[Congressional Record (Bound Edition), Volume 155 (2009), Part 9]
[House]
[Pages 11605-11612]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        U.S. ECONOMIC CONDITIONS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from Ohio (Mr. Driehaus) is recognized 
for 60 minutes as the designee of the majority leader.
  Mr. DRIEHAUS. Mr. Speaker, thank you for the opportunity to address 
the House today in what is the first of what will be many conversations 
amongst the new Members of Congress and our observations as to where we 
are going in this Congress, some of our observations as to the economic 
conditions and the policies that have gotten us to where we are.
  I would like to thank the Speaker and the majority leader and the 
majority whip for giving me this opportunity and for giving my fellow 
classmates, the new members of the Democratic class, the opportunity to 
come here today and talk for just a little while about what I believe 
to be the most pressing issue in the United States, and that is the 
foreclosure crisis and the lending crisis that has led us into this 
recession.
  We would like to talk about some of the reasons we got there. We 
would like to talk about some of the actions that have been taken since 
the Democrats have regained control of Congress in order to address the 
foreclosure crisis. But we have heard much rhetoric over the years 
about why we are where we are in terms of this economic crisis.
  I spent 8 years in the State legislature in Ohio, and I will be 
joined shortly by a former colleague in the State legislature in Ohio. 
We have seen Ohio hit hard by the foreclosure crisis.
  Just today in the Cincinnati Inquirer, my hometown newspaper, out of 
our 52 neighborhoods in Cincinnati, it stated in 33 of those 
neighborhoods, over 10 percent of all houses currently sit vacant. That 
is a tragedy, Mr. Speaker. But unfortunately, that tragedy is playing 
out again and again and again across the United States.
  So we are going to spend a little time in conversation with my 
Democratic colleagues discussing how we got here and what the impacts 
are, what the impacts are to our constituents, what the impacts are to 
American families across the country who are currently suffering under 
the weight of this foreclosure crisis.
  With that, Mr. Speaker, I would like to yield to my colleague, the 
gentleman from Ohio (Mr. Boccieri) to talk a little about his 
observations in northern Ohio.
  Mr. BOCCIERI. I thank the gentleman from Ohio and greater Cincinnati 
area who has done extraordinary work in the Ohio legislature to try and 
remedy the situation where we find so many families struggling and so 
many families trying to live the American Dream of owning their own 
home and having a job to pay for their mortgage.
  Mr. Speaker, what we have found over the last several years is that 
the housing crisis is at the epicenter of the economic downturn that we 
are experiencing in this country. Make no mistake, today's great 
recession is rooted right here in the housing crisis that we find so 
many families plagued with, and especially across Ohio.
  But the irony here is that the success of our communities actually 
begins at home.
  Now, the gentleman from Ohio (Mr. Driehaus) and I know, after 
studying this issue for a long time, we worked on the predatory lending 
bill that passed through the State legislature in Ohio, and he is 
assigned to the Financial Services Committee here in the Congress, to 
try to remedy this situation for average families back home in Ohio.
  Now let's talk about those average families. We hail from the Buckeye 
State. Buckeyes. Bob and Betty Buckeye go to the local community bank. 
They take out a mortgage to live to that dream of American 
homeownership. They take out a mortgage. They go to work. They punch a 
time clock and play by the rules. Maybe they put their kid in college. 
That bank sells their mortgage three, four, five times down the road. I 
don't know, Mr. Speaker, maybe that violates the spirit of the Truth in 
Lending Act. What happens is after this mortgage is sold three, four, 
five times, they have no idea who owns it.

                              {time}  1645

  And they send their mortgage off every month because they get the 
bill in. And what happens? Bob and Betty Buckeye begin to feel the 
economic pinch. They begin to see that the job market is starting to 
erode. All of a sudden, Bob loses his job and can't make his home 
mortgage payment. So what does he do?
  He goes down to the local bank where he took out the loan and says, 
``Mr. Lender, give me a couple of extra days. I need a couple of extra 
days just to make this mortgage payment.''
  He says, ``Well, Mr. Buckeye, we don't own your mortgage anymore.''
  He says, ``Well, who owns it? I took the loan out from you.''
  What happens is that many, many of our constituents are finding that 
their

[[Page 11606]]

