Housing and Economic Recovery Act of 2008

* Ms. WATERS. Mr. Speaker. I rise in strong support of this legislation. Simply put, this package is urgently needed to help our nation address the current foreclosure crisis and its impacts on the world financial markets.

* I will limit my remarks to two parts of the current package that I was most active on: modernization of the Federal Housing Administration (FHA) and $4 billion in CDBG funding for states and localities to purchase, rehabilitate, and resell or rent out abandoned and foreclosed homes.

* The modernization of the FHA has long been a priority of mine because in recent years FHA had become obsolete in many parts of the country, due to its low loan limits ($362,790), outdated rules, and slow bureaucracy. I saw too many low-income homebuyers in California with little choice but to turn to the subprime mortgage market for assistance.

* This Congress, I introduced H.R. 1852, ``the Expanding American Homeownership Act of 2007'' to give FHA the tools and resources to allow it to assist more low-income homebuyers. H.R. 1852 passed the House on September 18, 2007 on a bipartisan vote of 348-72, and again on May 8th of this year as part of H.R. 3221, the first go-round on this housing rescue package.

* Including FHA modernization in the amendment before the House today is essential because FHA is the only national agency with the capacity and expertise to assist the nation's homeowners on a large scale.

* Another part of the package that deserves support is funding for states, counties, and cities to stabilize neighborhoods devastated by foreclosures. According to Realty Trac, banks repossessed over 71,000 properties in June, an astounding 171 percent more than one year ago. This means that 770,000 properties nationwide are now in ``real estate owned'' or REO status, an increase of 330,000 since the end of 2007.

* These abandoned and foreclosed properties drag down the value of homes still occupied by working families, and contribute to a cascade effect whereby plummeting home prices erode the tax base that state and local governments have to work with, while straining their police, fire, code enforcement, and other resources.

* States and most local governments must balance their budgets each year, and as a result, at least 20 states have already made budget cuts due largely to revenue losses resulting from the subprime crisis. Even so, many hard-pressed states and cities are dedicating their own limited resources to purchasing foreclosed properties to stabilize neighborhoods.

* But they are overwhelmed by the scale of the problem. For this reason, the National Governors Association, the Conference of Mayors, the National Association of Counties, and nearly every other local government trade association support Federal neighborhood stabilization assistance.

* This is why I introduced H.R. 5818, ``the Neighborhood Stabilization Act of 2008,'' which passed the House on May 8th of this year. Although the amendment before us provides less funding than H.R. 5818--$4 billion as compared to $15 billion and distributes funds differently, I believe that the Senate's language, which we are considering today, is basically a sound approach. With time being of the essence, finalizing this bill is more important than playing more ping-pong with the Senate.

* I am compelled to respond to criticisms raised by the Administration about the CDBG funding in H.R. 3221: (1) that it is a bailout for lenders and investors, and (2) that it incentivizes foreclosures over loan workouts for distressed borrowers. This is simply not so.

* First, the many local officials and community-based nonprofits my Subcommittee has heard from are in no mood to give sweetheart deals to the financial institutions who own these properties--many of whom they are actually suing over their subprime and predatory lending practices during the boom years.

* Second, the facts of the current housing market just don't bear out the Administration's claims. Lenders spend $50,000 to $60,000 up front in a foreclosure, or on average, 25 percent or more of the value of the loan. It is unlikely that a lender would refuse to work out a loan with a borrower--thereby saving a substantial amount in foreclosure related costs--and instead rush to foreclosure on the chance that a community-based buyer might be willing to purchase the property at 30 to 50 cents on the dollar, which is what foreclosed properties are going for upon resale these days.

* In closing, I would like to thank Chairman Frank and Speaker Pelosi for ensuring that 15 percent of housing counseling funds authorized by H.R. 3221 are directed to organizations--like the National Urban League--that target counseling services to low-income and minority homeowners and neighborhoods.

* African-American and minority neighborhoods were disproportionately targeted for subprime loans. It is only appropriate that some of portion of the housing counseling funds are targeted to these communities, lest minority communities and homeowners once again fall through the cracks.

* I urge my colleagues to vote for this legislation.

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