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

Floor Speech

NEW DIRECTION FOR ENERGY INDEPENDENCE, NATIONAL SECURITY, AND CONSUMER PROTECTION ACT AND THE RENEWABLE ENERGY AND ENERGY CONSERVATION TAX ACT OF 2007 -- (Senate - April 04, 2008)

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Mr. COLEMAN. Mr. President, I rise with my colleague from Florida to speak on behalf of our amendment No. 4423. I start by thanking, first, the chairman of the Banking Committee, Senator Dodd, and ranking member Senator Shelby, for bringing us to this point. People are losing their homes. I hear it. We all heard it when we went back over Easter break. For Senator Dodd and Senator Shelby to come together in a bipartisan way and give us an opportunity to do what this Senate is going to be doing, I express my deep appreciation; also to Senator Baucus and Senator Grassley, the chair and the ranking member, for working with us on this amendment. It is one of those things that goes to the heart of what we are trying to do today.

Mr. President, I ask unanimous consent that Senator Martinez be added as a cosponsor of this amendment.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. COLEMAN. Mr. President, during our travels back home to housing townhall forums during the course of this last year, we are all meeting more and more folks who are in very desperate straits, trying to keep their home. Minnesota ranks No. 2 in the number of subprime mortgages in for closure. Minnesota--who would have thought? That is the reality. It is across the country. I was in a forum at St. Cloud, in the central part of my State. I met a nurse named Terri Ross, a woman who had two jobs, bought a house which was in need of repair. She had a pretty good mortgage, low interest rate, and wanted actually to quit one job to go back to school. She wanted to improve herself, improve her life, add to her education. She met with the mortgage broker. He said: Have I got a deal for you. We can get you a mortgage and it will be at a low rate. Don't worry about the fact--I am not sure she even knew it was going to pop up in a few years. Don't worry about it because property values are rising and there will be more equity in your house. She put the money in the house, did the mortgage. When all was said and done, she found herself in the situation where the value of the house was less than the value of the additions. She had lost one job. She now had one job, her income was in half. She is in big trouble.

Here is a woman who worked all her life, put aside some money for retirement. What she did is she tapped into that and then she paid a penalty on it, trying to save her home. That was what she had. The problem is, across the Nation, people are now looking to use their retirement savings to save their homes and they get hit hard with a 10-percent early withdrawal penalty.

There was an article in USA Today. They ran a piece entitled ``401(K)s Tapped to Save Homes.'' The article focuses on this problem. Americans are being slammed with taxes and penalties as they try to keep their homes.

I ask unanimous consent that at the conclusion of my remarks this article be printed in the Record.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. COLEMAN. These are the stories my friend from Florida and I have been exchanging. We have personal accounts that do stretch from the Gulf of Mexico to the Great Lakes. These are the reasons we were called to take up this commonsense cause. We want to work on this legislation that Senator Nelson and I believe is one more way we can responsibly help homeowners, to temporarily waive this 10-percent penalty for withdrawals up to $25,000. Our amendment would also waive ordinary income taxes, as the Senator from Florida indicated, if the homeowner pays back the withdrawal within 3 years of making it, so homeowners are provided with a strong incentive to make their retirement savings whole again.

This is not a silver bullet--I don't know if there is a silver bullet in terms of the crisis we are dealing with--but it helps those whom we want to help, homeowners who are in big trouble. In doing so, this temporary relief can prevent an unnecessary foreclosure from happening, one which hurts not only the family but hurts the entire community. When houses are foreclosed and vacant, it affects everyone in the surrounding area. It affects the neighborhoods. As a former mayor, I looked at neighborhoods we built up in my time as mayor and I believe the same neighborhoods are being torn down by the crisis we are facing.

This bill is about homeowners helping themselves. While the 10-percent penalty is well intentioned and we do not want people to be using retirement savings during their working years, times such as this require us to recognize that sometimes such rules need to be flexible in order to serve a greater good. Both on a home ownership level and community level, I believe it makes sense to enable those who can to keep their homes. Ultimately it is up to the homeowner to decide whether it makes financial sense to turn to their retirement savings to keep their homes.

At least for those who decide to do so, we should not penalize them for trying to keep a roof over their heads and wanting to remain part of the community they have called home.

I urge my colleagues to support this commonsense and much needed relief.

I yield the floor.

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Mr. COLEMAN. If the Senator will yield, I also understand the concern raised by the chairman of the Banking Committee. I will be pleased to work with the chairman and my colleagues. I ask the chairman of the Finance Committee, I think one of the things he did address, a piece of issue, had to do with the tax consequences. If a mortgage was $150,000 and it was taken down to $100,000 by agreement, in the past that $50,000 was a taxable gain. I believe recently--again, this little piece--we took that building block and said: Hey, if you knock it down to $100,000, that $50,000 is no longer a taxable gain; is that correct?

Mr. BAUCUS. That is correct.

Mr. COLEMAN. All these pieces fit together. Again, there is no silver bullet at the end, but if we can come closer to addressing the full range of concerns, I think that would be positive. I think we already moved, with the leadership of the chairman of the Finance Committee, to address that one piece. This is another piece. It is your home, your future, and clearly there is more work to be done.

Mr. BAUCUS. I appreciate that. Earlier, when the Senator from Minnesota talked about silver bullets I was smiling because it is my view there are never silver bullets. It is always a major effort to find lots of different pieces, different steps to address the difficulties.

The occupant of the chair might remember this. There is a famous journalist, H.L. Mencken, of Baltimore, who said: For every complicated problem there is a simple solution--and it doesn't work.

I guess that is true of this situation, too.

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