[Congressional Record (Bound Edition), Volume 154 (2008), Part 4]
[Senate]
[Pages 4576-4578]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             HOUSING CRISIS

  Mr. BOND. Mr. President, as I think we all know, far too many 
families in America are seeing the American dream of owning their own 
home slip away.
  Over the Easter break, I toured the State of Missouri. In every 
community around the State I met with people who are struggling under 
the threat of foreclosure, neighborhood groups concerned about the 
impact of foreclosure on their families and on their communities, 
mayors, city council leaders who are seeing their communities 
threatened seriously by this spate of subprime foreclosures, and most 
of all mothers and fathers with children who are facing the loss of 
their home.
  I did not talk with speculators, investors, or the folks on Wall 
Street, but

[[Page 4577]]

the people I talked to did have a number of thoughts--thoughts they 
believe would help them keep the promise of keeping their home. They 
did not want a Federal bailout. But they were looking for ways to make 
the system work for them.
  Some of the suggestions they made were at the macro level and, among 
others, they said there ought to be regulation--probably Federal 
regulation--of those who originate mortgages. Now, many of the bricks-
and-mortar lending institutions--banks, and savings and loans in the 
community--are regulated, but there are many mortgages, subprime 
mortgages, that were sold over the Internet and by fax. Whenever I go 
home, my fax machine is filled with 1 percent mortgage teaser rates.
  They also want to see HUD be able to move more quickly in getting the 
FHA secured loans. That is a good idea--to go in and to help homeowners 
whose mortgages have reset and caused them to lose their homes--but it 
is too narrow. They think that ought to be reformed.
  I believe that through FHA, we, as taxpayers, should not be put at 
risk by insuring loans where there is zero downpayment. Regrettably, 
zero downpayment too often means the homeowner can't afford that 
mortgage and they walk away. The often cited program, the Nehemiah 
Program, which provides charitable contributions to take care of the 
downpayment requirements, has an appalling 30 percent default rate. 
That is a raid on the Federal Treasury. We ought not to be doing that. 
Before people make a loan, they ought to have counseling and education 
to make sure their finances, their income will support the mortgage 
payments.
  Also, when you buy a home, you might have to support the replacement 
of a furnace that blows or a leaky roof, things that renters don't have 
to pay. If they can't afford to buy a home, we want to see them in a 
good home that could be a rental home.
  But the most important thing they said we could do now is provide 
counseling, to bring together those homeowners whose homes are in 
foreclosure or who are facing foreclosure, to sit down with the lenders 
and see if they can work out an agreement before they go to 
foreclosure. Everybody says: Well, what interest does a lender have in 
avoiding foreclosure? Well, foreclosures are expensive. They drive down 
the value of the property and potentially put at risk the value behind 
other mortgages they may own in the same community.
  Last fall, Senator Dodd and I agreed to include $180 million in the 
Housing and Urban Development Appropriations bill to begin counseling. 
The first $130 million has gone out. We are beginning to see the 
results of that. Those counseling dollars can help homeowners, if they 
will go to a counseling entity such as The United Way or local 
governments to get counseling, before they wind up on the courthouse 
steps.
  In addition, there need to be dollars available to buy down mortgages 
where the mortgage rates have skyrocketed because of the subprime 
crisis. That is why, in the SAFE Act which I have introduced with my 
colleagues--the Security Against Foreclosure and Education Act--we make 
sure there is money available through the State Housing Finance 
agencies. I know well the Housing Finance Agency in Missouri--the 
Missouri Housing Development Corporation--and they have a great plan. 
If they can have more money, maybe $160 million to $180 million, 
possibly $200 million in Missouri, they could go in and refinance 
mortgages where the private mortgage holder has had to increase 
substantially the rate because of the overall market conditions. If 
