Helping Families Save Their Homes Act Of 2009
Floor Speech
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Mr. DODD. Mr. President, I see our colleague from Florida has arrived. I will take a few minutes and then ask unanimous consent that he be recognized as the original author of the safe harbor provision so he has a chance to explain his point of view.
Let me begin. Again, it is not necessarily the most compelling of arguments, but I think it is worthy of note that those organizations who are opposed to the amendment of the Senator from Tennessee include the Consumer Federation of America, the National Community Law Center, the National Association of Consumer Advocates, the Housing Policy Council, the Financial Roundtable, the Center for Responsible Lending, the Mortgage Insurance Corporation, mortgage bankers, and the ABA. This is a pretty rare collection, when we get the major consumer groups that watch all this stuff very carefully, as well as some of the major lending institutions. They never come together on anything. It is a unique moment on this proposal.
Let me say to my friend from Tennessee, I don't like the situation we are in either. This is not the ideal world because his point about contracts is a valid one. There is no question. I pointed out there are contracts with second homes and vacation homes and the like as well. We had no problem with the cram-down with mortgages involved there. We have a prohibition on primary residences, but we make the exception with other properties. Frankly, had we taken the Durbin amendment, that might have minimized the importance of what we have here.
Here is the problem: 10,000 people a day are losing
their homes; 20,000 a day are losing their jobs. The question is, How can we possibly get the kind of incentives so the bankers, the servicers, the lenders, and the borrowers can modify these mortgages? We now have 11 million homes in this country where the mortgage exceeds the value of the property. If we don't step up soon, those numbers will explode. We have a moratorium on foreclosures in certain areas, and that is just building up a backlog that if we don't end up with some means by which that borrower and lender can work out an arrangement that they can modify the mortgage, we will face a cascading effect which most people agree is the root cause of our financial difficulties, beginning with predatory lending and subprime lending that helped create this problem with no-documentation loans, the liar loans and the like.
What we have crafted is a rather narrow answer. They have a safe harbor provision which is very broad and, frankly, it can be narrowed. That is what Senator Martinez has done with his proposal. What we are talking about are loans in the private label securities. That represents about 16 percent of what we are talking about. Yet within that 16 percent, in excess of 62 percent of those loans, are seriously delinquent loans. So while it is a relatively small number compared to the total mortgages being written, in terms of delinquent mortgages, it represents a fairly significant majority. We are narrowly dealing with those.
Then we are talking about two circumstances in which they voluntarily can move. That is with the Obama plan or the HOPE for Homeowners. We are not limiting it. If people don't want to do it, there is no requirement that they do it. We are trying to remove one of the great barriers, and that is the fear of litigation. The servicers are saying: We would like to do this. We understand the value of it. We want to get paid. Banks want to get paid. Borrowers want to stay in their homes. Everybody seems to agree on that. Here is the problem: If we end up modifying this, the investor, not an illegitimate point, says: Wait a minute, we had a contract with you, Mr. Servicer. You are going to now modify this, violating our interests as an investor. Therefore, we are going to sue you.
That is the fear. So the servicer says: I am not going near this. I respect the fact the borrower would like to get out of this situation in an affordable mortgage. I would like to get paid something in the process. But I will not go through the kind of litigation that will occur if there is not a safe harbor. Hence, the Martinez amendment.
In these narrow circumstances involving 16 percent of this market, and of which 62 percent are the delinquent mortgages, under two fact situations, the HOPE for Homeowners and the Obama mortgage modification plan, we provide for that safe harbor, saying to that servicer, if, in fact, you move forward, we will provide you with that harbor and avoid the potential of litigation, in some cases even frivolous litigation.
Again, in a perfect world, would I like to avoid that and do what my friend from Tennessee wants? Absolutely. But there are no perfect choices, and yet there are some potential dangers. I don't like setting a precedent. We narrowly define this in time and circumstance, only involving those that already occurred, and the problem dies or is sunsetted in December of 2012. So this is not a perpetual program. It is limited to the fact situation, limited to opportunities in order to try and provide some relief primarily to the consumer, to the person holding that mortgage or the person having that mortgage who runs the risk of losing their home.
We have tried, for a year and a half, all sorts of different ways. My friend from Tennessee and the former Secretary of Housing and Urban Development, Senator Martinez, who knows something about these issues, will recall we tried, in the spring of 2007, to get these people together to try and work out things. They promised they would try. They never did. Then we drafted legislation, far from perfect because we are back today talking about it, called HOPE for Homeowners. We tried all sorts of means by which we could slow down the foreclosure problem.
Regretfully, we have not been as successful as we would like. There is no guarantee this will work as well as we would like either. I say that as a coauthor of this bill overall, and I appreciate my colleague's fine comments about the effort. But it is an attempt to try and provide some space, in these very delinquent mortgages, to provide an opportunity for a modification so people can stay in their homes, borrowers can keep their homes, lenders get something back, rather than going to foreclosure in which the implications for everyone are devastating.
