New Direction for Energy Independence, National Security, and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007--Motion to Proceed

Floor Speech

NEW DIRECTION FOR ENERGY INDEPENDENCE, NATIONAL SECURITY, AND CONSUMER PROTECTION ACT AND THE RENEWABLE ENERGY AND ENERGY CONSERVATION TAX ACT OF 2007--MOTION TO PROCEED -- (Senate - February 29, 2008)

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Mr. BROWN. Mr. President, housing is on the minds of so many Ohioans these days, as it is on people's minds across the country. My State has the unfortunate distinction of leading the Nation in the percentage of property in foreclosure.

Every day, 200 Ohio families lose their homes--200 families every single day. The strides we have made as a Nation in increasing home ownership in the last few years will be reversed if we don't act.

The foreclosure crisis is having a tremendous impact on all of Ohio. No city, no region has bee n spared. The past few years have seen an explosion of predatory lending. The State of Ohio was slow to respond, while the Federal Government--regulators and Congress and the President--have been even slower to respond. Today, we pay the price.

As late as this summer, President Bush and Secretary Paulson--the Bush administration--indicated the problem was largely contained and it would
play itself out. So long as the problem was largely contained to Ohio, Michigan, Indiana, Illinois, and the Presiding Officer's State of West Virginia, the situation was nothing to worry about. But once the problem spread from Main Street, Cleveland, or Main Street, Dayton, to Wall Street, the administration suddenly became a bit concerned. Not overly concerned, mind you. For while it changed its tone a bit, its words have not been accompanied by much action. The budget submitted by President Bush shows, for example, no signs of a housing crisis. Congress appropriated $180 million for housing counseling last September at the urging of Senator Schumer, Senator Casey of Pennsylvania, and me, from the Banking Committee, but the President proposes only about one-third of that for the year ahead and criticizes the Reid proposal for continuing that funding.

As cities see their crime rates go up and their property tax bases shrink and more and more homes and families vandalized, with copper and aluminum being stripped from these homes, the President proposes to cut the community development block grant by more than 20 percent.

I appreciate Secretary Paulson's efforts to get voluntary action by lenders and servicers. That is a good thing, but it is not nearly enough. We have seen a rate of mortgage modifications rise from a measly 1 percent to a meager 3 percent. And I have to say, I am not confident how much progress even those numbers represent.

My office just heard from a struggling homeowner in Ohio whose lender offered to reduce her interest rate from 11 percent to 10 percent. But after penalties and late fees were added to the principal, her monthly payment barely budged.

Earlier this week, a couple from Lyndhurst, OH, joined Senators Klobuchar, Schumer, Durbin, and me in Washington to tell their story. John and Vicki Glicken went through a rough patch when John lost his job, but he found a new one, and they are doing their best to make their payments and stay in their home. They have done everything as citizens and as homeowners that we would ask, but doing so is going to be impossible for them so long as they are stuck with a loan that costs more and more every 6 months.

These families, and millions like them across America, need our help. Instead, they are facing foreclosure on one side and a filibuster on the other. That is unconscionable.

The legislation we are being prevented from considering, with the vote yesterday, when our efforts were blocked, would help hundreds of thousands of families like the Glickens. It would help the tens of thousands of communities from Ironton, across the river from West Virginia, to Steubenville, to Cleveland, to Dayton.

I applaud Majority Leader Reid for trying to act on the legislation that would provide vital help to communities and families across the country. Under this bill, which I am proud to cosponsor, housing agencies would have access to lower cost financing; businesses that are struggling would get a boost; cities would be helped by an infusion of community development funds, big cities and smaller cities alike; and families would be able to restructure their debts and get back on their feet.

The administration has made a lot of voluntary efforts to date, and to be sure, every bit helps. But the rate freeze will help only a very small sliver of people, of borrowers, and banks just aren't being responsive enough. They say they have no interest in foreclosing on homes, and that is per haps true, but they do not seem to have the capacity to work out loans with people who could afford to make payments on a reasonable loan long term. I know lenders want to avoid becoming real estate owners, but they do not have the ability to deal with problems their lax underwriting standards have created, and they are obviously not in the business of rebuilding the communities this crisis has threatened.

That is why I think Senator Harry Reid's legislation is so important. If we can spend $3 billion a week on the war in Iraq, we can find room in our budget to spend $4 billion a year to help communities across America get back on their feet. There are billions, tens of billions of dollars to rebuild Iraq. Yet President Bush says no to $4 billion to rebuild our cities.

The administration has argued this constitutes a bailout for lenders and speculators. In Ohio, we are going to meet these people in the courthouse, all right, but I assure my colleagues it won't be to record the title on some swee theart deal. Anybody who tries to make the argument that cities, both large and small alike, will use community development funds to bail out lenders and speculators has no clue what is going on in communities such as Springfield and Zanesville and Chillicothe.

As we try to rebuild our communities, we must do everything we can to keep families in their homes. If lenders and their servicers can't keep up with the flood of foreclosures they are facing, it is essential we permit the bankruptcy courts to serve as a backdrop; otherwise, the problem only gets worse.

Consider this, Mr. President: One of the ratings agencies is now predicting a 50-percent default rate for subprime loans made in the fourth quarter of 2006--a 50-percent default rate for securitized subprime loans. That is not lending, that is putting a bet on black at the roulette table with somebody else's home. What happens when that bet goes bad? A family is put out on the street, a neighborhood is hurt, and a town has one more magnet for trouble.

The banks have trouble too. Nationwide, banks are recovering only about 60 cents on the dollar for what they are owed when a home goes into foreclosure. In Ohio, that number is only 35 cents, by one estimate. When lenders recover only 35 cents on the dollar on a foreclosure in my State, I don't think they have anything to fear from an alternative process that may result in avoiding foreclosure. Judges would only step in when voluntary efforts have failed and when a family is on the ropes.

That is why the Reid bill's proposal to permit the modification of the mortgages on primary residences makes so much sense. We know servicers can't keep up with the flood of bad loans, so we need a backstop for the 600,000 or so families that may well end up in bankruptcy. Allowing bankruptcy judges to modify a loan on a primary residence, just as they can do today on a loan for a vacation home or a boat or a family farm or a small business, will not just keep a family in a home, it will keep the bank from a 65- percent loss on that property.

Two years ago, there were a lot of slick promises made about how these loans could be refinanced. Today, we know that is just not the case. So we need to act, and we need to act soon so that 2 years from now we can focus again on expanding home ownership under reasonable terms rather than trying to stop the bleeding.

Mr. P resident, I yield the floor.

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