[Congressional Record (Bound Edition), Volume 155 (2009), Part 5]
[House]
[Pages 5997-6016]
[From the U.S. Government Publishing Office, www.gpo.gov]




             HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009

  The SPEAKER pro tempore. Pursuant to House Resolution 190 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the State of the Union for the consideration of the bill, H.R. 1106.

                              {time}  1215


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 1106) to prevent mortgage foreclosures and enhance mortgage 
credit availability, with Mr. Serrano in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time.
  General debate shall not exceed 1 hour equally divided and controlled 
by the chairman and ranking minority member of the Committee on 
Financial Services and the chairman and ranking minority member of the 
Committee on the Judiciary.
  The gentleman from Massachusetts (Mr. Frank), the gentleman from 
Alabama (Mr. Bachus), the gentleman from Michigan (Mr. Conyers) and the 
gentleman from Texas (Mr. Smith) each will control 15 minutes.
  The Chair recognizes the gentleman from Michigan.
  Mr. CONYERS. Mr. Chairman, I yield myself as much time as I may 
consume.
  Members of the House, this very important legislation would limit an 
anomaly in the Bankruptcy Code which prohibits judicial modifications 
of principal residences, even though every other class of asset, from 
second homes to yachts, airplanes, investment properties, family farm, 
hotels, and even office buildings, is eligible for such treatment. I 
believe that this proposal represents a critical step that we can take 
to not only protect hardworking and honest Americans struggling to keep 
their homes in the midst of a once in a lifetime economic calamity, but 
to limit the downward cycle of foreclosures that are now damaging our 
neighborhoods, while, at the same time, protecting financial 
intermediaries and ensuring that judicial modification is considered 
only after every reasonable effort has been taken to achieve voluntary 
modification outside of the bankruptcy.
  Mr. Chairman, on that note, I reserve the balance of my time.
  Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, our country has fallen into a serious economic 
recession, a recession that is worsened by the foreclosure crisis. 
Until we address the rising number of foreclosures, it will be 
difficult for the economy to recover.
  But some of what is in this bill we consider today will be helpful. 
Providing loan servicers a safe harbor from the threat of litigation if 
they offer borrowers meaningful loan modification will, in fact, help 
blunt the crisis.
  But the bill also includes many counterproductive components, 
especially the bankruptcy provision. This bankruptcy provision not only 
will fail to solve the foreclosure crisis, but also will make the 
crisis deeper, longer and wider.
  Allowing bankruptcy judges to rewrite mortgages will increase the 
overall cost of lending. Lenders and investors will hesitate to put up 
capital in the future if they fear that judges will rewrite the terms 
of their mortgage contracts. Less available capital and increased risk 
means that borrowers will pay higher interest rates in the future.
  Allowing bankruptcy judges to rewrite mortgages will also encourage 
borrowers to file for bankruptcy. Under this bill, a borrower will be 
able to reduce, for example, a $500,000 mortgage to $400,000. When 
housing prices rise in the future, that borrower has no obligation to 
pay back the $100,000 amount they crammed down. Thus, the borrower 
receives a $100,000 windfall. And experts predict that receiving this 
windfall will provide an incentive for borrowers to file for 
bankruptcy.
  If bankruptcy filings increase as a result of this legislation, which 
is predicted, it is unlikely that the country's only 368 bankruptcy 
judges could handle the additional caseload in an effective manner. 
This will prolong the crisis as borrowers wait for their bankruptcy 
plan to be court-approved.
  In fact, even Senator Durbin, the primary sponsor of this legislation 
in the Senate, has stated that he is ``willing to restrict'' this 
legislation to subprime mortgages in an effort to make this proposal 
``reasonable.''
  So, the legislation we are considering today, and the ``Housing 
Affordability

[[Page 5998]]

and Stability Plan'' announced by the President last Tuesday, really 
amount to another entitlement program, a program that comes at the 
expense of the 92 percent of the homeowners who are making their 
payments on time.
  And it is a program that benefits lenders who wrote irresponsible 
loans and borrowers who borrowed more than they could afford. In other 
words, this legislation will punish the successful, tax the 
responsible, and hold no one accountable.
  If we pass this legislation, what message does it send to responsible 
borrowers who are making their payments on time? How can we ask them to 
foot the bill for their neighbors' mortgages? What are homeowners to 
think if they pay back the full amount of principal they owe, while 
others receive a government-granted reduction in principal?
  We need to do everything we can to help solve the foreclosure crisis, 
but we need to do so in a manner that doesn't bankrupt the taxpayers or 
our financial system and that is, in fact, fair to all.
  And as we work to solve the foreclosure crisis, we need to remember 
how we got here. As the President said in his address to Congress on 
Tuesday, ``It is only by understanding how we arrived at this moment 
that we'll be able to lift ourselves out of this predicament.''
  This foreclosure crisis was brought on largely by irresponsible 
mortgage policies. Those policies were implemented by lenders and 
supported by government-sponsored entities like Fannie Mae, who were 
all too willing to put profits ahead of prudence. Their irresponsible 
behavior was encouraged by Members of Congress and the Clinton 
administration. Too often borrowers, spurred on by cheap credit and 
little or nothing as a down payment, borrowed more than they could 
afford.
  The mortgage bankruptcy provisions in this bill are not the answer. 
Allowing bankruptcy modification of home mortgages will be costly, 
generate unintended consequences, and likely delay the resolution of 
the foreclosure crisis itself.
  If we're going to enact this bankruptcy provision, despite all of its 
flaws, we should at least limit relief to subprime and non-traditional 
mortgages. We should provide bankruptcy judges with clear guidance on 
the procedure to follow in modifying the terms of home mortgages, 
guidance that would make lowering payments to an affordable level the 
paramount goal of bankruptcy modification. And we should provide much 
stricter provisions for allowing a lender to recapture any principal 
that is reduced in bankruptcy if the home is later sold at a profit.
  Mr. Chairman, this bill, and the amendments we are going to consider 
today, provide none of these safeguards.
  I urge my colleagues to vote against this bill.
  I reserve the balance of my time.
  Mr. CONYERS. Mr. Chairman, I just want my friend on the other side to 
know that the majority whip of the Senate did not make that statement. 
It is inaccurate.
  I now yield to the distinguished gentlelady from Florida, Debbie 
Wasserman Schultz, 2 minutes.
  Ms. WASSERMAN SCHULTZ. Mr. Chairman, I rise in support of H.R. 1106, 
the Helping Families Save Their Homes Act.
  Mortgage foreclosures lay at the very heart of our financial crisis. 
Until we stop this bleeding, we cannot hope to stabilize the housing 
market and truly rescue our economy.
  This legislation is about more than just shoring up our economy, it's 
about helping hardworking Americans hold on to the American Dream. 
Foreclosures uproot families and decimate communities. Vacant homes 
blight our neighborhoods and depress all of our property values.
  Foreclosure rates are now approaching heights not seen since the 
Great Depression. In my own home State of Florida, we have the second 
highest foreclosure rate in the Nation. Since January, more than 4,200 
Florida families have lost their homes. Another 1.2 million Florida 
homeowners are ``under water,'' that is, they owe more than their homes 
are worth.
  Mr. Chairman, my constituents, our constituents need a lifeline, and 
we must throw it to them. Voluntary modification is just not working, 
and our current bankruptcy laws fail our families.
  Unlike every other secured debt, including debts secured by second 
homes, investment properties, luxury yachts and private jets, the 
mortgage for a primary residence cannot be modified in bankruptcy. That 
is simply not fair.
  The Bankruptcy Code should be a safety net of last resort for 
families in distress. In this recession, excluding the family home 
makes no sense and fans the flames of foreclosure.
  This bill allows families to remain in their homes and avoid 
foreclosure. It will also lead to a financial recovery for the lender 
that would be as good or better than they could get at a foreclosure 
sale. This is a win-win.
  I know some well-meaning opponents believe families will rush 
headlong into filing for bankruptcy. We all know, however, that the 
grave consequences of filing for bankruptcy means it will always be a 
last resort.
  Thank you, Chairman Conyers and Chairman Frank, for your leadership 
on this issue.
  Mr. JORDAN of Ohio. Mr. Chairman, I yield 2 minutes to our 
distinguished colleague from California (Mr. Daniel E. Lungren).
  Mr. DANIEL E. LUNGREN of California. Mr. Chairman, the suggestion has 
been made that it makes no sense to treat primary residences in the way 
that the current bankruptcy law does. Well, in fact, Supreme Court 
Justice Stevens, in the case of Nobleman v. American Savings Bank, 
explained why we have this when he said that, ``At first blush it seems 
somewhat strange the Bankruptcy Code could provide less protection to 
an individual's interest in retaining possession of his or her home 
than of other assets. The anomaly, is, however explained by the 
legislative history indicating that favorable treatment of residential 
mortgages was intended to encourage the flow of capital into the home 
lending market.''
  In other words, it is precisely because we want to promote home 
ownership that it is treated in this way.
  Now, we in the Judiciary Committee believe we can do a lot of things. 
But one thing we have been unable to do, but we're trying to do it once 
again is suspend the laws of economics. This suggests that this change 
will have no impact whatsoever.
  The change will have this impact: It will include higher risk 
premiums on all mortgages in the future because of the uncertainty now 
involved with respect to all mortgages. That's what's going to happen.
  I had a telephone town hall in my district with thousands of people 
on the line, and one person said to me, how is that fair? How is that 
fair to me? How is that fair to my children and my grandchildren, when 
this means this is going to increase the cost of home mortgages in the 
future across the board and maybe limit the accessibility to home 
mortgage notice future to those very people we say we're trying to 
help?
  Sometimes it is more than just a sentiment that we have to act on 
here. It is reality. And unless we can suspend the laws of economics, 
this provision will actually undo what the bill is intended to do, that 
is, help people be able to have access to mortgages and help people get 
lower rates. This is one of the reasons why you have lower rates for 
home mortgages than you do for second homes.
  The CHAIR. The time of the gentleman has expired.
  Mr. JORDAN of Ohio. I yield the gentleman an additional minute.
  Mr. DANIEL E. LUNGREN of California. And some people have suggested 
well, look, it's treated differently in all other aspects.
  Interestingly enough, if you look at chapter 12, which has to do with 
agricultural loans, and you see the argument being made that, well, 
when they made that change there, it had no impact. Interestingly 
enough, it was during the Clinton administration that their Department 
of Agriculture concluded that chapter 12 may have substantially 
increased costs for farm

[[Page 5999]]

businesses. That's not the Bush administration. That's not a Republican 
economist. That's the Clinton administration, their Department of 
Agriculture concluding that this type of a change in the agricultural 
setting actually substantially increased costs for home businesses.
  If you want to substantially increase the cost for home mortgages in 
the future across the board for all Americans then vote for this 
provision. Go home and talk about how you felt good about it. But don't 
tell folks what it's really going to do. It's going to hurt everybody 
in terms of their accessibility to home mortgages.

                              {time}  1230

  Mr. CONYERS. Mr. Chairman, I yield myself 15 seconds to merely 
apprise my dear friend from California and distinguished member of the 
Judiciary that Mark Zandi, the GOP adviser to John McCain, said, ``The 
total cost of foreclosures to lenders is much greater than that 
associated with a chapter 13 bankruptcy.''
  The CHAIR. The time of the gentleman has expired.
  Mr. CONYERS. Mr. Chairman, I yield myself 15 more seconds.
  There is no reason to believe that the cost of mortgage credit across 
all mortgage loan products should rise. That's a Republican economist.
  I now yield 2 minutes to my good friend from Massachusetts, William 
Delahunt, himself a distinguished member of the Attorney General's 
office in Massachusetts.
  Mr. DELAHUNT. Mr. Chairman, last year in the United States, over 2 
million homes went into foreclosure, and the rate of mortgage defaults 
is now accelerating. If we don't act soon, today, then our entire 
economy is at risk. That's how we got here to begin with.
  What I find particularly disturbing is that the people who got us 
into this mess oppose the bill. They'd prefer to have the taxpayers 
cover their losses and have them continue to bail them out.
  Of the most recent issue of BusinessWeek, not a Democratic 
publication, by the way, this is what it says on the cover: ``Home 
Wreckers: How the Banks Are Making the Foreclosure Crisis Worse.''
  Here is their take on this issue of this kind of legislation. I'm 
reading: ``The bad mortgages that started the current financial crisis 
have produced a terrifying wave of home foreclosures. Unless this surge 
eases, even the most extravagant Federal stimulus spending won't spur 
economic recovery . . . One reason foreclosures are so rampant is that 
banks and their advocates in Washington have delayed, diluted and 
obstructed attempts (like this) to address the problem.''
  So, if we want to have taxpayers keep bailing out the banks with no 
end in sight, that's one option or we can compel the banks to sit down 
with debtors and mitigate the losses, which would benefit the consumer, 
the lender in the end and the investors.
  Mr. JORDAN of Ohio. Mr. Chairman, I would yield 2 minutes to my 
friend and colleague from Texas, Congressman Gohmert.
  Mr. GOHMERT. Mr. Chairman, I'm sure most people have heard about the 
guy who kept beating himself in the head with a hammer, and when people 
said, Why are you doing that? he said, Because it feels so good when I 
stop.
  The trouble is we keep beating the same people who are footing the 
bill for everything. Now, I know this bill is well-intentioned. I know 
the hearts of those who are pushing this, but the trouble is there's a 
big difference between the investment banks that have squandered money 
and have gotten us into big trouble and the community banks that have 
been making good loans.
  The trouble is, once you allow a bankruptcy judge not only to do what 
they can do now with mortgages--change the rate, change the terms--but 
to actually bring down the principal to whatever the bankruptcy judge 
feels like, then banks--these good, solid community banks--will be in 
jeopardy, and they will only be able to give loans to those who can 
prove for sure they will not ever file for bankruptcy. You're going to 
put in jeopardy the bottom lines of the people who've actually been 
responsible and who've had good banks and have done the right things.
  The bottom line is the people whom we've saddled with so much debt in 
just the last few months--the young people, the young couples who are 
trying to make it and who are hoping for a home loan--are not only 
going to be cussing our names 30 years from now for the debt we've put 
them in, but when they go to the bank after this passes, they won't get 
a home loan because we've been irresponsible in trying to help but not 
looking at the ramifications of what we're doing.
  This adds to the hundreds of billions we've already spent, and now 
we're going to hurt the very people we need to be relying on to get 
this economy going. The young people need to be able to get those loans 
to get homes, and this will ensure they can't go get them, because 
we've been irresponsible in not thinking about the unforeseen 
conclusions.
  The point is we can foresee them. We know what's going to happen. 
Talk to your community banks. Don't hurt them. Don't hurt the young, 
working people any more than we already have. Give them a break. Do the 
right thing. Don't cram this down on America and our young people.
  Mr. CONYERS. Mr. Chairman, I yield 2 minutes to the distinguished 
gentlewoman from Houston, Texas, Sheila Jackson-Lee.
  Ms. JACKSON-LEE of Texas. Wait a minute. Can we get a little history 
lesson here? Does anybody remember the $700 billion that we gifted to 
the banks? When they were on their knees, they took Federal money. Many 
of us voted against it because we wanted to know what was going to 
happen to the American public.
  Why is my friend talking about the young people who were hurting in 
the administration before us? They hurt more than young people. They 
told us that we needed $700 billion of government money to give to the 
banks. We asked the banks to voluntarily modify the loans. We begged 
them to do it. We worked with them. We spoke with them. They did not do 
it.
  Today, we vote for the little person, for the individual who has been 
responsible, who has been working like a constituent in my constituency 
for 18 years as a cafeteria worker, saving up money, who has got a 
small bungalow, but it was at an adjustable rate. That's not that 
lady's fault. She is still working, but she has fallen behind. She will 
go into court under this bill. She will be able to use the FHA and VA. 
They will be able to look to voluntarily modify before the court.
  The only thing that this does is it allows, after all things have 
happened, for you to be able to go into the courthouse, stand before a 
judge and be assessed on your own responsibility. We have a manager's 
amendment. If there's any profit to be made, it goes back to the 
lender, to the bank. Mr. Bank and Mrs. Bank, why didn't you do this on 
your own? We would have preferred you to have done it.
  I'm looking forward to introducing legislation where, for people 
who've been responsible and who go in to redo their mortgages, their 
issue will not be part of their credit score, of their potential 
foreclosure, of their back payments, because it is not their fault. 
We've fallen into a crisis, into an abyss.
  So, my friends, I don't know how we can stand on the other side of 
the aisle talking about the poor little banks. We asked the banks to 
reorder people's mortgages. People in my district begged for them to do 
so, but when they called, there was nothing but a 1-800 number.
  Support this legislation. It's the little fellow's day today. We want 
people to save their homes. We're saving America.
  Mr. Chairman, I rise in strong support of H.R. 1106, ``Helping 
Families Save Their Homes in Bankruptcy Act of 2009.'' I would like to 
thank Chairman Conyers of the House Judiciary Committee and Chairman 
Barney Frank of the Financial Services Committee for their leadership 
on this issue. Mr. Chairman, I

