PRESS CONFERENCE WITH REP. ERIC CANTOR (R-VA) AND HOUSE REPUBLICANS IN THE ECONOMIC RECOVERY WORKING GROUP
SUBJECT: REPUBLICAN PROPOSALS ON HOUSING RECOVERY ALSO PARTICIPATING: REP. JUDY BIGGERT (R-IL); REP. DAVID DREIER (R-CA); REP. MICHAEL N. CASTLE (R-DE); REP. MIKE PENCE (R-IN)
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REP. CANTOR: Good morning. Thank you all for coming. We're here today as members of the House Republican Economic Recovery Working Group to present a plan that belongs to a series of proposals that Republicans in the House continue to roll out, to unveil, to provide that constructive addition to the debate as to how we take this country forward and how we address the woes -- economic woes facing America's families.
And in response to the administration, and the president himself, who continues to say that Republicans don't have any ideas, we're here today to say yes we do. And this is one in a series. This will not be the last. We are committed to trying to pull the agenda back to the mainstream and to respond to the problems facing America's families today.
Obviously, many, many families across this country are struggling to pay their mortgage. They are struggling to get through every month with the bills that are stacking up. And what they see right now are policies that have come out of the administration that frankly don't make a lot of sense.
Because the notion in this country is you work hard, you pay by -- play by the rules and that you can get a reward. And what has come out from the administration in the housing area doesn't quite jive with that sense of the American spirit.
Instead what we have seen are proposals which call upon the 90-some percent of Americans who are paying their mortgage, playing by the rules, calling on them to subsidize those who don't.
So the plan we have unveiled today responds to that notion and speaks to all Americans and tries to address this severe problem with the excess in home inventories. And we see this housing fix as a central element in addressing the bank failures and the capital markets failures.
If we are to address that, we must first address the housing situation. So with this, I would like first to call upon Judy Biggert -- she's from the Financial Services Committee -- who has been working on issues having to do with housing.
REP. BIGGERT: Thank you, Eric.
And good morning, everyone. It's great to be here. You know, three years ago at least, there was a report in Chicago that members of gangs had turned to the mortgage fraud business, rather than selling drugs, because it was more lucrative. Unbelievable, unbelievable. And in 2008, mortgage fraud reports increased 44 percent in a 12-month period.
Now, over 90 percent, 93 to 95 percent of American people are paying their mortgages on time. And they're struggling to do that in many cases. But they're doing it. So bad actors should not make a profit, while the taxpayers that are paying their mortgages have to take care of them.
Fighting fraud then has to be one of the elements in this. And I introduced a couple years ago, following this gang report, mortgage fraud, that we need to have more efforts put into that.
This bill that I introduced was passed three times in Congress over a two-year period. Passed in the House, went over to the Senate. What happened? It either was removed from one of the bills or it was not even discussed. So that's why we are looking at this now. We have got to get this accomplished.
If we are going to have the American people -- restore confidence, in the economic crisis, we have got to have something that really gives them a look at the root causes of this economic crisis. And mortgage fraud is one of them. So the Republican alternative does two things.
Number one, it directs the FBI, the Department of Justice, the FHA and other government agencies who are -- to increase their efforts to address the mortgage fraud.
And secondly, it gives them more resources -- the Department of Justice, the FBI -- to really do more investigations and prosecutions to solve this problem.
We have to restore the confidence of the American people in our system, and one way to do that is to stop the abuse of the system by bad actors. Thank you.
REP. CANTOR: Thank you, Judy. And I think, consistent with our notion that we want to reflect the common-sense spirit of this country, much of what you've seen come out of the administration -- their proposals do not speak to fraudulent actors. In fact, given what we have seen in their proposals, fraudulent actors can take advantage of some of the help that this administration wants to provide. Obviously, not something that most Americans would support.
I'd next like to call on David Dreier, who will talk about the proposal he's working on.
REP. DREIER: Thank you very much, Eric.