home mortgage from Ohio is now off in California or Texas or some other 
State, and we don't have the opportunity to work with our local 
community banks to renegotiate this or have that extra month or 2 
months. Automatically these things go into foreclosure. You've seen 
this in Ohio.
  Mr. DRIEHAUS. Reclaiming the time, Mr. Speaker, and as the 
Congressman noted, we both worked on predatory lending legislation in 
the State of Ohio. I should mention, we initiated those efforts back in 
2001 and in 2002, the same type of efforts that were initiated right 
here in the United States Congress by our Democratic members here in 
the United States Congress.
  Unfortunately, to this day, we do not have Federal predatory lending 
legislation that has become law in the United States. I think that is a 
tragedy for our country because, as you have described, Congressman, is 
how it has played out across the country.
  I served on the Governor's Foreclosure Task Force in the State of 
Ohio. What you observed in terms of Bob and Betty Buckeye--and I like 
the name--but what you observed played out over and over again. We 
found that the vast majority of these mortgages were in the subprime 
market.
  That term is tossed around a lot--these subprime loans. Well, 
subprime loans are simply loans made to families who have already shown 
that they have difficulty making payments. That's why they are 
considered to be subprime--that they have difficulty in terms of their 
credit report, they have difficulty in terms of their credit history in 
making payments.
  So what happened? As you described, we saw these financial entities--
not necessarily State-run banks, not necessarily depositories--but we 
saw these financial entities come into the State of Ohio, and we saw 
this over and over again in multitudes of States, where they would make 
loans available. Sometimes it was no money down, sometimes it was no-
doc loans. That is, you didn't have to show any documentation as to 
your annual income. Yet the folks still qualified for the loan.
  Well, how did that happen? Because it used to be, as you know, 
Congressman, that you would go into the local bank or you would go into 
the local savings and loan and you would ask for a mortgage loan. And 
they would come out and appraise your house. And the risk associated 
with that mortgage loan would be held by you and it would be held by 
the bank. And they would hold that paper in their portfolio. It was a 
long-term investment for that financial institution.
  But as you described is how it played out. With the development of 
these secondary markets and the securitization of mortgages across the 
country, what we saw was very interesting behavior. So that no longer 
was it the financial entity that was closing the loan that was carrying 
the risk, but they immediately transferred that risk onto a secondary 
market. They sold the loan.
  The loan was then securitized in a mortgage-backed security on Wall 
Street and sold to an international investor, sold to a pension fund. 
So there was no risk at the front end of the closing of the loan. It 
incentivized all kinds of behaviors. So people who should not have 
qualified for loans were qualifying for loans. And, very interestingly, 
the loan products that they were qualifying for were very predatory in 
nature. Many of these loans, we came to find out, were adjustable rate 
mortgages--mortgages that had teaser rates up front, but 2 years into 
the loan, 3 years into the loan, the mortgage rate would adjust. It may 
adjust in certain cases every 4 months, every 6 months. And you often 
found the family wanting to get out of that loan, wanting to refinance, 
but they were unable to do so because of this little instrument 
contained in almost every one of these loans called a prepayment 
penalty.
  So think about it. You've got a family who has a poor credit history, 
who has difficulty paying off their debts, now finding themselves with 
a mortgage that used to be affordable. Say it was $700. Now all of a 
sudden that mortgage is $1,200 after the rate has started to adjust. 
They want to get out, but this prepayment penalty of maybe $2,000 or 
$5,000 stops them from refinancing.
  So they are trapped. They are trapped in a loan that they cannot get 
out of, and it just repeats itself over and over again when it comes to 
foreclosures.
  I will yield to the Congressman.
  Mr. BOCCIERI. So, Representative Driehaus, let me get this straight. 
Those constituents of ours, Bob and Betty Buckeye, that get those 
flyers in the mail saying they can get a free vacation if they 
refinanced their house, they can send some money to their kids who are 
in college, those are predatory in nature, am I right, because there's 
no skin in the game? They're asking constituents to sign away for 30 
years or 15 years on a mortgage.
  Mr. DRIEHAUS. They were absolutely predatory in nature. Time and time 
again, there were those of us in State legislatures across the country 
who called out to our Congress and said, Look, you have the ability to 
regulate these entities. You have the ability to crack down on 
predatory lending.
  The Republicans in Congress at the time--or the Republicans now--are 
engaging in revisionist history, where they want to blame the CRA--the 
Community Reinvestment Act--or they want to blame Fannie Mae or Freddie 
Mac for the foreclosure crisis, and they seem to forget that they were 
elected in 1994 and they held the majority in 1995, in 1996, in 1997, 
in 1998, in 1999, in 2000, in 2001, in 2002, in 2003, in 2004, in 2005, 
all the way until the election in 2006.
  As this chart demonstrates, we saw the growth of these in early 2000. 
That's when you saw many initiatives. You saw legislation introduced 
right here on the floor of this Congress in 2000, trying to address 
this problem.
  But the Republicans would have none of it. They said the market will 
take care of it. The market will address the situation.
  We saw in 2003, 734,000 foreclosures. That number, as staggering as 
it is, in 2003, by 2008 had grown to almost 2.5 million foreclosures 
across the United States.
  I think it's important--and our colleague from Florida is about to 
join us, as is another colleague from Ohio--but I think it's important 
when you talk about the true cost of foreclosures, the cost is not 
simply with the family that is being foreclosed upon, but it's to 
everybody in the neighborhood.
  I have a house two doors down from me that was foreclosed on. That 
hurts my property value. It hurts the property value of my neighbor 
across the street. But when you see a multitude of foreclosures and 
vacancies across a neighborhood, then you see deterioration in the 
schools. It hurts small businesses. It hurts the entire fabric of the 
community as you see increasing crime and as you see local governments 
having to pay the cost of upkeep on those properties.
  I will now yield to my colleague from Columbus, Ohio, Congresswoman 
Kilroy.
  Ms. KILROY. Thank you so much, Congressman Driehaus. I have been 
listening to what you have been saying about the impact of this 
foreclosure crisis on Ohio, and you are absolutely right. When you talk 
about the impact of these large numbers of foreclosures on communities, 
we know that a single foreclosure can devastate neighboring homes and 
the surroundings.
  On average, we are told that when a home enters foreclosure, its 
value immediately plummets, on average, $58,759. It hurts the 
neighborhood as well because when that lower price, that lower sales 
price, that lower valuation hits the books, it hurts the value of the 
entire neighborhood.
  Every time you see a foreclosure, if it's in your neighborhood, your 
house or my house or our neighbors' houses are going down in value. 
That also has an impact on our local governments. We know that local 
governments are hurt as well in this economic downturn. They are 
finding it harder to protect neighborhoods against arson or squatting 
or other criminal activity.
  So the foreclosure crisis hurts that family, it hurts the 
neighborhood, but

