be no
class actions. It was carefully done. It's not the gentleman's fault.
He wasn't there. I wish the people who had been there had told him
that.
This is the legislative language taken from a bill that went through
the full legislative procedure and passed the House. In fact, there was
a change because we told the gentlewoman from Ohio, who has been very
diligent in this regard, that we thought it was best precisely to avoid
that kind of argument and to take the language that had already been
adopted in the committee, in the conference and on the floor of the
House.
Secondly, we are told it's going to cost extra money. No, it will
not. In fact, it could save money. In the language that the House
passed and the conference committee passed, we authorized $35 million
for exactly this purpose.
What the gentlewoman from Ohio is proposing is that we take money
that has already been voted under the TARP and use it for that. The
gentleman has been asked to characterize it as a ``slush fund.''
Hardheartedness has rarely come so close to the Christmas season. This
slush fund is to go to working Americans who bought homes and who are
facing foreclosure. Frankly, we were reasonably certain of this when we
passed this earlier this year, but we now know there have been serious
legal problems with the foreclosures. Some of them are merely
paperwork. Others we have seen are documented abuses.
You are a homeowner in trouble. You have the legal teams coming at
you from the lenders, from the servicers and others. You cannot
yourself afford a lawyer. You're having trouble meeting your mortgage
payment.
What we say is, We will give you access to a lawyer--not in the
offensive way. There is no class action here. There is no legal suit
that can be brought against the lenders. There maybe should be.
This says, I'm being foreclosed. I don't think I should be
foreclosed. They made a mistake. I paid that mortgage; or I got a
modification. Somebody forgot it.
All we're asking is, Can we take some money that has already been
voted and let that person have a lawyer to go to court--a legal
services lawyer, vetted by the local bar association--to defend him?
To the Republican Party, that's a slush fund. I am appalled. I am
appalled at the insensitivity and at the cruelty.
By the way, I voted for the TARP money, along with Mr. Boehner, the
incoming Speaker. They did it at the
[[Page H8625]]
request of President Bush. As for the bailouts they keep flailing
about, every single bailout that exists in America today was initiated
by President George Bush, every single one--AIG, the TARP, the
automobiles. It was George Bush who did it, and George Bush, after the
election conveniently, said that it was the TARP that saved the economy
from the consequences, I think, of mistakes that had been made during
his Presidency. So that's the bailout they are talking about.
What we are saying is this:
We put an end to any new money. Given existing money, given the clear
documentation that there have been abuses and errors and even, in some
cases, fraud in the foreclosure process--although, in some cases, they
were just paperwork errors--this is for beleaguered homeowners who are
trying to save their homes, who are trying to keep themselves and their
families from being kicked out the of their homes in case there was a
mistake at legal assistance. If everything is in order, the lawyers
can't save them.
What we are saying is, given what has been documented, let's take
some of the money that has already been voted in the TARP--that's
right. It has no CBO score--and put it there.
Secretary Geithner told me personally that he supports this. I'm
sorry the letter isn't here yet, but I think Members will accept the
fact that I'm telling the truth when I tell you that I spoke to the
Secretary and showed him what we were doing, and he supports it. The
language has gone through the full legislative process. It is language
taken from the bill.
I hope we will pass this and also have the $35 million. This is for
the hardest-hit States, the States that have had the worst impact. The
$35 million could then be used for the other States. But again, a slush
fund? It's a slush fund that can't go to ACORN. I know ACORN is a real
focus for them.
It, of course, validates the old saying: Great obsessions from tiny
acorns grow.
So every time we try to help any poor people with legal assistance so
they are not faced with the unfair situation of being outgunned by an
array of lawyers and they don't have any lawyers themselves to defend
them, ACORN gets it. ACORN can't get this money on a number of grounds.
There can't be class action suits.
If there is a homeowner who is convinced that he or she is being
unfairly foreclosed upon and could document errors, should that person
be denied legal assistance from money already voted at the request of
George Bush and with the support of Mitch McConnell and with the
support of the incoming Speaker and with the support of the incoming
majority leader? Should they not be able to use it?
I wish this weren't partisan. People tell me, Why are things
partisan?
I wish things weren't partisan. I wish I could eat more and not gain
weight. I wish a lot of things.