This team, the economic recovery working group, is here as Republicans to say, "Yes, yes, yes, yes, yes." We are very serious about providing a very positive solution to dealing with this challenge. Unfortunately, over the past several years, we have, through a lack of supervision and oversight of government-sponsored enterprises, been encouraging people to treat their homes like rental units -- and actually, even further than that.
How has that happened? Well, it's been because people have been able to put nothing down, and pay virtually no interest. And a friend of mine reminded me the other day that it's not even at the level of a rental unit. Why? Because they're not even required to provide a security deposit. And in light of that, what we need to do is we need to encourage responsible behavior.
We know that there is an over-supply of housing up there, and we need to do everything that we can to dry that up. We need to encourage home ownership, but we also want to make sure that people have skin in the game. We want to encourage responsible behavior.
And so how is that? Well, what we're doing is we are providing a tax credit of $15,000 -- $15,000 -- if people will put a 5-percent down payment or more in that home. And the idea behind that, of course, is they will have an interest in that home. They'll have an interest in staying there. They'll have an interest in improving that home.
Now, we know that there was an $8,000 provision that was provided in the stimulus bill for first-time homebuyers. Well, when you look at the challenges out there -- and I've talked to a number of my friends in California -- you have people who are forced out of their homes, because they've lost it, and they're moving in and staying with family members. And they're not first-time homebuyers necessarily that we want to encourage back into the housing market.
And so what we have done is, is we have a substantially higher level, and we incentivize responsible behavior. And those are the challenges that we're tackling, and I believe that that will go a long way towards dealing with the very serious challenge that we have here.
REP. CANTOR: Thank you, David. And now Kevin Brady will talk about his neighborhood incentive piece of this package.
REP. KEVIN BRADY (R-TX): Well, Eric, first, thanks for your leadership on the -- or on the Responsible Homeowners Act. And I'm here to fully support it. Economic recovery, something every American is hoping for, will depend in large part on the recovery of the housing market. And stabilizing home prices is just crucial to get people back buying homes again.
We believe the best way to stabilize home prices and protect neighborhood property values is to encourage local solutions, rather than wait for big government. It's especially important in areas with a high number of foreclosed homes to get individuals who are willing to invest in these homes and get them reoccupied. Unfortunately current law only gives incentives for the purchase of your primary home, owner-occupied home.
Under our Republican proposal, if you buy a distressed home in your community or neighborhood and maintain it until the market recovers, you can keep the gain from your investment just like as if it was the home you lived in. In other words, if you invest in your neighborhood, we'll invest in you.
And this is in direct contrast to the Democrat proposal -- program of putting aside $2 billion of taxpayer money for the government to buy homes. We want to unleash the power of our neighborhoods to protect the values of the neighborhood. And as you know, in your own primary home, we protect you. If you maintain your home and have gains, we protect you from Uncle Sam taking profits from it up to a pretty decent level. We want to do the same thing in the neighborhood. And this provision -- we've had a lot of discussion back home. I think it's going to help reward private capital, neighborhood investors in a real positive way.
REP. CANTOR: All right. Next I would like to introduce the freshman from Buffalo, New York, Chris Lee, who has a particular provision that responds to some of the difficulties that the families that he represents are experiencing.
REPRESENTATIVE CHRIS LEE (R-NY): Thanks, Eric.
I was glad to be chosen to be part of the working group here and was pleased to come up with a proposal which I think addresses a big issue that many constituents we see from around the country -- that is, we want to help those people who are struggling, not only those who are trying to buy a first-time home, but those who are actually living in their home and having a tough time making their mortgage payment. Up till now, there really hasn't been a very strong solution for those individuals.
And what we came out with was a $5,000 tax credit that could be used to refinance your mortgage. In doing so, that'll help lower the monthly payment that people who are struggling -- lower that down, allow them to have more cash flow to help pay down other bills, be it their credit card, helping their son or daughter through college. But it's a way to help all those hardworking Americans who have been struggling and have been paying their monthly mortgage, but now they have an opportunity to refinance, write down their principal, help lower the -- or use points. All of that is deductible under this $5,000 tax credit.