[[Page 6000]]

urge my colleagues to support this bill because it provides a viable 
medium for bankruptcy judges to modify the terms of mortgages held by 
homeowners who have little recourse but to declare bankruptcy.
  This bill could not have come at a more timely moment. Just a day 
after the President's address before the Joint Session of Congress 
where President Obama outlined his economic plan for America and 
discussed the current economic situation that this country is facing.
  To be sure, there are many economic woes that saddle this country. 
The statistics are staggering.
  Home foreclosures are at an all-time high and they will increase as 
the recession continues. In 2006, there were 1.2 million foreclosures 
in the United States, representing an increase of 42 percent over the 
prior year. During 2007 through 2008, mortgage foreclosures were 
estimated to result in a whopping $400 billion worth of defaults and 
$100 billion in losses to investors in mortgage securities. This means 
that one per 62 American households is currently approaching levels not 
seen since the Depression.
  The current economic crisis and the foreclosure blight have affected 
new home sales and depressed home value generally. New home sales have 
fallen by about 50 percent. One in six homeowners owes more on a 
mortgage than the home is worth raising the possibility of default.
  Home values have fallen nationwide from an average of 19% from their 
peak in 2006 and this price plunge has wiped out trillions of dollars 
in home equity. The tide of foreclosure might become self-perpetuating. 
The nation could be facing a housing depression--something far worse 
than a recession.
  Obviously, there are substantial societal and economic costs of home 
foreclosures that adversely impact American families, their 
neighborhoods, communities and municipalities. A single foreclosure 
could impose direct costs on local government agencies totaling more 
than $34,000.
  I am glad that this legislation is finally on the floor of the United 
States House of Representatives. I have long championed in the first 
TARP bill that was introduced and signed late last Congress, that 
language be included to specifically address the issue of mortgage 
foreclosures. I had asked that $100 billion be set aside to address 
that issue. Now, my idea has been vindicated as the TARP today has 
included language and we here today are continuing to engage in the 
dialogue to provide monies to those in mortgage foreclosure. I have 
also asked for modification of homeowners' existing loans to avoid 
mortgage foreclosure. I believe that the rules governing these loans 
should be relaxed. These are indeed tough economic times that require 
tough measures.
  Because of the pervasive home foreclosures, federal legislation is 
necessary to curb the fallout from the subprime mortgage crisis. For 
consumers facing foreclosure sale who want to retain their homes, 
Chapter 13 of the Bankruptcy Code provides some modicum of protection. 
The Supreme Court has held that the exception to a Chapter 13's ability 
to modify the rights of creditors applies even if the mortgage is 
undersecured. Thus, if a Chapter 13 debtor owes $300,000 on a mortgage 
for a home that is worth less than $200,000, he or she must repay the 
entire amount in order to keep his or her home, even though the maximum 
that the mortgage would receive upon foreclosure is the home's value, 
i.e., $200,000, less the costs of foreclosure.
  Importantly, H.R. 1106 provides for a relaxation of the bankruptcy 
provisions and waives the mandatory requirement that a debtor must 
receive credit counseling prior to the filing for bankruptcy relief, 
under certain circumstances. The waiver applies in a Chapter 13 case 
where the debtor submits to the court a certification that the debtor 
has received notice that the holder of a claim secured by the debtor's 
principal residence may commence a foreclosure proceeding against such 
residence.
  This bill also prohibits claims arising from violations of consumer 
protection laws. Specifically, this bill amends the Bankruptcy Code to 
disallow a claim that is subject to any remedy for damages or 
rescission as a result of the claimant's failure to comply with any 
applicable requirement under the Truth in Lending Act or other 
applicable state or federal consumer protection law in effect when the 
noncompliance took place, notwithstanding the prior entry of a 
foreclosure judgment.
  H.R. 1106 also amends the Bankruptcy Code to permit modification of 
certain mortgages that are secured by the debtor's principal residence 
in specified respects. Lastly, the bill provide that the debtor, the 
debtor's property, and property of the bankruptcy estate are not liable 
for a fee, cost, or charge incurred while the Chapter 13 case is 
pending and that arises from a debt secured by the debtor's principal 
residence, unless the holder of the claim complies with certain 
requirements.
  I have long championed the rights of homeowners, especially those 
facing mortgage foreclosure. I have worked with the Chairman of the 
House Judiciary Committee to include language that would relax the 
bankruptcy provisions to allow those facing mortgage foreclosure to 
restructure their debt to avoid foreclosure.


                          manager's amendment

  Because I have long championed the rights of homeowners facing 
mortgage foreclose in the recent TARP bill and before the Judiciary 
Committee, I have worked with Chairman Conyers and his staff to add 
language that would make the bill stronger and that would help more 
Americans. I co-sponsored sections of the Manager's Amendment and I 
urge my colleagues to support the bill.
  Specifically, I worked with the Chairman Conyers to ensure that in 
section 2 of the amendment, section 109(h) of the Bankruptcy Code would 
be amended to waive the mandatory requirement, under current law, that 
a debtor receive credit counseling prior to filing for bankruptcy 
relief. Under the amended language there is now a waiver that will 
apply where the debtor submits to the court a certification that the 
debtor has received notice that the holder of a claim secured by the 
debtor's principal residence may commence a foreclosure proceeding 
against such residence.
  This is important because it affords the debtor the maximum relief 
without having to undergo a slow credit counseling process. This will 
help prevent the debtors credit situation from worsening, potentially 
spiraling out of control, and result in the eventual loss of his or her 
home.
  Section 4 of the Manager's Amendment relaxes certain Bankruptcy 
requirements under Chapter 13 so that the debtor can modify the terms 
of the mortgage secured by his or her primary residence. This is an 
idea that I have long championed in the TARP legislation--the ability 
of debtors to modify their existing primary mortgages. Section 4 allows 
for a modification of the mortgage for a period of up to 40 years. Such 
modification cannot occur if the debtor fails to certify that it 
contacted the creditor before filing for bankruptcy. In this way, the 
language in the Manager's Amendment allows for the creditor to 
demonstrate that it undertook its ``last clear'' chance to work out the 
restructuring of the debt with its creditor before filing bankruptcy.
  Importantly, the Manager's Amendment amends the bankruptcy code to 
provide that a debtor, the debtor's property, and property of the 
bankruptcy estate are not liable for fees and costs incurred while the 
Chapter 13 case is pending and that arises from a claim for debt 
secured by the debtor's principal residence.
  Lastly, I worked to get language in the Manager's Amendment that 
would allow the debtors and creditors to get to negotiate before a 
declaration of bankruptcy is made. I made sure that the bill addresses 
present situations at the time of enactment where homeowners are in the 
process of mortgage foreclosure. This is done with a view toward 
consistency predictability and a hope that things will improve.


                            RULES COMMITTEE

  During this time, debtors and average homeowners found themselves in 
the midst of a home mortgage foreclosure crisis of unprecedented 
levels. Many of the mortgage foreclosures were the result of subprime 
lending practices.
  I have worked with my colleagues to strengthen the housing market and 
the economy, expand affordable mortgage loan opportunities for families 
at risk of foreclosure, and strengthen consumer protections against 
risky loans in the future. Unfortunately, problems in the subprime 
mortgage markets have helped push the housing market into its worst 
slump in 16 years.
  Last night, I offered an amendment that would prevent homeowners and 
debtors, who were facing mortgage foreclosure as a result of the 
unscrupulous and unchecked lending of predatory lenders and financial 
institutions, from having their mortgage foreclosure count against them 
in the determination of their credit score. It is an equitable result 
given that the debtors ultimately faced mortgage foreclosure because of 
the bad practices of the lender.
  Simply put, my amendment would prevent homeowners who have declared 
mortgage foreclosure as a result of subprime mortgage lending and 
mortgages from having the foreclosure count against the debtor/
homeowner in the determination of the debtor/homeowner's credit score.
  Specifically, my amendment language was the following:


[[Page 6001]]

     SEC. 205. FORBEARANCE IN CREATION OF CREDIT SCORE.

       (a) In General.--Section 609 of the Fair Credit Reporting 
     Act (15 U.S.C. 1681g) is amended by adding at the end the 
     following new subsection:
       ``(h) Foreclosure on Subprime Not Taken Into Account for 
     Credit Scores.--
       ``(1) In general.--A foreclosure on a subprime mortgage of 
     a consumer may not be taken into account by any person in 
     preparing or calculating the credit score (as defined in 
     subsection (f)(2)) for, or with respect to, the consumer.
       ``(2) Subprime defined.--The term `subprime mortgage' means 
     any consumer credit transaction secured by the principal 
     dwelling of the consumer that bears or otherwise meets the 
     terms and characteristics for such a transaction that the 
     Board has defined as a subprime mortgage.''.
       (b) Regulations.--The Board shall prescribe regulations 
     defining a subprime mortgage for purposes of the amendment 
     made by subsection (a) before the end of the 90-day period 
     beginning on the date of the enactment of this Act.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall take effect at the end of the 30-day period beginning 
     on the date of the enactment of this Act and shall apply 
     without regard to the date of the foreclosure.

  The homeowners should not be required to pay for the bad acts of the 
lenders. It would take years for a homeowner to recover from a mortgage 
foreclosure. My amendment would have strengthened this already much 
needed and well thought out bill.
  I intend to offer a bill later this Congress to address this issue.


                   HOUSING AND FORECLOSURES AND TEXAS

  Despite being such a large state, Texas ranks only 17th in 
foreclosures, below the national average. One reason is that Texas 
homeowners enjoy strong constitutional protections under the state's 
home-equity lending law. These consumer protections include a 3% cap on 
lender's fees, 80% loan-to-value ratio (compared to many other states 
that allow borrowers to obtain 125% of their home's value), and 
mandatory judicial sign-off on any foreclosure proceeding involving a 
defaulted home-equity loan.
  Nationwide, the number of home foreclosures rose nearly 60% from 
February 2007 to February 2008, while foreclosures in Texas actually 
decreased 1% during the same period. In fact, state-wide foreclosure 
filings in Texas dropped 17% from January to February.
  Still, in the last month, in Texas alone there have been 30,720 
foreclosures and sadly 15,839 bankruptcies. Much of this has to do with 
a lack of understanding about finance--especially personal finance.
  Last year, Americans' personal income decreased $20.7 billion, or 0.2 
percent, and disposable personal income (DPI) decreased $11.8 billion, 
or 0.1 percent, in November, according to the Bureau of Economic 
Analysis. Personal consumption expenditures (PCE) decreased $56.1 
billion, or 0.6 percent. In India, household savings are about 23 
percent of their GDP.
  Even though the rate of increase has showed some slowing, 
uncertainties remain. Foreclosures and bankruptcies are high and could 
still beat last year's numbers.
  Home foreclosures are at an all-time high and they will increase as 
the recession continues. In 2006, there were 1.2 million foreclosures 
in the United States, representing an increase of 42 percent over the 
prior year. During 2007 through 2008, mortgage foreclosures were 
estimated to result in a whopping $400 billion worth of defaults and 
$100 billion in losses to investors in mortgage securities. This means 
that one per 62 American households is currently approaching levels not 
seen since the Depression.
  The current economic crisis and the foreclosure blight have affected 
new home sales and depressed home value generally. New home sales have 
fallen by about 50 percent.
  One in six homeowners owes more on a mortgage than the home is worth 
raising the possibility of default. Home values have fallen nationwide 
from an average of 19% from their peak in 2006 and this price plunge 
has wiped out trillions of dollars in home equity. The tide of 
foreclosure might become self-perpetuating. The nation could be facing 
a housing depression--something far worse than a recession.
  Obviously, there are substantial societal and economic costs of home 
foreclosures that adversely impact American families, their 
neighborhoods, communities and municipalities. A single foreclosure 
could impose direct costs on local government agencies totaling more 
than $34,000.
  Recently, the Congress set aside $100 billion to address the issue of 
mortgage foreclosure prevention. I have long championed that money be a 
set aside to address this very important issue. I believe in 
homeownership and will do all within my power to ensure that Americans 
remain in their houses.


                               BANKRUPTCY

  I have long championed in the first TARP bill that was introduced and 
signed late last Congress, that language be included to specifically 
address the issue of mortgage foreclosures. I had asked that $100 
billion be set aside to address that issue. Now, my idea has been 
vindicated as the TARP that was voted upon this week has included 
language that would give $100 billion to address the issue of mortgage 
foreclosure. I am continuing to engage in the dialogue with Leadership 
to provide monies to those in mortgage foreclosure. I have also asked 
for modification of homeowners' existing loans to avoid mortgage 
foreclosure. I believe that the rules governing these loans should be 
relaxed. These are indeed tough economic times that require tough 
measures.


                             Credit Crunch

  A record number of commercial real estate loans coming due in Texas 
and nationwide the next three years are at risk of not being renewed or 
refinanced, which could have dire consequences, industry leaders warn. 
Texas has approximately $27 billion in commercial loans coming up for 
refinancing through 2011, ranking among the top five states, based on 
data provided by research firms Foresight Analytics LLC and Trepp LLC. 
Nationally, Foresight Analytics estimates that $530 billion of 
commercial debt will mature through 2011. Dallas-Fort Worth has nearly 
$9 billion in commercial debt maturing in that time frame.
  Most of Texas' $27 billion in loans maturing through 2011--$18 
billion--is held by financial institutions. Texas also has $9 billion 
in commercial mortgage-backed securities, the third-largest amount 
after California and New York, according to Trepp.
  Mr. Chair, my amendment would have helped alleviate these problems. 
Although my amendment language was included in the bill, I believe that 
this bill is important and will do yeoman's work helping America get 
back on the right track with respect to the economy and the morgtgage 
foreclosure crisis. I wholeheartedly urge my colleagues to support this 
bill.
  Mr. JORDAN of Ohio. I yield 2 minutes to a colleague and friend from 
Iowa, Congressman King.
  Mr. KING of Iowa. Mr. Chairman, this is a bad bill, and I would echo 
the statement of Congressman Louie Gohmert from Texas.
  We have community bankers. We have independent bankers. They're good 
bankers. These are people who understand their communities. They 
understand their customers. They understand their depositors. They make 
these discretionary decisions at a community level.
  I represent 286 towns in 32 counties in western Iowa. Some of those 
towns have shriveled up. Some other towns have actually shriveled up 
and have gone away, but when I look at what's left of the towns that 
are shrinking, often the last enterprise is the community bank, the 
independent bank, because they're investing back into the community.
  When I watch these communities grow back again--and some of them have 
grown back again since I've been elected to Congress--it's because 
there's an investment locally because decisions are made at the 
discretion of the depositors. They are those who support the board 
members who hire the loan officers who make these discretionary 
decisions. They want mortgages. They want to invest in the community. 
They're invested in the community. This cramdown bill hands it over to 
an unelected judge.
  We had an intense discussion in the Rules Committee last night about 
what kind of accountability there is for judges. I'd like to hear a 
list of the names of those judges who have been removed for 
incompetence, let alone for poor discretion. I'd rather give that 
discretion to the banker who is accountable to the depositors than to a 
judge who is not accountable unless Congress happens to find him.
  Speaking of accountability, I do rise in frustration that an 
amendment that I introduced in the Judiciary Committee that succeeded 
by a vote of 21-3 was taken out of this bill after the fact. Even 
though it had the support of the chairman and of all but three 
Democrats and every Republican, when something like that happens out of 
committee, I have to trust as an elected Member of Congress that there 
will be a level of respect so that when the

[[Page 6002]]

committee votes, that's the will of the committee. I would argue that 
the job is for the Chair or for the Speaker or for whomever it might be 
to bring out the will of the group.
  The CHAIR. The time of the gentleman has expired.
  Mr. JORDAN of Ohio. I yield an additional minute to the gentleman.
  Mr. KING of Iowa. The way you find out the will of the group is you 
have a vote, and there is a full expectation, when an amendment passes 
in committee, it is part of the bill. That's why we have the markup.
  So I had an impromptu colloquy with the chairman, and he said, ``I 
accept responsibility. I'll find out what happened. I'll report back to 
you. I'll get back to you right away.''
  I don't know the answer to that at this point. I can only draw the 
conclusion that, since no one knew this happened and since no member of 
the Judiciary Committee, no Member of Congress has said, ``I'm 
responsible,'' other than responsible for its happening, I trust it was 
a staff act that's not been held accountable. Until I get an answer, 
I'm going to operate under the assumption that no other agreement 
that's made between gentlemen is going to be valid until we can make 
this one valid.
  Mr. CONYERS. Mr. Chairman, it is with great pleasure that I recognize 
for 2 minutes the subcommittee Chair of Immigration, the head of the 
Ethics Committee, and a great leader in the Congress, Zoe Lofgren.
  Ms. ZOE LOFGREN of California. Mr. Chairman, there has been a lot 
discussed here on the floor today that this is a problem that is 
limited to just a few parts of our country--California, Nevada, 
Florida. I just think this is important:
  I went and got the records for year to year on the rate of 
foreclosure. In Alabama, there was nearly a 73 percent increase; in 
Arkansas, a 127 percent increase; in Hawaii, a 139 percent increase; in 
Kentucky, a nearly 60 percent increase; in Maine, a 104 percent 
increase; in Missouri, a nearly 60 percent increase; in Nebraska, a 165 
percent increase; in New Hampshire, a 356 percent increase; in New 
Mexico, a 270 percent increase; in North Carolina, a 126 percent 
increase; in North Dakota, a 150 percent increase.
  This is happening all over the United States, and I'll tell you: when 
foreclosures hit a neighborhood, when half of the block is up for sale 
in a bank sale, the value of your home declines dramatically, and when 
the meth dealers move into those naked homes, I'll tell you that it 
does nothing to increase the value of the homes of the remaining 
homeowners.
  It is essential that we interrupt this foreclosure wave. Now, this 
very modest bankruptcy piece is a small part of the picture. It's 
important to note that, contrary to some of the comments, this 
provision only relates to mortgages entered into before the effective 
date of this bill. It is not prospective. It is retroactive only. We 
have further narrowed the provision in the manager's amendment, which 
will be discussed later, but I think it's worth noting that the bad 
faith on the part of a debtor throws the whole thing out. We've made 
tremendous improvements. It's essential that we act soon.
  Mr. JORDAN of Ohio. If the gentleman from Michigan has more speakers, 
we will reserve the balance of our time.
  Mr. CONYERS. I yield 1 minute to the gentlewoman from California, 
Linda Sanchez.
  Ms. LINDA T. SANCHEZ of California. Mr. Chairman, I rise in strong 
support of the Helping Families Save Their Homes Act.
  The mortgage meltdown affects everyone. No one is immune from the 
widespread effects of home foreclosures. It hurts the families who are 
forced out of their homes, of course, but it also hurts their 
neighbors, who see a drastic drop in property values and communities 
that have to cut back services due to losses in property values. For 
too many, the American dream of owning a home has quickly eroded into a 
nightmare. The bill's mortgage bankruptcy and loan modification 
provisions will provide direct help to real American families.
  As the former chairwoman of the Commercial and Administrative Law 
Subcommittee, I held many hearings on the mortgage foreclosure crisis 
and its impact on families. I know that this bill fixes an inequity in 
the bankruptcy code by ensuring that, under limited conditions, 
homeowners and bankruptcy proceedings will have access to the full 
range of financial support and options available.
  I urge my colleagues on both sides of the aisle to support homeowners 
and neighborhoods by supporting this vital piece of legislation.
  Mr. JORDAN of Ohio. We will continue to reserve the balance of our 
time.

