Helping Families Save Their Homes Act Of 2009

Floor Speech

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Mr. DODD. Madam President, let me, first of all, thank our colleague from Illinois for his tireless work on behalf of this idea. I joined him, along with Senator Schumer, early on in recommending a proposal like this.

History is always a good source to go to. Back in the spring of 1933--which is about as close an example we could probably find over the last 100 years that compares to the days we are in today. Of course, that was the height--or the beginning--of the Great Depression. In 1929, certainly, it all began.

After the election of 1932--during that now often repeated ``first 100 days'' of each administration--and that was the first 100 days ever talked about. It was the Roosevelt administration. The inauguration was in March of 1933. Inaugurations occurred in March in those days, not in January. So that 100 days ran from March until June. One of the first things the new administration did in the face of significant foreclosures across the country--and there were significant ones. They were major. Those days were, in many ways, far more difficult than the ones we are in.

These are bad days, obviously, with 10,000 homes a day going into foreclosure, with 20,000 people a day on average losing their jobs. Retirement accounts are evaporating. We have all heard about, read about, and know people that has occurred to.

But one of the things the new administration did in those days was to go out and actually purchase the home mortgages. The Federal Government actually did that. In order to stem the tide of foreclosures, the U.S. Government decided in those days that it would take over that responsibility.

They did other things as well: put capital into banks to stop the runs that were occurring across the country--major steps. But in home foreclosures, they took the unprecedented step of trying to stem that tide, knowing how much damage foreclosures could cause, not only to families and neighborhoods and communities but also to the financial system.

Senator Durbin is not advocating anything quite as revolutionary as the Government acquiring the mortgages of every home. While some have made that suggestion, he is not doing so. What he is suggesting is modifying the bankruptcy laws of our country for a limited amount of time, in a very narrow set of circumstances, to say: Where your primary residence is concerned--and for those who have not followed the debate, let me explain.

There is no restriction in a bankruptcy court for a bankruptcy judge to modify--or at least to negotiate--the modification of your mortgage if you have a vacation home or if you have a pleasure boat and have a mortgage on that. The bankruptcy judge can modify the mortgage on that beach house, that mountain cabin, that yacht you may have. That is perfectly legitimate under bankruptcy laws. What you are not allowed to do, if you are a bankruptcy judge, is to modify the mortgage on a principal residence.

I don't know if statistically what I am about to say is accurate. I suspect that most Americans who have a principal residence don't have vacation homes. I know some do, and that is perfectly legitimate. I am not arguing that you shouldn't have one. But explain to me, if someone will, the distinction on why a vacation home, a yacht, a mountain cabin--as nice as it is to have one--ought to be able to be subjected to a workout with the mortgage involved, and yet, for the person who only owns one home, as most do--you own one house--a bankruptcy judge is prohibited from engaging in a workout between the lender and the borrower on that principal place of residence. For the life of me, over the last number of months we have been involved in this debate and discussion, I have failed to hear an adequate explanation of why there is a distinction on a principal place of residence where a mortgage is involved and there is no hesitation, no restriction whatsoever, on whatever other number of homes you may have. Some have a lot more than two; some have three, four, and five. All of those can be subject to a workout, but not a principal place of residence. That is all we are trying to do here. Not forever, not looking back, not looking forward forever--Senator Durbin's amendment says for a limited amount of time, under limited circumstances--under the total control of the lender, by the way, because if you turn down a workout as a borrower, then basically you lose the option of working it out.

It is so narrowly drawn under these circumstances that, for the life of me, I don't understand the objection. It is one of those moments where I try--when preparing for debate, we all ask: What is the other side going to argue? So I thought last night, I have to get ready for the other side. I tried thinking through what is the argument I would make if I believed this would somehow cause great harm to the economy, was going to flood our courts or was going to require hundreds more bankruptcy judges to deal with it. What is the argument I would make to my constituents and to the American people that we ought not allow a bankruptcy judge to sit down between the borrower and the lender and work out a financial arrangement that allows the borrower to stay in their home, the lender to be paid--at least getting something back--turning that property into a foreclosed, vacant property, contaminating the value of every other home in that neighborhood. What is the logic? For the life of me, I can't come up with that, and I have tried.

So I would urge my colleagues, as you are thinking about this and listening to these debates, why can't we do what the Senator from Illinois has suggested: For a limited amount of time, try this. It is not forever. It just might do what the authors have suggested, and I am proud to be one of them. It might just do what we failed to be able to achieve despite the efforts of all of my colleagues here.