We are here on a partisan situation because what ought to be obvious
is that money already appropriated, knowing as we do that there have
been abuses in the foreclosure process, ought to be available to
appoint genuine lawyers to defend people. By the way, do you know legal
services lawyers? They're among the most dedicated people you'll find.
These people could be making far more money in private practice, but
they're there to help out.
They're restricted. There can't be class action suits. They can't go
to a general organization that does legal work. They have to go to a
genuine legal services organization, which are often, in my case,
always supervised by the State bar association--and it is a slush fund.
You know, I can understand some differences of opinion, but to demean
it this way--to call it a ``slush fund''--to deny ownership of the
bailout, which was, of course, a Republican administration policy and
to characterize it that way, all we are saying is money already voted
could be made available for genuine legal assistance to help people who
are facing unfair foreclosures so they can go to court.
The point is that we get this demeaning characterization. You know,
we are supposed to be proud of our system of justice. We are not
talking about giving anybody a free pass. What we are saying is working
people who are facing foreclosure ought to be able to get to court on,
not equal terms with the lenders and the large organizations opposing
them, but with some bare minimum of representation--and that's a slush
fund. That's a political trick.
{time} 1130
I am very disappointed. We had real hopes that we could get some
agreement on this. Everybody acknowledges that there have been abuses
in the foreclosure process. We know there are people who can't afford
lawyers. It will not cost the taxpayers any money. This is money that
will be used elsewhere. It's a diversion from money that was otherwise
going to be used in the TARP. It doesn't reopen the TARP. I hope it
will add to the $35 million we hope we can get. It has been vetted
through the legislative process. The gentlewoman from Ohio, who has
been a great crusader on behalf of people in this situation, accepted
our suggestion that she take the language that has already been voted
on in the House.
So I am disappointed, but I hope that party discipline will not
prevail on the Republican side. People--particularly from those States,
Ohio, California, Indiana, and Florida, where they are particularly
hard hit, but everybody, because everybody will benefit if we can
increase this pool--will say something that's apparently terribly
radical to my Republican friends. Let's let members of legal assistance
operations, supervised by their bar associations, subject to their
supreme courts and the State's supervision, go to court to defend
someone facing an array of high-priced legal talent when they know that
they are being foreclosed upon illegally and inappropriately.
And that is apparently a terrible thing to the Republican Party. I
am, as I say, appalled. I hope that a sense of fairness will somehow
prevail and we can pass this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. TERRY. Mr. Speaker, I yield myself such time as I may consume.
I appreciate my friend from Massachusetts pointing out my good
soldiering here, but there are certain things that I do know are facts,
and that is: Taxpayers are already paying for legal services for the
impoverished. It's the Legal Services Corporation. And the
appropriation for this year, at least as it currently is listed, is
$440 million.
Perhaps what we're saying here is using the TARP fund as the vehicle
and keeping TARP alive is the wrong process here. Perhaps this isn't a
TARP or financial services issue. The right way is an appropriation
issue.
If the majority is upset that there is not enough money going to
legal services for the poor, whether it's for foreclosures or other
legal issues, the right path would be addressing the Appropriations
Committee and asking for additional funds within an already existing
process.
Committee staff is not aware of whether or not Geithner has now said
he is in favor of this bill. We don't know of any conversations, but we
have no doubt to disagree with the gentleman from Massachusetts'
statement that he has had conversations. We've heard about a letter,
but we only have one dated September 13.
Mr. FRANK of Massachusetts. Will the gentleman yield?
Mr. TERRY. I yield to the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. Yes, the letter is on the way. I state,
as a matter of fact, that I personally spoke to Secretary Geithner and
he told me, as I explained it, that he supports it.
Does the gentleman doubt my word?
Mr. TERRY. No, and I said I don't doubt your word. I said that.
What we have here is a September 13 letter, but we've also heard that
there is another letter, or maybe we are talking about the same letter.
Mr. FRANK of Massachusetts. Will the gentleman yield?
Mr. TERRY. I yield to the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. The letter you are talking about is one
in which he says he doesn't have the legal authority to do it. This
bill gives him the legal authority. There is no conflict. This bill now
is a response to that letter. And I repeat that he has said that he is
in favor of getting the legal authority to do it.
Mr. TERRY. And reclaiming my time, that's the reason for our
opposition here.
[[Page H8626]]
The Treasury Department--it wasn't Republicans. It was their own
administration and the Cabinet Member, Mr. Geithner, that said TARP
doesn't have the powers to be a legal aid fund, so it takes them to
have to change this.