                              {time}  1245

  Mr. CONYERS. Mr. Chairman, I yield 2 minutes to the distinguished 
gentleman from Tennessee (Mr. Cohen).
  Mr. COHEN. Mr. Chairman, Chairman Conyers has done a wonderful job 
bringing this bill to the floor with others. This is a bill that 
shouldn't be partisan, but the other side has tried to make it such. 
And obviously it's not because otherwise Jack Kemp wouldn't be 
wholeheartedly supporting this. Besides Jack Kemp, Nobel Prize winners 
in economics, Joseph Stiglitz and Paul Krugman, as well as George 
Soros, endorse it. In fact, this is something the American people need.
  President Obama just the other night spoke about doing something 
worthwhile, words engraved above the Speaker's rostrum. This is 
something worthwhile we can do to help individuals stay in their homes, 
help communities, help local governments.
  If we lose these people's homes to foreclosure, which otherwise we 
would, it's no cupcake ride into the bankruptcy court. There are strict 
rules about income and assets that allow a person to get in there. And 
the judges who are there, who might be decried by some, are judges that 
are appointed and sit as a decider between the borrowers and lenders 
for what's equitable and right. These people lose their homes and the 
neighborhoods' values will go down, home values will go down, tax 
revenues to local and State governments will go down, crime will go up. 
This is an effective way for neighborhood stabilizations and to keep 
families in their homes.
  The fact is this law came out of a compromise in the Congress in 
1978. And Justice Stevens might have been talking about that 
legislation, but it wasn't Justice Stevens' logic. And he talked about 
the flow of capital into the housing market. Well, there was too much 
flowing of capital into the housing market, and that's what's caused 
these foreclosures.
  This bill will force modifications. People have to give 15 days' 
notice before they can go into bankruptcy, and hopefully banks will 
then have voluntary modifications, which they've refused to do up to 
this point. And remember, the key to this bill is FDIC insurance. And 
if we don't pass this bill, the banks and the community banks and the 
credit unions won't get $250,000 of FDIC insurance to protect the banks 
for what has been their profligate ways that have put us in this 
circumstance that we are in now in this economy and in this country.
  But we need to support this legislation and see that we get the FDIC 
insurance for the right spot, and then we need to do something for our 
families and our neighborhoods.
  Mr. JORDAN of Ohio. Mr. Chairman, I continue to reserve.
  Mr. CONYERS. Mr. Chairman, may I inquire how many speakers my friend 
on the other side has remaining?
  Mr. JORDAN of Ohio. I will be closing.
  The CHAIR. The Chair will note that both sides have 2 minutes 
remaining.
  Mr. JORDAN of Ohio. Mr. Chairman, there is nothing in this bill that 
requires borrowers to attempt to work out a loan modification prior to 
filing for bankruptcy. There is nothing in this bill that will limit 
bankruptcy relief to only those borrowers that are in danger to losing 
their homes because they have a subprime or nontraditional loan.
  In fact, I offered this very amendment to limit the scope of the 
provision in committee, same amendment

[[Page 6003]]

that was actually the bill that came out of committee last session. 
Unfortunately, that was defeated.
  There is nothing in this bill that addresses the moral hazard the 
bankruptcy provisions will create by incentivizing homeowners to file 
for bankruptcy so they can cram down their principal and receive a 
windfall when housing prices rise in the future. And there is nothing 
in this bill that will place a sunset on the bankruptcy provisions so 
that this relief is limited to the current crisis.
  Americans want solutions to this crisis that do not abandon 
accountability and that do not reward those who acted irresponsibly. 
But think about this: 94 percent of mortgages are being paid on time. 
It is wrong to tell those individuals they are now going to have to in 
some way compensate or not be able to get credit in the future to 
accommodate those individuals, that 6 percent, who have behaved in an 
irresponsible fashion.
  Bankruptcy cramdown is not such a solution. It absolves lenders and 
borrowers of the responsibility, passing that responsibility off on the 
taxpayers, those who borrowed responsibly, and those who will seek to 
borrow responsibly in the future.
  I urge my colleagues to vote against this bill.
  I yield back the remainder of our time.
  Mr. CONYERS. Mr. Chairman, it gives me pleasure to yield the 
remainder of our time to the gentleman from North Carolina, Brad 
Miller. 
  Mr. MILLER of North Carolina. Mr. Chairman, it is remarkable after 
all that has happened in the American economy to still hear the talking 
points of the banking industry and the securities industry repeated 
verbatim without criticism, simply parroted. That the banking industry 
is really all about helping folks, that's what caused the problem; that 
they were trying too hard to help people; that they loaned, perhaps not 
wisely but too well.
  The reality is, this is not going to affect the availability of 
credit. We've got plenty to judge that by. There have been rafts of 
economic studies by real economists in peer review journals that show 
that when you compare lending practices in one place and another at the 
same time with different laws, there is very little, if any, 
difference.
  Now, the minority has tried to tap into the American anger at banks 
by calling this a bailout. The reason that the banking industry is so 
virulently opposed to this, this is the only proposal to deal with the 
foreclosure problem that does not give them tax money. We aren't 
begging them, we aren't bribing them to do the right thing; we will 
make them do the right thing. They will modify mortgages in the way 
they should have, voluntarily, involuntarily in bankruptcy court if 
they don't do it voluntarily.
  Mr. Gohmert suggests this is somehow going to be wild, arbitrary, the 
Wild West, no one knows what a bankruptcy court will do, what a 
bankruptcy judge will do. Mr. Chairman, there have been thousands of 
bankruptcy cases. The law is very clear. The procedures are very clear. 
The judges do this all the time. Everyone involved in bankruptcy knows 
exactly what will happen, and it will be a very predictable, orderly, 
logical modification of mortgages in bankruptcy so that borrowers will 
come out with the very mortgage--with the mortgage they should have 
gotten, if they should have gotten a mortgage at all--and the lender 
will come out with a mortgage they should have made in the first place.
  Do something the banks won't like to solve this problem and pass this 
bill.
  The CHAIR. The gentleman from Massachusetts (Mr. Frank) will be 
recognized for 15 minutes and the gentleman from Alabama (Mr. Bachus) 
will be recognized for 15 minutes.
  The Chair recognizes the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Chairman, this bill is a joint 
product of two committees: the Committee on the Judiciary and the 
Committee on Financial Services. I very much appreciate the fully 
cooperative relationship that the gentleman from Michigan and I and the 
members of the committee staffs have had. Working with him has been a 
pleasure as he has taken the lead in the more controversial parts of 
this bill. I say controversial not in denigration but in support.
  I think the bankruptcy provisions--which are the product of the 
Judiciary Committee, not the committee I chair--are essential. I was 
particularly struck--and I will enter into the Record letters from the 
National Council of Life Insurers specifically approving the bankruptcy 
provision, and from the National Association of Realtors also approving 
the bill.
  Obviously, there are people entitled to a variety of opinions, but I 
think it's relevant to note that two important groups, one involved in 
housing--the Realtors--and another very, very much involved in 
finance--the Life Insurance Council--support the bill including the 
bankruptcy provision.
  There is another reason why bankruptcy is relevant to some of the 
things in the jurisdiction of our committee. Even where there are 
people willing to modify mortgages, there are some legal tangles. We 
have this form of a servicer. A servicer is an entity which has been 
given control or authority over packages of mortgage securities. Even 
in cases where the servicer has been willing, in some cases, to do a 
modification, that entity is facing lawsuits from investors who say you 
can't do it.
  There are also second mortgages, that is, even in cases where there 
are a lot of willing parties to this on both the lender and the 
borrower's side, the fact that there is such a tangle of legal rights 
has been an obstacle. Bankruptcy is the only way to cut through that. 
And given the moderate way in which bankruptcy has been put into this 
bill, that adds to--let me put it this way, people are saying let's 
have voluntary modification. But some modifications that are supported 
by almost everybody cannot go forward because of this.
  Beyond that, this bill has some things that are widely supported. For 
instance, the increase in the insurance deposit limits is supported by 
the community banks and the National Federation of Independent Business 
and almost every other group. It does provide to the servicers to whom 
I just alluded a protection that was a bipartisan production of the 
gentleman from Delaware (Mr. Castle) and the gentleman from 
Pennsylvania (Mr. Kanjorski) to say that if you as the servicer modify 
a loan that you hold on behalf of an investor in ways that will 
minimize the loss to the investor, you could not be successfully sued 
because you will have carried out your obligation. It authorizes the 
payment of a fee of up to a thousand dollars to servicers for 
modifications because this is a job that many of them did not expect.
  It also improves the HOPE for Homeowners program which, when we 
passed it in July, had some hopes and they weren't realized; and I will 
acknowledge that we didn't do that well. We were at the time responding 
to pressures that said don't be too generous. As a result, particularly 
after the Senate got through with it, it became unworkable.
  The impetus for change came in part from the Bush administration. The 
FHA, under the Bush administration, Secretary Preston and Commissioner 
Montgomery, said you've made this unworkable. So we have amendments 
that would make it workable. And what we hope coming together is this: 
no one ought to be encouraged to go bankrupt or think bankruptcy is an 
easy path. We do prefer voluntary modifications.
  What we have is a package, along with the very good proposals 
enunciated last week by the President, worked on by Secretary Geithner 
and Secretary Donovan, who did an excellent job on it, we have a menu 
of ways using all the powers of the Federal Government, including 
authority, by the way, that we first gave the administration, the Bush 
administration, in the TARP bill, which they sadly refused to use. But 
this administration is using authorities that were given to the Bush 
administration through Fannie Mae and Freddie Mac, through the TARP, 
through other ways, through the FDIC and other bank regulators. This 
enhances the authority to do modifications.

[[Page 6004]]

  So the result--and this is why it's a package. We strengthen the 
community banks, in particular, with this increase in the deposit 
insurance; we provide a set of options other than bankruptcy to modify; 
and we remove legal obstacles, to the extent we can constitutionally do 
so, to such voluntary modifications. But we then believe that in some 
cases, you will still need to go to bankruptcy to deal with these 
tangles that I mentioned, and we also believe that the fact that there 
is a bankruptcy looming will be an encouragement to negotiations.
  On both the lender's and the borrower's side, we've heard complaints 
that they have tried to communicate with the other. Some people say, 
``I wrote to my lender. He didn't answer.'' Some lenders say, ``I wrote 
to the borrower. She didn't respond.''
  One of the things that the Judiciary Committee did very well--and I 
think they did an excellent drafting job on this bill--is to say that 
if you want to go bankrupt, you have to notify your lender and then 
there is a waiting period.
  So this will promote exactly the kind of communication between 
lenders and borrowers that we hoped would go forward.

                             National Association of Realtors,

                                Washington, DC, February 24, 2009.
       Dear Representative: When people lose homes to foreclosure, 
     our communities, the housing market and our economy all 
     suffer. The National Association of REALTORS' 
     believes H.R. 1106, the ``Helping Families Save Their Homes 
     Act,'' includes provisions to minimize foreclosures, 
     stabilize home values and move the country closer to an 
     economic recovery.
       The bill provides a safe harbor for mortgage servicers who 
     conduct loan modifications in good faith. Currently few loan 
     modifications are occurring because servicers face the threat 
     of investor lawsuits. This provision will relieve servicers 
     from liability, and allow more loans to be modified.
       The bill also reforms the Hope for Homeowners program, 
     allowing more borrowers to refinance into safe, affordable 
     mortgages. Despite being well-intentioned, the Hope for 
     Homeowners program has enjoyed very limited success. The 
     program's constraints have made it very difficult for lenders 
     and servicers to participate. H.R. 1106 eases current 
     restrictions and makes the program more useable, while still 
     preserving the benefits to homeowners and limiting risks to 
     the FHA fund and the American taxpayer.
       The bill strengthens oversight of FHA-approved lenders. FHA 
     is experiencing unprecedented volume during this mortgage 
     liquidity crisis. More and more lenders want to become 
     involved with FHA. To ensure that predatory lenders are 
     unable to participate, the bill provides a number of 
     safeguards to protect the FHA fund and taxpayers from fraud 
     and abuse.
       As progress continues on the bankruptcy provisions within 
     this bill, NAR would support reasonable and equitable 
     requirements for judicial review of loan terms for homeowners 
     who are forced into bankruptcy because they are unable to 
     qualify for or obtain foreclosure prevention assistance.
       The National Association of REALTORS' believes 
     H.R. 1106 will help millions of homeowners who are at risk of 
     losing their homes. It will also help neighborhoods avoid the 
     ramifications of foreclosures and will help our economy on 
     the road to recovery. We ask you to support this important 
     bill.
           Sincerely,
                                                 Charles McMillan,
     2009 President.
                                  ____

                                                February 24, 2009.
       Dear Member of Congress: On behalf of the ACLI and its 340 
     member companies, I commend Congress and President Obama for 
     considering different ways to mitigate the impact of 
     foreclosures on homeowners. I am particularly pleased that as 
     the House moves forward with H.R. 1106, which includes new 
     mortgage ``cram down'' authority for bankruptcy courts, the 
     effects on investors are being taken into consideration.
       The policy rationale behind bankruptcy relief is laudable: 
     providing a way for homeowners in financial distress but with 
     sufficient means to remain in their homes. As the bill 
     recognizes, it is equally important to ensure that there are 
     no unintended negative consequences on those who have 
     invested in mortgage backed securities to the benefit of 
     millions of American homeowners.
       The life insurance industry provides millions of Americans 
     with the products that can help them attain financial and 
     retirement security. To maintain sufficient reserves and 
     surplus to meet obligations to policyholders, life insurance 
     companies are required to invest in high quality financial 
     instruments. For decades we have been the largest holder of 
     corporate bonds in the U.S., and we also hold a significant 
     amount of top tier mortgage backed securities. That is why 
     language clarifying the new cram down law's effect on 
     investors is so important to this industry.
       Without clarifying language, top tier mortgage backed 
     securities could be downgraded significantly, resulting in 
     increased capital requirements for life insurers and a need 
     to raise additional capital in a hostile environment. An 
     inability to raise capital could result in unwelcome 
     downgrades for life insurers.
       This issue by itself is of extreme importance to life 
     insurers. When coupled with the impact of other recent 
     government actions, it could impair an otherwise strong and 
     stable, but increasingly challenged, industry. For example, 
     the $3.5 billion in bonds held by life insurers were 
     virtually erased by the fire sale of WaMu to JP Morgan. Life 
     insurers' $1 billion in preferred stock was virtually wiped 
     out by the take-over of Fannie and Freddie. And we are tested 
     daily by the SEC's failure to adjust mark to market 
     accounting.
       The cumulative impact of these actions on the life 
     insurance industry could erode a vitally important sector of 
     the financial services industry. Our companies can weather 
     this economic storm, but only if lawmakers recognize the 
     consequences of their actions on an industry that provides 
     millions of Americans with financial protections they cannot 
     obtain anywhere else.
       That is why we endorse the inclusion of the language in 
     Section 124 of H.R. 1106. We believe the inclusion of this 
     language is a step in the right direction in avoiding 
     negative, unintended consequences on investors who are vital 
     to this nation's economic recovery. We look forward to 
     working with the House and Senate as this legislation moves 
     forward to make sure that all the ramifications are 
     considered and properly addressed.
           Sincerely,
                                                    Frank Keating,
     President & Chief Executive Officer, ACLI.
                                  ____

                                               National Federation


                                      of Independent Business,

                                Washington, DC, February 25, 2009.
     Hon. Barney Frank,
     Chairman, Financial Services Committee, House of 
         Representatives, Washington, DC.
     Hon. Spencer Bachus,
     Ranking Member, Financial Services Committee, House of 
         Representatives, Washington, DC.
       Dear Chairman Frank and Ranking Member Bachus: On behalf of 
     the National Federation of Independent Business, the nation's 
     leading small business advocacy organization, I am writing in 
     support of Section 204 of H.R. 1106, which makes permanent 
     the deposit insurance limits enacted as part of the Emergency 
     Economic Stabilization Act of 2008.
       Specifically, we are pleased that H.R. 1106 permanently 
     increases the FDIC insurance limits from $100,000 to 
     $250,000, giving small businesses confidence that their 
     business banking assets are secure. It also provides more 
     assurance for banks, especially community banks, that their 
     customers will not remove their money.
       Permanently expanding deposit insurance coverage from 
     $100,000 per account to $250,000 is critical for small 
     businesses, many of whom rely on bank deposits to meet 
     payroll and finance other business activity. According to the 
     NFIB's Research Foundation, a majority of small-business 
     owners use two or more financial institutions to conduct 
     their firms' affairs.
       America's 26 million small businesses are facing the 
     toughest economic climate in decades. Raising FDIC deposit 
     limits will ensure that small business owners can readily 
     access their insured accounts, allowing them to survive and 
     compete in today's challenging economy.
       Thank you for your support of small businesses, and we 
     appreciate your leadership on this issue.
           Sincerely,

                                                Susan Eckerly,

                                            Senior Vice President,
     Public Policy and Political.
                                  ____



                                                         AARP,

                                Washington, DC, February 25, 2009.
     Hon. Nancy Pelosi,
     Speaker, House of Representatives, The Capitol, Washington, 
         DC.
     Hon. John A. Boehner,
     Minority Leader, House of Representatives, The Capitol, 
         Washington, DC.
       Dear Speaker Pelosi and Representative Boehner: On behalf 
     of AARP and its 40 million members, I am writing to reiterate 
     our strong support for legislation to permit modification of 
     home mortgages in bankruptcy as an option to help homeowners 
     avoid foreclosure. Bankruptcy offers an existing structure, 
     and an impartial and trusted process that can help hundreds 
     of thousands of families save their homes, and do so at 
     little cost to taxpayers.
       Over 1.5 million homes with subprime mortgages have already 
     been lost to foreclosure. A December 2008 Credit Suisse 
     report estimated that foreclosures of all types of mortgages 
     could exceed 8 million by the end of 2012 the equivalent of 
     one foreclosure for every 6 households with mortgages. Recent 
     research by AARP found that Americans age 50 and older hold 
     41 percent of all first mortgages and represent 28 percent of 
     all homeowners in delinquency or foreclosure. Clearly, 
     millions of older homeowners will face the loss of their 
     homes, and much of their retirement assets, unless more 
     effective foreclosure relief can be provided.

