[Congressional Record Volume 157, Number 78 (Thursday, June 2, 2011)]
[House]
[Pages H3922-H3924]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
AMERICA'S HOUSING CRISIS
The SPEAKER pro tempore. The Chair recognizes the gentlewoman from
Ohio (Ms. Kaptur) for 5 minutes.
Ms. KAPTUR. Mr. Speaker, in 2008, gas prices that rose above $4 a
gallon triggered the Wall Street meltdown and housing crisis that
continue to plague our country. We're in the same boat today again with
gas prices going over $4 a gallon, so be prepared.
I rise today to talk about that housing crisis that is devaluing our
housing stock across our country and destroying neighborhoods and
communities across the Nation.
[[Page H3923]]
Last week, the New York Times ran a piece I wish to place in the
Record highlighting one more twist in this crisis. According to their
front page expose, the big banks and mortgage companies have profited
even more from the foreclosure crisis by amassing giant ``real estate
empires'' that span across our country. So not only do six banks now
control two-thirds of the banking system of this country, they've also
become real estate magnates, too. When is too much too much?
The impact on communities has been devastating. The numbers are
simply shocking. In my community alone, over 6,700 more homes are in
some type of foreclosure filings. While thousands of America's families
are being thrown out on the street, the big Wall Street banks have
nearly doubled the number of houses they've taken through foreclosure
since the crisis began 5 years ago. That represents nearly 900,000
homes. That's 900,000 more families whose American Dream ended in
foreclosure.
Sadly, this doesn't include those who are barely hanging on.
Approximately one in four mortgaged homes are still underwater, where
families owe more than the home is worth.
After taking billions of dollars from our taxpayers, we might expect
that the Wall Street banks would want to help people stay in their
homes and help more vacant properties be taken off the market. Well,
that's not what I'm hearing from local realtors. I spoke with a group
of them over a week ago. They keep running up against a brick wall any
time they even try to do a workout with one of these banks. They
continue to have difficulty accessing credit for qualified, willing
buyers. More and more, I hear how it's only our local banks and our
credit unions that are making any effort to make this troubled housing
market function.
Wall Street walked away with billions in bailout money, and then
walked away from the housing mess they created. But they want even
more. All the while they are sitting on top of huge profits and taking
enormous tax breaks. The six largest banks in the country, including
Wells Fargo, Bank of America and JPMorgan Chase, together paid an
approximate tax rate of only 11 percent of their pretax U.S. earnings
in 2009 and 2010, less than half of what other businesses pay. I wish
someone in this place could explain why this is allowed to go on.
We need to understand that this foreclosure crisis is far from over.
In the first quarter of this year alone, approximately 215,000 more
properties were in foreclosure across our country, and another 700,000
properties were either in foreclosure filings, received default notice,
bank repossession or scheduled auction. As these banks continue to
agglomerate these properties that are becoming vacant, neighborhoods
across our country are being devalued and continue to disintegrate.
Every Member here knows what I'm talking about.
There are some signs that our economy is slowly improving. But, boy,
we aren't out of the woods yet. Moody's is predicting that housing
prices across our Nation will continue to fall by as much as 5 percent
by this year's end--I should say 5 percent more. We cannot sit on our
hands and hope the situation gets better. Revival of the housing sector
and the jobs it creates has always played a crucial and leading role in
any economic recovery. We need to work to help struggling families stay
in their homes, protect neighborhoods from being riddled with vacant
structures and get our economy moving again by arresting the continuing
decline in our vital housing assets built up over decades coast to
coast.
Importantly, revitalizing and reoccupying the troubled housing stock
would put millions of Americans to work. And isn't it over time to do
exactly that?
[From the New York Times, May 22, 2011]
As Lenders Hold Homes in Foreclosure, Sales Are Hurt
(By Eric Dash)
El Mirage, AZ.--The nation's biggest banks and mortgage
lenders have steadily amassed real estate empires, acquiring
a glut of foreclosed homes that threatens to deepen the
housing slump and create a further drag on the economic
recovery.
All told, they own more than 872,000 homes as a result of
the groundswell in foreclosures, almost twice as many as when
the financial crisis began in 2007, according to RealtyTrac,
a real estate data provider. In addition, they are in the
process of foreclosing on an additional one million homes and
are poised to take possession of several million more in the
years ahead.
Five years after the housing market started teetering,
economists now worry that the rise in lender-owned homes
could create another vicious circle, in which the growing
inventory of distressed property further depresses home
values and leads to even more distressed sales. With the
spring home-selling season under way, real estate prices have
been declining across the country in recent months.
``It remains a heavy weight on the banking system,'' said
Mark Zandi, the chief economist of Moody's Analytics.