these HFAs can sell paper, tax-exempt paper, they can bring back the 
mortgage rates to the level that was affordable initially.
  It is very important for fixed-income homeowners to count on a 
certain mortgage payment. Some have seen it go up 50 percent, and too 
many of them are being forced to the choice of walking away because 
they can't meet it. We need to get HFAs to have the ability to go in 
and refinance those mortgages.
  In addition, with Senator Isakson, we have included in the SAFE Act a 
measure to provide a tax credit for families willing to buy a home in 
foreclosure or going into foreclosure. In other words, it would be a 
$5,000 tax credit for each of 3 years for families who would move into 
one of these homes either in foreclosure or facing foreclosure. That 
not only gives a boost to first-time home buyers, but the most 
important thing it can do for communities is avoid the problem of 
having a community with 20 percent of the homes in foreclosure.
  This isn't a problem for just the 20 percent of the families who are 
facing foreclosure; that is a potential disaster for the other 80 
percent of the homeowners because what it does to the value of their 
homes and to the value of every house in that community is to drive the 
values down significantly, so they may find their home is worth less 
than the value of the mortgage.
  Finally, we want loan transparency. As a former lawyer, I have had 
the dubious pleasure of going through home purchasing documents several 
times recently. They give you a stack of paper this high that has all 
been written by lawyers, God bless them, and it has every contingency 
spelled out. But most people who go through the purchase process spend 
40 minutes signing the papers without knowing what is in them. What we 
want is a very simple disclosure on top, which is binding on the lender 
and on the borrower, that says what the rate will be, if it is 
adjustable, how high it can adjust, when it can adjust, if there is a 
prepayment penalty, and what are the other terms that might cause 
significant economic distress to the home buyer. They need to know that 
in advance. Also, there ought to be counseling to help those 
prospective home buyers measure their financial ability, their ability, 
through their income, to buy a home and to make sure they can afford 
the mortgage they are seeking.
  I hope this is the basis on which almost all of us in this body can 
agree. We have heard a lot about what is going on at the macro level. 
There are important things happening with the Fannie Mae and the 
Freddie Mac, such as getting $200 billion more that they can loan, and 
the Federal Reserve moving in. All these things are important on a 
large national scale.
  This is not only, however, a national and international problem; most 
of all, it is a community problem. The proposals we have set forth in 
the SAFE Act are designed to help build up from the community level the 
solutions we need for home buyers and homeowners, particularly those 
threatened with foreclosure. We are only going to solve this problem if 
we work community by community. The SAFE Act is designed to help 
homeowners, counselors, and local government officials deal with the 
problem in their communities and build, community by community 
nationwide, the solutions to the problem that affects not just 
homeowners but affects our entire country.
  I invite our colleagues to look at this legislation. I hope we can 
discuss it, as our leader has said, and come to agreement on some 
things we can pass, and pass right now, because too many homeowners are 
facing a crisis and need help.
  I thank the Chair and I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Florida is 
recognized.
  Mr. MARTINEZ. Mr. President, I thank the Senator from Missouri for 
his words. I was reminiscing, as I was listening to him, about my work 
as the HUD Secretary, and many times getting good counsel and advice 
from my main appropriator, a man who knows a great deal about this 
whole problem and about this issue, and I thank him for his comments. I 
think he is exactly right when discussing how the problem we are seeing 
today is hurting families.
  When I had the good fortune to be at HUD, it was in the good times. 
We were talking about ever-increasing rates of home ownership, 
particularly among minority families; more and more people getting into 
home ownership. It was a good thing because as we were doing that, we 
were building communities. Streets were getting stronger