As chairman of the Banking Committee, we have come up with all sorts of very complicated proposals to try to assist homeowners, and I regret to report that while I think these ideas have great merit and we have all tried hard, they have not been terribly successful, despite the good intentions of everyone to work it out. This is the one idea we have not yet tried to make a difference in the foreclosure crisis.

Before the Sun sets tonight, 10,000 families are going to potentially lose their homes, and that will be true tomorrow and the next day and the day after that. Just think about that. As we all go home tonight to our respective dwelling places here, 10,000 of our fellow citizens in this country will end up losing their homes. They have to come back and face their families. Imagine, if you will, if you were in that position, walking into that house tonight and facing your children and facing your family and saying: We can't make this happen financially. We are being pushed out of this house.

This body cannot, for a limited amount of time, under limited circumstances, try something that might make a difference in that family's condition? I hope, in these very difficult days--if almost 100 years ago, 90 years ago, another body sitting here in the wake of economic circumstances that were as trying as they were could do something as unprecedented as the Government actually purchasing the mortgages, can we not now ask the Federal bankruptcy courts to sit down and try, for a limited amount of time, to make it possible for that family to stay in their home?

It may not work in every case. The Senator from Illinois has pointed out that of the potentially 8 million foreclosures, his bill may only affect 1.7 million of the 8 million, and for a lot of people, this won't even work, regretfully. But for 1.7 million, it might just make a difference to those families. The value of that--how do I put an economic value on that? What does it say to a family who can stay in a home they have bought, they watched the value decline--the mortgage probably exceeds the value of the home in many cases--but that sense of optimism and confidence, that family staying together during very difficult times?

If you are the next-door neighbor, you live down the block, what happens to the value of your home? We know what happens. In fact, that very day, the value of that home that is not in foreclosure and there is no threat of it, but your neighbor's home now declines by as much as $5,000, then, of course, that property and those other properties could fall into a similar situation. All of a sudden, what was otherwise a healthy neighborhood--people meeting their obligations, equity in their homes--all of a sudden, you watch a neighborhood begin to decline. Just imagine, if you would, you are in the market to buy a home and you are riding down that street and you see a couple of places you might be interested in buying but you see foreclosure notices up on two or three. How willing are you going to be to buy a home in a neighborhood where there are foreclosures? So there is a contagion effect, a ripple effect, beyond just the plight of that family, which ought to be enough motivation to try to make a difference, but if you are not impressed by that, think about that neighborhood and community.

In the city of Bridgeport, CT, in my State, there are over 5,000 homes in that city that are subprime mortgages in danger of going to foreclosure--5,000 homes in 1 city. I don't need to tell anyone in this body what that will mean to that community. The tax base gets lost, but far beyond the financial implications is what it does to the heart of a community, what it does to the heart of a neighborhood, what it does to the heart of a family.

So all we are asking for with the Durbin amendment is let's try this for a limited amount of time to see whether it will make a difference. Maybe it won't achieve the results we authors claim it will, but is it not worth a try to see if we can't bring that lender and that borrower together, to work something out so they can stay in that home? The lender gets paid. It seems to me that has to help.

I agree completely with my colleague from New York, Senator Schumer, who made the case, and did so simply. There is a direct connection here. If we are unable to get our housing situation stabilized, all of these other efforts we are making to get the financial system working are not going to succeed. At the root cause of this issue is the residential mortgage market. The failure of us to reach that bottom--to begin to see these values improve and people out purchasing homes will also be not only indicative of the direction we are heading in but also essential if we are going to recover.

Beyond the issue of housing and what happens to families, the very heart of the economic crisis, its roots, began in the housing market. I believe very strongly, as others do who are far more knowledgeable about macroeconomics than I will ever be, that our inability or unwillingness or failure to address the residential mortgage market will make it almost impossible for us to get the kind of recovery we are all seeking on the larger economic issues.

So I wish to commend my colleague from Illinois. He has worked tirelessly. He has brought together the financial institutions. I know many of them mean the very best. There is no ill will involved in this, I presume. I think there is a culture that goes back a long time which says that if a house is in foreclosure or about to go into it, get the family out, put it on the market, sell it to someone else, because the likelihood of that family redefaulting is pretty high. That may be true statistically, but it seems to me that in these circumstances, we are dealing with something very different, far more pernicious, far more widespread, with far greater implications. So even the best argument one might make that historically you do better in getting an economy back on its feet by allowing these properties to go into foreclosure, I think all of us recognize, with the numbers we are talking about here, that accepting that kind of conclusion could be disastrous, as it has proven to be.