I kind of heard both things here, that if the administration was
agreeing to this or saying that this was the right thing for TARP or
that they had the powers, why was this bill even necessary? But let's
say TARP was necessary, or this bill is necessary, because, as Geithner
said in the September 13 letter, they don't have the power. So now, 2
years after the fact, they want to change TARP to become a legal aid
fund.
I was part of the group that held out our votes because we wanted to
make sure that this wasn't going to be a fund that was going to be
continuously used, that every dollar that was going to be spent had the
opportunity to be recouped so that the taxpayers at the end would not
be out any dollars. This changes the whole philosophy of TARP for many
people that voted for it.
Department of the Treasury,
Washington, DC, September 13, 2010.
Hon. Mary Jo Kilroy,
House of Representatives,
Washington, DC.
Dear Representative Kilroy: I am writing in response to
your recent inquiries about the Housing Finance Agency
Innovation Fund for the Hardest-Hit Housing Markets (the
``HFA Hardest-Hit Fund''). As you know, we designed the Fund
to support new and innovative foreclosure prevention efforts
in states--such as Ohio--that have been hardest hit by
housing price declines and high unemployment rates. I share
your strong commitment to maximizing the impact of the HFA
Hardest-Hit Fund and to helping responsible Americans keep
their homes.
I also understand your interest in whether the HFA Hardest-
Hit Fund can support legal aid services proposed by state
HFAs. It is critically important that struggling American
families receive accurate and helpful advice about how to
take advantage of the Administration's housing relief
efforts. Accordingly, I asked George Madison, the General
Counsel of the Treasury Department, to review the issue
closely. Mr. Madison has concluded that legal aid services
cannot be funded through programs such as the HFA Hardest-Hit
Fund that are authorized under the Emergency Economic
Stabilization Act of 2008 (``EESA''). I have enclosed a
detailed memorandum that analyzes the legal issues and
statutory limitations.
Thank you for your attention to these critical issues.
Although we cannot use EESA funds to support legal aid
services, we are fully committed to working with you to
ensure that the HFA Hardest-Hit Fund successfully provides
targeted aid to struggling homeowners and encourages
innovative solutions to the housing downturn.
Sincerely,
Timothy F. Geithner,
Secretary of the Treasury.
Enclosure.
Department of the Treasury,
Washington, DC, September 10, 2010.
Memorandum for Secretary Geithner
FROM: George W. Madison, General Counsel
SUBJECT: Funding of Legal Aid Services in connection with
the Housing Finance Agency Innovation Fund for the Hardest
Hit Housing Markets
This memorandum addresses whether the Department of the
Treasury (``Treasury'') can support certain proposed legal
aid services using Troubled Asset Relief Program (``TARP'')
funds in connection with the Housing Finance Agency
Innovation Fund for the Hardest Hit Housing Markets (``FIFA
Hardest-Hit Fund'').
We understand that you intend to share this memorandum with
Members of Congress.
I. Summary Conclusion.
For the reasons discussed below, we have concluded that
legal aid services cannot be funded through programs such as
the HFA Hardest-Hit Fund that are funded under the Emergency
Economic Stabilization Act of 2008 (``EESA''). Legal aid
services are not specifically authorized under EESA. In
addition, the proposed legal aid services are not necessary
and incidental, as a matter of law, to the implementation or
effectiveness of the HFA Hardest-Hit Fund, because: (1)
Congress has provided other specific appropriations that fund
the same type of legal aid services proposed by the state
Housing Finance Agencies (``HFAs''); and (2) legal aid
services are not necessary or essential to the implementation
of a loan modification program.
II. Factual Background.
Treasury has provided funding under EESA for the HFA
Hardest-Hit Fund for measures developed by state HFAs to help
homeowners in the states that have been hardest hit by the
housing downturn. Treasury has designated the HFA Hardest-Hit
Fund specifically for implementation in eighteen states, as
well as the District of Columbia. Each applicable state HFA
(or an eligible entity on its behalf) has developed a range
of programs tailored to the needs of its individual state and
has submitted funding requests to Treasury. Proposal
submission guidelines instruct the eligible state HFAs that
the proposed programs must ``meet the requirements of EESA.''
