[Congressional Record (Bound Edition), Volume 154 (2008), Part 3]
[Senate]
[Pages 3512-3513]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             HOUSING CRISIS

  Mr. BROWN. Mr. President, I say to the Presiding Officer, it seems as 
though every day in your State of Pennsylvania and my State of Ohio and 
across the country the news brings us more evidence of the length and 
the breadth of the housing crisis in this country.
  Yesterday, the Mortgage Bankers Association released statistics on 
the fourth quarter of 2007, and the news is grim. The rate of 
foreclosure starts and the percentage of loans in the foreclosure 
pipeline are the highest ever.
  My State set a record for foreclosures last year of more than 83,000 
foreclosures, according to the Ohio Supreme Court. That is more than 
200 every day--Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, 
Sunday--more than 200 every day, and more than 300 a day for every day 
the courts are in session.
  Every week, 1,500 families in Ohio--just in Ohio--lose their homes--
week in, week out. Four percent of home loans in Ohio are in 
foreclosure, the highest rate in the Nation. And the end is nowhere in 
sight. In Ohio, there are another 120,000 home loans that are 
delinquent. Nationally, one of the ratings agencies is now predicting a 
50-percent--nationally, a 50-percent--default rate for subprime loans 
made in the fourth quarter of 2006. That means the rates for those 
loans will reset in the fourth quarter of this year.
  Think about that: One of every two subprime loans made in the fall of 
2006 will go bad. That is not lending; that is gambling with somebody 
else's home.
  The losses on these loans to lenders are substantial--on the order of 
40 percent nationwide and about 65 percent in my State. That means only 
35 cents on the dollar is preserved, if you will.
  We have sheriffs' sales in Ohio that are attracting no bidders 
whatsoever. And the trend lines have been straight down.
  Congress must act in the face of this crisis. Majority Leader Reid, 
to his credit, brought legislation--of which the Presiding Officer is a 
cosponsor, and many others of us--before the Senate that would take 
several steps to help homeowners faced with foreclosure and the 
communities in which they live.
  The needs of communities are critical because this crisis has an 
impact far beyond just the people--as large a number as that is, as 
tragic as it is for them--an impact far beyond just the people who lose 
their homes. Whenever a home goes into foreclosure, the value of 
neighboring properties is reduced. It is not confined to our large 
cities or to our small towns. It is rural areas. It is inner ring 
suburbs. It is outer ring suburbs.
  In many areas, criminals move in quickly in these abandoned homes to 
strip the copper pipe and aluminum siding from a home. A copper 
processor in northwest Ohio told me the other day that copper prices 
are now exceeding $3 a pound, which just encourages more and more 
vandalism of these homes.
  Crime goes up just when property tax revenues are plunging and the 
resources of a city or town are stretched to the limit.
  So Senator Reid's bill would include $4 billion in funding for the 
Community Development Block Grant Program so communities that have been 
hit hard could renovate or rebuild or, in some cases, raze those 
properties. This legislation would also provide another $200 million 
for supporting the efforts of nonprofit agencies across the country to 
counsel homeowners on how to work with a lender to stave off 
foreclosure. That part is so very important.
  Senator Casey, the Presiding Officer, Senator Schumer, and I, a year 
ago, on the Banking Committee, began to try to get money appropriated, 
which the President initially vetoed, to these counseling agencies, 
these not-for-profit groups in our communities that help people stave 
off foreclosure--no bailout, no Federal dollars to pay the mortgages, 
but simply to help them find a lender and trace their mortgage and help 
to restructure their payments so they can pay it off. This is no easy 
task.
  Once upon a time, you took out a loan with your local bank to buy a 
home. You knew the people at the bank. They knew you. They had just as 
much interest in you paying off your loan as you did in paying off your 
loan and staying in your house. Today, especially for subprime loans, 
that doesn't happen. So help in navigating this mortgage maze is 
essential.
  Senator Reid's bill also provided bankruptcy judges the ability to 
modify mortgage terms on a primary residence in the same way--get 
this--that the judge today can modify a mortgage on an investment home 
or vacation property or a boat. I heard one of my Republican colleagues 
today talk about this whole issue of bankruptcy and how that is going 
to be a problem, and that is why they seem to oppose this bill--because 
of the bankruptcy provisions. But they never really answer the 
question: Why can't a judge modify a mortgage in bankruptcy for a home, 
for a personal home, when under the law they can on a vacation home in 
Florida or Arizona? They can on a boat, they can on an investment 
property.
  Lenders and their servicers cannot keep up with the flood of 
foreclosures they are facing. Much has been made of the number of loans 
that have been changed as a result of voluntary efforts. That is a good 
thing; I don't discount those efforts at all. But tacking late fees and 
penalties on the back end of a loan doesn't do much to help a family 
make their monthly payment.
  One woman who called my office recently reported a loan modification 
she had gotten to reduce the interest rate on her loan from 11 percent 
to 10 percent. With the late fees and the penalties folded in, her 
monthly payment barely changed.
  Modifications such as these simply aren't going to help. It is 
essential that we permit bankruptcy courts to serve as a backstop.
  So with the housing crisis spreading across the country and Senator 
Reid's proposal before us, what did the Senate do? My colleagues in the 
minority again chose to filibuster--filibuster again and again. Fifteen 
hundred families in Ohio every week are losing their

