American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - June 19, 2008)

BREAK IN TRANSCRIPT

Mr. KERRY. Madam President, let me begin by saying that I am delighted we are on the floor of the Senate today addressing this question of housing. I congratulate the chairman, Senator Dodd, on a long effort over several months to be able to try to get the response the Senate ought to be providing to what is an obvious crisis in the country.

I think a lot of people in the country have to be scratching their heads and wondering where the Congress has been on this matter, where Washington has been, and where the administration has been. I know it is particularly frustrating to the chairman and to many of us. Way back in January, I recall going to the White House for a meeting on the question of a stimulus package and saying to the President: Mr. President, the obvious crisis is in housing, and you cannot address it and stem the hemorrhaging with respect to the American economy unless you deal with the cause, which is the subprime crisis.

I remember Secretary Paulson was there, Vice President Cheney, and others. Heads nodded in a kind of consent. Then the President proceeded to go to the State of the Union Message and call in his State of the Union Message for the mortgage revenue bond proposal.

Still, here we are now in June, and we do not have an adequate response at the Federal level to the housing crisis from the Congress. We have had some responses by lowering interest rates. But, the fact is, you pick up the paper and see there were record levels of mortgages in foreclosure in the Washington area and in other parts of the country. As we all know, when that happens to a community, it is not just a few houses, it is not just the families directly impacted by virtue of foreclosures, it is the entire community. When a street has a group of foreclosures on it, the housing values all around start to go down. The local pharmacy gets hurt, the gas station gets hurt, the 7-Eleven gets hurt, the police wind up having to patrol more because they have more homes that are then on the market. The real estate market becomes glutted.

So the downstream implications are gigantic. In Boston, Mayor Menino and
I sponsored an afternoon in Roxbury where families were invited to come in. We finally got them to be able to sit down with a human being. They had been telephoning and going through 10 or 15, ``push 5,'' ``push 3,'' ``push 2,''. A consecutive series of pushing buttons and they were exasperated because they could not talk to someone to get answers for their individual situations.

So we got the 10 biggest lenders to come in and sat them down with these people over the course of a day. During the time that I was there, I actually had people come up to me with huge smiles on their faces and saying: Thank you. I just cut a new deal. I am staying in my home. They were able to go from a 13-percent interest rate--think of that, 13 percent. I would like to know what CEO of a company in America was paying 13 percent on a mortgage, or 9 percent on a mortgage. But here were these hard-working Americans paying $5,000 a month for their home, who had put money back into their home. The equity loan they took on their home, in too many cases sort of pushed on them, they put into rewiring or roofing, putting a new boiler in, raising the equity in their home. Then all of a sudden their interest rates started to go up, often by circumstances beyond their control. One woman I met and talked to held down two jobs and was buying her mortgage on the basis of the two jobs that she held down. But then she got sick and she was not able to hold onto the two jobs. Because she got sick all of a sudden, she was threatened with foreclosure.

She offered to buy the home at the rate they were going to sell the home after it was foreclosed on. She could afford to do that and could afford to pay for the mortgage at a discounted rate. They refused to sell it to her. They refused to allow her to stay in it.

Extraordinary circumstances of stubbornness or bullheadedness--I do not know what principle was being applied. But in the process, a lot of average folks are getting squeezed and hurt, I mean seriously hurt, as a result.

Equally important, it has continued the process of depressing the market and driving it downward. So I am glad we are here. I hope we can get it done because it is long overdue, long overdue. But we cannot allow the acute crisis in foreclosures to also cloud the other opportunities that are presented in this bill.

GSE reform, the FHA reform, the Foreclosure Protection Act, there is a provision in here for veterans, which I have sponsored. I think all of those are important components of this bill. But there is also another part of the housing crisis, and it is being addressed in this legislation; that is, the ongoing and deepening shortage of affordable rental housing in our country.

So I was very pleased the National Affordable Housing Trust Fund was included in the Housing and Economic Recovery Act, and that would produce about 1.5 million affordable rental housing units for our poorest families over the next decade.

As the original author of this legislation, I know what it is going to be able to do. I had the privilege of serving on the Banking Committee and serving as chairman of the Housing Subcommittee. I worked with some of the staff who are still here--Jonathan Miller and others--who helped pull this together in an effort to create a trust fund that will help us provide funding.