Staff members from several eligible HFAs have expressed an
interest in funding certain types of counseling and/or legal
aid services. Accordingly, they requested Treasury's views on
the funding of these types of services. In response, we
communicated--through a law firm engaged by Treasury to
assist it with the implementation of the HFA Hardest-Hit
Fund--our conclusion that certain limited counseling services
are eligible for funding under EESA, but that the proposed
legal aid services are not eligible. This memorandum
describes Treasury's legal position in further detail.
III. Legal Analysis.
As a general matter, government funds may be used only for
their intended purpose. EESA does not expressly authorize
payments for legal aid services. Section 101 of EESA
authorizes the Secretary of the Treasury to purchase
``troubled assets from any financial institution.'' And
109(a) authorizes the Secretary to use ``loan guarantees and
credit enhancements to facilitate loan modifications to
prevent avoidable foreclosures.'' Consistent with this
authority, Treasury has specified that FIFA Hardest-Hit Fund
proposals must facilitate loan modifications using credit
enhancements in the form of payments to loan servicers,
investors, and borrowers.
EESA does not cite, much less authorize, spending for legal
aid services. However, appropriations law does not require
that all government expenditures must be specifically or
expressly identified by Congress. It is well-settled that
when Congress makes an appropriation for an expressly-stated
purpose, it also authorizes by implication expenditures that
are ``necessary or incident to'' the implementation of the
expressly stated purpose.
The Comptroller General of the United States has held that
three factors must be considered when determining whether a
federal government expense is necessary or incidental--as a
matter of law--to the implementation of the object of an
appropriation (in this case, the implementation of a mortgage
modification program under EESA). All three factors must be
satisfied.
First, the expenditure must be ``reasonably related to the
purposes for which the appropriation was made.'' Second, the
expenditure ``must not be prohibited by law.'' And third, the
expenditure ``must not fall specifically within the scope of
some other category of appropriations''--in other words, the
expenditures are only authorized if they have not been
provided for more specifically by some other appropriation or
statutory funding scheme. The last requirement applies even
if the more appropriate funding source is exhausted and
therefore unavailable. If a federal agency funds an activity
under a broad appropriation, despite the fact that the
activity been specifically funded by another appropriation,
the agency would violate the Anti-Deficiency Act (31 U.S.C.
Sec. 1341).''
In our view, the expenditure of EESA funds for legal aid
services under the HFA Hardest-Hit Fund is prohibited,
because it does not satisfy the third factor of the
Comptroller General's test. Congress has otherwise
appropriated federal funds for the same types of legal aid
services proposed by the state HFAs. This conclusion, by
itself, is dispositive and means the proposals cannot be
funded under the HFA Hardest-Hit Fund.
In addition, we have concerns about whether the HFA
proposals satisfy the first factor of the Comptroller
General's test. Although the precise legal standard governing
this factor is unclear, numerous opinions require a close
nexus to a specific statutory purpose--i.e., that
expenditures be ``necessary'' or ``essential.'' We recognize
that typical legal aid services, such as those proposed by
the various state HFAs, are reasonably related to foreclosure
prevention efforts generally. However, we do not believe they
are necessary or essential to loan modification programs
under the HFA Hardest-Hit Fund.
A. Legal Aid Services Fall Specifically within the Scope of
Another Appropriation.
The third factor of the Comptroller General's test
prohibits the payment of any expenses if another
appropriation ``makes more specific provision for such
expenditures. In this case, the question is whether the legal
aid services proposed by the state HFAs fall within the scope
of other existing appropriations.
The answer is yes. Congress has specifically provided funds
for legal aid services through annual appropriations to the
Legal Services Corporation (the ``LSC''). The LSC uses
appropriated funds to make grants to non-profit legal aid
programs, which in turn offer legal services to low-income
individuals and families. Those services include helping
``homeowners prevent foreclosures or renegotiate their
loans.''
Moreover, Congress recently authorized legal aid
specifically related to foreclosure prevention efforts. On
July 21, 2010, the President signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Pub. L. No.
111-517 (2010) (the ``Dodd-Frank Act''):
Section 1498 of the Dodd-Frank Act authorizes HUD to
establish and administer a program that funds foreclosure
legal assistance to low- and moderate-income homeowners and
tenants related to home ownership preservation, home
foreclosure prevention, and tenancy associated with home
foreclosure;
[[Page H8627]]
Section 1498(d)(1) requires that the legal assistance only
be provided to ``homeowners of owner-occupied homes with
mortgages in default, in danger of default, or subject to or
at risk of foreclosure;'' and
Section 1498(f) appropriates to the Secretary of HUD $70
million for fiscal years 2011 and 2012 ($35 million each
year) for these legal aid grants.
