[Congressional Record Volume 168, Number 199 (Wednesday, December 21, 2022)]
[Senate]
[Pages S9780-S9781]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


     
     
               STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
     
           By Mr. REED (for himself, Mr. Brown, Mr. Wyden, and Ms. Smith):
       S. 5342. A bill to provide requirements for the bulk auction or group 
     sale of certain non-performing loans, and for other purposes; to the 
     Committee on Banking, Housing, and Urban Affairs.
       Mr. REED. Mr. President, today I am introducing the Preserving Homes 
     and Communities Act with Senator Brown, Senator Wyden, and Senator 
     Smith. This legislation would reform Federal Housing Administration, 
     FHA, Fannie Mae, and Freddie Mac note sale programs to protect 
     homeowners from foreclosure and keep properties in the hands of owner-
     occupants and local community members.
       In the wake of the Great Recession, FHA, Fannie Mae, and Freddie Mac 
     began selling nonperforming and reperforming loans to strengthen their 
     balance sheets. These transactions, known as note sales, transfer 
     mortgage ownership to bulk purchasers, which are often private equity 
     firms or institutional investors that can move homes to the single-
     family rental market. While note sales reduce financial risk for FHA, 
     Fannie Mae, and Freddie Mac and help purchasers earn a profit, they 
     often directly harm homeowners and communities.
     
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       Borrowers with loans insured by FHA or securitized by Fannie Mae or 
     Freddie Mac have strong foreclosure protections because mortgage 
     servicers must offer specific loss mitigation options to eligible 
     borrowers before they can begin foreclosure proceedings. These robust 
     protections help many delinquent homeowners catch up on mortgage 
     payments and avoid foreclosure, but they drastically shrink when a 
     mortgage is included in a note sale.
       It is not surprising that over 80 percent of homeowners whose 
     nonperforming loans were sold by FHA ultimately lost their homes after 
     their new servicers reached a final loan resolution. Moreover, the U.S. 
     Government Accountability Office has found that nonperforming loans 
     sold by FHA are more likely to face foreclosure than comparable loans 
     that FHA keeps on its balance sheet. The majority of homeowners with 
     nonperforming loans sold by Fannie Mae and Freddie Mac have also lost 
     their homes after servicers reached a final resolution. The data is 
     overwhelming: note sales do not help most borrowers remain in their 
     homes.
       Compounding matters, note sale purchasers, which again are 
     predominately private equity firms and institutional investors, often 
     move foreclosed properties out of the owner-occupied market. In fact, 
     Pretium, one of the Nation's largest owners of single-family rental 
     homes, is the third largest purchaser of Fannie Mae and Freddie Mac 
     nonperforming loans in note sales. As a result, approximately one-third 
     of properties foreclosed upon after a Fannie Mae or Freddie Mac 
     nonperforming loan note sale are sold to an investor, held by the 
     purchaser for rental, or become real estate owned--leaving fewer 
     affordable owner-occupied homes in the market and shifting property 
     ownership away from local control.
       The Preserving Homes and Communities Act tackles these problems. 
     First, it would require mortgage servicers to complete FHA or Federal 
     Housing Finance Agency-required loss mitigation actions before FHA, 
     Fannie Mae, or Freddie Mac includes a nonperforming mortgage in a note 
     sale. Second, it would extend protections to these mortgages after they 
     are acquired by purchasers in a note sale. Third, it would require FHA, 
     Fannie Mae, and Freddie Mac to give local entities with public 
     missions, including States, municipalities, and nonprofits, the first 
     opportunity to purchase nonperforming mortgages--ahead of private 
     equity and institutional investors. Finally, it would require 
     purchasers that foreclose on nonperforming note sale properties to make 
     at least 75 percent these properties available to owner-occupants or 
     low- and moderate-income renters. In sum, our legislation seeks to keep 
     homeowners in their homes, keep home ownership within local 
     communities, and preserve the supply of available and affordable homes 
     for families.
       I thank the National Consumer Law Center, on behalf of its low-income 
     client, and the National Community Stabilization Trust for their 
     support. I urge my colleagues to cosponsor this legislation and support 
     its passage.
     
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