When you compare it to the Democratic plan, theirs really only helps 40 percent of Americans. Ours is 100 percent, because it covers all of those who are non-Fannie and -Freddie.
So we think it's a very strong proposal, and it will help hardworking Americans who really have been left out in the cold.
So thank you.
REP. CANTOR: Next I'd like to call on -- Mike Castle, as you know, is a very senior member of the Financial Services Committee, who's actually played a pivotal role in trying to shape the proposals that have come out of that committee and in fact was successful in inserting a provision and will amplify that now to be included in the Responsible Homeowners Act that we unveiled. Mike?
REP. CASTLE: Thank you, Eric.
I'm getting to the age where a reference to being senior bothers me a little bit -- (laughter) -- but other -- that, I appreciate your kind words of introduction.
I will take just a moment to talk about a provision called safe harbor. This is something that I have worked on and prepared and introduced and the Financial Services Committee took up. And actually it's in all the Democratic bills dealing with mortgage foreclosure circumstances as well, and I think it's provision that will prevail, regardless of where we go. We thought it was justified to be in this legislation.
The purpose of what we're doing is to incentivize the real estate market in this country, as you can ascertain. But we want to protect people who are in their homes as well, and this is what this does. Basically the servicers for mortgages -- and that could be the original holders of the mortgage or an -- somebody to whom the mortgage was assigned or sold or whatever -- are very concerned about modifying or rewriting mortgages because of the potential legal ramifications of downstream income holders. That is, people who receive income from that mortgage. As you know, they've been sliced and diced to the point we aren't sure exactly how many entities may be in that circumstance.
So this particular provision would provide a safe legal harbor for the servicers to be able to sit down with those individuals who are paying the mortgage and to rework the mortgage, perhaps reduce the interest rate or extend the number of years or whatever it may be. We think this is a far better way than going through a bankruptcy court or any of the other ways of doing business. This basically puts the mortgage servicer and the mortgagee in the room together in an effort to try to get them to resolve whatever the economic concerns may be and be able to move forward.
It has to be consistent with their statutory duties for them to fall within the safe harbor. And it also provides that the plaintiffs will pay all attorney fees and legal costs if they bring suits and they're not justified in their bringing of the suit. We think this will help a great deal in encouraging the various mortgage servicers throughout the country to sit down with the individuals who are having problems with their mortgages. And being able to work out those differences so they can continue to stay in their house and be able to pay their mortgage we think ultimately benefits everybody.
REP. CANTOR: Thank you, Mike.
And we also have an additional provision that was authored by Thad McCotter. And this is a provision which essentially responds to what the Democrats are trying to get at in their cramdown legislation.
I would think it's fair to say that most of us, on the other side of the aisle, disagree with the notion that you can improve access, to homeownership, by forcing cramdown and requiring courts to step in and change the terms of loans and contracts.
So what the provision that Thad McCotter has come up with says is, we want incentives in place for lenders to engage in modification discussions. We want to make sure that if at all possible, Americans can stay in the homes that they've got, if they can afford to pay their mortgage.
So what this does: It says if lenders do engage in modifications and if they do concede in terms, with the borrower, and say that they're going to share in the appreciation, of the value of the home, once the modification is complete, that that position that the lender assumes will be treated in a tax-free way, again giving incentive to lenders to do the right thing, rather than to have the government or court come in and change the term of a contract that was entered into prior.
So that sort of is a summary of the individual pieces and provisions of this Responsible Homeowners Act. And I'd like to call upon now the chairman of the Republican Conference, in the House, Mike Pence from Indiana.
REP. PENCE: Thank you, Eric.
Welcome to the next installment of the party of yes. Yes to better solutions. Yes to alternatives that will resonate with millions of Americans, because they are grounded in the timeless values of personal responsibility.