In short, Congress already has funded legal aid services
through existing appropriations and statutory funding
schemes. Accordingly, we believe that providing additional
funding for legal aid services under the HFA Hardest-Hit Fund
would be contrary to opinions of the Comptroller General and
it might violate the Anti-Deficiency Act.
B. Legal Aid Services May Not Constitute a ``Necessary
Expense.''
The first factor of the Comptroller General's test requires
that necessary and incidental expenses must be ``reasonably
related to the purposes for which the appropriation was
made.'' As previously noted, we are not relying upon this
analysis, because the HFAs' legal aid proposals clearly do
not satisfy the third factor of the Comptroller General's
test. Nonetheless, various Members of Congress and other
interested parties have raised questions related to this
issue. Therefore, we have considered it and concluded that
the legal standard may not be satisfied.
Despite a ``vast number of decisions over the decades,''
the Comptroller General has not applied the first prong of
its test in a clear and consistent manner.'' Instead, the
Comptroller General has used a variety of different
formulations when discussing the standard. ``If one lesson
emerges, it is that the concept is a relative one.''
Nonetheless, in numerous opinions, the Comptroller General
has required a close nexus between a specific express
statutory purpose and any proposed expenditures--ie., the
expenditures must be ``necessary'' or ``essential.''
In this case, legal aid services may be reasonably related
to foreclosure prevention efforts generally; however, they
are not necessary or essential to running a loan modification
program. Typically, legal aid lawyers who represent
struggling homeowners perform a variety of functions, other
than just negotiating mortgage modifications. For example,
legal aid lawyers represent borrowers in arbitration
proceedings against their lenders; file injunctions and
bankruptcy petitions to prevent foreclosure sales; and, when
foreclosure sales occur, file exceptions proceedings in state
court.
Notably, the HFAs' legal aid proposals do not focus on
obtaining modifications under the HFA Hardest-Hit Fund or
under Treasury's Home Affordable Modification Program
(``HAMP'' ). Instead, they fall within two general
categories: using EESA funds to pay lawyers to
represent distressed borrowers in state foreclosure
proceedings, or using funds to provide general support to
legal aid programs related to foreclosure prevention.
Given the breadth of the proposals, legal aid services
frequently would result in outcomes other than loan
modifications. Accordingly, they are not--by definition--
necessary or essential to loan modification programs under
the HFA Hardest-Hit Fund. Moreover, even if the HFAs'
proposals were more targeted, most borrowers can obtain
modifications without traditional legal services. That is,
there is no need for representation in court proceedings,
no requirement to file papers or cite legal authorities,
and no need to negotiate contracts (because the
modifications are standardized).
We recognize that some Comptroller General opinions suggest
that expenditures merely need to be ``reasonably related'' or
``contribute materially'' to an authorized statutory purpose.
Here, one could argue that a general statutory purpose of
EESA is to prevent foreclosures and that any expenditures
reasonably related to that purpose are permissible. We
believe that such an interpretation sweeps too broadly. It
would authorize an almost unlimited number and variety of
government expenditure--ie., anything that is reasonably
related to preventing foreclosures. It also would render
meaningless the express provisions in EESA that together
provide authority for the HFA Hardest-Hit Fund: Section 101
authorizes the Secretary to purchase ``troubled assets from
any financial institution,'' and 109(a) authorizes the
Secretary to use ``loan guarantees and credit enhancements to
facilitate loan modifications to prevent avoidable
foreclosures.'' Lastly, such an interpretation would be
contrary to how Treasury has implemented EESA.
C. Certain Limited Intake and Follow-Up Services Are Eligible
for EESA Funding.
Finally, it is instructive to compare the HFAs' legal aid
proposals to the much narrower intake and follow-up services
related to TARP-funded modifications that are provided by
homeowner counseling agencies. We previously have concluded
that these services satisfy the Comptroller General's test
and are eligible for EESA funding.