[[Page 6005]]

       The foreclosure relief plan announced by President Obama 
     last week includes support for judicial mortgage modification 
     as part of a coordinated set of new initiatives to address 
     the foreclosure crisis. While these initiatives will benefit 
     many distressed homeowners, many others will not be assisted 
     either because they are too deeply in debt to benefit from 
     loan refinancing, their loans exceed the GSE loan principal 
     limits, or they lose their jobs and have too little income to 
     pay their mortgage. Court supervised loan modification thus 
     becomes essential to the success of the broader foreclosure 
     relief plan, serving both as an option of last resort for 
     these families to save their homes and as an incentive for 
     servicers generally to offer meaningful loan modifications 
     outside of court.
       Legislation to allow for judicial modification of primary 
     mortgages (H.R. 200) was approved last month by the Judiciary 
     Committee and has been combined with other important measures 
     to stabilize the housing market and prevent foreclosures in 
     H.R. 1106, the ``Helping Families Save Their Homes Act of 
     2009.''
       This legislation offers a balanced approach to bankruptcy 
     reform that will provide relief for many distressed 
     homeowners while limiting any adverse impact on the cost of 
     future mortgage credit.
       We urge the House to resist all weakening amendments to the 
     bankruptcy sections of H.R. 1106 and to immediately approve 
     this timely and needed legislation.
           Sincerely,

                                              David P. Sloane,

                                            Senior Vice President,
                                Government Relations and Advocacy.

  I reserve the balance of my time.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
South Carolina (Mr. Barrett).
  Mr. BARRETT of South Carolina. Mr. Chairman, I rise in opposition to 
H.R. 1106 because I believe the bill is unwise, unproductive, and most 
of all, unfair.
  My heart goes out, Mr. Chairman, to anyone facing foreclosure. It's 
never easy to hear the stories of families losing their homes. But 
allowing bankruptcy judges to modify mortgages is not the right 
solution for our economy or for our housing market.

                              {time}  1300

  The provisions in this bill allow bankruptcy judges to cram down 
principal in mortgages on primary residences, and it will have long-
lasting adverse and unintended consequences on our housing market. I 
offered an amendment that would take out these cramdown provisions, but 
unfortunately, Mr. Speaker, it wasn't even allowed to come to the 
floor.
  This legislation is unfair to Americans who have made difficult 
decisions to cut back their spending in order to pay for their 
mortgages. By further tightening the credit market, this bill forces 
homebuyers to pay more for their mortgages.
  Allowing judges to rewrite mortgage contracts will effectively 
increase the cost and reduce the availability of credit to homebuyers. 
No matter how narrow the mortgage cramdown provisions are, allowing 
these mortgages to be modified in bankruptcy courts will create 
additional uncertainly in the housing market. America needs certainty 
right now, Mr. Speaker, and this bill moves us in the wrong direction.
  I urge my colleagues to join me in opposing H.R. 1106 to protect 
responsible homeowners.
  Mr. FRANK of Massachusetts. I yield 1\1/2\ minutes to the gentleman 
from Oregon (Mr. Blumenauer).
  Mr. BLUMENAUER. I appreciate the gentleman's courtesy in permitting 
me to speak on this just as I appreciate his hard work and leadership.
  We hear our Republican friends from the other side of the aisle who 
talk about their hearts going out to people across the country who are 
facing the tragedy of losing their homes. They have their home mortgage 
under water, in circumstances beyond their control in a system that has 
systematically destroyed the ability of people to be able to actually 
voluntarily deal with a modification of their loan as my friend, the 
chairman, mentioned. This legislation steps forward to restructure the 
relationship, to be able to have the modification. But most 
importantly, it is the fastest, least expensive way to cut through the 
thicket of these issues.
  Now, I hear people talking about cramdown provisions. It's exactly 
the same provision that Donald Trump is going to have the next time he 
goes bankrupt on his fourth vacation home. I've got a situation in my 
community, and it's much worse on the gold coast of Florida, or in Las 
Vegas, or in some places in California, where we have condominia, where 
there are people who bought three, four, five units as investments. 
Then there is somebody who has the misfortune of just buying it to live 
in. The investor, the speculator can have the ``cramdown'' provision, 
he can have the terms modified, with the interest rate reduced, the 
balance reduced, but the poor person who just is living in his or her 
home is stuck. Doesn't sound to me like their hearts are going out to 
the people who are in trouble. That's not equitable. If we had had 
these provision in law before, we never would have securitized goofy 
loans and had this pyramid scheme start in the first place.
  I salute the committee's work; I'm proud to support it. It is going 
to make a big difference, and everybody should vote for it.
  Mr. BACHUS. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman 
from Colorado (Mr. Coffman).
  Mr. COFFMAN. Mr. Chairman, I rise in opposition to H.R. 1106.
  The poison pill in this legislation is the cramdown provision. And 
the cramdown provision will create uncertainty in our credit markets at 
the very time that we are trying to stabilize our financial system. It 
will significantly raise the cost of borrowing, not just for Americans 
who are trying to refinance their homes, but for all future American 
homeowners. It will significantly raise the cost of borrowing because 
it will create a risk premium that lenders will have to place on these 
loans, knowing full well that if the value of the property goes down, 
then they will take a loss. But the legislation also creates a fiction 
that if the value of the property rises, that the lenders will be able 
to recover some of those losses.
  This cramdown provision is wrong for restoring our credit markets and 
it is wrong for the millions of future homeowners across this country 
who will be forced to pay more for those who will be able to use our 
court system to pay less.
  I would encourage a ``no'' vote on this legislation.
  Mr. BACHUS. At this time, Mr. Chairman, I yield 2 minutes to the 
gentleman from California (Mr. Royce).
  Mr. ROYCE. Mr. Chairman, I think I want to comment here on the marked 
difference that I've seen between the sanctity of the mortgage contract 
in the United States and what I've seen around the world.
  Hernando de Soto, the Peruvian economist, touches on this in his 
book, ``The Mystery of Capital: Why Capitalism Succeeds in the West and 
Fails Everywhere Else.'' And his point is that, long term, this private 
mortgage contract is essential. If we begin to undo that contract, 
there isn't any reason to believe that interest rates won't climb up 
commensurate with the kinds of interest rates that we see with respect 
to what you pay on your Visa card or Master Charge.
  The reality really is that Supreme Court Justice John Paul Stevens 
was right some 15 years ago when he cited that legislative history 
indicating that favorable treatment of residential mortgages were 
intended to encourage the flow of capital into the home lending market. 
And his point was that, without that capital flow coming in and pushing 
down interest rates, that long term we were going to face a 
considerably higher interest on home mortgages for the next generation.
  Now, to those skeptics that have been convinced this is a temporary 
solution, I would just say that we should all remind ourselves that 
here in Washington there is nothing more permanent than a temporary 
solution. These things have a way of becoming permanent, and that is 
what I'm concerned about.
  I am also concerned that we haven't recognized the role we played in 
this. And maybe, in terms of the good intentions of many of these 
Members who, frankly, if you look at the erosion of standards, once 20 
percent was the down payment for a house, then it went to zero. And one 
of the reasons it went

[[Page 6006]]

to zero was because of political pressure, because of the perception 
that we would make homeownership more affordable. One of the reasons 
Fannie Mae and Freddie Mac were allowed to over-leverage was for this 
same reason. This is not the solution.
  The CHAIR. The gentleman's time has expired.
  Mr. BACHUS. I yield an additional minute to the gentleman from 
California.
  Mr. ROYCE. I thank the gentleman for yielding me that time because 
this is not the solution. We are going to compound the problem. We are 
going to put in motion here a reticence on the part of those who loan. 
And once the principal amount is reduced in these loans, once people 
know that they can go through the process of bankruptcy, they will be 
more hesitant to work through the process that Treasury has set up with 
this Hope Now Alliance. There's 2.3 million loans last year that were 
reworked with lower interest rates. And if you think about it, it's in 
the borrower's interest and it's also in the lender's interest to sit 
down and do these reworks. That's where our focus should be.
  We should be encouraging those voluntary arrangements. We should be 
bringing resources to bear, to contact homeowners that are having 
trouble right now making those payments and remind them that instead of 
filing for foreclosure, if they get in touch with a lending 
institution, you can voluntarily right now run those out to 30-year 
loans now at 6 percent. And when people are contacted, we find that 
most of these don't go into foreclosure. That's where the focus should 
be.
  Mr. FRANK of Massachusetts. I will yield myself such time as I may 
consume because the gentleman from California wants to talk about the 
history and who pressured people into doing this.
  Yes, it's true, there is a governmental role here: it is a refusal to 
regulate subprime loans. In 1994--and party is relevant--the last time 
before the previous Congress that the Democrats were in the majority, 
this Congress passed a law directing the Federal Reserve to regulate 
home loans in the subprime category that were issued by everybody. Bank 
loans were regulated, nonbanks were not. Alan Greenspan, the Chairman 
of the Federal Reserve, refused to use the authority and acknowledged 
in testimony before the Committee on Government Reform late last year 
that he had refused to use it and that he was mistaken.
  So, part of the problem was, yes, there was a lowering of standards 
because the Federal Reserve refused to impose them. And then, let me 
quote Mark Zandi, who had been an adviser to John McCain, is now an 
economist of great repute--he was then, too, obviously--who notes in 
his book on this crisis that in 2004, the Bush administration decided, 
as part of its strategy of expanding homeownership, to push for an 
increase here, including, in 2004, the Bush administration ordered 
Fannie Mae and Freddie Mac to increase the number of loans they gave to 
people below the median income. And I will put into the Record my 
quotation at the time from an article put out by Bloomberg in which I 
objected to that. Secretary Jackson made them increase by 10 percent 
the number of loans they had to give to people below the median. And I 
said I thought that would be bad for Fannie and Freddie and bad for the 
borrowers because helping people borrow money they can't repay does 
them no good. And there was then an effort to try to get legislation 
passed to do what the Federal Reserve refused to do under Mr. 
Greenspan, regulate subprime loans. But the Republican leadership of 
the House at the time said we don't want to do this.
  There was also concern about Fannie Mae and Freddie Mac. And in 2005, 
I, as the ranking minority member of the Committee on Financial 
Services, joined the chairman, a former colleague, Mr. Oxley, in 
supporting a bill out of our committee to tighten the regulation of 
Fannie Mae and Freddie Mac. I later was opposed to what was done in the 
Rules Committee to weaken a housing provision, but I wanted the bill to 
go forward. And, in fact, that bill went to the Senate with a large 
majority. I opposed it on the housing ground, but I was for the 
regulatory part. The Bush administration rejected it. Then Secretary of 
the Treasury Snow said he thought the President was wrong. Mr. Oxley 
said he was very disappointed that the administration wouldn't go 
forward.
  In any case, the Republican-controlled Senate refused to take the 
bill up. So from 1995 until 2006, under Republican control of the 
Congress, no bill was passed to regulate Fannie Mae and Freddie Mac 
better, and nothing was done to restrain inappropriate subprime 
mortgages.
  In 2007, the Democrats returned to the majority. Within 4 months, the 
Committee on Financial Services had reported on exactly the bill that 
the Bush administration wanted under Secretary Paulson to tight the 
regulation of Fannie Mae and Freddie Mac. There was an organization 
called FM Watch that existed to try to tighten regulation of Fannie Mae 
and Freddie Mac, and they have been quoted as saying, after the House 
acted, ``Well, we finally got what we wanted.'' That was in 2007.
  So, yes, I regret the fact that in 2005 there was an intra-Republican 
split between Mr. Oxley and the President, with the Secretary of 
Treasury on Mr. Oxley's side and Senator Shelby on the President's 
side, and we got no bill. We got it through the House in 2007. It was 
then delayed in the Senate, unfortunately. In 2008, I asked the 
Secretary of the Treasury to put it into the stimulus, the tough 
regulation of Fannie Mae and Freddie Mac. He couldn't do that at the 
time. We got it, but we got it too late. But we got it too late because 
12 years of Republican rule went by and no bill became law.
  Then we had subprime. When we were unable to pass a subprime bill in 
2005 because the Republican leadership said no, we, in 2007, brought 
out a subprime bill. It passed this House. It was a bill to restrict 
inappropriate subprime loans. It was attacked by the Wall Street 
Journal--I'll put the editorial in there--it said it was ``Sarbanes-
Oxley for housing,'' that we would be depriving people of the chance to 
buy homes--yeah, people who shouldn't have had that chance. Once again, 
that was held up in the Senate. But to his credit, Chairman Bernanke, a 
Bush appointee, used precisely the authority that Alan Greenspan 
refused to use from 1994, from that statute, and imposed strict 
restrictions on bad subprime loans.
  I think we will go further. And I expect the Committee on Financial 
Services once again to bring out the bill to restrict inappropriate 
subprime loans. And I will look for that energy that I've heard from 
time to time expressed by some of my Republican colleagues about 
keeping people from being put into homes they shouldn't have. Because 
last time it was a more partisan fight than it should have been, 
although the ranking member, who has a very good history of being 
concerned about this, did join us in voting for the bill.
  The only other thing I would say is this--and I would agree that 
voluntary modification is a good thing. But with the servicer-investor 
conundrum and with second mortgages, even almost entirely voluntary 
agreements to modify cannot go forward without bankruptcy.

          Fannie, Freddie To Suffer Under New Rule, Frank Says

                            (By James Tyson)

       June 17 (Bloomberg)--Fannie Mae and Freddie Mac would 
     suffer financially under a Bush administration requirement 
     that they channel more mortgage financing to people with low 
     incomes, said the senior Democrat on a congressional panel 
     that sets regulations for the companies.
       The new rule compels the companies to put 57 percent of 
     their mortgage financing by 2008 toward homes for people with 
     incomes no greater than area median income. Fannie Mae and 
     Freddie, the two largest U.S. mortgage finance companies, 
     must currently meet a 50 percent threshold.
       The White House ``could do some harm if you don't refine 
     the goals,'' said Representative Barney Frank, a member from 
     Massachusetts on the House Financial Services Committee. 
     Frank's comments echo concerns of executives at the 
     government-chartered companies that the new goals will 
     undermine profits and put new homeowners

[[Page 6007]]

     into dwellings they can't afford. ``At their outer edges they 
     become counterproductive--there are not loans to make that 
     will get repaid,'' Freddie Mac Chief Executive Richard Syron 
     said Monday in an interview, referring to the new financing 
     rule.
       Frank said the administration is aiming to reduce the role 
     of the two companies in mortgage financing, and has seized on 
     the higher goals ``as a useful stick by which to beat Fannie 
     arid Freddie.''