Again, the investor does not have an illegitimate complaint, but in the context of balancing these interests, where, again, no one is going to come out of this perfect, in a way I think it is in our interest to try and do what we can to keep people in their homes and have the lenders be able to get something back. Hence, that is why you see this very unique coming together of various interest groups, from the consumer advocates to the major lending associations, saying on this point, they think this is the right--at least worthy of our attempt to get this right.
Again, I respectfully say to my colleague from Tennessee, I appreciate his points. He and I talked about this. But I honestly believe in this case this would be a mistake to accept this amendment and to run the risk of losing the opportunity to get that safe harbor opportunity.
With that, I yield to my colleague from Florida.
The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
Mr. CORKER. Mr. President, if the Senator from Florida would allow me to speak for 1 minute.
Mr. DODD. Yes.
Mr. CORKER. Mr. President, I wish to make it clear because I think the Senator from Connecticut, in doing a good job in talking about his position, made it seem as if we are against loan modifications. Look, there were 134,000 loan modifications last month. I am all for loan modifications.
But what this bill does now is it gives those four largest banks, and many others, the ability--we are paying them, we are giving them the ability to do things that are in their self-interest and not in the homeowners' self-interest--let me say that one more time: not in the homeowners' self-interest--and be totally obligation free, with no legal recourse whatsoever against them.
What this amendment does is say we are giving them safe harbor, but they have to look at a variety of ways to make sure the homeowner and the investor both are being treated fairly. This bill is very narrow. It allows them to wash their hands and do things that are in their best interest alone, and we are paying them to do that with no legal recourse. To me, that is far, far, far more than we should be doing in legislation such as this.
I thank the Senator.
The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
Mr. DODD. Mr. President, a quick response.
The homeowner gets to keep their home, hopefully, at a rate they can afford to pay. That is not insignificant, I say with all due respect. The idea there is nothing in here that benefits homeowners--and I am not interested in helping out the four big banks at all. I am interested in making it possible for this to avoid litigation. That is what the concern is; that if we are going to do this, we run the risk because it violates a contract potentially, and if you do that, you are subject to a lawsuit; hence, nothing happens.
That is the fear: nothing happens. If the servicers do not act, then you end up with the borrower losing their home, the lender ends up getting nothing out of it at all; and, hence, the reason why this safe harbor is designed to get us to the point where both the borrower and the lender--again, we are not interested in anyone coming out of this situation with some enrichment, but the idea of slowing down this cascading problem of foreclosures, I think is in everyone's interest, as my colleague has pointed out.
Several Senators addressed the Chair.
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Mr. DODD. Mr. President, I will take a minute. Let me just say again that I have great respect for my colleague from Tennessee. He and I work closely together on a lot of issues. He is invaluable as a colleague, as is Senator Martinez, former Secretary of Housing, who understands a lot of these issues well, not just from a senatorial perspective but from his previous job as Secretary of Housing and Urban Development in Washington.
Again, this is a program that is limited in time, limited in scope.
As both the Senator from Florida and I have said, this is far from a perfect world in terms of how we have to balance the various interests in all of this. I am not unmindful of the fact that we are in uncharted waters. We all recognize as well that we are in uncharted waters in a larger sense. We are in a time that none of us in this Chamber--with the exception of my colleague from West Virginia and a couple others--can recall. Our parents and grandparents talked to us about times like these almost a century ago.
While we are taking action here--and I hear my colleague from Tennessee, who made a legitimate point that we establish precedent here, and I understand that. People will look back, as we have looked back, to previous decades to seek ideas that might help us get back on track again and restore that optimism and confidence in our country. So we are moving into an area that is new, but as the Senator from Florida pointed out, we are in a time that is new as well.
We have tried, as we know, in numerous ways over the last many months to figure out ways to get at the root of this foreclosure problem. Every idea you can come up with has its shortcomings. We have yet to find the perfect one that everybody agrees on. If somebody has it, please let us know because we are looking for it to get us to the point where we can put the brakes on foreclosures, not because you impose a moratorium but because people can afford their mortgages, lenders are being paid, the economy is moving, credit is flowing, businesses are growing, and joblessness is no longer increasing but declining--all of the things we want to see.
This proposal we have advocated here, the safe harbor, in a narrowly crafted way, limited in time, scope, and circumstance, we believe will help in that regard. Is it perfect? Far from it. Is it necessary? Absolutely. That is why I think you see the collection of organizations. I don't want to overemphasize this point, but they have come together to say this is an idea worth trying. Rarely do you get that kind of cooperation.