Most HFAs have submitted proposals to Treasury that include
services narrowly tailored to obtaining modifications under
the HFA Hardest-Hit Fund programs, such as: (i) making
prequalification assessments of eligibility and submitting
the qualified applications to the HFAs; (ii) obtaining
supporting documentation from the borrowers and providing it
to the HFAs; (iii) ensuring that borrowers execute the
necessary documents for HFA Hardest-Hit Fund programs; (iv)
conducting post-closing meetings with borrowers receiving
assistance to ensure that they are complying with the HFA
Hardest-Hit Fund programs; and/or (v) verifying the steps
that the borrower has taken to find a job.
In contrast to legal aid, these particular services do not
fall within the scope of other existing appropriations.
Moreover, they are ``necessary'' and ``essential'' to running
a mortgage modification program, within the meaning of the
Comptroller General opinions. The HFAs have represented that
in the absence of intake and follow-up services, both the
number of applicants and the number of approved participants
will be materially smaller. These services are necessary for
many borrowers to participate in the HFA Hardest-Hit Fund
programs, and it will be very difficult for many of these
programs to run effectively without such services. In
addition, intake and follow-up services are directly related
to the HFA Hardest-Hit Fund programs. They will neither be
available to nor assist applicants to other, non-TARP funded
programs.
IV. Conclusion.
We recognize that legal aid services--such as representing
a borrower in court to avoid a foreclosure, or advising a
borrower about his or her legal rights--may be helpful to
preventing foreclosures. However, EESA does not expressly
authorize payments for such services, and Congress has
provided other federal funds for the same types of services
proposed by the HFAs. Moreover, unlike the specific
counseling services that HFAs have proposed, legal aid
services are not necessary or essential to the implementation
of the particular HFA Hardest-Hit Fund programs, within the
meaning of the Comptroller General opinions. For all these
reasons, Treasury has determined that legal aid services are
not eligible for EESA funding from the HFA Hardest-Hit Fund.
Mr. Speaker, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself such time as
I may consume.
Well, apparently the gentleman from Nebraska, having denounced those
bailouts, now tells us he voted for it. So it's confession time before
the House. He apparently voted for the measure that he characterizes as
a ``bailout'' that was such an imposition.
Secondly, I have never heard anything more confusing than this
discussion of the letters. Yes, the Secretary wrote and said, I don't
now have the authority. And we then said, Okay. We will give you the
authority.
Mr. TERRY. Will the gentleman yield?
Mr. FRANK of Massachusetts. I yield to the gentleman from Nebraska.
Mr. TERRY. We were referring to the gentlelady from Ohio's statement
on the floor that she has a letter saying that they support this. We
have not seen a letter that says that.
Mr. FRANK of Massachusetts. I know you haven't seen the letter. I
told her that the Secretary told me the letter is coming. The letter is
now being cleared by OMB. So we don't have the letter yet--the letter
has been written--but I can tell you the Secretary says he wants it.
The gentleman's discussion of the letter is totally confused--and
confusing, as a consequence.
Yes, there was a letter saying we don't now have the authority. This
gives them the authority, which they welcome. Secondly, this does not
extend the TARP at all. This does not extend the TARP in any way. And
as to getting repaid, there is legislation that we added to the TARP
that requires that at the end of the TARP program, 5 years from the
date of it, 2013, the President must submit to us legislation that
gives us a way to get it back from the financial services industry.
So, yes, this will be repaid to the taxpayer by the financial
services industry. By the way, the TARP is now down to a total of 25.
This does not add $1 or 1 day to the TARP, either in its lifetime or in
its funding.
The gentleman said, well, there is money in legal services. Yes. The
legal services appropriation last year was passed before we understood
the extent of the mistake, the fraud, and the abuse in the foreclosure
process. That is exactly right. The $400 million in legal services did
not anticipate what we have since learned about abuses in the
foreclosure process.
Finally, the gentleman said do it through the appropriation. We have
done that as well. We have asked for $35 million additional. By the
way, this is not extra money. The appropriations would be additional
money. But I will look forward to their support when that happens.
Mr. Speaker, I would now yield 3 minutes to the gentlewoman from Ohio
(Ms. Kilroy).
[[Page H8628]]
Ms. KILROY. I thank the chairman, and I thank the gentlelady, my
colleague from Ohio, Congresswoman Kaptur, for bringing this bill
forward.
You know, the hardest hit funds were put into place with the
intention of assisting and helping people in States that have been hard
hit by the foreclosure crisis that has enveloped this country, States
like Ohio that have been hit for years over and over again with record
foreclosures.