                            HUD Defends Rule

       Alphonso Jackson, secretary of Housing and Urban 
     Development, said the Bush administration has no hidden 
     motives in seeking to raise the percentage of financing for 
     low-income homeowners.
       ``There is no administration more supportive of Fannie and 
     Freddie than we are,'' Jackson said today in interview. ``We 
     are just actualizing what should have been done years ago.'' 
     An agency within HUD, the Office of Federal Housing 
     Enterprise Oversight, regulates Fannie Mae and Freddie Mac, 
     which own or guarantee about half the $7.3 trillion U.S. 
     mortgage market.
       The housing guidelines, subject to a public comment period 
     that ends on July 2, would become law Jan. 1. Referring to 
     both the White House plans and the coming presidential 
     election, Frank said, ``nothing can stop them except a change 
     in November.'' He spoke at a news conference sponsored by the 
     presidential campaign of Senator John Kerry of Massachusetts.
       Frank and housing industry representatives such as Jerry 
     Howard, chief executive of the National Association of 
     Homebuilders, say the White House rules fail to focus 
     financing on multifamily housing and other market segments. 
     The regulations also don't address a decline in refinancing 
     and other market changes, they said.
       ``We don't see how these goals in any way put Fannie Mae 
     and Freddie Mac into specific types of affordable housing,'' 
     Howard said.
       The association, which represents Centex Corp., Toll 
     Brothers Inc. and about 215,000 other companies in the 
     housing industry, plans to ask for a 60-day extension of the 
     public comment period, Howard said.
       Referring to the housing goals and the two companies, Frank 
     said, we want to push them further, but it doesn't make sense 
     to push them in an undifferentiated way.''
       Jackson said his critics should withhold judgment until 
     after Jan. 1. ``I don't see how people can say something is 
     not going to work when we have not had a chance to implement 
     it.''
                                  ____


A Sarbox for Housing--How To Restrict Lending to the Poor for Years to 
                                  Come

       Throughout the 1980s and '90s, Congress prodded, even 
     strong-armed, banks into making more mortgage loans to low-
     income and minority families. Washington enacted anti-
     discrimination and community lending laws with penalties 
     against lenders for failing to issue riskier mortgages to 
     homebuyers living in poor neighborhoods or with low down 
     payments and subpar credit ratings. And so it was that the 
     modern subprime mortgage market was born.
       Now, and for a variety of reasons, some two million of 
     those loans have gone sour, and the same politicians are 
     searching for villains. Leading the charge is House Financial 
     Services Chairman Barney Frank, who is accusing banks of 
     ``predatory lending''--by which he means making loans to the 
     very group of borrowers that Mr. Frank and his colleagues 
     urged banks to serve.
       As early as today, Mr. Frank plans to hold a committee vote 
     on his Mortgage Reform and Anti-Predatory Lending Act of 
     2007, which would impose new rules and financial penalties on 
     subprime lenders, while providing new lawsuit opportunities 
     for distressed borrowers. ``People should not be lent money 
     that's beyond what they can be expected to pay back,'' Mr. 
     Frank says. Now, there's an idea. Why didn't the bankers 
     think of that?
       Mr. Frank's proposal is a trial lawyer's dream. It would 
     forbid banks from signing up borrowers for ``overly expensive 
     loans''; require banks to make sure that the consumer has a 
     ``reasonable ability to repay the loan''; and insist that 
     loans must be ``solely in the best interest of the 
     consumer.'' This kind of murky language would invite 
     litigation from every borrower who misses a payment. If it 
     becomes law we can expect to see billboards reading: ``Behind 
     on your mortgage? For relief, call 1-800-Sue-Your-Banker.''
       Also for the first time, banks that securitize mortgages 
     would be made ``explicitly liable for violations of lending 
     laws.'' This is a version of secondary liability that holds 
     the bundlers and resellers of mortgages responsible for the 
     sins of the original lenders. The reselling of mortgages has 
     been a boon both to housing liquidity and risk 
     diversification. So to the extent the Frank bill adds a new 
     risk element to securitizing subprime loans--and it surely 
     will--the main losers will be subprime borrowers who will pay 
     higher rates if they can get a loan at all.
       No one disputes that there were lending excesses during 
     this decade's housing revels. The Federal Reserve's easy 
     money policy created a subsidy for debt and fed an asset 
     bubble that made borrowers and lenders alike think prices 
     would rise forever. If companies or individuals committed 
     fraud, they should be punished. Meanwhile, federal regulators 
     have been rewriting rules to outlaw the most abusive 
     practices, such as onerous prepayment penalties and disguised 
     balloon interest payments.
       But for all the demonizing, about 80% of even subprime 
     loans are being repaid on time and another 10% are only 30 
     days behind. Most of these new homeowners are low-income 
     families, often minorities, who would otherwise not have 
     qualified for a mortgage. In the name of consumer protection, 
     Mr. Frank's legislation will ensure that far fewer of these 
     loans are issued in the future.
       All of this would also hit banks when they and their 
     shareholders are already being punished in the marketplace. 
     The stock values of financial companies have taken a beating 
     and executives are losing their jobs. Lenders are fleeing the 
     subprime market, and the pendulum has swung to the opposite 
     extreme as banks have tightened credit, which is contributing 
     to the mortgage meltdown.
       The latest housing data indicate that new home sales are 
     down 23% from a year ago, with the biggest retrenchment in 
     the subprime market. The volume of subprime securities was 
     down a whopping 70% to $15 billion in the third quarter from 
     $62 billion one year ago. Originations of the controversial 
     subprime ARMs are down by 50% so far this year compared to 
     2006. Mr. Frank's bill couldn't come at a worse time, as it 
     will further shrink credit to marginal borrowers, which will 
     mean fewer buyers and extend the housing downturn.
       The Frank bill is essentially a Sarbanes-Oxley for housing, 
     an attempt to punish business in general for the excesses of 
     an unscrupulous few and the perverse incentives created by 
     Washington policy.

  Mr. Chairman, I reserve the balance of my time.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentlelady from 
Illinois (Mrs. Biggert).
  Mrs. BIGGERT. Mr. Chairman, I rise today in opposition to this bill 
and to express my sincere disappointment in the way it has come to the 
floor.
  Yesterday, I brought to the Rules Committee two simple, 
straightforward amendments that would have made this a much better 
bill. They would have ensured that taxpayers are protected from others 
making unfair profits on their dime. They would also prevent flippers, 
speculators, illegals and criminals from taking advantage of a program 
that should be aimed at worthy borrowers who are struggling to keep 
their homes.
  The first amendment I offered required that taxpayer-funded mortgage 
assistance not go to those who misstated their income to get a 
mortgage, aren't even living in the residence, were convicted of 
financial fraud, or aren't in the country legally and permanently.
  The second amendment is that taxpayers get paid back first. It 
required that those who profit from selling a property that benefited 
from taxpayer support pay back some of the money through an added 
capital gains tax.

                              {time}  1315

  Why should the 93 to 95 percent of Americans who are paying their 
mortgages on time have to foot the bill for others to make a profit on 
their real estate? It's not fair to my constituents who acted 
responsibly, have worked hard, saved, and took loans they knew that 
they could afford.
  Mr. Chair, these sound to me like principles that we can all agree 
on, and yet the majority in the Rules Committee has refused to allow 
Members of the full House to vote on these commonsense amendments. I 
don't think that's what the American people want, and I would urge my 
colleagues to oppose this bill.
  The CHAIR. The Chair will note that the gentleman from Alabama has 
7\1/2\ minutes remaining and the gentleman from Massachusetts has 2\1/
2\ minutes remaining.
  Mr. FRANK of Massachusetts. Mr. Chairman, I will now yield 1 minute 
to the gentleman from Pennsylvania (Mr. Kanjorski).
  Mr. KANJORSKI. I want to thank my chairman for allowing me this time.
  Mr. Chairman, let me say I want to rise in favor of the Helping 
Families Save Their Homes Act. I have two particular areas that I am 
particularly interested in. One was the provision that allows a 
reconstitution and protection or hold harmless for those who do modify 
mortgages. And Mr. Castle and I worked on that provision in the last 
Congress, and substantially the same

[[Page 6008]]

type of provision has been included in this bill. It benefits everyone 
other than those cranky few investors who have the weakest part of the 
tranches of the securitized mortgages who would like to stop those 
actions from being taken. But even most investors favor it and 
certainly the mortgage holder and the mortgage maker favor it. So I 
hope that provision will become law.
  And, finally, we also included in this package the provision that 
allows the Federal Credit Union Act to be amended to allow a 5-year 
period of payment to rebuild the deposit insurance reserves of the 
Federal Credit Union. And as we all know, with these hard times and 
circumstances, the credit unions need the same help to rebuild their 
deposit reserves.
  So, Mr. Chairman, I urge my colleagues to support this bill.
  Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from 
Texas (Mr. Hensarling).
  Mr. HENSARLING. I thank the gentleman for yielding.
  Mr. Chairman, to state the obvious, everybody in this economy is 
hurting. I've got personal friends of mine who never thought they would 
lose their jobs who have lost their jobs.
  But when we look at this piece of legislation, you have to ask the 
question who are you helping, why are you helping, and whom are you 
hurting to help the other people? We need to remember, Mr. Chairman, 
that, first, 94 percent of all America still is either renting their 
home, they own it outright, or they're current on their mortgage.
  Now, I want to make sure that we help those who through no fault of 
their own are finding themselves in arrears. I want to help the person 
who lost their job or through some debilitating disease can't keep up 
with their mortgage.
  But, Mr. Chairman, mortgage fraud has ran rampant for the last 2 
years. There were people out there who speculated in real estate. There 
were people who turned their homes into personal ATM machines. There 
are people who could have made sacrifices and now they expect their 
neighbor to make the sacrifice. Mr. Chairman, it's just patently unfair 
when you're struggling to pay your mortgage to be forced to pay your 
neighbor's as well.
  I heard from one of my constituents about this very subject. I heard 
from Theresa Steele in Mesquite, Texas, and she wrote me: 
``Congressman, I had to put off purchasing a home because of medical 
expenses that my family had to deal with. While paying these medical 
expenses, I was able to pay rent on a house. But it's really 
frustrating. You cannot get a break because our taxes keep going up 
along with the cost of groceries and gas, et cetera, and it seems no 
matter what you do, you cannot get ahead when others are out there 
throwing caution to the wind and seem able to have my tax dollars bail 
them out. It doesn't seem right to me.''
  Well, Mr. Chairman, if Theresa Steele was here, I would say it 
doesn't seem right to me either. To increase her taxes to pay for 
somebody else's mistake is patently unfair, will not help our economy. 
You cannot tax and borrow your way back into prosperity.
  Mr. FRANK of Massachusetts. Mr. Chairman, in the absence of any 
correction, I have only one speaker left; so I will reserve the balance 
of my time.
  Mr. BACHUS. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman 
from Georgia (Mr. Kingston).
  Mr. KINGSTON. I thank the gentleman for yielding.
  I certainly applaud the committee for trying to do something about 
this problem, but I'm afraid that this is not the right solution. It 
actually seeks to help a few at the cost of all homeowners.
  First of all, the government seems to be very content these days 
picking winners and losers. But I don't understand if Mr. Bachus is 
paying his mortgage and I'm not, why am I necessarily, just because of 
that, deserving to renegotiate the contract? What is it that the 
Federal bankruptcy judge will know about me which will make me have the 
insider advantage over my friend from Alabama? It doesn't make sense. 
The judge will have to decide, well, was I laid off because of 
something that I did? Did I bite off more than I should have chosen, 
because of my irresponsibility, because of the lender's 
irresponsibility? I think the precedent of this is extremely scary. And 
why only contracts that involve real estate? What about other contracts 
that people get involved with in terms of debt?
  The fact of this is it's going to also not just put the government in 
a position of picking winners and losers, but it's going to put more 
uncertainty in the market. And right now, as I talk to Realtors and 
bankers and investors, what this market needs on Main Street and Wall 
Street is knowledge of rules. Rules that govern, regulatory practices, 
whatever they are, if they're here or if they're here, what Wall Street 
and the investment community needs to know is what are the rules? We 
will adjust to them. But here we go one more time increasing 
uncertainty by changing the rules.
  Mr. Chair, the Helping Families Save Their Homes Act (H.R. 1106) 
would allow bankruptcy judges to reduce the principal owed on a 
mortgage, a practice often referred to as a ``cramdown.'' Judges would 
also be able to reduce interest rates or lengthen the term of the 
mortgage. This will help only a few people while raising the cost of 
borrowing for thousands of moderate-income and first-time homebuyers.
  Although supporters claim that this is a limited provision that 
applies only to existing mortgages, the cramdown language can easily be 
amended to make it permanent at a later date--which would then be 
priced into future mortgages. In addition, the House bill lacks many of 
the targeted limitations designed to make sure that bankruptcy is a 
last resort. It even weakens language passed earlier by the House 
Judiciary Committee that was designed to keep those who filed 
fraudulent mortgage applications from taking advantage of cramdowns.
  H.R. 1106 does contain two important provisions to correct flaws in 
the housing bailout plan passed last year.
  Problems with Cramdowns: Allowing bankruptcy judges to modify 
mortgages would raise mortgage costs for everyone and even more for 
first time homebuyers. Cramdowns would add additional risk that 
mortgages will not be repaid as the contract requires. Lenders must 
charge for that added risk, and experts estimate that the additional 
costs would raise mortgage rates by as much as two full percentage 
points or substantially increase required down payments. This increase 
would apply to every mortgage applicant in order to ensure that the 
entire pool of mortgages remains profitable upon resale to the 
secondary market.
  Mortgage companies would greatly expand ``risk based pricing'' of 
individual mortgages as well. These added costs would fall hardest on 
moderate-income and first-time homebuyers, who have a higher risk of 
defaulting on a mortgage. This will price many families out of the 
housing market.
  Further undermine the value of mortgage-backed securities: Banks and 
other investors are already facing heavy losses not only because 
mortgage-backed securities have lost much of their value but because of 
uncertainties about whether the mortgages will be paid. The language in 
H.R. 1106 increases this uncertainty. Investors will be at risk of both 
foreclosure and cramdowns that reduce the earnings of these securities. 
Many cramdown mortgages will later go into foreclosure. Since investors 
have no idea what this new provision will do to the value of their 
securities, prices will drop further.
  Fail to help many homeowners: Only one-third of all Chapter 13 fliers 
completes the process successfully and gets the fresh start that 
bankruptcy promises. The other two-thirds ``pay court fees, pay 
attorney's fees, pay fees to the bankruptcy trustee, invest time and 
money to restructure their financial affairs, and then wind up with 
nothing more than temporary relief. In fact, one third of chapter 13 
filers go on to file for bankruptcy again.
  Other Provisions in H.R. 1102: The Helping Families Save Their Homes 
Act also contains a mixture of other housing and financial provisions. 
These include:
  Liability waivers for mortgage servicers that modify mortgages: 
Mortgage servicers receive payments from mortgages and forward them 
(after fees) to the owners of the mortgages. As the main contact with 
homeowners, mortgage servicers should be able to refinance or alter 
mortgages in order to ensure that the owners get the best possible 
return, but many fear that unhappy mortgage owners would sue them. The 
legislation provides these servicers with a safe harbor so long as they 
act within certain specified boundaries. This is a needed change.

[[Page 6009]]

  Making $250,000 FDIC and MCUA deposit insurance levels permanent: 
Last fall, Congress increased deposit insurance coverage by FDIC and 
NCUA to $250,000 until December 2009. This bill makes that change 
permanent and also increases the agencies' borrowing authority to cover 
their losses. Borrowing authority is used only if the deposit insurance 
fund runs out. This is a useful change but unlikely to be needed.
  Keeping predatory lenders from taking advantage of FHA programs: 
Section 203 of H.R. 1106 makes it easier for HUD and the FHA to prevent 
predatory lenders from underwriting FHA-guaranteed home loans. This is 
a needed reform.
  Trying to fix the Hope for Homeowners program: Last summer, Congress 
created Hope for Homeowners, an FHA-based program that it originally. 
FHA claimed the program which is run jointly with Treasury, would help 
up to 2 million homeowners. To date, according to the FHA, it has 
actually helped about 500. The legislation makes a number of changes 
that will make it more attractive to homeowners, raise the cost of it 
by $2.3 billion, but is unlikely to otherwise improve it.
  Making the Problem Worse: Mortgage cramdowns would further 
destabilize an already damaged housing market while increasing mortgage 
costs for future borrowers. The useful changes it makes are necessary 
but in no way overcome the downsides associated with the passage of 
this legislation.