At least there is some indication that the other body might be willing to accept our language and take this bill, and the other provisions of the bill--
my colleague is correct--really are important and are needed immediately. We don't need to delay this further. That is not a reason to be for or against the amendment, but I just point out that the other side would agree to the Martinez idea.
I ask our colleagues to, at the appropriate time, oppose this amendment--and I say that respectfully--so that we can move on to the other amendment and see if we can reach a final vote this evening or sometime in the morning.
I yield the floor.
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Mr. DODD. I thank the Chair, and let me just say to my colleagues--and I see my friend, Senator Shelby, on the floor of the Senate as well--that we are open for business, as the expression goes. We have a number of amendments--a significant number--on which I think we might be able to reach agreement. We are not quite there on those, but we can do that. There are several that require votes, and the leadership would obviously like to complete this bill this evening, if it is possible.
My good friend from Alabama has been a good partner in all of this, in working on this, and so we invite all those with amendments to come over. We can offer them, debate them, and possibly reach agreement on them as well and adopt them as part of the bill. So I would just make that point.
I see one of my colleagues on the Senate floor but who is maybe not ready yet, so I will suggest the absence of a quorum until we get someone to show up.
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Mr. DODD. Madam President, before my colleague leaves the floor, I thank him as well. He has been a senior Member of the Banking Committee and has been an invaluable asset and partner on these issues. He understands regulatory reform as well as anyone and has dedicated a good part of his service on the committee to that issue. It was a pleasure to work with him on the issues he has mentioned in this bill, dealing with the FDIC and the National Credit Union Association. We are providing these resources. We think we have built in some pretty good safeguards so these guidelines will not be exceeded, but the best safeguards are for the institutions themselves to be cautious and prudent in utilization of these resources as well.
I underscore and endorse his comments on that point and I thank him immensely for his work on the bill, making it possible for us to arrive where we are this morning.
Lastly, I join him as well in his concerns about the Federal Trade Commission issue that I thought we successfully resolved in the colloquies we had here. Unfortunately, that was not, apparently, the case. We are still working at this. I want you to know Senator Crapo's office is directly involved with ours and others we are negotiating with and will obviously pursue this matter. I am hopeful we can resolve it amicably but, if not, there will be a moment in the not-too-distant future we will have to vote. I would like to work things out to everyone's satisfaction without that, but if that is the case, we will have to do that. I join with him. I think the jurisdiction is clear on that matter, and I think most agree with us, but, obviously, from time to time, you need to bring these matters to a head and actually have a decision by the body. Again, I hope we can avoid that, but if not, I join him in that effort to provide that legislative effort. I thank him very much, and hopefully we will, this evening, complete work on this bill and send it off.
I am hopeful about the other body which, I am told, has looked on our efforts here with approving eyes, so we may be able to get it signed into law pretty quickly.
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Mr. DODD. Madam President, I thank my colleague from South Dakota. I appreciate his cooperation in getting the amendment up and having a chance to debate it. It is my understanding, even though the debate may not last long on this, there will be a vote probably sometime around 2:15. That is the plan right now. So while we may not exhaust a lot of time when we come back at 2:15, I ask unanimous consent that there be 2 minutes equally divided between the Senator from South Dakota and myself for the benefit of our colleagues before a vote, to explain the amendment once again before we actually have a vote. I ask unanimous consent for that.
Madam President, I withhold that request.
Let me address the substance of the amendment. What all of us want, without exception, is to have this TARP money come back. This is taxpayer money that went out last fall to shore up the financial system, to make it possible for the financial system to get stabilized and provide resources to either purchase toxic assets or legacy assets, as well as to make capital investments in order to provide stability to institutions that were at risk of becoming completely insolvent or going out of business entirely. History will ultimately judge whether that decision was the right one or the wrong one. I happen to believe it was right. Most people concluded that it was, that had we not taken that step, as difficult as it was, with the warnings of the Federal Reserve Board and others that the financial system, in fact, globally, could melt down if we did not act quickly--it was awfully difficult in that environment to know exactly what was best. But given the time constraints and the importance of the issue, this body acted. I think we did so appropriately and properly.
The good news is that it is showing some glimmer of hope. I don't want to overstate the case, but there are some indications that this is beginning to work. Not that it will resolve itself overnight, but certainly it is beginning to show the possibility of getting credit once again moving.
The Senator from South Dakota offers an amendment that has a certain attractiveness, the idea that TARP money now coming back, as much as maybe $25 billion, maybe more--certainly, we hope a lot more ultimately will come back into the coffers of the Government--what do we do with that TARP money at this juncture? If we adopt the amendment of the Senator from South Dakota, it would take those resources off the table. We couldn't use them. What does that mean? It would mean that just at a time when the so-called stress tests are being conducted--and none of us knows and won't know until this Thursday how many of these 19 institutions will actually need additional capital. We hope none do, but I suspect some will. If that is the case, where does it come from?
