Foreclosure Prevention Act of 2008

FORECLOSURE PREVENTION ACT OF 2008 -- (Extensions of Remarks - May 13, 2008)

SPEECH OF
HON. THELMA D. DRAKE
OF VIRGINIA
IN THE HOUSE OF REPRESENTATIVES
THURSDAY, MAY 8, 2008

* Mrs. DRAKE. Mr. Speaker, first, I would like to thank Chairman Frank, Ranking Member Bachus and the Committee for their hard work. They have presented a thoughtful and creative proposal.

* Housing is a very complex issue--it is also a very emotional one. We aren't just talking about abstract concepts, we are talking about a person's home. We're talking about real people with a real problem.

* Prior to Congress I was a Realtor for over 20 years. I have worked with many families to help them realize their dream of home ownership. I have also served as chairman of the Virginia Housing Study Commission. Housing is an important issue for me and something I feel very strongly about.

* I have seen good markets and bad. I have witnessed many changes to the mortgage market. I have struggled with how to define and protect against predatory lending practices. I have seen interest rates and loan products that seemed too good to be true--unfortunately, we have seen that in fact, many were too good to be true. I rise today to share my observations and concerns about the bill before us.

* There are many components of this bill which I think are excellent and fully support. First Federal Housing Administration modernization is long overdue. FHA must be streamlined and made more efficient. Government Sponsored Enterprise regulatory reform would also help stabilize the housing market. I support an amendment to be offered today that will create a first time home buyer tax credit for low- to mid-income buyers. This would increase the number of buyers in the market--increasing demand now for an oversupply of homes. The bill also increases funding for foreclosure counselors and financial education. I also appreciate the additional funding for law enforcement to prevent mortgage fraud, and that Department of Veterans' Affairs loan limits are raised, and the enhanced appraisal standards and appraisal independence.

* These are all well thought out, very important reforms that will help American families and the marketplace.

* However, my concerns with today's package include the establishment of a new affordable housing fund to create new grants that can be directed to organizations that work specifically on housing issues. The bill does contain a provision that will prohibit the use of these grant funds for political activities, the fact is that many of the possible recipients engage in partisan political activities and therefore should not receive funding to offset their costs. It is important to remember that money is fungible, so that if a group cannot use these grants specifically for political activities, it could certainly have more money freed up for political activities because of the injection of new grants funding.

* I am also concerned about a $300 billion federal loan guarantee. There are two important issues with this provision that I foresee. One, a lender with troubled loans could contact those homeowners and offer a federally backed loan--and refinance at a loss but now he has moved that loan from a potential total loss to 85 percent current value--and will be guaranteed by federal government should it foreclose. He now has no reason to work with that borrower should the borrower still face foreclosure. Two, this program has a huge impact on neighborhoods. Consider neighbor A who bought at the height of the market. This person struggles month to month but manages to pay his mortgage on time. Neighbor 8 and their lender agree to take advantage of the new program and negotiates their mortgage to 85 percent current value. Not only is fairness between the two neighbors and issue, but the new reduction in value can have a huge impact on the value of surrounding properties.

* While I understand this is a voluntary program. My question is why can we not develop incentives for the private sector to do this and not obligate the American taxpayers with $300B in loan guarantees?

* Furthermore, there are several things already in the works. FHA secure is a new FHA product allowing homeowners to refinance their resetting Adjustable Rate Mortgages. So far, there are 3 times the refinances this year as in previous years. HOPE NOW is an alliance between counselors, services, investors that is working to prevent foreclosure through outreach to delinquent borrowers. The program provides counseling and loan work outs based on buyers' ability to pay. From July 07 through March 08 1.4m avoided foreclosures through these efforts. Also, Fannie Mae is currently working on a streamlined short sale program to allow the sale of property that is over-mortgaged.

* Both the administration and the private sector need to do a much better job at explaining what is currently available. Neither has done a good job of explaining to the public these available options. As such, I can understand Chairman Frank's frustration and desire to take action.

* Again I thank the committee for their work and I would encourage us to institute the reforms in this package that I highlighted. However, I firmly believe we should take caution and allow ongoing efforts to work before we decide to go down the path of obligating American taxpayers for $300B in loan guarantees.

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