       Analysis of the Homeowner Affordability and Stability Plan

  Two of the bill's three key components are designed to provide 
subsidies and benefits primarily to homeowners who, while still current 
in their payments, may not be able to take advantage of attractive 
refinancing opportunities at lower interest rates because the value of 
their home has declined beyond the loan-to-value ratio permitted by 
rules governing mortgage investments made by Fannie Mae and Freddie 
Mac. The second such provision of the plan would provide taxpayer and 
investor subsidies to mortgage borrowers who have taken on more debt 
than they could safely manage, including, in some cases, credit card 
and automobile debt. The third component of the plan encourages the 
enactment of legislation allowing bankruptcy judges to alter the terms 
of certain mortgage loans, a practice that to date has been prohibited 
by federal law.
  The legislation suffers from 12 specific weaknesses and risks: The 
plan's Stability Initiative bestows new and costly benefits on those 
who took on more debt than they could handle, including credit cards, 
automobile loans, and mortgages (including refinancing and seconds). 
Worse, the value of the benefits will vary in direct proportion to the 
degree of borrower financial irresponsibility and the intensity of 
community land regulations. Homeowners with a first mortgage as large 
as $729,750 are eligible for the initiative, meaning that the well-to-
do will receive more financial benefits than those of modest means. And 
as analysts at one nationwide financial firm noted, ``The modifications 
would go disproportionately to borrowers who overstretched and who lied 
about their income.'' This moral hazard sends a clear message to the 
American people: The worse the behavior, the greater the reward.
  Under this Stability Initiative, borrowers with a ratio of mortgage 
debt service to income greater than 31 percent can have their mortgage 
interest rate reduced to as little as 2 percent if that is what it 
takes to achieve the 31 percent ratio-with government paying half the 
subsidy and the investor/lender surrendering the other half. If this 
concession is insufficient to reach 31 percent. Eligible borrowers may 
also have loans that are as much as 50 percent greater than the value 
of the house.
  It is also unlikely that, under the Stability Initiative, borrowers 
with a ratio of debt service payment to income as high as 55 percent--
because of combined mortgage, credit card, and automobile debt--will be 
eligible to receive temporary payment reductions if they merely agree 
to HUD-approved counseling. Such borrowers may then be eligible for 
permanent payment reductions. This reduction scheme will be disclosed 
in rules that the Administration has announced it will release on March 
4.
  Because the investor/lenders will be responsible for a portion of the 
mortgage rate reduction, this program will deter private sector 
investment in all but the best mortgages. Combined with the proposed 
``cramdown'' bankruptcy proposals, the net effect will be to require a 
substantial and permanent federal presence in the housing finance 
market to accommodate those many potential borrowers who are not highly 
qualified.
  The plan also includes a formal endorsement by the President of a 
bankruptcy provision that allows judges to alter the terms of certain 
mortgages. This provision will increase the risk to lenders of all 
mortgages. The industry is already treating this as a permanent 
measure. Increased risk requires higher costs to compensate lenders, 
and either down payments or interest rates would have to rise, while 
potential borrowers with checkered credit histories would be denied 
access to credit. However, these costs would not rise evenly for all 
borrowers: Higher-risk borrowers (first-time buyers and moderate-income 
workers) would see costs rise more and have fewer opportunities to buy 
a house.
  Anticipating such criticisms, the proposal contends that it will 
``seek careful changes to personal bankruptcy provisions.'' However, 
because any changes in bankruptcy law must be passed in legislation, 
this outcome may merely be wishful thinking. As the President wants to 
make sure that ``millionaire homes don't clog bankruptcy courts,'' 
mortgages eligible for judicial ``cramdown'' cannot exceed $729,750 in 
value. Moreover, the most recent version of the legislation weakens 
language adopted earlier by the House Judiciary Committee to prevent 
borrowers who committed fraud in their mortgage application from taking 
advantage of cramdown.
  The plan's Refinancing Initiative creates a new right for American 
borrowers now current in their mortgage payments; the right to 
refinance their home at a lower interest rate even if the quality of 
the loan--as measured by the loan-to-value ratio--would otherwise pose 
a risk to the lender. As such, this proposal establishes the act of 
being highly leveraged or slightly ``underwater'' (the amount that a 
borrower owes on his or her mortgage is more than the value of the 
house) as a legitimate reason to default, and as a policy problem 
worthy of taxpayer support and federal intervention. The creators of 
this new right fail to recognize that many other consumer credit 
markets operate comfortably, successfully, and safely despite the fact 
that many borrowers are underwater the minute they sign the contract--
notably home improvements, mobile homes, automobiles, RVs, and HDTV's. 
Though those borrowers do expect to be ``underwater'' for these kinds 
of purchases, it raises the question of whether future legislation will 
extend this concession to car loans and credit card debt, which are 
also experiencing significant levels of default.
  Only borrowers with loans held or repackaged by the federally 
controlled and subsidized Fannie Mae and Freddie Mac will be eligible 
to exercise this new right to refinance. Borrowers whose loans are held 
by private investors are denied this right, further distorting the 
housing markets with government-selected winners and losers.
  To date, the several, federal loan modification programs that have 
been put in place have had very limited success, and the rate of 
failures exceeds that of successes, especially for loans where one or 
more payments have been missed. For loans that were four months past 
due at time of modification, the recidivism rate is 80 percent after 12 
months. For loans one month past due, the recidivism rate after 12 
months is 60 percent. With the nationwide decline in house prices 
accelerating in recent months, the risk of recidivism under the new 
program could remain at high levels.
  The program will cost $275 billion ($75 billion for problem mortgages 
and $200 billion for Fannie Mae and Freddie Mac).
  Obama's plan will take a great deal of time to implement. A recent 
MarketWatch.com articles notes that loan refinancing applications are 
up 47 percent at a time when a substantial portion of the loan 
originating infrastructure has disappeared due to bankruptcy and bank 
consolidation. The prospect that a shrunken mortgage lending system 
could expeditiously accommodate the 7-9 million borrowers expected by 
the Obama plan is wishful thinking. The result will be long waits for 
refinancing that will come too late for some borrowers and may also 
crowd out efforts by unsubsidized borrowers to refinance due to the 
generous financial incentives offered to servicers participating in the 
new federal program.
  Perhaps the most troubling part of the plan is the increased reliance 
being placed on the now federally controlled Fannie Mae and Freddie 
Mac, whose tax and corrupt behavior over the past decade was an 
important contributing factor to the present economic crisis. Although 
nominally privately owned, both are now run by the U.S. Treasury, whose 
massive holdings of preferred shares in both give it a huge implicit 
ownership stake. As is clear from the refinancing plan--which will 
reduce Fannie's and Freddie's earnings and thus weaken them further--
the two have become little more than the federal government's captive 
mortgage financing banks to be used at will for any housing policy 
initiatives that the President and/or Congress wish to pursue. And with 
the plan's many provisions discouraging the private sector from getting 
involved

[[Page 6010]]

in mortgage finance, this plan substantially advances the de facto 
nationalization of America's housing finance system for all but the 
``jumbo'' mortgages that exceed conforming limits.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 10 seconds.
  The gentleman from Georgia asked about what other contracts. This is 
precisely the bill to make this like other contracts. Everything else 
can be declared void in bankruptcy. So the gentleman has it absolutely 
backwards. This doesn't create an exception to general contract law. It 
amends one and makes this on the same footing as, quoting the 
gentleman, all other contracts.
  Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, I would like to introduce into the Record an article 
from the New York Times, dated September 30, 1999, and here's what it 
says:
  ``Fannie Mae, the Nation's biggest underwriter of home mortgages, has 
been under increasing pressure from the Clinton administration to 
expand mortgage loans among low and moderate income people . . . ''
  And then they quote Franklin Raines: ``Fannie Mae has expanded home 
ownership for millions of families in the 1990s by reducing down 
payment requirements. Yet there remains too many borrowers whose credit 
is just below what our underwriting has required and who have been 
relegated to paying significantly higher mortgage rates . . .''
  Well, I think we know the rest was history. They lowered their 
standards, they moved into this new risky form of lending, and then 
last July the American people were submitted the bill, and that bill 
was a half trillion dollars, and every day we're adding billions of 
dollars to that tab. And there were people at that time who warned that 
it was risky and who warned that ultimately the taxpayers may have to 
step in and bail out Freddie and Fannie. Now today we are being asked 
to adopt legislation, the HOPE for Homeowners Program, which would 
require FHA to insure loans with a greater risk of default and require 
a higher per loan taxpayer subsidy.
  In fact, the Congressional Budget Office says that this program is 
going to help 25,000 borrowers, but it's going to cost up to $579 
billion. Now, coupled with the new projection that the HOPE for 
Homeowners is going to only help 25,000 borrowers, that's $23,000 per 
borrower that you're going to ask the American people to pay or expose 
them to that risk.
  I'm going to give you the same warning that was given in 1999. It's 
the taxpayer that's going to have to take up the cost of this subsidy 
and this risk. And for that reason, I am not willing to burden the 
taxpayer with another dollar.
  These are terrible economic times. All taxpayers are under risk. Many 
taxpayers are facing loss of their job. At a time like this, an 
uncertain time like this, to further expose the taxpayers of this 
country, the American families we represent, to another half trillion 
dollars' worth of exposure is not something that I'm willing to do.
  I am willing, and I have said many times I was willing, to endorse 
the Kanjorski-Castle provision, which would allow servicers with 
lenders and borrowers to work out terms, and I applaud that provision 
in the bill. Strip out this $23,000 per-loan program and we will all go 
down and vote for Castle-Kanjorski.
  And let me say this: we have had one too many bailouts. We don't need 
another one. It's time that we started watching out for the taxpayer 
and help borrowers without submitting the bill to hardworking 
Americans.

               [From the New York Times, Sept. 30, 1999]

            Fannie Mae Eases Credit To Aid Mortgage Lending

                         (By Steven A. Holmes)

       In a move that could help increase home ownership rates 
     among minorities and low-income consumers, the Fannie Mae 
     Corporation is easing the credit requirements on loans that 
     it will purchase from banks and other lenders.
       The action, which will begin as a pilot program involving 
     24 banks in 15 markets--including the New York metropolitan 
     region--will encourage those banks to extend home mortgages 
     to individuals whose credit is generally not good enough to 
     qualify for conventional loans. Fannie Mae officials say they 
     hope to make it a nationwide program by next spring.
       Fannie Mae, the nation's biggest underwriter of home 
     mortgages, has been under increasing pressure from the 
     Clinton Administration to expand mortgage loans among low and 
     moderate income people and felt pressure from stock holders 
     to maintain its phenomenal growth in profits.
       In addition, banks, thrift institutions and mortgage 
     companies have been pressing Fannie Mae to help them make 
     more loans to so-called subprime borrowers. These borrowers 
     whose incomes, credit ratings and savings are not good enough 
     to qualify for conventional loans, can only get loans from 
     finance companies that charge much higher interest rates--
     anywhere from three to four percentage points higher than 
     conventional loans.
       ``Fannie Mae has expanded home ownership for millions of 
     families in the 1990s by reducing down payment 
     requirements,'' said Franklin D. Raines, Fannie Mae's 
     chairman and chief executive officer. ``Yet there remain too 
     many borrowers whose credit is just a notch below what our 
     underwriting has required who have been relegated to paying 
     significantly higher mortgage rates in the so-call subprime 
     market.'' 
       Demographic information on these borrowers is sketchy. But 
     at least one study indicates that 18 percent of the loans in 
     the subprime market went to black borrowers, compared to 5 
     percent of loans in the conventional loan market.
       In moving, even tentatively, into this new area of lending, 
     Fannie Mae is taking on significantly more risk, which may 
     not pose any difficulties during flush economic times. But 
     the government-subsidized corporation may run into trouble in 
     an economic downturn, prompting a government rescue similar 
     to that of the savings and loan industry in the 1980s.
       ``From the perspective of many people, including me, this 
     is another thrift industry growing up around us,'' said Peter 
     Wallison a resident fellow at the American Enterprise 
     Institute. ``If they fail, the government will have to step 
     up and bail them out the way it stepped up and bailed out the 
     thrift industry.''

  Mr. Chair, there are elements in this legislation that I support, 
such as permanently increasing deposit insurance coverage limits to 
$250,000 that will strengthen our banking system and help avoid 
destabilizing bank runs. The Kanjorski-Castle language, providing a 
safe harbor for mortgage servicers, is a timely and targeted solution 
that encourages loan modifications that benefit both homeowners and 
investors. It is a commonsense approach to help keep American families 
in their homes.
  And while I do support certain provisions in this bill--and did so in 
Committee--I oppose the legislation as a whole, and urge my colleagues 
to do the same.
  Enacted by Congress last July, Hope for Homeowners has been a failure 
by virtually every metric. And rather than cut taxpayer losses, this 
legislation aims to fix a fundamentally unfixable program, while 
abandoning key taxpayer safeguards.
  Initially, proponents claimed this program would provide relief to 
400,000 borrowers. They were wildly off mark. In fact, the program has 
received a mere 400 applications and closed on just 43 new loans.
  If today's legislation was enacted, the Hope for Homeowners program 
would allow FHA to insure loans with greater risk of default and 
require a higher per loan taxpayer subsidy. The non-partisan 
Congressional Budget Office (CBO) projects that even with these 
changes, the program will help a mere 25,000 borrowers, at best. Far 
from the 400,000 promised, and far from a success.
  According to CBO research, taxpayers may be responsible for up to 
$579 million as a result of potential defaults. This nearly billion 
dollar figure, coupled with the new projection that Hope for Homeowners 
will only assist at most 25,000 borrowers, could potentially cost the 
taxpayer an astounding $23,000 per loan.
  Throughout the campaign, President Obama almost daily expressed his 
goal of ending wasteful, underperforming and duplicative government 
programs. How many times do we have to attempt to change a program that 
has helped 43 borrowers nationwide? Under President Obama's criteria, 
HOPE for Homeowners would certainly qualify as a program to be cut.
  And worse, bankruptcy cram-down provisions included in this bill will 
further reward poor decisions made by a small amount of individuals and 
lenders, while adding uncertainty to the market and increasing mortgage 
costs for the vast majority of Americans.
  Congress should be asking: who is this legislation intended to help, 
and is it fair? Will this bill reward irresponsible behavior and punish 
those who have played by the rules and lived within their means? And 
how will this legislation stimulate the economy?

[[Page 6011]]

  Times are tough for American families--we all know that. But merely 
throwing good taxpayer money after bad is not the solution to our 
economic problems. We must consider the long-term consequences of our 
actions and how working American families and taxpayers will be 
affected. This legislation is not the answer. I urge my colleagues to 
vote ``no.''
  The CHAIR. The gentleman from Massachusetts has 80 seconds remaining.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield the balance of my 
time to one of the leaders in the effort to preserve homeownership for 
deserving people in America and the fight against abuses, the 
gentlewoman from California (Ms. Waters).
  Ms. WATERS. Mr. Chairman and Members, I am so pleased to stand here 
today in support of H.R. 1106, the Helping Families Save Their Homes 
Act of 2009.
  I work on both of these committees, the Financial Services Committee, 
the Judiciary Committee. I want to thank Mr. Frank, I want to thank Mr. 
Conyers, and all those Members who have been working so hard to try to 
assist our homeowners with loan modifications. We knew that we'd never 
be able to get this done without judicial modifications of home 
mortgages during bankruptcy for borrowers who have run out of options. 
That's in the bill.
  The other thing in this bill, the safe harbor for servicers that 
would allow them to move forward now and do these modifications, the 
strengthening of HOPE for Homeowners, which Mr. Frank has worked so 
hard on, and a piece that I wrote in on FHA approval that would ensure 
that predatory lending entities are not allowed to participate in the 
program because they have been ripping off our homeowners.
  I want to thank Jackie Speier and Mr. Driehaus for working with me on 
this part of the legislation. Now I think we are finally putting all 
the pieces together that can truly do loan modification for so many 
deserving citizens. I believe that we don't have to deal with this one-
by-one effort where homeowners are trying to call banks and servicers, 
not being able to get in touch with anybody, not being able to be 
serviced, but, rather, they can now depend on the law that we are 
putting out here today.
  I would urge everyone to vote for this bill.
  Mr. DINGELL. Mr. Chair, I rise today in support of H.R. 1106, the 
``Helping Families Save Their Homes Act of 2009.'' We are in the midst 
of the gravest recession in recent memory and hear daily of countless 
foreclosures across the Nation, particularly in my home state of 
Michigan. As President Obama mentioned during his address to the 
Congress two days ago, the Federal government can and must pursue 
measures to mitigate the effects of this terrible economic blight upon 
the Nation's citizens.
  With the painful memories of the Great Depression still clearly in 
mind, I offer my wholehearted praise and support for the President's 
call to action. Additionally, as the representative of a congressional 
district with one of the Nation's highest foreclosure rates and most 
dramatic decline in housing values, I feel it imperative that we move 
swiftly to stabilize the housing market to keep people in their homes.
  H.R. 1106 is a good first step toward achieving this goal. Its 
improvements to the Hope for Homeowners program and provision for a 
safe harbor to mortgage servicers that elect to participate in mortgage 
modifications will help stem the tide of foreclosures sweeping across 
the country. The bill's provision to make permanent the increase in 
Federal deposit insurance from $100,000 to $250,000 will give Americans 
greater faith in the safety of their savings at a time of continued 
bank failures.
  Nevertheless, I am troubled by the broad authority afforded to 
bankruptcy judges in Title I of H.R. 1106 to modify the terms of a loan 
for primary residences. It is my view that this authority should be 
limited to apply only to those homeowners subject to the ill effects of 
deceptive lending practices that gave rise to the recent mortgage 
crisis. Further, I am concerned that the aptly named ``cramdown'' 
authority in Title I of the bill will encourage people to seek 
bankruptcy as a matter of course, and not of last resort, in addressing 
their indebtedness.
  This aside, I cannot in all good conscience oppose passage of H.R. 
1106. I will vote in favor of this well-intentioned legislation but in 
so doing, call upon my colleagues to narrow the applicability of the 
H.R. 1106's loan term modification provisions in conference.
  Mr. BLUMENAUER. Mr. Chair, this bill is a significant step in the 
right direction for all Americans struggling to pay their mortgages.
  Today, our economy is facing a real and growing crisis, threatening 
the longest period of economic stagnation since the Great Depression. 
Nowhere is that problem more evident than in the wave of home 
foreclosures. In my state, the foreclosure rate is below the national 
average but continues to rise. According to the Center for Responsible 
Lending, more than 20,000 new foreclosures will be initiated in Oregon 
in 2009.
  These foreclosures affect neighbors who may have paid off their 
mortgages long ago and communities whose tax bases are eroding quickly, 
creating a vicious cycle of house price declines, defaults, and 
foreclosures.
  I would like to highlight the bankruptcy provisions in this bill. 
Providing the bankruptcy courts with the authority to reduce the 
principal owed on mortgages, reduce interest rates, and reduce fees is 
a crucial victory for consumers.
  Under those provisions, the bill provides bankruptcy courts with the 
same options for the treatment of primary residences that are already 
available to the courts for second homes, vacation homes, and 
investment property.
  It makes absolutely no sense that Donald Trump can have the mortgage 
of his fourth vacation home modified to more acceptable terms if he 
goes bankrupt, but that John and Jane Doe living in their primary 
residence of Anywhere, USA, are not afforded this help.
  Another key set of provisions are the improvements to the Hope for 
Homeowners program. Under the Bush Administration, that program--while 
touted as a lifeline for struggling homeowners--did not insure a single 
loan.
  This bill opens the door to participation by homeowners by reducing 
insurance premiums, easing requirements for lenders to participate, and 
defraying some of the costs of refinancing mortgages.
  Overall, this legislation is a good step in the right direction, but 
we cannot take our eye off the ball, and I will continue working with 
my colleagues to addressing these challenges.
  Ms. PELOSI. Mr. Chair, I thank Chairman Conyers and Chairman Frank 
for their strong leadership in bringing this much needed housing and 
bankruptcy legislation to the floor.
  The legislation is the result of the perseverance of many Members, 
especially Brad Miller, the original author of the legislation and Mr. 
Cohen of the Judiciary Committee.
  I also commend Zoe Lofgren, Ellen Tauscher, and Dennis Cardoza for 
their compromise that is reflected in the manager's amendment. They 
have worked diligently to make improvements to the bill to ensure that 
homeowners will avoid bankruptcy whenever possible by first and 
foremost providing homeowners to a workable and accessible loan 
modification process.