[[Page 11607]]

it also hurts all of us in terms of the increase in criminal activity. 
Vacant and abandoned properties impose high costs on our local 
communities. Local jurisdictions and our school districts feel the 
impact of that lost tax revenue from those properties. Our cities are 
bearing the cost of municipal services, increased code enforcement, 
boarding things up, trying to find money to demolish homes and other 
properties that are vacant and declared to be nuisances.
  All of these are problems associated with addressing the issue of 
vacant and abandoned properties, particularly in our city 
neighborhoods. But it's not just in the cities. It ripples out. It 
affects our entire State. It affects, in my area, the entire central 
Ohio community.
  So we understand, as you have said so clearly, that in the last 8 
years during the Bush administration, and particularly during the 6 
years when the Republicans controlled Congress, there wasn't the 
necessary action that needed to be taken to stem the tide of 
foreclosures and protect the rest of us from the impact that 
foreclosures had on the greater economy, the effect in the financial 
markets because of the securitizing of mortgages, and to protect all of 
us from the subprime lending that was at the core of this foreclosure 
issue and this foreclosure problem.
  Every day when I drive through my community, I find that there are 
more and more foreclosed homes, more and more For Sale signs and, 
according to a recent Associated Press analysis, my county, the largest 
county in my district, has the unfortunate ranking of number one 
nationally for neighborhoods with the largest percentage of vacant 
homes. This is a problem that hurts all of us.
  Mr. DRIEHAUS. If the gentlelady would yield, we have been talking 
about the impact of the foreclosure crisis and the mortgage lending 
crisis in the State of Ohio. But we are joined now by Congressman 
Grayson from Florida. As you know, Florida has been hit hard by this 
economic crisis as well.
  I would like to yield some time to Congressman Grayson to share his 
thoughts on the foreclosure crisis.
  Mr. GRAYSON. Thank you very much. I appreciate that from the 
Congressman from Ohio. I will tell you that one of the most hard-hit 
areas of our entire country in terms of foreclosures, dropping housing 
values, and a general destruction of the economy, is Florida. In 
particular central Florida, which I represent.
  In central Florida, the economy is based on three things: Tourism, 
housing, and senior services. Tourism is not doing well. Senior 
services is just barely getting by. But housing has been crushed by the 
dramatic decline in property values and this plague of foreclosures 
that we see all over central Florida, but in particular, in the 
epicenter of that earthquake, which is Orlando.
  In Orlando, we have the highest home vacancy rate in the country. 
Almost 10 percent of the homes in Orlando are vacant. We have had 
extreme overbuilding and a problem that has been exacerbated terribly 
by foreclosures, which destroy entire neighborhoods.
  What you have to understand about foreclosures is that they are 
fundamentally, economically irrational. As we heard before, every 
foreclosure results in losses of tens of thousands dollars to the 
mortgage holder, as well as putting a family out on the street. So you 
have to ask yourself: Why are the mortgage companies acting this way, 
and what can be done about it?
  For those of us perhaps on the other side of the aisle who worship 
the free market, the god of the free market, you can look at the 
situation happening right now and you can see for yourself that our 
economic actors are acting irrationally by tossing people out on the 
street when there is an economic motivation to keep them in their homes 
and keep them paying. And that's what we saw over and over again in 
Florida.
  We saw 30 percent, 40 percent losses being taken on houses, when 
people in those houses were employed, when people in those houses had 
income, when people in those houses had savings and the ability to keep 
paying, although they had missed a few payments already. In a situation 
like that, what do we gain by throwing people out on the street?

                              {time}  1700

  What benefit is that when the mortgage company takes a 30 or 40 
percent loss, the homeowner has to move in with relatives or live in a 
car, and beyond that, the entire neighborhood is destroyed by 
foreclosure after foreclosure after foreclosure pervading the real 
estate market? What good is that?
  Well, in Orlando, we have reached a solution that is at least a 
temporary solution for this problem. What we did is I asked our local 
State court chief judge to institute mandatory mediation in all 
foreclosure cases. So for 45 days, foreclosures in Orlando just 
stopped, stopped cold. We put everybody on timeout. The banks, the 
borrowers, the homeowners, everybody was on timeout for 45 days. And 
you know what? People found a solution to their problems. In 45 days, 
we got the borrower, the homeowner and the bank together. We put them 
all together in a room with a mediator paid for by the bank.
  Under this program, many people were able to keep their homes. All 
they needed, some of them, was just an extra couple of months to pay 
their bills, a little breathing space. That's all they needed. In some 
cases they needed a longer term on their loan, in some cases they 
needed to refinance and they hadn't cleared the paperwork yet, but time 
after time after time what we found is that with a little bit of 
breathing space people could end up keeping their homes--at least those 
that had an income, at least those that still had a job.
  We did an enormous amount of good by this simple fix on foreclosures 
in Orlando. But it evokes a deeper question. The deeper question is, 
How did we get in this situation in the first place? What is it that 
led to this plague of foreclosures in the first place? And we all know 
the answer; the answer is predatory lending and housing fraud.
  And for those across the aisle who want to cast the blame in this 
direction, I ask a simple question. The Bush administration was in 
charge of enforcing the law in this country for 8 years. Can you name 
me one person in that 8 years that was convicted of Federal housing 
fraud, just one? And I see a blank stare in response. Not one. Not one 
case can they identify of a single person who was enforced criminally 
in this country with violation of our housing laws, not one.
  Now, our job is to pass the law. Our job is to pass a bill, send it 
to the Senate, take a Senate-passed bill, vote on it ourselves, and ask 
the President to sign it. That is what we do here, and we do oversight 
as well. But can we enforce the law? No. That is the responsibility of 
the executive branch. And I am telling you right now that for 8 years 
they did nothing. Nothing. And now they have the nerve to come to us 
and blame us for the problems that they created?
  Mr. BOCCIERI. Will the gentleman yield?
  Mr. DRIEHAUS. I will yield to the gentleman from Ohio (Mr. Boccieri).
  Mr. BOCCIERI. Thank you. Congressman, you bring up several good 
points. And let's make sure that we have full disclosure here and big-
picture stuff.
  You know, the government shouldn't be so immersed in the market. But 
we set the goalpost, we set the out-of-bounds markers, and within the 
parameters of that we should allow the free market to work. But what 
was happening in that free market for the last 10 years? We had hedge 
fund operators betting on the price of fuel going up; we had folks who 
were investing and betting on the price of food going up--supermarket, 
you go into a supermarket, you see prices rising--and we had hedge 
funds that were betting that people would not be able to pay their 
mortgage. Now, this was a recipe for disaster.
  Congressman Grayson, you bring up valid points: Why was there no 
enforcement? Why were there no referees enforcing the out-of-bounds 
markers or