Most experts agree that at the center of our financial turmoil is the mortgage crisis. Unfortunately our Democrat colleagues have only offered failed policies that reward bad behavior and massively expand government programs.
Republicans today unveil a better solution. And when the American people have a chance to look at it, I believe, most of them will agree. To help distressed homeowners, the Republican proposal makes available a $5,000 financing tax credit.
So struggling homeowners can get a better rate, lower their monthly payments and stay in their homes. But also to help responsible homebuyers back into the market, the Republican proposal includes a $15,000 homebuyer tax credit, to buyers who can come up with a minimum of 5 percent down.
The Republican alternative, as you heard, also provides incentive to neighborhood investors, to clean up the market, and directs law enforcement agencies to bring to justice those engaged in mortgage fraud, as you've heard described.
Contrary to the administration's straw-man diversions, Republicans do have our own ideas and our own alternatives. And today is just one more example of those better solutions that Republicans will continue to bring forward.
Later this week, Republicans will bring forward a substantive and comprehensive budget alternative.
And so I congratulate our colleagues who worked so tirelessly in the development of this idea, this alternative that is built on the principles of personal responsibility, and not just helping those homeowners at the point of distress but looking to all American homeowners during this time of crisis with solutions that are grounded in timeless American ideals.
REP. CANTOR: Thank you, Mike.
Anybody have any questions? Yes.
Q First, do you have a cost estimate of how much -- (off mike) -- are? And then also, aren't some of these provisions -- (off mike) -- horse is out of the barn? The House has already passed -- (off mike) -- to enact the president's plan -- (off mike).
REP. CANTOR: Let me speak first to the scoring. We're still working with legislative counsel, and the date at which we have that completed, hopefully we'll have the score on that.
Secondly, as far as the bill -- as the horse being out of the barn, look. We're about trying to put forward solutions that can work. These are solutions that are complementary, and in some cases can replace what we believe are misguided attempts to try and do the same thing.
Again, every one of us believes in the American dream. We ought to be encouraging people -- qualified buyers back into the market and give that opportunity to as many folks as possible. These provisions, we believe very strongly, reflect the notion that the qualified buyers that are out there sitting on the sidelines due to a variety of circumstances beyond their control can be induced to come back into the market through these provisions.
Q Congressman, can you give us -- the markups are happening as we speak on the budget. Can you give us any preview of what the Republican alternative will be, how it will address health care, energy?
REP. CANTOR: I think that what you will see in the Republican budget is a responsible attempt to restrain the growth in government, to return us back to a period of economic growth through tax relief and fiscal prudence. We will be speaking to the tremendous explosion in entitlement costs and try and address that through our vision put forward in the budget. I think you will see it's in stark contrast to the smoke and mirrors inherent in the Democrat -- in the House Democrat plan.
Much of what the administration has been talking about in terms of raising taxes on families through the tax -- cap-and-trade system is still in the Democrats' budget. It's just set aside in a reserve fund so as not to be considered in the budget window.
Again, the smoke and mirrors that this president has talked against is exactly the kind of method that is being employed, I think you will see, coming out of the Budget Committee today. So we will, I believe, in a much more transparent way, in a much more straightforward fashion, address the fiscal emergency that we have in this federal government and try and speak back to the people who are looking for some confidence that they can see the jobs return to their communities, and frankly, a little easier time in managing their households and preparing their children for the future.
Q On the issue of your alternative, as you know -- (off mike) -- saying you don't have a plan. This budget came out a month ago, and you still haven't presented your alternative. Why haven't the Republicans come out with their alternative so that we can compare it today while the president's on the Hill talking about his budget? Why are we still waiting to see the Republican alternative?
REP. CANTOR: Well, first of all, the president knows different when he says that we don't have a plan. And I think he would tell you, if he was being accurate, that from the first days of his administration, Leader Boehner and I went in and personally handed him our plan on a stimulus. Okay? He comes out with a budget. As we all know, this budget process is multi-faceted. The president presents the budget to Congress; Congress then reacts and presents its own.