[[Page 3513]]

homes, and over 100,000 are facing foreclosure. Multiply this all over 
the country, and almost half the Senate chose to filibuster.
  What could possibly be the reasoning for this decision? The 
administration threatened a veto of the bill because it believed it was 
too costly and that the bankruptcy provisions were unwise. I don't 
agree, but can't we have a debate on that to make those decisions? I 
would love to discuss why we can afford to spend $3 billion a week on 
the war in Iraq--$3 billion on the war in Iraq--but we can't find $4 
billion in 1 year, $4 billion in 1 year to help the towns and the 
cities, including Burlington and Philadelphia and Pittsburgh and 
Cleveland and Steubenville and Erie--why we can't find $4 billion in 1 
year to help communities in this country that are being carpet-bombed 
by foreclosure. We can spend billions of dollars on Halliburton to 
rebuild Iraq, and we can't spend a few billion dollars on local 
businesses in my communities in Ohio to rebuild our communities.
  My Republican colleagues apparently think it is OK for a bankruptcy 
judge to modify the mortgage on a multimillion-dollar vacation home, 
but it is not OK to provide the same relief to a family facing 
bankruptcy in a $100,000 home. When lenders are recovering only 35 
cents on the dollar in my State--the national average is higher but not 
a lot higher--35 cents on the dollar on a foreclosed property, I don't 
think they have anything to fear from an alternative process supervised 
by bankruptcy courts that may result in avoiding foreclosure. The 
bankruptcy provisions are a significant change in our law, to be sure, 
but they are a responsible reaction to some extraordinarily 
irresponsible underwriting.
  I understand the importance of protecting contract rights, but think 
for a minute about the contracts that are in question. The vast 
majority of subprime loans went to refinance homes, and they were 
designed to do three things: generate fees, strip out equity, and 
quickly become unaffordable. That is what they were designed to do. 
That is why so many people were able to take the money and run--the 
mortgage brokers--and, unfortunately, that is what happened. Do we 
really want to take the position that those contracts should be beyond 
the reach of a bankruptcy judge?
  I may have answered my earlier question. I guess maybe a filibuster 
would be easier for my friends on the other side of the aisle than an 
actual debate on these issues. I know lenders want to avoid becoming 
real estate owners, but they don't have the capacity to deal with the 
problems that their lax underwriting standards have created. They are 
obviously not in the business of rebuilding the communities this crisis 
has devastated. That is why Senator Reid's legislation is so important.
  I hope my colleagues on the other side of the aisle will reconsider 
their tactics and will allow us to proceed on the legislation the 
majority leader has introduced and which I am proud to cosponsor. Maybe 
we will not have the votes in this body. In a fair and full debate, 
maybe we will not have the votes to maintain all of the provisions. 
Maybe there are alternative approaches. I am open to that. I want to 
see this solved. But let's at least vote, and let's do it quickly. 
Every day we delay, 200 people in my State--200 people--twice the 
membership of this body--every single day 200 people in my State lose 
their homes. They deserve more from us.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont is recognized.
  Mr. LEAHY. Mr. President, I was impressed with what the Senator from 
Ohio said, and I commend him for what he said. We talk about the cost 
of the President's war in Iraq and we have been in Iraq longer than we 
were in World War II and the cost just in interest of the huge deficits 
and the tripling of the national debt under the Bush-Cheney 
administration; if we take the money we pay on interest on the national 
debt and the money we pay in Iraq, it comes to somewhere around $1 
billion a day, every single day of the year.
  Think what we could do with that $365 billion a year: health care for 
everybody, dramatically improve our schools, research on Alzheimer's, 
diabetes, AIDS, cancer, so many things. Instead, we are sending 
interest payments overseas and money to Iraq.
  So I commend the Senator from Ohio for speaking out as he did.

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