                            every 13 seconds

  As Chairwoman Lofgren has said, we have a foreclosure in America 
every 13 seconds.
  Every 13 seconds, a family is uprooted, their children are forced to 
switch schools, their biggest investment--their home--is boarded up, 
increasing blight and reducing property values.
  Each foreclosure represents nothing less than the end of an American 
Dream. But with this legislation--the Helping Families Save Their Homes 
Act--we can protect the American Dream and preserve it for America's 
families.


                       what the legislation does

  This legislation will reduce the number of foreclosures by providing 
incentives for loan modifications that will permit families to stay in 
their homes on a long term basis.
  It reforms the HOPE for Homeowners program to make it more workable 
for both homeowners and lenders.
  In addition to providing incentives to lenders and servicers, this 
legislation, thanks to improvements that Members have worked on, also 
provides important incentives to homeowners to work with lenders and 
servicers to modify loans and to avoid bankruptcy--a painful and 
intrusive process for families. For those who cannot be helped, the 
legislation permits existing home mortgages to be judicially modified 
under the Bankruptcy Code, similar to the treatment of other real 
estate such as investment properties.
  Finally, the legislation strengthens our financial system to foster 
the flow of credit necessary for home refinancing by making permanent 
the new $250,000 deposit insurance limit for Americans' accounts in 
banks and credit unions.


                            president's plan

  This legislation compliments the President's recently announced 
Homeowner Affordability and Stability Plan, which will help up to 7 to 
9 million families restructure or refinance their

[[Page 6012]]

mortgages to avoid foreclosure by refinancing or modifying their loans. 
Both the Obama plan and this legislation are long overdue steps to 
strengthen the housing market.


                responsibility of borrowers and lenders

  As we consider this legislation, we all agree on the principle that 
everyone bears a personal responsibility for their actions and their 
debts. This legislation upholds this principle.
  Lenders must also act in good faith, responsibly lend to qualified 
homeowners, and work with homeowners who are at-risk of foreclosure 
because that is in the interests of lenders, borrowers, neighborhoods, 
and our nation's economy.
  Yet, as 22 state Attorneys General recently noted, ``many servicers . 
. . remain unwilling or unable to act, even when their own economic 
interests dictate otherwise.''


                                 close

  When homeowners are unable to obtain relief, we must act to protect 
the American Dream of owning a home, to protect the neighborhoods 
ravaged by foreclosures, and to protect our economy, which has been 
ravaged by the decline of housing market.
  Unless we address our nation's foreclosure crisis, more Americans 
will lose their jobs, will not be able to send their kids to college, 
and see their retirements savings continue to decline and disappear.
  This bill helps homeowners, lenders, and neighbors. It is essential 
to our economic recovery. I urge my colleagues to take action today to 
stop foreclosures and help American families save their homes.
  Mr. DINGELL. Mr. Chair, I rise today in support of H.R. 1106, the 
``Helping Families Save Their Homes Act of 2009.'' We are in the midst 
of the gravest recession in recent memory and hear daily of countless 
foreclosures across the Nation, particularly in my home state of 
Michigan. As President Obama mentioned during his address to the 
Congress two days ago, the federal government can and must pursue 
measures to mitigate the effects of this terrible economic blight upon 
the Nation's citizens.
  With the painful memories of the Great Depression still clearly in 
mind, I offer my wholehearted praise and support for the President's 
call to action. Additionally, as the representative of a congressional 
district with one of the Nation's highest foreclosure rates and most 
dramatic decline in housing values, I feel it imperative that we move 
swiftly to stabilize the housing market to keep people in their homes.
  H.R. 1106's provisions will do much toward achieving this goal. Its 
improvements to the Hope for Homeowners program and provision for a 
safe harbor to mortgage servicers that elect to participate in mortgage 
modifications will help stem the tide of foreclosures sweeping across 
the country. The bill's provision to make permanent the increase in 
federal deposit insurance from $100,000 to $250,000 will give Americans 
greater faith in the safety of their savings at a time of continued 
bank failures.
  I extend my heartfelt congratulations to my colleagues, 
Representatives Lofgren, Tauscher, and Cardoza, for their work to 
narrow the authority in this bill afforded to bankruptcy judges to 
modify the terms of a loan for primary residences. I believe that in 
keeping with the President's housing plan, we should adopt a targeted 
effort at stemming foreclosures to address the housing crisis.
  I urge my colleagues to support this legislation.
  Ms. WOOLSEY. Mr. Chair, the mortgage foreclosure crisis is the center 
of the financial crisis that our country is now facing. And, until we 
take on the foreclosure crisis, and find a way to help keep people in 
their homes, we are never going to get to the root causes of our 
economic downturn.
  That's why I support judicial modification of primary residences in 
bankruptcy proceedings. This important provision in H.R. 1106, the 
Helping Families Save Their Homes Act, would allow judges who are 
presiding over bankruptcies to modify the terms of a mortgage, allowing 
homeowners who are trying to keep their heads above water and stay in 
their homes. The more people who are facing foreclosure, the worse this 
crisis is going to get.
  It's important that, as this bill makes its way through Congress, we 
work with our counterparts in the Senate to ensure this provision isn't 
used as a tool for those who would be tempted to commit fraud. It's 
equally important to ensure that those institutions who have acted in 
good faith are not unfairly punished by the good intentions of this 
bill. There are many lenders, like some of the credit unions in my 
district, who have not traded in the sub-prime market, and have bent 
over backwards to keep their members in their homes. It would be 
shameful if anything that we are doing with H.R. 1106 negatively 
impacted those who are actively trying to solve the foreclosure 
epidemic from the lending side of the ledger.
  Mr. Chair, I hope that this is only the first of many bills that come 
to the House Floor to address the housing crisis, and I urge my 
colleagues to support this legislation.
  Ms. LEE of California. Mr. Chair, I rise in support of H.R. 1106, the 
Helping Families Save Their Homes Act of 2009.
  I want to commend Chairman Conyers, Chairman Frank and Speaker Pelosi 
for their dedication and work in bringing this bill to the floor.
  Of course, I would have preferred to vote on the prior, more robust 
version of this bill, but nevertheless this is an important step 
forward that will help keep families in their homes.
  As we all know the roots of the current economic crisis are grounded 
in the housing market and the greedy lending practices of the banks.
  Many of us warned about this impending housing crisis years ago. As a 
member of the Financial Services committee for eight years, I remember 
expressing my concern about the housing bubble and the subprime loans 
that were fueling it and the consequences to our economy if the bubble 
popped.
  But our warnings fell on deaf ears.
  When we tried to encourage the banks to participate in voluntary 
foreclosure prevention programs to help families in distress, they 
balked and made every excuse to avoid participating.
  Then the economy tanked and they begged us for a bail out.
  Now millions more families are threatened with bankruptcy and 
foreclosure. That's why we are taking this step today, to restore some 
equity to our bankruptcy laws to allow judicial modifications of 
mortgages on primary residences and to help keep families in their 
homes.
  I applaud the improvements to the Hope for Homeowners program that 
are also included in this legislation. We had to address the low rate 
of participation in this voluntary program and I know that the 
improvements included here will provide many more homeowners with a way 
to work out new, affordable mortgages and to continue making their 
mortgage payments.
  Passing this bill will be an important step in stabilizing the 
housing markets because not only will we help families protect their 
homes and their assets during this economic crisis, we will strengthen 
our entire banking system by making permanent the increase in the FDIC 
insurance limits to $250,000. This will protect the savings of every 
American and will increase confidence in the banking systems both here 
and abroad.
  Mr. Chair, I urge my colleagues to support passage of H.R. 1106.
  Mrs. MALONEY. Mr. Chair, I rise today in strong support of H.R. 1106, 
the ``Helping Families Save Their Homes Act.'' This legislation is 
needed now more than ever, and I want to commend Chairman Frank, 
Chairman Conyers, and the Leadership for working together to bring this 
bill to the Floor.
  It is important to remember that behind the economic and housing 
statistics are real people--the hard-working Americans and their 
families who are facing difficulties paying their bills every day. H.R. 
1106 contains several key provisions to ensure that homeowners will 
have more options available to them to stay in their homes.
  The bill before us would make necessary improvements to the Hope for 
Homeowners program including reducing current fees that have 
discouraged lenders from voluntarily participating and offering a 
$1,000 incentive payment to servicers for each successful refinance of 
existing loans. H.R. 1106 will ensure that predatory lenders, who bear 
some of the responsibility for today's housing situation, will not be 
approved as lenders under FHA programs. The legislation also provides a 
safe harbor from liability to mortgage servicers who engage in certain 
loan modifications, and it makes permanent an increase, from $100,000 
to $250,000, in the amount of bank or credit union deposits insured by 
Federal banks and credit union regulators. H.R. 1106 establishes a 5-
year restoration plan for the National Credit Union Administration 
(NCUA) which is currently required to restore the equity ratio of the 
Share Insurance Fund within one year.
  I think most of us agree that bankruptcy should be the option of last 
resort. However, for those homeowners facing bankruptcy, H.R. 1106 will 
allow bankruptcy judges to reduce the principal, extend the repayment 
period, or authorize the reduction of an exorbitant interest rate to a 
level that helps make a mortgage more affordable. I am glad that we 
have been able to make changes to this legislation that will enable 
homeowners to stay in their homes, while at the same time providing 
greater certainty to lenders and to the secondary market.
  I am hopeful that this bill will help to stem the tide of 
foreclosures and ensure that our

[[Page 6013]]

neighborhoods do not experience a cascade of increased vacant lots and 
decreased property values.
  The President has proposed a plan to help make it easier for 
homeowners, including those who are still in repayment but at risk for 
default, to refinance their mortgages at around the current market 
rate, or modify their loans. H.R. 1106 is an important step in moving 
forward with that plan. We must act now. The American people deserve no 
less than our full commitment to helping them through these troubled 
times.
  I urge my colleagues to support this legislation.
  Mr. HOLT. Mr. Chair, I rise today in support of the Helping Families 
Save Their Homes Act of 2009 (H.R. 1106), and to commend Chairman 
Frank, Chairman Conyers, and the Financial Services and Judiciary 
Committees for their leadership and hard work on this measure. I urge 
my colleagues to support it.
  No doubt, the experience of my colleagues is the same at when the 
economy spiraled out of control last year, my constituents did not call 
me and write me and come to my Town Hall meetings saying ``please give 
my hard-earned taxpayer dollars to Wall Street. Wall Street is really 
hurting, and I want to do my part to help.'' No, they came to me saying 
``I am in trouble. I played by the rules. I did everything right, but 
my life is falling apart, and my home is about to be taken away. Please 
help me.'' We responded a few weeks ago by enacting the American 
Recovery and Reinvestment Act to help stimulate the economy and get 
people back to work while providing for the essential services people 
need to get by. Today, we are taking another very important step by 
responding to the foreclosure crisis that is at the root of the 
recession.
  The foreclosure crisis is a vicious cycle. Due to plummeting home 
values in recent years, an estimated 14 million homeowners owe more on 
their homes than their homes are worth; their mortgages are ``under 
water''. For a variety of reasons, including predatory lending abuses, 
exploding adjustable rate mortgage payments, and increasing job losses, 
homeowners all over the country have tried to refinance their mortgages 
into lower rates just to make ends meet. But the decreased values of 
their homes made that impossible. Unable to afford their current 
mortgage payments, unable to refinance them, and unable to sell the 
homes due to the depressed housing market, many face foreclosure. 
According to the trade research organization RealtyTrac, lenders made 
foreclosure filings on 2.3 million properties last year alone. Each 
foreclosed home reduces nearby property values by as much as 9 percent, 
sending those surrounding homes down the path towards being under 
water. And the cycle continues. Congress must act, must act now, and 
must act with force and determination.
  The Helping Families Save Their Homes Act attacks the foreclosure 
crisis aggressively, and approaches the problem from many angles at 
once, but is measured in its application. The bill would help millions 
of homeowners stay in their homes, by including incentives to encourage 
lenders to negotiate affordable mortgages for homeowners whose 
mortgages are under water, who are at risk of foreclosure, and who are 
facing bankruptcy. For example, it would modify the Hope for Homeowners 
program by reducing the fees that discouraged lenders from voluntarily 
participating in that program last year, and by providing for a $1,000 
incentive payment to servicers for each successful refinancing of an 
existing loan.
  The bill also provides special protections for veterans, by allowing 
the Department of Veterans Affairs, the Federal Housing Administration 
(FHA), and U.S. Department of Agriculture to guarantee and/or insure 
mortgage loans that have been administratively or judicially modified. 
Therefore the bill would provide additional financial incentives for 
lenders to voluntarily modify mortgage loans instead of foreclosing. 
The bill also would expand the FHA's mortgage loan modification 
abilities by allowing a reduction of interest payments of up to 30 
percent of the outstanding loan balance.
  Most importantly, the bill would pay for adjustments to existing 
programs by tapping into $2.316 billion in already-authorized funding 
under the Troubled Assets Relief Program enacted last year. Therefore, 
to be clear--this is not a ``new bailout.'' This bill gives back to 
taxpayers more than 2 billion taxpayer dollars that previously had been 
allocated to Wall Street by previously-enacted legislation.
  In addition to incentivizing lenders to modify mortgages to keep 
families in their homes, the bill would give homeowners an important 
new tool to fend for themselves: judicial modification of primary home 
loans. By allowing bankruptcy judges to modify the terms of the home 
mortgages at the core of the economic crisis--the mortgages already 
issued prior to enactment of this bill under terms, conditions and 
circumstances that forced so many of them into foreclosure or the brink 
of failure--we help our constituents remain in their homes under 
revised payment plans they can afford. This important protection also 
does not cost taxpayers anything, but it could reduce foreclosures by 
20 percent.
  The mere fact that homeowners have judicial modification of primary 
home mortgages available as an option, which is already available for 
vacation home loans and other consumer loans, will further encourage 
lenders to modify mortgages before borrowers file for bankruptcy. In 
addition, as it would be further fine-tuned by the Conyers amendment, 
the bill would apply a ``good faith'' test to deny bankruptcy 
modification relief to individuals who can afford to repay their 
mortgages without it, and extend the negotiation period requiring the 
debtor to certify that he or she contacted the lender and sought to 
reach agreement on a qualified loan modification. As perfected, the 
amendment would also allow a court to consider, in lieu of reducing 
principal in a modification, reducing the interest rate to lower the 
borrower's monthly payment; enhance the ``good faith'' test restricting 
the use of judicial modification to reduce principal by requiring 
courts to determine whether a lender offered to modify the loan and 
whether the debtor could afford the offered modification; and increase 
the proportion of appreciation on a home that a lender could recoup in 
a sale within five years after the modification. The bill already 
includes a provision protecting mortgage servicers from lawsuits by 
investors who may be unhappy with the mortgage modifications.
  Some have expressed the concern that this bankruptcy option will 
increase the cost of borrowing for other homeowners. Compared to the 
alternative of foreclosure, however, judicial modification should 
maximize, rather than decrease, the value of troubled mortgages for the 
lender. According to economist Mark Zandi, ``[g]iven that the total 
cost of foreclosure to lenders is much greater than that associated 
with a Chapter 13 bankruptcy, there is no reason to believe that the 
cost of mortgage credit across all mortgage loan products should 
rise.'' In addition, because the bankruptcy modification right only 
applies to mortgages issued before enactment of the bill, home 
mortgages issued in the future will be viewed as more stable, reliable 
and predictable than loans that can be modified in bankruptcy, and 
capital should again in the future readily flow to the home mortgage 
industry as it did in the past.
  The bill also recognizes that unchecked predatory lending activity 
was one of the root causes of the crisis we face today and attacks that 
problem directly in several ways. For example, it requires the 
Department of Housing and Urban Development (HUD) to approve all 
parties participating in the FHA single family mortgage origination 
process, allows HUD to impose a civil money penalty against loan 
originators which are not HUD-approved but participate in FHA mortgage 
originations, and establishes other rigorous conditions on eligibility 
for would-be participants in the program.
  Finally, it makes permanent an increase, from $100,000 to $250,000, 
in the amount of bank or credit union deposits insured by Federal banks 
and credit union regulators, and increases these regulators' authority 
to obtain additional liquidity from the US Treasury. It is an 
aggressive and comprehensive, but thoughtful and measured bill. It puts 
taxpayers first, and most of it costs nothing or is already paid for by 
taking taxpayer funds that had been allocated to Wall Street and 
returning them to Main Street. I urge my colleagues to support it.
  Mr. VAN HOLLEN. Mr. Chair, I rise today in support of the Helping 
Families Save Their Homes Act.
  This important bill will help more Americans stay in their homes by 
addressing a major flaw in the Hope for Homeowners Program and by 
extending to single residence homeowners an option currently only 
available to owners of second and third homes.
  The Hope for Homeowners program was established in October of last 
year by the Bush Administration to help more Americans refinance. The 
Congressional Budget Office projected the program would let 400,000 
troubled homeowners swap risky loans for conventional 30-year fixed 
rate loans with lower rates.
  But, because of flaws in the program, and despite the tremendous 
resources the government is making available to banks, none of the 
major mortgage lenders have been willing to make the new mortgages 
required to refinance distressed properties. To date, only 25 loans 
have been renegotiated nationwide.
  So we gather here today to make the changes necessary so that more 
homeowners can take advantage of this important program.
  The bill makes two important changes: It reduces the fees and 
administrative burdens to

