[Congressional Record (Bound Edition), Volume 146 (2000), Part 4]
[Extensions of Remarks]
[Pages 5116-5117]
[From the U.S. Government Publishing Office, www.gpo.gov]



      AMERICAN HOMEOWNERSHIP AND ECONOMIC OPPORTUNITY ACT OF 2000

                                 ______
                                 

                               speech of

                        HON. BENJAMIN L. CARDIN

                              of maryland

                    in the house of representatives

                        Thursday, April 6, 2000

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 1776) to 
     expand homeownership in the United States:

  Mr. CARDIN. Mr. Chairman, I rise in support of HR 1776 however, I 
speak to you today to encourage deliberate caution with concern to FHA 
and HUD legislation.
  Homeownership is a critical building block of strong families and 
healthy communities. It has helped many households accumulate wealth, 
and a home owned free of mortgage debt is considered an important part 
of retirement security.
  While the current homeownership rate is at a record high of 66.8%, 
the purchase of a first home remains difficult or out of reach for many 
young people and low to moderate income families, particularly single-
parent households and minorities.
  As the Secretary of Housing and Urban Development said on March 30th: 
``The economic boom which has produced the highest homeownership rate 
in history has a downside and that is predatory lending.'' 
Unfortunately, we are now just learning the full meaning of that 
statement.
  FHA has in some areas, inadvertently fueled a downward spiral created 
by purchasing homes, selling to buyers with limited resources or 
readiness for ownership, allowing foreclosure and leaving boarded up 
houses sitting and pulling a community even further into despair. While 
HUD has made a credible start, there is much more that this Congress 
must do to ensure that these issues are addressed.


                We must repair FHA/HUD lending programs

  Baltimore has the highest number of FHA foreclosures per capita in 
the nation. Baltimore has become one of the worst manifestations in the 
country of predatory lending.
  HUD, responding to complaints that federal housing policies have 
resulted in tremendous damage to Baltimore neighborhoods, told city 
nonprofit agencies last week that it would be willing to halt Federal 
Housing Administrations (FHA) foreclosures in some of Baltimore's 
hardest hit neighborhoods for eight weeks to have a task force study 
what is happening.
  I agree that we must find out what is happening and I propose that 
there must be the

[[Page 5117]]

formation of a federally led task force that would find a solution to 
flipping, predatory lending and FHA disposal of houses the agency 
acquires through foreclosures.


     We Must Deal with Predatory Lending Practices and Institutions

  Just five years ago there were 1,900 loans that went into foreclosure 
for the entire year of 1995. In the first 3 months of this year 1,700 
loans in Baltimore City have gone into foreclosure.
  Some say that HUD has fueled these problems. The agency has relaxed 
its control over the issuance of mortgages insured by one of its 
agencies, the Federal Housing Administration (FHA) allowing lenders to 
make questionable loans that often end up in foreclosure.
  HUD must have better oversight to make sure that the would-be home 
buyer is ready as well as the appraisal process needs to be closely 
monitored. HUD contracts out for the appraisal process which has led to 
unrealistically high appraisals, which then creates bad loans given by 
these ``lenders of last resort.'' As you can see this process continues 
on a vicious downward spiral.
  The buyers of these home loans often are single mothers with low-wage 
jobs who end up defaulting on the mortgages. In cases where FHA insures 
the loans, the agency pays off the lender and takes title to the house.
  Once HUD pays off the lender and acquires title to a property after 
foreclosure, the house often sits vacant for months--depreciating the 
value not just of that property but of the neighborhood. HUD then sells 
the house on an ``as-is'' basis. Often they are in poor shape and 
unattractive to potential homeowners. Which, as a result leads to yet 
another phenomenon--they frequently are sold to unscrupulous 
speculators who quickly ``flip'' them for a huge markup--sometimes 
marking the homes up to 100% of what they were originally purchased 
for.


            We Must Repair the Damage To These Neighborhoods

  I hope that a HUD Task Force on Predatory Lending will find solutions 
to this problem.
  However, we now must also identify, fund and implement programs to 
repair the damage done to these communities and hold the speculators 
accountable for their illegal actions. HUD, local governments, and non 
profit housing organizations must begin working together now!

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