``Housing prices are falling, and they are going to fall some
more.''
Over all, economists project that it would take about three
years for lenders to sell their backlog of foreclosed homes.
As a result, home values nationally could fall 5 percent by
the end of 2011, according to Moody's, and rise only modestly
over the following year. Regions that were hardest hit by the
housing collapse and recession could take even longer to
recover--dealing yet another blow to a still-struggling
economy.
Although sales have picked up a bit in the last few weeks,
banks and other lenders remain overwhelmed by the wave of
foreclosures. In Atlanta, lenders are repossessing eight
homes for each distressed home they sell, according to March
data from RealtyTrac. In Minneapolis, they are bringing in at
least six foreclosed homes for each they sell, and in once-
hot markets like Chicago and Miami, the ratio still hovers
close to two to one.
Before the housing implosion, the inflow and outflow
figures were typically one-to-one.
The reasons for the backlog include inadequate staffs and
delays imposed by the lenders because of investigations into
foreclosure practices. The pileup could lead to $40 billion
in additional losses for banks and other lenders as they sell
houses at steep discounts over the next two years, according
to Trepp, a real estate research firm.
``These shops are under siege; it's just a tsunami of stuff
coming in,'' said Taj Bindra, who oversaw Washington Mutual's
servicing unit from 2004 to 2006 and now advises financial
institutions on risk management. ``Lenders have a strong
incentive to clear out inventory in a controlled and timely
manner, but if you had problems on the front end of the
foreclosure process, it should be no surprise you are having
problems on the back end.''
A drive through the sprawling subdivisions outside Phoenix
shows the ravages of the real estate collapse. Here in this
working-class neighborhood of El Mirage, northwest of
Phoenix, rows of small stucco homes sprouted up during the
boom. Now block after block is pockmarked by properties with
overgrown shrubs, weeds and foreclosure notices tacked to the
doors. About 116 lender-owned homes are on the market or
under contract in El Mirage, according to local real estate
listings.
But that's just a small fraction of what is to come. An
additional 491 houses are either sitting in the lenders'
inventory or are in the foreclosure process. On average,
homes in El Mirage sell for $65,300, down 75 percent from the
height of the boom in July 2006, according to the Cromford
Report, a Phoenix-area real estate data provider. Real estate
agents and market analysts say those ultra-cheap prices have
recently started attracting first-time buyers as well as
investors looking for several properties at once.
Lenders have also been more willing to let distressed
borrowers sidestep foreclosure by selling homes for a loss.
That has accelerated the pace of sales in the area and even
caused prices to slowly rise in the last two months, but
realty agents worry about all the distressed homes that are
coming down the pike.
``My biggest fear right now is that the supply has been
artificially restricted,'' said Jayson Meyerovitz, a local
broker. ``They can't just sit there forever. If so many
houses hit the market, what is going to happen then?''
The major lenders say they are not deliberately holding
back any foreclosed homes. They say that a long sales process
can stigmatize a property and ratchet up maintenance and
other costs. But they also do not want to unload properties
in a fire sale.
``If we are out there undercutting prices, we are
contributing to the downward spiral in market values,'' said
Eric Will, who oversees distressed home sales for Freddie
Mac. ``We want to make sure we are helping stabilize
communities.''
The biggest reason for the backlog is that it takes longer
to sell foreclosed homes, currently an average of 176 days--
and that's after the 400 days it takes for lenders to
foreclose. After drawing government scrutiny over improper
foreclosures practices last fall, many big lenders have
slowed their operations in order to check the paperwork, and
in two dozen or so states they halted them for months.
Conscious of their image, many lenders have recently
started telling real estate agents to be more lenient to
renters who happen to live in a foreclosed home and give them
extra time to move out before changing the locks.
``Wells Fargo has sent me back knocking on doors two or
three times, offering to give renters money if they cooperate
with us,''
[[Page H3924]]
said Claude A. Worrell, a longtime real estate agent from
Minneapolis who specializes in selling bank-owned property.
``It's a lot different than it used to be.''
Realty agents and buyers say the lenders are simply
overwhelmed. Just as lenders were ill-prepared to handle the
flood of foreclosures, they do not have the staff and
infrastructure to manage and sell this much property.
Most of the major lenders outsourced almost every part of
the process, be it sales or repairs. Some agents complain
that lender-owned home listings are routinely out of date,
that properties are overpriced by as much as 10 percent, and
that lenders take days or longer to accept an offer.
The silver lining for home lenders, however, is that the
number of new foreclosures and recent borrowers falling
behind on their payments by three months or longer is
shrinking.
``If they are able to manage through the next 12 to 18
months,'' said Mr. Zandi, the Moody's Analytics economist,
``they will be in really good shape.''
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