[[Page 6014]]

loan underwriters by making the requirements associated with refinances 
more consistent with standard FHA practices. Also, the bill permits the 
Hope for Homeowners Program to pay lenders up to $1,000 to refinance 
each mortgage, and provides a safe harbor from liability to mortgage 
servicers who engage in loan modifications, workouts or other loss 
mitigation.
  To pay for these important changes, the bill is offset by a $2.316 
billion reduction in the $700 billion Troubled Asset Relief Program.
  For those homeowners facing bankruptcy, the bill permits judges to 
reduce the principal, interest rates, and fees owed on mortgages for 
primary residences. This is the same option already available for 
owners of yachts and vacation homes. The measure allows courts to 
reduce the principal on such mortgages to the current market value of 
the home, from the higher amount specified in the original mortgage. 
This provision should encourage banks to work with homeowners upfront 
and to exhaust every option so as to avoid having to settle the issue 
before a judge.
  I encourage my colleagues to join me in support of the Helping 
Families Save Their Homes Act. By helping struggling homeowners, we are 
helping reduce the number of foreclosed homes in our communities which 
should help stabilize home prices and strengthen our economy.
  Mr. KENNEDY. Mr. Chair, I rise in support of the Helping Families 
Save Their Homes Act and in support of President Obama's Homeowner 
Affordability and Stability Plan.
  We simply cannot overstate the effect that the housing crisis has had 
on our economy. Foreclosures continue to decimate both our financial 
system and the neighborhoods that we call home. In Rhode Island, we are 
suffering from the highest foreclosure rate in New England and housing 
prices have dropped 25 percent in the last year.
  President Obama's plan is a welcome recognition that we cannot begin 
to resolve our economic crisis without first stemming the tide of 
foreclosures. Under his leadership, the Homeowner Affordability and 
Stability Plan will help up to 7 to 9 million American families 
restructure their mortgages to avoid foreclosure. This plan will help 
responsible homeowners in danger as well as our neighbors, our banks 
and our local economies. For example, this initiative will save the 
average homeowner from price declines of as much as $6,000 in the value 
of their home.
  It is long past time for a President who recognizes that bold action 
is needed to curb the foreclosure crisis. Bankruptcy judges must be 
given the power to adjust mortgages on primary residences. The language 
in the bill we are debating today is very similar to legislation I 
cosponsored earlier this Congress and I applaud President Obama for his 
leadership on this issue.
  Yet, there are some banks that claim this legislation will make 
homeowners choose bankruptcy over working out their mortgages. These 
are the same banks that have flatly refused to help work out those 
mortgages over the last year. These concerns have been directly 
addressed. To make sure nobody abuses the courts, this legislation will 
require all homeowners seeking bankruptcy protection to certify that 
they first attempted to modify their mortgage with the banks.
  Every time we try to reform our financial system, we are told by 
industry and skeptic alike that consumer protections like those in the 
Homeowner Affordability and Stability Plan might ``destabilize'' the 
market. Our government accepted that advice for much of the last decade 
and it landed us in an economic crisis. The great people of Rhode 
Island have watched their home equity plummet because of reckless 
behavior on Wall Street. Frankly, that is the kind of destabilization I 
am worried about.
  It is true that this legislation will make a number of important 
revisions to the Hope for Homeowners Program. However, the real problem 
with Hope for Homeowners was that the lending industry never had any 
interest in participating. Until homeowners have some bargaining power 
and the lending industry understands that these loans must be reworked, 
there will be no real progress. Currently, bankruptcy judges can change 
the terms of loans for automobiles, stores, vacation homes and 
factories but not primary mortgages. It's time we let them do something 
much more important: help Americans to keep their houses.
  This plan will empower homeowners and give lenders the incentive they 
need to save millions of mortgages from foreclosure. I look forward to 
continuing to work with my colleagues in Congress and with President 
Obama to tackle the housing crisis and restore America's economy.
  Mr. POSEY. Mr. Chair, H.R. 1106 is a combination of several free-
standing bills, all of which touch on financial services and which are 
intended to address the mortgage situation. While I support some 
aspects of H.R. 1106, such as updates to the Federal Credit Union Act 
and a servicer safe harbor for loan modifications, the bill goes far 
beyond this by expanding the failed Hope for Homeowners program and 
allowing judicial ``cram downs'' in bankruptcy cases. ``Cram down'' 
will significantly raise the cost of mortgages for all borrowers by 
enabling bankruptcy judges to rewrite the terms of mortgages. The House 
Financial Services Committee has never held a hearing on the impact of 
``cram down.'' My amendment to the Committee's Oversight Plan, accepted 
unanimously on February 11, directed the Committee to investigate the 
potential impacts of ``cram down'' legislation including its effects on 
the cost of mortgages, the taxpayers and the secondary market for 
mortgages.
  Despite a dismal performance record, this bill throws more money at 
the Hope for Homeowners (H4H) program, which I am informed has helped a 
mere 43 borrowers. The Congressional Budget Office estimates that 
expanding this program will help no more than 25,000 borrowers at a 
cost of $23,000 each. We also know that the changes the bill makes to 
H4H will weaken important taxpayer safeguards, leaving taxpayers to 
foot the bill directly for additional defaults.
  A significant concern I have with H.R. 1106 is the cram-down 
provision. The ``cram down'' provision would allow bankruptcy judges to 
change the terms of a mortgage loan for a primary residence, 
overturning a century of bankruptcy code and practice. Proponents of 
``cram down'' are quick to argue that bankruptcy judges should have the 
authority to help everyone stay in their homes. Anyone with common 
sense knows that higher risk or greater uncertainty will raise interest 
rates. Opening the possibility of ``cram down'' across the board for 
all primary residences adds uncertainty in the market and it will lead 
to higher interest rates across the board for all home buyers. 
Everyone, including responsible buyers, will be forced to foot the bill 
for speculators and those who make poor purchasing decisions as the 
costs of those decisions are spread across all borrowers. For more than 
100 years primary residences have been exempted from ``cram down'' 
bankruptcy proceedings precisely to help keep mortgage interest rates 
lower and homes more affordable. At a February 11 House Financial 
Services Committee hearing, I asked the nation's leading lenders what 
would happen if Congress passed ``cram down.'' Their response was 
overwhelmingly clear: allowing bankruptcy judges to ``cram down'' 
mortgages would increase the cost of all mortgages and add an incentive 
for more people to declare bankruptcy.
  The adverse effects of this legislation will extend beyond the small 
percentage of people it is intended to help. The increased risk in the 
housing market, and increased interest rates, will result in much 
larger down payments and cost first-time buyers and lower and middle-
class families tens of thousands of dollars. The Mortgage Bankers 
Association predicts that ``cram down'' would increase interest rates 
from six percent to eight percent on a 30-year, fixed rate mortgage. 
For a $300,000 loan for example, this would cost the borrower nearly 
$5000 per year and over $144,000 for the life of the loan. H.R. 1106 
will encourage more homeowners to file bankruptcy as some homeowners, 
currently on the margin of bankruptcy but still making payments, could 
take advantage of ``cram down'' bankruptcy as opposed to seeking a loan 
modification with their lender. Is encouraging bankruptcies really a 
solution to our problems? For many filers it would only delay the pain 
of foreclosure. Just one-third of Chapter 13 filers actually complete 
the process, which is itself costly and time-consuming. If our goal is 
to unfreeze credit and improve the economy, H.R. 1106 is the wrong 
prescription.
  We can do better. We can craft solutions that give troubled home-
owners a ``time out'' and help them catch up on payments without 
burdening taxpayers, overturning a bedrock provision of our bankruptcy 
code that has benefited 90 percent of Americans who do not have 
troubled mortgages. If this bill becomes law, new responsible 
homeowners will be forced to make higher mortgage payments each and 
every month for 30 years. That is a significant ``tax'' on responsible 
middle class families. Forcing responsible Americans to subsidize bad 
decisions by others may not meet the technical definition of a tax 
increase, but I believe whenever you take money out of one person's 
pocket and give it to someone else it is a tax.
  Mr. HOYER. Mr. Chair, It can be easy to think that a neighbor's home 
troubles are no concern of ours. If we can still pay our mortgages, 
it's easy enough to shut our doors on their problems.

[[Page 6015]]

  But the world doesn't work like that. Our prosperity is bound to 
theirs, in good times and bad. A single foreclosed home can threaten a 
neighborhood; a neighborhood of foreclosed homes can help bring down 
the economy of a city; and a nation full of foreclosures can expect 
economic turmoil, and frozen credit, and layoffs, and decreasing 
demand, and more layoffs. That is where we are today: a nation with 14 
million families' mortgages underwater, and counting; a nation in which 
foreclosed homes can drive down the value of their neighbors' property 
by nearly 10 percent.
  That's why this bill is so necessary. The Helping Families Save Their 
Homes Act puts into law some of the most important provisions of 
President Obama's homeowner stability plan. It makes it easier for 
lenders to renegotiate mortgages for families who are underwater, close 
to foreclosure, or nearing bankruptcy. And for families that are driven 
into bankruptcy by their home payments, this bill allows bankruptcy 
judges to modify the terms of their loans--a step that is free for 
taxpayers and could reduce foreclosures by 20 percent. Today, investors 
can restructure debt on their vacation homes; real estate speculators 
can do it for their property; corporations can do it for their private 
planes; and you can even do it if you own a boat. It is only fair that 
average Americans have the same right for the homes they live and raise 
their families in.
  I also want to make very clear that this bill is not designed for 
those who bought bigger houses than they knew they could afford. It is 
made for those who acted responsibly but need this breathing room 
because of circumstances they could not control--circumstances like 
unemployment or the nationwide decline in home values.
  Maybe someone listening in this chamber, or watching on TV, knows 
what it's like to lose a home. You know, in a way that I do not, just 
how wrenching it is to be forced to box up your things and turn over 
your key.
  But this bill is not just about you--it is about all of us. As 
President Obama said this month, ``In the end, all of us are paying a 
price for this home mortgage crisis. And all of us will pay an even 
steeper price if we allow this crisis to deepen.'' The effects go far 
deeper than one family and one now-vacant house. They go to the health 
of an entire economy--to the jobs and livelihoods of people on the 
other side of the continent. They go to a crisis that will not end 
until this mortgage mess is cleaned up.
  So for all of our sakes, we need to pass this bill and begin putting 
President Obama's plan into effect.
  Mr. LARSON of Connecticut. Mr. Chairman, I rise today to express my 
support for H.R. 1106: Helping Families Save Their Homes Act of 2009. I 
want to thank all of the members who worked tirelessly on this bill as 
well as the President for making this a priority in his plan to help 
families stay in their homes.
  Our country is faced with enormous challenges and every community has 
felt the effect of this economic downturn. Digging ourselves out of the 
hole we have been left will not be easy and will require difficult 
choices.
  The housing crisis is not only at the root of the economic crisis we 
currently face, but continues to be a problem for millions of families 
facing difficulties in paying their mortgages. In Connecticut there 
were over 25,000 foreclosure filings in 2008, which was an increase of 
84 percent over the previous year. Already in January of this year 
there have been more than 1,600 foreclosure filings in the state, 
including 387 in Hartford County alone.
  This bill will go a long way to decreasing foreclosures and keeping 
families in their houses. It helps provide opportunities for families 
to refinance or modify their mortgages and ensures fairness in our 
bankruptcy courts for homeowners who face this option as their last 
resort. By allowing bankruptcy judges to modify the terms of mortgage 
loans, we will give homeowners the same opportunity that others have to 
restructure their loans for vacation homes. The bill also contains 
fixes to the Hope for Homeowners program that will provide more 
incentives for servicers to refinance mortgage loans and reduce fees 
for participating in the program. Finally, by permanently increasing 
federally insured deposits from $100,000 to $250,000 we will help 
restore confidence in our financial system.
  This recovery will require a number of steps and this legislation is 
the next step in getting America back on track. I again want to express 
my support for this bill and urge my colleagues to vote for its 
passage.
  Mr. ETHERIDGE. Mr. Chair, I rise in support of H.R. 1106, Helping 
Families Save Their Homes Act of 2009.
  Across our country, millions of responsible homeowners are facing 
foreclosure. Some reports indicate there could be up to 6 million 
families currently in danger of losing their homes. Although the 
foreclosure crisis has not been as pronounced in my state as in some 
others, North Carolina has seen one of the fastest rises in 
unemployment in the country, with a rate of 8.2% earlier this year. 
These job losses will risk damaging neighborhoods and towns across the 
state by placing more families at risk of defaulting on mortgages. H.R. 
1106 will ensure that lending institutions work with borrowers to help 
keep Americans in their homes to strengthen the housing market, which 
is critical for our nation's economic recovery.
  H.R. 1106 takes steps to address this crisis and help families across 
the country. This bill will help millions of struggling homeowners 
refinance or restructure their mortgages. H.R. 1106 reforms the Hope 
for Homeowners initiative by lowering fees and providing $1,000 to 
servicers that participate. This will make the initiative more 
attractive to lenders and more effective in reaching the many families 
seeking help. H.R. 1106 provides ``safe harbor'' for mortgage lenders 
so that they can modify mortgages without the threat of lawsuits from 
the secondary mortgage market. In addition, this bill would protect 
consumers' savings by permanently increasing the amount of federal 
deposit insurance savings in banks or credit unions from $100,000 to 
$250,000.
  H.R. 1106 also contains a provision that would allow for the 
modification of some mortgages under the terms of Chapter 13 
bankruptcy. Current law allows for a bankruptcy judge to adjust the 
principal on all secured loans except for those on primary residences. 
Provisions in H.R. 1106 ensure that people can afford their mortgage. 
The bill also stipulates that judicial modification should only be 
employed as a last resort for saving a family's home. Only existing 
mortgage loans are eligible, and a judge is required to consider 
whether all other options are exhausted before changing the principal 
of a home loan. Finally, this bill ensures that if a borrower gets 
relief through this mortgage relief initiative and then sells their 
home for a profit, the lender is able to recoup a sizable portion of 
that profit. This is a key provision to incentivize lenders to work 
with at-risk borrowers who are seeking help through mortgage 
modification initiatives.
  In order to get our struggling economy back on track, we must address 
the foreclosure crisis, one of the main factors that precipitated this 
recession. Not only are foreclosures devastating to individual 
families, but their effect ripples throughout the economy, hurting 
manufacturers and construction firms, dropping consumer spending and 
confidence, and cutting the value of neighboring homes. H.R. 1106 is an 
important step to deal with this crisis.
  I support H.R. 1106, Helping Families Save Their Homes Act of 2009, 
and I urge my colleagues to join me in voting for its passage.
  Ms. ROYBAL-ALLARD. Mr. Chair, I rise today in support of H.R. 1106, 
the Helping Families Save Their Homes Act of 2009.
  Mr. Chair, my congressional district, like districts all across the 
nation, has been hit hard by the foreclosure crisis. In 2007 Los 
Angeles County had a foreclosure rate of 12%. In 2008 this number had 
jumped to 35%. Worse yet, while many parts of the country have already 
received the full brunt of the foreclosure crisis, experts agree that 
the full force of the crisis has yet to reach Los Angeles.
  I have been concerned that previous congressional efforts to 
stabilize the economy and help my Los Angeles constituents have failed 
to address the root of the problem--defaulting mortgages.
  I am pleased that the Helping Families Save Their Homes Act will make 
substantive reforms to end the rising tide of foreclosures and keep 
families in their homes.
  Specifically, the measure will allow a judge to modify primary 
mortgages in the case of bankruptcy so that families can stay in their 
homes. Currently, when a family files for bankruptcy they can modify 
loans on second homes, and other property but not on their primary 
residence. It Is widely recognized that judicial modification of 
mortgages on primary residences is one of the most significant things 
that we can do to keep families in their homes.
  By encouraging homeowners to work out their loans before filing for 
bankruptcy, the measure ensures that bankruptcy still remains a measure 
of last resort. The bill will also adapt federal loan modification 
programs to make it easier for mortgage servicers to participate.
  In addition, the bill begins to address a growing concern--the 
growing number of organizations that aim to profit off of families who 
are in crisis and at risk of losing their home. This problem is highly 
visible in my congressional district, and is a cause of great concern. 
The measure increases oversight over the FHA home mortgage insurance 
program to better ensure that predatory lenders are barred from 
participating.
  Mr. Chair, this legislation is necessary to help our nation's path of 
recovery by addressing the cause of the economic crisis.

[[Page 6016]]

  I urge my colleagues to vote ``yes'' on this critical measure that 
will keep our constituents in their homes.

                              {time}  1330

  The CHAIR. All time for general debate has expired.
  Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee 
do now rise.
  The motion was agreed to.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Tonko) having assumed the chair, Mr. Serrano, Chair of the Committee of 
the Whole House on the state of the Union, reported that that 
Committee, having had under consideration the bill (H.R. 1106) to 
prevent mortgage foreclosures and enhance mortgage credit availability, 
had come to no resolution thereon.

                          ____________________