American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - June 24, 2008)

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Mr. ENZI. Mr. President, I will return the discussion to housing. I do thank the Senator from New Mexico for his comments on energy. I know from traveling around Wyoming last weekend, the biggest thing on everybody's mind is $4-plus gas. I got a lot of comments on ways it could be fixed. What we are working on right now, of course, is fixing housing.

I am going to discuss the Federal Housing Finance Regulatory Reform of 2008. That is what we just had the vote on. I do not support this legislation.

I opposed this legislation in the Senate Banking Committee and I continue to oppose it today. As the national housing market continues to suffer from falling home sales, housing starts, and skyrocketing foreclosure rates in some parts of the country, the Senate has an opportunity today to restore confidence in the principles of good government to our economy. These principles include limiting taxpayer liability, ensuring a sustainable housing market in the future, and preventing a Federal Government bailout of big banks that made unaffordable loans or investors who made bad investments. Unfortunately, the bill ignores these principles and ignores irresponsible actions at the expense of responsible homeowners and hard-working taxpayers.

This bill contains a title called ``The HOPE for Homeowners Act.'' The program included in this title would create a $300 billion taxpayer loan guarantee program.

Let me repeat that. It would create a $300 billion taxpayer loan guarantee program--taxpayer guarantee program--doubling the size of the Federal Housing Administration. This expansion will be accomplished by taking the worst performing and the most risky loans made by banks, shifting 100 percent of the liability of foreclosure onto the American taxpayer. The loans I am talking about have made a lot of press in the past few months--adjustable rate, interest only, low documentation or no documentation; loans that in many cases the lender made with no regard for the borrower's ability to repay.

The Congressional Budget Office estimates that 35 percent of these loans will default, placing a huge liability on the FHA and ultimately the taxpayer for guaranteeing these loans. Even FHA Commissioner Brian Montgomery believes this is a dangerous proposition. On June 9 he stated:

The FHA is not designed to become Federal lender of last resort, a mega-agency to subsidize bad loans.

But that is exactly what this bill does. In past years, banks continued to make record profits by pushing these unaffordable mortgages. Investors, homeowners, bankers, and realtors bet heavily on the tidal wave of ever increasing home prices. If a rate adjustment made monthly mortgage payments unaffordable, homeowners and mortgage investors could count on home equity to bail them out. In other words, the value of the price of the home would go up sufficiently to cover the costs homeowners could not. As the Senate's only accountant, I can tell you this practice does not make good financial sense. It is completely unsustainable. However, most of industry ignored the warning signs and continued to make record profits from unaffordable loans.

Now these same banks and investors are in trouble. They have discovered that unaffordable mortgages can be, shockingly, unaffordable. Complicating this matter is that the housing market cycle is now on a downswing and people can no longer rely on home equity loans to bail them out of a mortgage rate hike. Banks and speculators now expect Congress to reward this irresponsible behavior with a taxpayer bailout. They expect the Federal Government to turn its back on responsible lenders and borrowers and renters waiting to become first-time homeowners, and support those groups that have pushed our housing market into decline with bad loans and bad investments. This bill is a Federal Government bailout and that is why I oppose it.

I will also note there are separate provisions of the legislation I do support. A separate title of this bill would create a new regulator for the government-sponsored enterprises, Fannie Mae and Freddie Mac, and the Federal Home Loan Banks. This world-class regulator will have the authority necessary to ensure that these entities are adequately capitalized and are operating safely within the secondary mortgage market.

The GSEs, government-sponsored enterprises, are the most important factors in our mortgage market and play an increasingly influential role in our global credit markets.

The regulators created by this legislation must support the housing market by allowing Freddie and Fannie to buy and securitize mortgages, thereby increasing credit at lower rates and restoring investor confidence. While I continue to oppose the affordable housing trust fund included in the bill, I support a strong regulator that will allow the secondary mortgage market to operate more effectively, to the benefit of our economy.

I support the deliberate and safe conversion of the GSEs into the jurisdiction of the new agency included in this legislation. It is past due. As these massive entities are brought under new supervision, I trust the transition will be done in a way that ensures that no disruptions occur in our housing and our credit markets.

There are also several tax provisions that are important to Wyoming and the Nation. Currently, Wyoming receives approximately $2 million per year in low-income housing tax credits to encourage developers and contractors to develop affordable rental housing projects. This bill will provide a temporary 2-year increase of approximately $50,500, a 2.5-percent increase to the Wyoming Community Development Authority. It will also increase access to the Mortgage Revenue Bond Program, another helpful tool for Wyoming housing infrastructure development.

Unfortunately, the good provisions of this legislation are not enough to outweigh the bad ones. Pushing liability onto the Federal Government by bailing out irresponsible lenders and investors is not good government. I cannot support a bill that puts reckless investors and lenders ahead of hard-working Wyoming taxpayers.

I yield the floor.

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