We have tried various ways to assist in this issue, and the President
and the Treasury came up with and we approved the Hardest Hit Fund
Program, H.R. 5510. That allows States to put together a plan for how
they want to address the issue of foreclosures inside their own State.
The States need to agree.
Now, some States wanted to include legal services in their plans and
were not able to do it. States like Ohio were not able to do it, even
though the use of attorneys in the process can be a very cost effective
and useful way of moving the cases forward, of coming to agreement, of
helping people come up with a plan and helping the banks to agree with
it. Sometimes they are needed because there are egregious abuses on the
other side in the foreclosure process that need to be addressed. But
sometimes, in counties like mine, Franklin County, Ohio, where, when I
was a county commissioner, we set up a court mediation process for
foreclosures, lawyers are needed and useful in, again, bringing the
parties together and helping them resolve the issues with respect to
their mortgages, their refinancing, and their ability to keep their
home, which is a major investment in their life. And keeping people in
their homes also helps our communities. It helps our neighborhoods,
because every time we have a foreclosure, we see crime going up and we
see the value of their neighbors' properties going down.
{time} 1140
This fix to allow Treasury to approve plans submitted by States that
want to use legal services will help this process move forward in an
effective, just, and cost-effective way.
I thank the gentleman.
Mr. FRANK of Massachusetts. How much time is remaining?
The SPEAKER pro tempore. The gentleman from Massachusetts has 2
minutes remaining, and the gentleman from Nebraska has 10\1/2\ minutes
remaining.
Mr. TERRY. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio
(Mr. LaTourette) who was actually a sponsor of the bill.
Mr. LaTOURETTE. Mr. Speaker, I wasn't going to come over and talk on
this bill this morning, but there's some things that are upsetting me
as we wind down this lame duck session, and I think there's one
merciful thing that could happen around here--this lame duck ought to
be killed because nothing good's occurring at the moment.
But this particular bill, I am a proud cosponsor of this bill with
Ms. Kaptur and I commend her for moving this legislation; and as a
matter of fact, we were engaged in some conversations last night to
clear it for unanimous consent. That didn't quite work out because
there are, as you know from the debate today, some objections.
But I have to say that having listened to the discussion, the
objections fall short, in my estimation. This bill doesn't extend TARP.
By the way, for the record, I voted against TARP despite the fact that
President Bush wanted us to vote for it, Secretary Paulson and a number
of our leadership. I thought it was a bad idea, continue to think it's
a bad idea even though some people say it saved America. Bad idea
because it had no rules. We're going to do this--no, we're going to do
that--we're going to buy banks, whatever.
But, anyway, so the money is already out there, however, and all this
bill does is say that States may have an option, if they choose, to
take some of the money in the hard hit fund and allow people who are
being foreclosed upon unjustly to use those funds for legal
representation. No class action, no ACORN, no peanuts, no nothing. I
mean, this is a clean bill when it comes to that, and I think that we
are letting form subsume substance.
Yesterday, I was on the floor and I was a cosponsor on a piece of
legislation with the gentlelady from Minnesota (Ms. McCollum) that
would have just moved money, no new money, would have moved money so
that societies that are coercing young girls into marriage, we could
build them latrines so they could go to school or we could make sure
that they could stay in school so they're not forced into marriage at
the age of 12 and 13. All of a sudden, there is a fiscal argument. When
that didn't work, people had to add an abortion element to it.
Look, this is a partisan place. I'm a Republican. I'm glad that we
beat their butt in the election and we're going to be in the majority
next year. But there comes a time when enough is enough, and McCollum's
bill was a good bill last night. Kaptur's bill is a good bill today. We
should stop the nonsense, approve the bill and move on.
Mr. TERRY. I yield myself such time as I may consume.
The point here is there's an appropriate vehicle and this isn't it.
We already have taxpayers paying into legal services. Perhaps there
should have been more money in there, but we didn't go through an
appropriations process for this area this year. That was the majority's
decision here. We can have this argument and debate, but that's the
proper course here. And it needs to go through regular service. This is
not.
Enough is enough. My friend from Ohio is right, enough is enough.
Let's let TARP die. We want it gone. It served its purpose. Let's not
keep it alive. Let's use the appropriate ways to do this, which is
Legal Services Corporation.
I yield back the balance of my time.