[[Page 11608]]

the goalposts? Why were we not enforcing this? And why were we allowing 
families to lose their homes, lose the American Dream? And this notion 
that we don't have enough regulation, we don't have enforcement of the 
regulations is what is happening. And what we are finding is that 
families across this country are struggling because of that lack of 
enforcement.
  Let me give you one example of a family in Ohio. Just last month, the 
RealtyTrac rated Stark County, the largest county in the 16th 
Congressional District, one of the counties in my district, among the 
worst in the Nation in foreclosure rates. The Canton-Massillon 
metropolitan area ranks near the top of that list: 6,400 foreclosures 
last year. One of those homeowners was Willie Campbell.
  I met Ms. Campbell a couple weeks ago at a roundtable I put together 
back home to discuss these home foreclosure issues and find out how we 
could find some valuable solutions. Ms. Campbell was falling behind on 
her mortgage payments on her three-bedroom home in Stark County. She 
wanted to do the right thing. She wanted to remedy the problem. She is 
a good American. She called an 800 number listed on a TV commercial 
that promised to help her. Well, it didn't. In fact, it was a scam. 
They took money out of her bank account for 5 months.
  Ms. Campbell turned to a community development organization for help. 
Through mediation, she received help to lower her monthly payments from 
more than $850 to a little more than $620. She was able to cut her 
interest rate from 9 to 5.6 percent. What's more is that community 
organizations like the one that she sought help from were able to 
negotiate a 3-month grace period so her mortgage payments would not be 
late and so that she could catch up on her bills.
  Now, while Ms. Campbell was eventually able to find the help that she 
needed, more than 4,400 Stark County homeowners who filed for 
foreclosure last year were not so lucky. And what are those statistics, 
as Congressman Driehaus suggested and Congresswoman Kilroy from Ohio 
suggested? Ohio ranks at the top five States nationwide for the highest 
home foreclosure rates. We have found nationwide that home values have 
dropped 18 percent. Nearly one in five homeowners owes more than their 
home is worth. And each foreclosed property, as Congressman Driehaus 
suggested, reduces the property value of neighbors by 9 percent.
  We can do better. We have got to enforce the regulations. And that is 
why this Congress acted to make sure that we have enforcement of the 
regulations that are out there so that these fly-by-night lenders and 
folks who are willing to sign on the other end of the table are brought 
into check and that we have some balance.
  Mr. DRIEHAUS. Thank you, Congressman. I just want to follow up on a 
point you made and a point that the Congressman from Florida made, and 
it's about the markets.
  We have the best economic structure in the world. We have free market 
capitalism. And that allows for competition, it allows that competition 
to drive down prices, and that competition is what makes our economy 
grow. But when the markets don't work, when the markets have 
disruptions, it is our job, it is the job of government to intervene.
  We are not elected to protect the barons on Wall Street, although if 
you sit on Financial Services, you would think that some Members are. 
But we are elected to protect the public good, protecting the public 
good.
  I have heard my colleagues on the other side of the aisle go so far 
as to suggest that this economic crisis was precipitated by something 
called ``predatory borrowing,'' as if the borrower has control, as if 
the borrower has control in the interaction in a mortgage loan, as if 
the bank is not allowed to say, you know what, you didn't give me the 
documentation as to your income, so therefore I am going to deny the 
loan.
  We have folks on the other side of the aisle who have just closed 
their eyes to the crisis, saying the markets will take care of it. And 
I think that explains the inaction during the 1990s and in 2000 and 
2001 and 2002 and 2003, 2004, 2005, 2006.
  I had my staff pull some of the bills that were introduced in the 
House by the Democrats when the Republicans led the Congress. And in 
the 106th Congress you have both the Anti-Predatory Lending Act of 2000 
as well as the Predatory Lending and Consumer Protection Act of 2000, 
didn't get a vote on the floor. In the 107th, the Protecting Our 
Communities From Predatory Lending Practices Act, no vote on the floor. 
The Predatory Mortgage Lending Practices Reduction Act, no vote on the 
floor. In the 108th Congress, the Predatory Mortgage Lending Practices 
Reduction Act, nothing. The Prevention of Predatory Lending Through 
Education Act, no action on the floor by the Republican-led Congress. 
Again, in the 108th, the Prohibit Predatory Lending Act, no action. And 
this happens over and over again every single year.
  It wasn't until the Democrats took control of Congress that this 
Congress took seriously its role in regulating the markets when it 
comes to mortgages, when it understood that our primary objective, our 
primary purpose is to protect the public good.
  This Congress failed the American people under Republican leadership 
when it comes to housing. And it was only when the Democrats were 
elected in 2006 that we started to see action. But before I go through 
the number of steps that have been taken since 2007, when the Democrats 
took control, I would like to yield time to our colleague from New York 
(Mr. Tonko). So, Mr. Tonko, thank you for joining us.
  Mr. TONKO. Thank you, Representative Driehaus. I thank you for 
bringing us together on what is a very important topic.
  You know, as we look at this very deep and long recession, far longer 
than some forecasted, we need to look at the root causes of yesterday 
that bring us to this point in history of today and how we are going to 
move forward.
  I was very much interested in the chart that you shared with us 
earlier to look at the recent past history and the neglect that has 
caused such hardship in so many of the communities across this country. 
And, rightfully, it can be stated that this recession that we are 
currently enduring was pretty much triggered by the housing crisis, the 
mortgage crisis, the lending crisis, the foreclosure crisis. And as has 
been indicated by Representative Kilroy, it impacts in several ways; 
and we can measure that in very interesting dynamics.
  To think of the fact that one out of every 200 homes will be 
foreclosed upon is a very unraveling thought. That translates to some 
3,000 people just in this capital city of Washington, D.C. alone. That 
is a tremendously difficult burden for communities. When you think of 
the fact that one child in every classroom in America is at risk of 
losing her or his home because the parents cannot pay for that 
mortgage, six in 10 homeowners that wish they understood the terms and 
details of their mortgages better. And the list goes on and on, all 
sorts of dynamics that really speak to the trouble that is out there 
and the impact that has been felt in our communities.
  Any number of tipping points can cause this mortgage crisis or this 
foreclosure crisis. It can range from a job loss in this tough economy, 
to a health crisis that many families face, to previously missed 
mortgage payments--or certainly the lack of savings and access to 
credit, which has been another dynamic that has been dealt with and 
felt very severely by America's working families.
  But on March 5 of this year, several of us--perhaps all of us in this 
colloquy--were able to stand up on this floor and pass H.R. 1106, the 
Helping Families Save Their Homes Act, which was our step forward, with 
the leadership of this House, with Speaker Pelosi determined to make a 
difference, with the Members of the majority looking to respond as 
there wasn't a response in the past, with the President and his 
administration looking to employ certain agencies to help resolve these 
crises.

