SNOWSPORTS OUTREACH SOCIETY -- (Senate - December 06, 2007)
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Mr. COBURN. Mr. President, I object to the unanimous consent agreement to pass S. 2338, the FHA modernization bill.
The Senate has twice attempted to pass a complex and critical mortgage reform bill without the opportunity for debate or amendment. I certainly understand the importance of this issue, which is why I believe the bill must be afforded time for proper scrutiny and debate by the Senate. It is nai 4ve, irresponsible and reckless for the Senate to claim it can fix this national challenge by rubberstamping our approval for this legislation without the opportunity to improve the bill through amendments.
More importantly, however, this bill is not the proper response to the housing crisis. This bill increases the availability of government-backed mortgages, adding a liability to the taxpayer of $1.6 billion in government-backed loans. This bill greatly increases the loan limit which the government may insure, while simultaneously decreasing the down payment requirement for borrowers. This only makes taxpayers liable for billions of dollars in loans that may default. The solution to the mortgage crisis is fewer risky loans, not more.
Proponents of the legislation have argued that this bill is a low-risk way for the government to prevent future subprime foreclosures. However, this bill only creates more opportunities for borrowers to receive government-backed loans, increasing the liability on American citizens, but not preventing the possibility of delinquency or default.
According to a recent analysis by the Wall Street Journal, many subprime borrowers are not delinquent because they cannot afford increasing adjustable rates, but because they cannot afford their initial rates in the first place. The Wall Street Journal states:
It is true that many subprime borrowers were sold a toxic mortgage by unscrupulous mortgage brokers. However, the primary reason for the spike in subprime delinquencies so far is that many subprime borrowers have taken on more debt than they can pay back using any reasonable interest rate.
It would be unconscionable to shift this burden on to the Federal Government, especially at a time when our national debt stands well over $9.1 trillion, or $30,132 per citizen.
Sixty-one economists from universities and think-tanks from across America released an open letter to the U.S. Congress advising against ``excessive new regulations or federal interventions'' to deal with credit repricing in the subprime mortgage market. The letter warns: ``Legislation to create new underwriting standards will reduce competition and restrict consumer access to credit. Additionally, efforts to bail out or shore up lending institutions create a moral hazard that would slow the adjustments required in the marketplace. ..... These [bail out] proposals would fundamentally alter the workings of the mortgage market, leaving consumers with fewer choices when seeking to buy a home and potentially increasing taxpayer exposure for bad loans.''
The American people agree that making government-backed loans more available is not the right response. According to a survey conducted by Harris Interactive on behalf of the National Taxpayers Union, NTU, when asked which statement most closely reflects their views of allowing Federal agencies to increase the size of the loans they can insure and reduce downpayment requirements, 66 percent of respondents answered that ``these proposals are nothing more than a taxpayer-funded bailout of banks and lenders that provided and profited from these risky loans.'' Furthermore, 60 percent of respondents said taxpayers would be most negatively affected if the government were to bail out the subprime mortgage market.
I do believe the Senate should debate this issue, and examine what can be done to keep borrowers from defaulting and ensure that Americans are able to stay in their homes. I believe lenders must take responsibility for their loans, including full disclosure about the terms of the agreement and the possibility of default, and borrowers must be responsible for the agreement into which they enter. Mortgage brokers, real estate agents and other lenders should be transparent with their lending conditions and must be accountable for full disclosure to borrowers. However, I do not believe it is the job of the government to bail out default mortgages and loans and it is not the proper role of the government to insure loans with taxpayer dollars.