Mr. FRANK of Massachusetts. Mr. Speaker, I yield the balance of my
time to one of the single most effective fighters against unfair
foreclosures on our committee and among the leaders in the Nation, the
gentlewoman from California (Ms. Waters).
The SPEAKER pro tempore. The gentlewoman is recognized for 2 minutes.
Ms. WATERS. Thank you very much.
Mr. Speaker and Members, I'd first like to thank Barney Frank for all
of the efforts he's put into helping homeowners and the leadership that
he's provided on this committee, the Financial Services Committee.
I'd like to thank Marcy Kaptur. She has been a stalwart, not on the
committee but working every day because she's in one of the hardest hit
States, but so am I in California.
It is unthinkable that we could have used TARP funds for every major
corporation, all of the banks, all of the too-big-to fail, and yet we
would deny homeowners in the heart of his State some assistance. What
are we saying? These are people who have followed the American Dream,
and we have found that all kinds of exotic products were put on the
market. Many of them were tricked into signing on the dotted line, and
now we have whole communities that are being boarded up, that are in
foreclosure, communities that are being driven into the ground because
cities can't afford to keep them up.
We've done everything that we could do. We had the NSP. We have
assistance to unemployed folks. We're trying to do everything with not
a lot of help from the administration or from the regulatory agencies
in general.
The HAMP program simply has not worked. We need to send a message and
a real substantive message to the people and homeowners of America that
we care about them. We don't want them put on the street. We don't want
them losing their homes. The services or the too-big-to-fail banks,
everybody has made out on the backs of the American public. What's
wrong with using some of the TARP money for legal assistance?
People are trying very hard to fight these battles alone. They can't
get in touch with the services. They're trying to figure out where the
notes are, who really owns the mortgages. We have found that all kind
of robo-signing is going on. This whole industry has failed us and we
are allowing these homeowners to swim out there alone by themselves
with no help.
Let's help the American people. This is the least that we can do as
we close out this 111th Congress. We can not only send this message,
but we could stand up and demand that they get the kind of help that
will keep them and their families in their homes.
Mr. FRANK of Massachusetts. Mr. Speaker, I would like to submit the
following letter from
[[Page H8629]]
the Secretary of the Treasury Timothy Geithner to Congresswoman Marcy
Kaptur:
Department of the Treasury
Washington, DC, December 17, 2010.
Hon. Marcy Kaptur,
House of Representatives,
Washington, DC.
Dear Representative Kaptur: I am writing in support of your
proposed legislation, the ``Aiding Those Facing Foreclosure
Act of 2010'', H.R. 5510, as amended for consideration under
suspension of the Rules.
This legislation would permit the funding of legal aid and
other services to struggling homeowners through the Housing
Finance Agency Innovation Fund for the Hardest-Hit Housing
Markets program (``Hardest-Hit Fund''). Under current law,
funds available under the Emergency Economic Stabilization
Act of 2008, which are being used to finance the Hardest-Hit
Fund, cannot be used for legal aid services. If the
legislation is enacted, I believe Treasury would have the
authority to approve proposals for Hardest-Hit Fund monies
that were Previously allocated to states to be used for legal
aid services to homeowners.
I appreciate your ongoing commitment to this critical
issue.
Mr. JOHNSON of Georgia. Mr. Speaker, I rise in support of H.R. 5510,
the Aiding Those Facing Foreclosure Act, which would redirect bank
bailout funds to help struggling homeowners stay in their homes.
Mr. Speaker, the American people are deeply frustrated with the
financial services industry. The same lenders who begged for taxpayer-
funded welfare to survive their own mistakes now carelessly and
summarily throw American families out of their homes. When they came to
Congress hat in hand, having imperiled the global economy, they
implored us to bail them out with claims that the American people would
suffer if they were allowed to fail. Now, once again boasting record
profits, they are throwing the American people under the bus.
I applaud the distinguished gentle lady from Ohio, Ms. Castor, for
her courageous efforts to produce this bill, which would take bank
bailout money and put it to good use assisting homeowners who face the
nightmare of foreclosure.
I opposed the bank bailout known as TARP in 2008. I am pleased now to
support redirecting those funds to a better cause.
I urge swift passage of H.R. 5510, a common sense bill that serves
the public interest, not the rich, powerful, and connected.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Massachusetts (Mr. Capuano) that the House suspend the
rules and pass the bill, H.R. 5510, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. TERRY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________