That is why I strongly oppose the Bond amendment to make contributions to the trust fund by Fannie Mae and Freddie Mac voluntary. I think the Bond amendment to make these contributions voluntary is the wrong amendment and would have a very damaging impact on our ability to be able to deal with rental housing and the rental housing crisis.

Let me explain why. Fannie Mae and Freddie Mac already have requirements to assist low- and moderate-income families to obtain critical housing. What we do in this bill is take excess funding that is produced in housing. It is not often you have a program that is producing excess funding, and then there is still need in that particular sector. So you can actually take the excess and put it back into that sector to address the need. We create that excess through GSEs. What we do is take the excess and put it into a revolving fund to produce rental housing. In September of 2000, I first introduced this legislation. Last year, along with Senator Snowe, on a bipartisan basis, we again introduced the National Affordable Housing Trust Fund to address the very question of a severe shortage of housing by establishing a rental housing production program. We now have 23 bipartisan cosponsors.

Similar legislation passed the House of Representatives last year with a bipartisan vote of 264 to 148. With the work of Senator Jack Reed on the Banking Committee, of Chairman Dodd, and of Ranking Member Shelby, they have helped to bring this bill to the Senate floor at this critical moment by including it in the Housing and Economic Recovery Act.

Frankly, it does not make sense in terms of our economic interests, our housing crisis interests, our family interests, to now suddenly make voluntary something that has the ability to be able to address such a critical need.

The Affordable Housing Trust Fund would create a production program that will ensure 1.5 million new rental units are built over the next 10 years for extremely low-income families and working families.

The goal is obviously to create long-term, affordable, mixed-income developments in the areas with the greatest opportunities for those low-income families. It has been endorsed by more than 5,700 community organizations led by the National Low-Income Housing Coalition, including the National Association of Realtors, the National Association of Home Builders, the Children's Defense Fund, the U.S. Conference of Mayors, the National Coalition for Homeless, and many others.

The funding from the trust fund can be used for construction, rehabilitation, acquisition, preservation incentives, and operating assistance to ease the affordable housing crisis. Funds can also be used for downpayment and for closing costs assistance by first time home buyers.

Since 2006, the American housing construction industry has shed 457,000 jobs. The construction of fewer homes means fewer new kitchens, fewer new basements for manufacturers to place their appliances and other products. The loss of manufacturing jobs follows from those fewer purchases and placements of appliances.

Job losses combine with slumping home sales to depress consumer confidence, and that causes a slowdown in spending, and then you ultimately shrink the economy.

This is not a small impact. Passing the trust fund will help create thousands of jobs in housing construction across the Nation, and it will help to turn our country around. This is what a real stimulus package ought to do, create jobs for the long term not pass out checks that burn up in the short term. It will help signal to businesses across the Nation to produce jobs that are critical to our economic security.

So voting for the Bond amendment will, in fact, reduce our ability to address the current crisis in the economy and reduce the creation of new jobs. Because of the lack of affordable housing, an awful lot of families are forced to live in substandard living conditions. Do you know what that does? That puts a lot of children at risk in America. Children living in substandard housing are more likely to experience violence, hunger, lead poisoning, or to suffer from asthma.

They are then more likely to have difficulties learning and more likely to fall behind in school. Our Nation's children depend on access to affordable rental housing.

One other thing people don't often think about, if you don't have affordable housing or you have insecurity in your housing, you also have a downstream impact on schools. Because kids who have to move from home to home are kids who are more likely to get yanked out of a school. Classes are disrupted and the school is then disrupted. We have a much longer term interest, in terms of our workforce development as well as the stability of our communities, to make certain that we have affordable housing available. The trust fund will produce 1.5 million units of affordable housing to provide children in America with a better quality of life. The Bond amendment would make that entirely voluntary. If it is voluntary, it is not going to happen today for low-income families.

Long-term changes in the housing market have dramatically limited the
availability of affordable rental housing across the country. It has severely increased the cost of rental housing that remains. In 2005, a record 37.3 million households paid more than 30 percent of their income on housing costs, according to the Nation's Housing 2007 Report from the Joint Center on Housing Studies at Harvard University. Approximately 17 million families paid more than half of their income, 50 percent of their income, on housing costs. The trust fund would produce rental housing and help lower the cost of housing. This is especially important for families, those 17 million and 37 million families with high housing expenditures. Adopting the Bond amendment will mean that many more children and their families will live in substandard housing or will become homeless. They are children who are ultimately less likely to do well in school, if they even stay in school. I believe that is unacceptable.

I hope colleagues will oppose the Bond amendment.

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