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and families were getting stronger and cities and communities were 
getting stronger. Now we are seeing the reverse of that. That is why it 
is so important to take the steps the Senator from Missouri suggested 
and to move forward aggressively on this problem.
  Let me talk a little bit about what I saw in Florida during the last 
few days when I was there. I think in Florida it is a microcosm of the 
problem. The state of the market is one in which we see increasingly, 
at the level of the homeowner, that people are more and more distressed 
and more and more in trouble about holding onto the home they have. You 
drive around and see signs about a foreclosed home for sale. In 
addition to that, you know people are having a problem making ends 
meet.
  The second situation related to that is the fact that many people are 
now staying away from the market. They are simply not buying homes. The 
reason for that is there is a sense of insecurity about where we are 
today in this very difficult moment. So as a result, we find that homes 
are not being purchased. This is having an impact on market prices, 
where home prices are in a decline and fewer and fewer buyers are in 
the marketplace. As a result of all these things, there have been 
significant economic impacts on the State of Florida. So what begins as 
a problem for a family--and a significant problem, a heartbreaking 
problem--becomes a compounding problem when it impacts the entire 
economy of a State such as Florida.
  The State of Florida is greatly dependent on homebuilding for its 
economy, and that is a fact. When speaking these past few days to 
people in the industry, I am hearing from homebuilders who are saying: 
I have had to lay people off. I had to lay off substantial numbers of 
the workforce. Large homebuilders have laid off hundreds and hundreds 
of people. The impact on the economy is significant.
  So the Florida situation is somewhat revealing of what is happening 
across the country, which is why I come back here more determined than 
ever that we have to act; that this is a time for the Congress to take 
strong and significant action to try to have an impact on what is a 
deteriorating situation.
  Everybody keeps talking about whether we have hit bottom or when the 
housing market is going to hit bottom. Well, I am not sure if we have 
hit bottom yet. I hope we have, and I hope we are beginning the 
situation of ascending back. But the bottom line is we have to act, and 
there are things we can do in certain areas where we must act.
  I suggest we act in three areas. One is the area that impacts the 
homeowners themselves. That is what Senator Bond was talking about: 
About home counseling, about getting people help, about workouts. The 
fact is, it is in the best interests of a financial institution to work 
out a loan with a hurting homeowner rather than to turn that into 
foreclosure. Nobody wants to have a foreclosed home on their inventory; 
what they want is the homeowner continuing to make their payments.
  We have to work on housing counseling. We also have to do FHA 
modernization. I see the Senator from Connecticut, my chairman. We have 
worked hard to get FHA done. We have to get that done. That is going to 
help families by making the FHA a more active player in this current 
marketplace. It is going to bring FHA into play by allowing them to do 
larger loans, by allowing them to be more flexible in the loans they 
do.
  FHASecure is a good first step. We need more flexibility in 
FHASecure. We need to make sure families who have already gotten in 
trouble but who are not desperate yet--who have not gotten yet to 
foreclosure but who have gotten behind--are able to utilize FHASecure. 
Why do we do that? Because it will allow families to get into an FHA 
mortgage that will allow them to be in a mortgage they can carry and 
keep out of trouble.
  We need to stabilize values. We need to make sure the decline in home 
values stops, because as that happens, the equity in homes continues to 
decline, and that is not good for the economy as a whole.
  How can we help with these ideas? One I like a lot is Senator 
Isakson's idea to provide a tax credit to try to lower the inventory of 
unoccupied homes. If these homes are unoccupied, as has happened in 
Florida--many were built that are today not being bought. We need to 
get the market going again. We need to get people back into buying 
homes. We need to make sure they have an opportunity to do so. The 
encouragement of a tax credit I think will go a long way toward doing 
that.
  A second related problem is liquidity. I have talked to homebuilders 
who are telling me they have some buyers who cannot find loans. Banks 
are not lending money. Money has tightened. So as money has tightened, 
we need to provide those things which will create more liquidity in the 
marketplace. Which is why I am fearful that cramming down mortgages is 
not a good idea; in fact, it will work against providing more 
liquidity.
  I also wish to look at the long-term effects. There is a need for 
regulatory reform. I have talked about the regulation of the 
government-sponsored enterprises Fannie Mae and Freddie Mac home loan 
banks.
  We need a stronger, more effective regulator. I have been preaching 
this since I was at HUD. This is an important concept. We have 
increased loan limits and lowered capital requirements to 20 percent. 
As we have done that, it is necessary that we look at a stronger 
regulator. The rules today are not up to par for what we need. These 
are trillion dollar companies of incredible importance that will play a 
significant role in getting us out of the market dilemma we are in. In 
order for them to be stronger and for them to have the kind of investor 
confidence they must have, I think a stronger regulator would be a 
great step forward.
  I commend the Secretary of the Treasury for the proposal he made on a 
broader regulatory scheme for our financial world. I think some of 
these ideas that are also being discussed in Congress are important. We 
need to consider them and many need to be adopted. They may be on a 
second tier.
  I am looking at more immediate things we can do to prop up the 
housing market and look forward in that regard. I want to touch on the 
importance of working in a bipartisan fashion. Chairman Dodd and I have 
had conversations. It is important we work together and come together 
with something that will help the American people. The people of 
Florida desperately need help. This is a problem not only relating to 
the end consumer, the homeowner--the family who tasted that dream of 
home ownership and got into a loan and is now seeing the nightmare of 
losing it--but also to those people who have lost a job or are fearful 
of losing one.
  The economy depends so much on housing. That is what we need to 
address. I hope we will come to some understanding of how to move 
forward in a bipartisan fashion and work toward a solution that will 
help the American people get back to the strong, vibrant economy we 
have known in recent years, and also continue to grow that dream of 
homeownership for more and more American families.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER (Mr. Tester). The Senator from Connecticut is 
recognized.

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