American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - July 07, 2008)

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Mr. DODD. Mr. President, we only have a few minutes before there is a rollcall vote. I wish to take a few minutes to give my colleagues an update on where we stand on this issue.

The cover story in today's Congressional Quarterly Weekly is devoted to the housing crisis. One of the opening paragraphs in the story reads as follows:

U.S. companies eliminated 91,000 jobs in June, on top of the 487,000 dumped in the previous six months. Car sales fell last month to their lowest level in 15 years. ..... Much of this bad economic news comes back, at some point, to the collapse in house prices and the resulting foreclosures.

As we all know and as the article points out, home ownership is the largest investment most Americans will ever make. Middle-class families use home equity as a cushion against uncertainty, to finance a secure retirement, college costs, health care expenses, and the like. ``Now,'' to quote the Congressional Quarterly article again, ``that has come to a crashing halt, leaving many in the middle class working harder than ever and yet still hard-pressed to make ends meet.''

That brings us to where we are today, with the consideration of the Housing and Economic Recovery Act of 2008, which the Banking Committee, which I am pleased to chair, reported out with a 19-to-2 vote. I compliment Senator Shelby from Alabama, the ranking Republican of the Committee, with whom I worked closely over the past number of months in grappling with the housing issue.

Among the key elements of this bill is a new program to provide relief to these homeowners who would otherwise suffer through foreclosure--a provision that would help them salvage their American dream.

It was my hope that this bill would have been on the President's desk by now, but regrettably we were unable to achieve that goal because of unfortunate delaying tactics. That failure has consequences. Because we failed to take action, there have been approximately another 90,000 foreclosures that occurred over the week we were home during the Independence Day break. Had we passed the legislation and sent it to the President, as I argued for, before July 1, I think we would have avoided some 90,000 filings that occurred during the period we were on this recess. Not only are these families threatened with foreclosure, but their neighbors and their communities will see falling home prices, rising crime rates, and fewer resources for local schools, police, fire, libraries, and other services.

I remind colleagues that this legislation has proven time and again to enjoy strong bipartisan support. In fact, shortly before we left for the recess, this bill passed by a vote of 79 to 16 on a cloture motion. Yet, because of a technicality, this measure is now being held up by one Senator because that Senator wants to add another vote on a completely unrelated matter.

Let me review for my colleagues, as we prepare to renew our discussion on this bill, exactly what it is we are talking about and why it is so hard to achieve. The bill we are working on has a number of very key elements, all of which have been supported by strong bipartisan votes in either the Banking Committee or on the floor of the Senate.

First, we have the HOPE for Homeowners Act, which will help 400,000 to 500,000 American families save their homes from foreclosure. These families were simply seeking the American dream of home ownership. Sadly, in case after case, they were led astray, steered into mortgages they could not afford, often by mortgage brokers and loan officers who pretended to be trusted financial advisers but were really only out to make a buck for themselves. The HOPE for Homeowners Act is a voluntary program that will help save these homes by forcing the lenders to choose to participate and take significant losses. There are no bailouts here. The homeowners will have to pledge at least 50 percent of all new equity and future appreciation in order to get the benefit of the new FHA-insured mortgage.

There are many protections built into the program: Only homeowners can qualify; no investors or speculators will be allowed to participate; borrowers would have to show they cannot afford their current mortgages; and all loans will be underwritten at a level the borrower can afford to pay. New loans will be 30-year fixed-rate mortgages.

All of this is done at no cost to the taxpayer. In fact, over the next 10 years, the Congressional Budget Office tells us that the program could actually raise some $250 million for the Treasury.

This provision, combined with the GSE regulatory reform section of the bill, passed the Banking Committee by a vote of 19 to 2, receiving strong bipartisan backing.

We desperately need this legislation. As I have said over the past number of weeks, every day that we wait, somewhere between 8,000 and 9,000 new foreclosures are filed in our country.

In late June, the census reported that the home ownership rate, after reaching an alltime high in 2005, fell to 67.8 percent--the sharpest decline in home ownership in 20 years. Minorities, who were disproportionately likely to get subprime loans, are suffering especially badly. That is why this legislation is widely supported by the community and civil rights organizations around our country. They see a generation of wealth being lost as a result of this foreclosure crisis.

The Senate expressed its strong bipartisan support for the HOPE for Homeowners Act when it defeated an amendment to strip this program out of the larger bill on a vote of 69 to 21.

Second, the bill includes the FHA Modernization Act. This passed in early April as part of the Foreclosure Prevention Act by a vote of 84 to 12 in this body. The provisions in the current bill are identical to that legislation, with the exception that the loan limits have been increased in high-cost areas to a maximum of $625,000.

As the administration has repeatedly said, modernizing the FHA program will put it in a far better position to help keep future borrowers away from subprime loans.

A number of our colleagues have spent some time citing the problems at FHA. Clearly, FHA has suffered some losses in recent months, as have all players in the mortgage market. Yet the program has about $18.5 billion in reserves, and the performance of FHA loans improved over the past quarter, even as the performance of both prime and subprime loans has declined, according to data provided by the Mortgage Bankers Association.

Moreover, for the past several months, credit scores of FHA borrowers have been rising, and the percentage of refinance loans--loans to borrowers with a proven track record of making timely payments--has actually increased. In addition, this bill eliminates the seller-funded downpayment assistance program which has been the largest source of losses in the FHA program.

In other words, with its hefty reserves, an improving mix of business, and the reforms in this bill, we can have confidence that FHA will be safe and sound for years to come.

Third, this legislation creates a strong and effective world-class regulator with the housing government-sponsored enterprises--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These entities have kept the housing and conforming mortgage markets going while other capital markets have frozen.

Madam President, I ask for 2 additional minutes.

The PRESIDING OFFICER (Ms. Stabenow). Without objection, it is so ordered.

Mr. DODD. We need to make sure these crucial market players are appropriately capitalized, well regulated, and properly supervised so the American people can continue to depend on them to ensure that affordable mortgages are always available. Recent losses at Fannie Mae and Freddie Mac speak to the urgency of this need, and the bill before us accomplishes that goal.

Finally, there are other important provisions in this bill. The bill includes $3.9 billion in community development block grants to help local communities revitalize neighborhoods devastated by foreclosures. All the major organizations representing Governors and mayors across the country strongly support this provision as well.

Lastly, this bill also has an affordable housing program in it which is absolutely critical for the long-term needs of our country.

In short, this is a good bill. It is a balanced bill that goes to the heart of our Nation's current economic problems. The bill has very broad support, including from the Conference of Mayors, the League of Cities, the Mortgage Insurance Companies of America, the Leadership Conference of Civil Rights, the Mortgage Bankers Association, the Consumer Federation of America, the National Association of Homebuilders, the NAACP, ACORN, the Financial Services Roundtable, and numerous other business, consumer, and civil rights organizations.

Senator Shelby and I urge that this legislation be supported. I hope we have a chance to pass it quickly, to send it to the other body for their consideration, and then give this bill to the President for his signature. This will be the major achievement and accomplishment of this Congress, when it comes to dealing with the underlying economic crisis which, at its heart, is the foreclosure rate.

I appreciate the indulgence of the Chair. I yield the floor.

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