I know this much about our colleagues: Whether you serve on one side or the other, none of us would rather go back and have to vote again on yet another tranche of TARP money. Wouldn't it be wiser, since the previously passed legislation allows for any money that comes back into the Government from these institutions repaying the TARP money, to recycle that money rather than coming back again and asking for additional money, which we may very well be asked to do very quickly?
My concern with the amendment is, just at the very hour that we may need some additional resources to either further capitalize or purchase toxic assets, in either case to allow our economic recovery to move forward, we would be removing those resources altogether, once again forcing this institution to allocate additional resources. The more prudent step to take would be to utilize these resources coming back at this critical moment in order to get this program working.
Why is that important? It isn't just about the financial institutions. In fact, if it were only about that, I suspect I know where 99 or 100 of us would be on that issue. The question isn't so much what happens to these major institutions in and of themselves; it is what happens to the people who depend upon them, those small businesses, midsize businesses that need credit lines in order to buy inventory, to pay employees. What happens to people who are seeking a mortgage, buying an automobile, dealing with student loans, dealing with credit card debt? All of these issues are affected by what happens in the financial system as a whole. These are not separate entities disconnected to the overall well-being of the economy. If you could divorce them from the well-being of the economy, most would say amen and do so. But to suggest so is to not understand how the financial system has to operate.
At the very moment that we as a nation need to keep this ball moving in a direction that allows for the financial system to shed the toxic, clogging assets that are freezing up the circulatory system financially, we would be stepping back and forcing an institution to vote for additional resources. My political barometer tells me there are not the votes. I think most of my colleagues know that. At this juncture, we need to see a lot more about how this program is working before this institution is likely to vote again for an additional allocation of taxpayer money for the program. It may come to a point where the President will ask us for that. But I don't think we want to jump to that option, particularly if we have resources coming off the TARP program that could be recycled for the next 11 months or so and that we can properly use at a moment that it is needed.
That is the reason I will ask my colleagues to respectfully reject this amendment. At this very hour, the last thing we need to be doing is deny the Treasury Department and others the resource capacity to respond to a situation.
It is in one sense, on one level, about the financial institutions. But in a far more profound and important way, it is about the people who depend upon these institutions for their economic livelihood, their economic well-being, their economic survival. That is not an exaggeration. Most businesses need credit in order to operate. If you strangle credit and it does not move, then the people whom we care most about--the small businesses on Main Street, that home purchaser, that other person out there struggling at this hour, when you are losing 20,000 jobs a day, 10,000 homes every day through foreclosure, not to mention retirement accounts and other problems--at the very hour that things seem to be just limping ever so slightly in the right direction, to deny these moneys to reinvest in the program and make it work and depend upon the outcome of a vote here to provide additional resources would be the wrong step in the wrong direction. The very people we want to see get back on their feet again would be the victims.
We have a tendency to focus on whether these institutions are deserving of help. My colleagues may be divided on that point. I don't think we are divided on whether we want to see the people who need the institutions get help. There, I think we all agree. So at the very hour we agree about helping them, we deny them the ability to get the help they need by depriving these resources to be reinvested in the acquisition of the very assets that are making it difficult for credit to move. That is the reason I am asking my colleagues to reject the amendment when the vote occurs at 2:15.
Again, we will know on Thursday how many of these lending institutions are so-called ``passing the stress test.'' My hope is that a majority of them are and that there would be very few, if any, that need more capital. I suspect there will be some that do. Which is the better choice at that moment--to take some of this TARP money that has come back and put that to use or take that off the table and have to come back up here and seek a majority vote or a 60-vote margin? What is the likelihood of that occurring? If it is not likely to occur and we stall out in this recovery, all of us would regret that.
So I appreciate very much the spirit with which Senator Thune offers the amendment. We all agree we would like this money back. We would like it back with interest. We would like to strengthen our economy, restore that confidence and optimism that is critical for the success of the Nation. But we also recognize, as do most Americans, that we have a time to go before this is going to result in the recovery we would all like to see. This decision, at this juncture, could stall or set that effort back, not just days and weeks but months. None of us wants to be a party to that.
With those thoughts, at the appropriate time I will ask my colleagues to vote against the Thune amendment and move on to the remaining amendments which we hope we can clean up this afternoon and finish voting on this very important bill. This is a bill that is very important to our community bankers, to our folks out there trying to resolve how they can stay in their homes. It is very important to the Federal Deposit Insurance Corporation, the insurance fund, as well as to the national credit unions across the country. There are a lot of entities that do need this kind of help. It is a major step in getting our economy moving in the right direction. This amendment would set that effort back and jeopardize this legislation from being adopted quickly at a time when we need it. With respect to the author of the amendment, knowing his intentions and his motivations are certainly understandable, I think it is the wrong choice at this hour.
I yield the floor and suggest the absence of a quorum.
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