[[Page 11609]]

  We are going to move forward with a plan of action. And we need to 
make certain that more people are allowed to have a stable, affordable 
mortgage outcome. We need to work with agencies like the Department of 
Veteran Affairs and the Federal Housing Administration and the 
Department of Agriculture to allow people to modify their mortgages so 
that we can save the day for many homeowners. We need to expand the 
FHA's mortgage loan modification abilities so that, again, we can bring 
assistance to so many families.
  Ms. KILROY. Would the gentleman yield?
  Mr. TONKO. Yes.
  Ms. KILROY. I appreciate what you are saying. And after 
Representative Driehaus laid out the problem of inaction and the impact 
that it had on our States, on our communities, and the large 
foreclosure crisis that has spilled over into the greater economy, what 
you are bringing up is that we now have a Congress that is ready to 
take action, take action to protect families, to protect communities, 
to address the issues that got us here into the sad state of affairs 
that we are; and the Making Homes Affordable Act, helping to stabilize 
our housing market, helping maybe 7 to 9 million Americans reduce their 
monthly mortgage payments to more affordable levels through 
refinancing, through workouts. And I am proud to have supported that 
kind of legislation, as I know you are and my colleagues. And I am 
happy to help people who contact my district office to find ways to 
learn about these programs and how they can learn whether it will help 
their particular situation.
  I think it is great that these programs have gotten a lot of notice 
and a lot of publicity. But I am concerned that Representative Boccieri 
brought up the issue with the example of his constituent who got taken 
advantage of by somebody who pretends to help and is really hurting, 
and a whole new class of predators here springing up in Ohio--and 
probably in other States as well--taking advantage of somebody who went 
to them for help.
  So I think it is really important that people, when they are working 
out their mortgages, work with their bank or go to an accredited 
housing counselor. And in central Ohio, there are five of them--there 
is Homes on the Hill, there is Columbus Housing Partnership, there is 
the Urban League, the Consumer Credit Counseling, accredited agencies 
that will help you.

                              {time}  1715

  Mr. DRIEHAUS. Reclaiming my time, we have seen tremendous resources 
springing up spontaneously across the country, reaching out to 
homeowners, reaching out to renters who find themselves in difficulty, 
who are seeking housing assistance. And just like in Columbus, we have 
the resources for 211 and other avenues, and the Ohio Department of 
Commerce has done tremendous work in the State of Ohio. And we have 
talked about what got us here and the inaction of the multitude of 
Republican Congresses.
  But I would like to draw attention just for a minute and recognize 
our colleague Congressman Himes to discuss solutions because we have an 
opportunity this week. We have an opportunity this week to pass a 
predatory lending bill. And this will be, I hope, the predatory lending 
bill that becomes law in this country, that finally when we got here in 
2009, we made our mark and we said enough. Enough of the politics as 
usual. Enough of the Bush administration's saying ``no'' to protecting 
consumers and protecting homeowners. We have strong predatory lending 
legislation that we hope will become law.
  So I yield to my friend Jim Himes.
  Mr. HIMES. Thank you to my colleague from Ohio for organizing this on 
this very, very important topic.
  At one level what we're discussing is really very simple. Like every 
one of my colleagues standing here today, I have deep respect and 
appreciation for the power of the free market. It is the free market 
that has created the wealthiest society in the history of humankind. 
However, a free market requires smart regulation. We regulate dangerous 
things. We regulate tobacco, we regulate alcohol, we regulate firearms 
because we understand that used responsibly, they can enhance one's 
quality of life, but used irresponsibly, they can be devastating. And 
if there is one lesson that we have learned from this economic crisis, 
it is that an excess of debt can be devastating, devastating to 
individuals, to families, and, as we have learned much to our peril, to 
our country as a whole.
  We have a long record, as my colleague from Ohio has pointed out, of 
attempts, failed attempts, to put in place over Congress after 
Congress, Republican-controlled Congress after Republican-controlled 
Congress, attempts to regulate the more excessive and predatory aspects 
of consumer lending that never saw the light of day.
  But now we have an opportunity, a really terrific opportunity to pass 
commonsense legislation, which in many ways mirrors the very 
commonsensical legislation that we saw passed in strong bipartisan 
fashion last week around credit cards with respect to predatory 
lending.
  H.R. 728 is a bill that will bring about a reform of the most 
predatory of practices. And it's hard, as you dive into this bill, to 
disagree with what is in there. The bill establishes a simple Federal 
standard for all home loans that simply says that lending institutions 
must ensure that borrowers can repay the loans they are sold. Now, in a 
free market, the market would bring that discipline to bear. But there 
are oddities within the housing market, subsidies, other incentives 
that mean, and we are all suffering from this today, that all too often 
mortgages are extended to families where the lender knows or perhaps 
doesn't know but didn't do the work but knows that the individual, the 
family cannot repay that mortgage. So how hard is it to conceive of a 
regulation that simply says that a lender must do the work to assure us 
and to assure the borrower and themselves as a lender that they can 
repay the loan?
  Lenders would be required and mortgage brokers would be required, if 
a family qualifies for a prime mortgage, to not sell them a subprime 
mortgage. And this is a particularly pernicious aspect of the mortgage 
industry. We see it particularly in our minority communities where 
minority families who might qualify for the low rates associated with 
the prime mortgage instead are sold a subprime mortgage and therefore 
are paying hundreds, in some cases thousands, of dollars every month 
that they don't need to pay. Again, this bill would just assure that 
mortgage brokers and lenders are not financially incented to put people 
into mortgages that they don't need to be into. Good, commonsensical 
regulation.
  This bill will also ask that our securitizers, and we know now that 
one of the aspects of the housing market that was a bit pernicious was 
that risk was just passed from one hand to another, sliced and diced, 
and the person who made the decision to take the risk by extending the 
mortgage a week later had no exposure to that risk. So we are asking 
that along the chain of custody of a mortgage, whether it's the broker, 
the lender, the securitizer, that people just do the very basic work to 
look at this stuff, to look at this stuff and to convince themselves 
that the law has been followed, that the policies are in place to make 
sure that you're not putting toxic paper into securities unknowingly, 
bringing some responsibility to a process which has been all too 
irresponsible for far, far too long.
  This is commonsensical legislation, and I hope and expect that it 
will draw the same kind of bipartisan support that we saw for the 
Credit Cardholder's Bill of Rights last week.
  Mr. DRIEHAUS. You know, Congressman, we used to say in Ohio that you 
had more protections in buying a toaster than you did a house in the 
State of Ohio before we passed predatory lending legislation. And the 
simple fact of the matter is that for far too long in the United States 
Congress, the Congress has bent over backward to protect the lenders, 
but they have failed to protect the consumers. And in failing to 
protect the consumers, it has not only cost those families who were