The Democrats today are unveiling their budget in the House. And I think the proper question is, where is your budget in relation to the Democrat response in the House? You will see our budget being begun to put on display today. And then as we work through this process from committee to the floor, you will see once again Republicans do have a plan. We are here in the minority to be constructive and, frankly, to pull this administration back into the mainstream.
All signs indicate the budget being proposed by the White House is so far out of the mainstream that even members of his own party in leadership in the House and the Senate have big questions as to whether they can support what it's about.
Q Two questions on the taxpayer -- the home buyer credit. First, Democrats during the stimulus debate were arguing that giving the credit to all home purchasers is inefficient because people who already own homes are not then buying up an empty home, they are leaving a home when they move to a new one, so there's no net gain for home purchases. So I'm wondering what your response to that is.
And then also, why not cap the allowable cost of a home purchase so that people -- so that the American taxpayer isn't subsidizing McMansions.
REP. CANTOR: Listen, right now everyone, no matter what price range you are in in a home, everyone has suffered losing equity in their homes because of the plunge in home prices across the country.
It is due to a glut of inventory.
We want to get qualified buyers back into the game and, through Kevin Brady's proposal, to get investors into the game so we don't have to call upon the taxpayers; from David Dreier's $15,000 tax credit to get responsible home-buyers, qualified home-buyers back into the game -- that helps everyone.
We don't want to just say certain classes of homes are the ones we want to move. We want all the market to move, because frankly to get the homes sold and to get the market moving again, you begin to address the fundamental problem in the collapse in our credit markets as well, which is the bottom has dropped out of these assets that underlie the securities out there that are having difficulty moving on our capital markets.
Q Given your concern about the fiscal crisis and also the public's concern about executive compensation recently, I'm wondering if you will support the president's proposal to increase the tax on hedge fund managers above the 15 percent that they currently are taxed on most of their income?
REP. CANTOR: Listen, I haven't seen his proposal in detail, but I can tell you any attempt to put disincentives in place for capital formation is the wrong direction to go in. We need investors back into the game to create jobs.
This is about small business, really. The engine for jobs in this country comes from small businesses and entrepreneurs. We had -- this group -- the economic working group had a small business forum last week. We've heard from small-business people from around the country, and one thing they said, right now, times are tough. And when times are tough, it means your customers are not walking through the door as quickly or with as many orders. And right now they need access to credit and credit lines to get them through the tough times.
If we're going to put disincentives in place for the banking system to function again, we are cutting off the lifeblood of small business. That's not the way to go.
Q Congressman, on that, so far the economic working group -- you've produced a lot of ideas. You and the president seem to be passing a lot like ships in the night. It doesn't seem like that there's a lot of -- in the end, a lot of synergy, where your ideas are being adopted into his measures. Do you anticipated any of these could be adopted or have you received any support from the administration for any of them?
REP. CANTOR: Well, you know, look, the president has said he wants to work with us. We've not had the reciprocal, if you will, intention demonstrated by the speaker of the House. The action has got to be in the House. This is where the legislation is made.
We stand ready to work with our colleagues on the other side of the aisle to get it right, because we can do better.
One more -- last question.
Q Following up on that a little bit, has there been outreach, maybe, to Democratic members, any members who have, you know, come to some of your ideas in the past to try and garner some support, to maybe get this moving if you could possibly get those things --
REP. CANTOR: I think if you ask any of the members here that have been involved in matters of the economy and trying to address challenges for families that we all are having conversations, working with, trying to increase support for commonsense solutions. You know, let's get out of the clouds, here.
Let's do what works for the people who are having difficulty out there, the ones that we represent.
So, yes, the answer is we are every day reaching out, and we hope that that will result in some common-sense solutions coming out of Congress; not some things that will go against what we believe are the prime generators of job growth, which is where we've got to focus right now, the small businesses of this country.
Thank you again.