American Recovery And Reinvestment Act Of 2009
Floor Speech
American Recovery And Reinvestment Act Of 2009
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Mr. MARTINEZ. Madam President, Members on both sides of the aisle agree that any stimulus we pass must be timely, targeted, and temporary. We need to put our economy back on track. The key to putting the economy back on track is that the spending we do through this stimulus be targeted, temporary, and timely.
Each of these principles is important and they each are loaded with meaning. It needs to be timely because it needs to be directed as soon as possible. As the President as early as this morning said, it is essential we get it out there.
It also has to be targeted because it cannot just go to all the wonderful things upon which the Congress might spend money. It has to be targeted to that which the economy needs in order to create jobs at this moment in time.
It must be also temporary because we well know at some point this economy is going to recover, and as it recovers, it would not be a good idea for Government spending to be out of control and be the beast that feeds inflation. We do not want to come out of this economic crisis only to be creating the next one, which would be an inflationary problem for our economy.
Americans want and deserve solutions that will create jobs and support the American worker. I have joined a number of my colleagues in offering an alternative with the right incentives to foster job creation.
While creating jobs is essential if we want to achieve economic recovery, it will not fix the problem with that alone. Our Nation is still in the midst of the worst housing slump in decades, and many American families face the frightening reality of foreclosure.
To date, Congress and the White House and the private sector have put forth a number of programs to help struggling homeowners, but we have yet to see significant results from any of these various programs that have been out there. This is because at the core of the problem are privately securitized mortgages, which were originated without a guarantee from the government-sponsored enterprises. These are the privately securitized mortgages that are not Fannie Mae, Freddie Mac or GSE sponsored. These mortgages account for only 15 percent of all outstanding mortgages, but they represent more than one-half of all the foreclosures that are taking place today.
If left alone, the crisis will only continue to worsen. According to one expert, we can expect to see 1.7 million more foreclosures in the year of 2009 alone. It is a downward spiral that seems to find no bottom.
Today I am proposing a plan that would provide troubled homeowners with options and incentivize participation from the private sector from these private securitizers who are out there in the private sector. Included in the plan is a loan modification program which will encourage mortgage servicers to help stem the tide of foreclosures.
Currently, there are two primary factors hindering mortgage servicers from modifying loans: a lack of proper compensation, and second and equally important is the threat of litigation.
The plan has a two-pronged approach that aims to address these concerns by the properly compensating mortgage servicers and removing the legal restraints that prevent modifications.
Under the plan, the Federal Government would temporarily provide a monthly incentive fee to servicers who modify privately securitized mortgages. It also includes a safe harbor provision that removes the legal constraints currently inhibiting modifications. This plan also recognizes the integrity of contracts.
There is always the potential that a relatively small number of junior investors could be harmed by the modifications permitted by the program. With this in mind, the proposed legislation eliminates the need for these junior investors to file suit by creating a small claims fund that the Treasury may use to resolve potential disputes. This will go a long way in protecting investors acting in good faith for the greater good--an incentive that is greatly needed if we want investors to be on board in helping to resolve this current crisis.
The plan has been supported by a number of economists, including Columbia Business School Dean Glenn Hubbard and Vice Dean Christopher Mayer. According to a Columbia report, the plan could reduce up to 1 million foreclosures at a cost of about $11 billion--roughly 10 percent of the $100 billion required by other plans.
I have been supportive of similar concepts, including the plan put forth by FDIC Chairman Sheila Bair, which is based on the model used to modify the loans the FDIC took over from IndyMac. I believe this plan is even more taxpayer friendly because future potential losses are shouldered by private investors, not the Government.
As we continue talking about the stimulus, I urge my colleagues to consider the need to address the root cause of this crisis, which is the housing market. Americans are struggling, and unless we provide them with realistic alternatives to foreclosure, we will fail to fix the larger problem at hand.
A lot of colleagues of mine have expressed support for this plan. I encourage Members on both sides of the aisle to please look at this plan carefully. Because as a result of what we are doing on stimulus, we need to also deal with the housing problem. The housing problem is what brought us into this problem. We will not get out of this economic mess until we once again resolve the housing problem.
We need to tackle it in two ways, in my view. We need to tackle it in keeping families in their homes, avoiding foreclosure where possible. A huge number of today's inventory of unsold homes are homes that have been or are coming out of foreclosure. Those homes in and of themselves obviously tend to be sold at much lower prices. So it continues to drive the market down. It depresses values. It depresses the market.
The second problem, obviously, is still the old law of economics of supply and demand. We have a huge inventory of unsold homes. This inventory of unsold homes also impacts price. So I support not only my proposal but the proposal my colleague from Georgia, the Senator from Georgia, JOHNNY ISAKSON, has proposed, which is to incentivize the purchase of homes by providing a $15,000 tax credit, over a year or 2 years, to anyone in America who purchases a home.
The bottom line is, if we can get the market back again and people buying homes again and we draw down that inventory of unsold homes, if we slow down or can bring foreclosures to a halt, those two elements, working together, will be a greater way in which we can now begin to see the housing market stabilize in prices, which will also stabilize the foreclosures of the future.
You see, families who are in trouble today were not the same families who were in trouble 2 years ago when this crisis began. Families who are in trouble today are people who increasingly find themselves upside down on their mortgage because of the continuing decline in home values.
I hope my colleagues will carefully analyze these proposals--not only mine, amendment No. 159, but also Senator Isakson's proposal. I think these two proposals, hand in hand, will help us to make a difference in the current housing crisis. Many other things we can talk about in the stimulus, but fixing housing is at the core of what we must do.
Madam President, I yield the floor.
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Mr. MARTINEZ. Madam President, the housing crisis got us into this problem we are in today which necessitates the need for a stimulus bill. Until we deal with housing problems, we are not going to be out of this problem.
My proposal creates a situation where, for 3 years, it compensates private servicers of mortgages so they can be incentivized to work out mortgages for families who are in trouble, so that they might be able to stay in their homes and not be foreclosed.
This is a way to utilize the private sector, with some incentives from government money, to make sure we do not foreclose on more families. Two things will be accomplished. It also provides a safe harbor for the servicers, so that they are beyond legal liability for anything they might do in those workouts.
At the end of the day, what we will do is stabilize home prices by freezing foreclosures. Not only will we be helping families, but we will also be trying to put a floor on the housing economy, on housing prices, which continue to decline. This will stabilize housing prices, it will avoid future foreclosures, and it will begin to turn us around and create the kind of housing economy we need in order for the American economy to come back.
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