[[Page 11610]]

duped into those predatory loans, but it has hurt neighborhoods, it has 
hurt communities, it has failed entire cities.
  With that, I would like to yield to Congressman Boccieri from Ohio.
  Mr. BOCCIERI. Thank you, Representative Driehaus.
  Congressman Himes brings up a very, very valid point. When Bob and 
Betty Buckeye go to that local community bank, they sign for a 30-year 
mortgage, a 15-year mortgage, and they are expecting that their job is 
going to remain intact, that they're going to be able to make those 
mortgage payments. But what we found with the transactions across the 
market is that those mortgages were sold three, four, five times, and 
guess what. They wound up in some investment bank on Wall Street, and 
then we had hedge funds betting on people failing to pay their 
mortgage.
  So this legislation and the action that the Congress is taking is 
making sure that Wall Street is put on notice to make sure that you're 
not going to bet on people failing, Americans failing. America is much 
better than that. We are more than that. We're not failures. We have a 
success story that is unmatched around this world.
  And when you talk about 6,400 forecloses in my district alone, the 
largest county in my district ranking number one in a State that ranks 
number five in the country, 6 million people across this country have 
lost their homes, these aren't just real numbers. These are real 
people. These are real people.
  Mr. DRIEHAUS. This is what Hamilton County, Ohio, looks like, 
Congressman. And thanks for the work of the folks that are working in 
neighborhoods for providing us this data. But this is what inaction in 
Congress means. It means foreclosures dotting the entire county. And I 
think I said earlier that in 33 of our neighborhoods in Cincinnati, we 
now have at least one in 10 homes standing vacant.
  We have talked a bit about Ohio, but we have been joined by some of 
our colleagues from New Mexico and from Virginia. So I would like to 
recognize Representative Lujan from New Mexico for his comments and his 
observations as to the situation in New Mexico.
  Mr. LUJAN. Mr. Driehaus, thank you very much for yielding.
  As we talk about the importance of looking after those that are most 
in need and those that have been getting impacted and thrown out of 
their homes, losing their homes on a regular basis, and you look to see 
the inactions that have caused this problem, and the actions that this 
Congress, the 111th Congress, is coming forward to work on to make sure 
that we're looking after those that need help the most, it's an honor 
to be here with so many of my new colleagues as we are talking about 
taking action and not just waiting and waiting and waiting, but being 
divisive and being bold in our approaches to make sure we're looking 
after the citizens that we represent.
  Mr. Driehaus, one important thing that I wanted to talk about today 
was there are so many people across the country who aren't able to 
afford that home, who are saving up and doing what they can so they can 
experience the American Dream of getting into that home. And they're 
renters. They are renting homes, and they are supporting a whole other 
segment of the housing across the country. And it's a segment of the 
population that was ignored for many years.
  Looking back at the Bush administration, when they took office in 
2001, touting a homeownership agenda with the goal of 5.5 million new 
homebuyers, but they neglected to address affordable renting housing 
needs.
  The legislation that we'll be looking at, one important aspect of it, 
is we're going to be protecting tenants who rent homes that go into 
foreclosure, recognizing that there is a whole other segment of the 
population that is very much in need, that are struggling, that made 
some good decisions, that were maybe lured by some of those predatory 
lenders but were able to hold off. And now we are going to be going 
forward, and these are some of the other people that the Democrats 
aren't turning their backs on, that we're looking to see how we can 
help.
  Mr. DRIEHAUS. Reclaiming my time, that provision is, in fact, an 
important part of the predatory lending bill that will be coming before 
us on this very floor on Thursday.
  We do understand that not everybody can afford a home, not everybody 
should be purchasing a home, and there are many, many responsible 
families that are out there renting. And through no fault of their own, 
the landlord has gotten in trouble, and the building is now being 
foreclosed on, and because of that foreclosure, they're out on the 
streets. This bill provides them protection, necessary protection. The 
first time this Congress has acted to provide them protection.
  So I appreciate your efforts on behalf of the renters and your 
standing up for the renters. And I just want to tell the people that we 
are standing up for them and that we will take action on Thursday on 
their behalf.
  With that, I would like to turn it over to Mr. Perriello from 
Virginia to offer his comments on this discussion.
  Mr. PERRIELLO. Representative Driehaus, this is indeed a very 
exciting moment. You can feel the sense of change.
  Many of us that are part of this colloquy right now are all from the 
freshmen class, and I think it's not a coincidence because we represent 
a class that is in favor of accountability, accountability and common 
sense. Many of us were called to politics for the first time by 
watching more than a decade of irresponsibility here in Congress and in 
the White House where we saw policies of Wall Street greed cloaked in 
the sense of Main Street compassion in what was called the ``ownership 
society,'' policies which seemed to suggest the idea that everyone 
could own a home regardless of how much money they made when really it 
was a strategy to help the rich make a lot of money on the failure of 
those who could never afford a house in the first place.
  Year after year, as you've pointed out, there were opportunities to 
put basic, commonsense accountability rules in place to prevent this 
from happening. And year after year we saw this Congress do nothing, do 
nothing, to challenge these absurd policies.
  And we all know now that these policies affected much more than just 
the lender and the borrower. We all as Americans are in the same 
neighborhoods affected by these massive foreclosures. It doesn't just 
affect those who cannot afford their mortgage but those who live on 
streets where foreclosures have occurred. We have seen a fundamental 
lack of accountability. But you see this Congress, particularly with 
the new Members from the 2006 and 2008 class, pushing for real change 
on accountability. We saw it last week with the credit card bill. 
Fundamental commonsense legislation that said let's put some rules in 
place to prevent the tricks and the traps. If it's a product you can't 
sell on your own, you have to fool people into it, then maybe this is 
the place where basic consumer protections need to step in. Now we're 
ready to do the same thing with predatory mortgage lending because we 
are all affected by this. Our housing prices are all affected by it. 
Our retirement security is affected by it. And it's about time that we 
put in place the kind of commonsense legislation that will reward the 
good actors like our community banks that remained strong through this 
entire process instead of continuing to bail out those who have been 
the least responsible through this process.
  This is a show that results are possible. They could have been 
possible if the will was there under previous Congresses and 
administrations. But now the will is there, and we will not rest until 
we put in these basic restrictions and continue to expand this new era 
of accountability to reverse the irresponsibility we have seen over the 
last 10 years and protect the American family and their right to 
homeownership.
  Thank you.

                              {time}  1730

  Mr. DRIEHAUS. Congressman, thank you for your tremendous efforts on 
behalf of homeowners in Virginia.
  As you say, we got elected. We got elected because people wanted to 
see

[[Page 11611]]

change. Barack Obama was elected President of the United States because 
people wanted to see change, and they want to see Congress move 
forward.
  But they keep hearing, on the other side of the aisle, the same old 
excuses. And the folks on the other side of the aisle don't want to 
point the finger at themselves. They forget; they have collective 
amnesia about their 12 years in power here in the House and their 
failure to do anything when it comes to predatory lending, when it 
comes to foreclosures.
  I yield to Mr. Himes for his observations and try to wrap this up.
  Mr. HIMES. Thank you for the opportunity. I want to highlight one 
other practice that would be prohibited by the antipredatory lending 
bill that is to come before the floor this week.
  I spent many years as a vice president of the Enterprise Community 
Partners, a nonprofit affordable housing group and saw up close and 
personal the devastation that can be wreaked by a process, a product, 
if you will, known as asset stripping.
  Asset stripping involves the extension of debt, either a mortgage or 
a home equity line, often to the elderly, often to minority 
populations, where the lender knows, the lender knows that there is no 
likelihood that either the senior citizen or the borrower, whoever that 
borrower may be, can repay that loan.
  And it's very deliberate, because as a result of the loan, the lender 
knows they will come into possession of the home involved. They will 
take the equity in the home.
  Now, in this world of declining real estate values, it's a little 
hard to understand that business model. But the reality is that 
ordinarily, when housing prices are rising steadily or less than 
steadily or more than steadily, as we saw in the last 10 years ago, 
that can be a very profitable business model based on the expectation 
that the borrower will fail. That is not the kind of product that 
anyone on either side of the aisle thinks should be out there 
victimizing, particularly the high concentration of the elderly and the 
minority borrowers who get caught up in this thing.
  Asset stripping is a pernicious thing that would be forbidden by this 
antipredatory lending bill, and I think we should take great pride 
should that occur should this legislation pass.
  Mr. DRIEHAUS. Congressman, that's a good point and I have seen all 
kinds of anomalies in the market that have led to behaviors that you 
wouldn't want to see. If you were, in fact, elected to protect the 
public and the public good, you would want to crack down on these 
pernicious behaviors. And that's exactly what we are doing in the 
antipredatory lending bill.
  But time and time again, if you turn on the radio, if you turn on C-
SPAN, if you turn on CNN, you turn on Fox News, you hear Republican 
after Republican getting up and making excuses, not talking about the 
pernicious behaviors, not talking about what is wrong with the market 
and how we might correct that, but blaming all kinds of different 
actions that have been taken by this Congress in the past.
  They go so far as to suggest the Community Reinvestment Act, the CRA, 
passed by this Congress in 1977, is the root cause of the housing 
crisis in the United States.
  If I have heard this once, I have heard it a thousand times, and it 
is now talked about all the time on talk radio.
  But when you look at the Community Reinvestment Act in 1977 and what 
it did, it addressed red-lining, because we knew that there were 
financial institutions that weren't lending in certain neighborhoods, 
especially minority and low-income neighborhoods. So we provided 
incentives for financial institutions to engage in responsible lending 
in those low-income and minority neighborhoods.
  It was called the Community Reinvestment Act, and the Community 
Reinvestment Act was extremely successful. As a matter of fact, 83 
percent of the failures, the loan failures that we are talking about, 
are not even with institutions that are covered by the CRA. That's a 
remarkable number.
  Yet Republican after Republican blames the Community Reinvestment 
Act. So I would like to put this one myth to bed. I would like to do 
that by reading a letter from the Chairman of the Federal Reserve, Mr. 
Bernanke, to Senator Robert Menendez about the CRA. This letter is 
dated February 25, 2008.
  ``Dear Senator:
  ``Thank you for your letter of October 24, 2008, requesting the 
Board's view on claims that the Community Reinvestment Act (CRA) is to 
blame for the subprime meltdown and current mortgage foreclosure 
situation. We are aware of such claims but have not seen any empirical 
evidence presented to support them. Our own experience with CRA over 
more than 30 years and recent analysis of available data, including 
data on subprime loan performance, runs counter to the charge that CRA 
was at the root of, or otherwise contributed in any substantive way to, 
the current mortgage difficulties.
  ``The CRA was enacted in 1977 in response to widespread concerns that 
discriminatory and often arbitrary limitations on mortgage credit 
availability were contributing to the deteriorating conditions of 
America's cities, particularly low-income neighborhoods. The law 
directs the four Federal banking agencies to use their supervisory 
authority to encourage insured depository institutions--commercial 
banks and thrift institutions that take deposits--to help meet the 
credit needs of their local communities, including low-and moderate-
income areas. The CRA statute and regulation have always emphasized 
that these lending activities be 'consistent with safe and sound 
operation' of the banking institutions. The Federal Reserve's own 
research suggests that CRA-covered depository institutions have been 
able to lend profitably to lower-income households and communities and 
that the performance of these loans is comparable to other loan 
activity.
  ``Further, a recent Board staff analysis of the Home Mortgage 
Disclosure Act and other data sources does not find evidence that CRA 
caused high default levels in the subprime market. A staff memorandum 
discussing the results of this analysis is included as an enclosure.''
  He ends like this: ``As the financial crisis has unfolded, many 
factors have been suggested as contributing to the current mortgage 
market difficulties. Among these are declining home values, incentives 
for originators to place loan quantity over quality, and inadequate 
risk management of complex financial instruments. The available 
evidence to date, however, does not lend any support to the argument 
that CRA is to blame for causing the subprime loan crisis.''
  Mr. Speaker, I submit the November 25, 2008, letter to Senator 
Menendez for the Record.

                                                Board of Governors


                                of the Federal Reserve System,

                                Washington, DC, November 25, 2008.
     Hon. Robert Menendez,
     U.S. Senate,
     Washington, DC.
       Dear Senator: Thank you for your letter of October 24, 
     2008, requesting the Board's view on claims that the 
     Community Reinvestment Act (CRA) is to blame for the subprime 
     meltdown and current mortgage foreclosure situation. We are 
     aware of such claims but have not seen any empirical evidence 
     presented to support them. Our own experience with CRA over 
     more than 30 years and recent analysis of available data, 
     including data on subprime loan performance, runs counter to 
     the charge that CRA was at the root of, or otherwise 
     contributed in any substantive way to, the current mortgage 
     difficulties.
       The CRA was enacted in 1977 in response to widespread 
     concerns that discriminatory and often arbitrary limitations 
     on mortgage credit availability were contributing to the 
     deteriorating condition of America's cities, particularly 
     lower-income neighborhoods. The law directs the four federal 
     banking agencies to use their supervisory authority to 
     encourage insured depository institutions--commercial banks 
     and thrift institutions that take deposits--to help meet the 
     credit needs of their local communities including low- and 
     moderate-income areas. The CRA statute and regulations have 
     always emphasized that these lending activities be 
     ``consistent with safe and sound operation'' of the banking 
     institutions. The Federal Reserve's own research suggests 
     that CRA covered depository institutions have

[[Page 11612]]

     been able to lend profitably to lower-income households and 
     communities and that the performance of these loans is 
     comparable to other loan activity.
       Further, a recent Board staff analysis of the Home Mortgage 
     Disclosure Act and other data sources does not find evidence 
     that CRA caused high default levels in the subprime market. A 
     staff memorandum discussing the results of this analysis is 
     included as an enclosure.
           Sincerely,
                                                     Ben Bernanke.
       Enclosure.
  Yet the myth is perpetuated over and over again by my Republican 
colleagues.
  We appreciate this opportunity, the newly elected Members of the 
Democratic class, to give an analysis of how we got here in terms of 
the mortgage crisis, how the mortgage crisis has led to the bank 
failures in this country, how we are now here to help pick up the 
pieces.
  We were elected in November, along with the President, to work on 
solutions, to quit turning a blind eye to the economic crisis in this 
country.
  But we know, over and over again, and I certainly saw it as a State 
legislator, when we asked for Federal intervention in the markets, when 
we asked for Federal intervention when it came to foreclosures, there 
was only silence coming from Washington D.C.
  On Thursday we have an opportunity. On Thursday we have an 
opportunity to pass antipredatory lending legislation that will make a 
difference, that will make a difference for every American family. And 
it is my hope that finally, in the spring of 2009, the Federal 
Government will step up to its responsibility and pass antipredatory 
lending legislation and pass a law that will be signed by this 
President to protect homeowners across the country.

                          ____________________