I recall January and February of 2007. I became chairman of the Banking Committee for the first time in January of 2007. We had a couple of hearings on currency manipulation, I believe it was, in those days in January, but the first hearings I held in February of 2007 were on this issue. In the 110th Congress, I think we had 80, 82 hearings, and a third and a half were on this subject matter as we tried over and over again to get the industry to step up, to come up with various ideas that would mitigate the foreclosure problem.

I recall at the very first hearing we had a witness who was very knowledgeable about housing issues, and he testified that he thought there might be somewhere between 1.5 million and 2 million foreclosures. He was sort of ridiculed because these numbers were hyperbolic; this was an exaggeration of what would happen. In fact, the critics were correct. It was. He was wrong. It wasn't 1.5 million or 2 million; it has now become 8 million. So those dire predictions in February 2007 have proven to be painfully off the mark because, in fact, the problem is a lot worse.

I believe very strongly that had we in 2007 been able to convince the previous administration to step up and engage this issue in 2007, and even a good part of 2008, we could have avoided what we went through last fall and are going through today as we try to get this economy back on its feet again. But there was tremendous resistance to doing anything despite countless meetings we had, including with the financial institutions, where commitments were made in March and April of 2007 to actually sit down and engage in a workout with borrowers and lenders. None of that ever really happened at all. The numbers are embarrassingly small where workouts occurred, despite the efforts to achieve this without going through a legislative proposal.

Of course, the idea of modifying the bankruptcy laws was one that Senator Durbin raised early on. We were unable to get it done. Today, we are trying one more time, in a far more constricted and narrow construct of this proposal, over a limited period of time, to affect as many people as possible.

This amendment would also preserve some $800 billion in home equity for neighbors, we are projecting. The list I have of just the properties that could be affected--in my own State, some 15,000 homes could be saved by the Durbin amendment. Looking down the list, the numbers are stunning. In California, I think the numbers I saw are 385,000 homes could be saved by the Durbin amendment. I see my friend from New Mexico is here, and there we are talking about over 6,000 homes would be affected in New Mexico. In the State of Oregon, it is like Connecticut. Over 15,000 homes would be affected, I say to my colleague from Oregon. In North Carolina, I am looking at 38,000 homes, it is projected, could actually be saved from foreclosure, the State of the Presiding Officer.

Madam President, I ask unanimous consent that this list be printed in the Record so Members can actually look down and see what a difference this amendment could make in their State.

There being no objection, the material was ordered to be printed in the RECORD

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Mr. DODD. Mr. President, I know that in a few minutes we are going to be voting on the amendment offered by our colleague from Illinois, Senator Durbin, and I wish to once again commend him and Senator Schumer and others who have been involved not just in the crafting of the amendment, but I wish to thank their staffs. Brad McConnell has done a Herculean job over these past number of weeks, including the 2-week recess period we were out of session, to try to reach a compromise with major lending institutions and others across the country to be supportive of this proposal that Senator Durbin has asked us to approve, which is to allow judges under the bankruptcy law to work out modifications between lenders and borrowers with home mortgages that are involved in principal residences.

Again, Senator Durbin has significantly shrunken his original idea to the point where this is a very modest proposal, for a very limited amount of time, affecting circumstances that would be very controlled due to the fears that were raised by others that this would be too broad and far-reaching. As to the point I attempted to make this morning, I am confounded by those who would oppose this amendment. Bankruptcy judges can engage in workouts between borrowers and lenders where vacation homes, holiday homes, recreational vehicles or yachts are involved, but they can't do it on a principal place of residence.

I think that is a hard argument to explain to the American people, most of whom--while they might like to have a vacation or a holiday home or other residences--only have a principal place of residence, so they are restricted. What strikes them--and those of us who are supportive of the Durbin amendment--is how you explain to two families who live next door to each other, one of whom only has a principal place of residence, as most Americans do, and the next-door neighbor who, because of economic circumstances, inheritances or whatever else it may be, has that wonderful beach house or that cabin up in the mountains or that yacht on the lake, and if they are in trouble on those mortgages, the bankruptcy judge can work out a new financial arrangement which allows them to keep that vacation home or keep that boat or log cabin up in the hills. Yet the next-door neighbor, with just a principal place of residence, hears: I am sorry, you are going to foreclosure. We are not allowed to work that out for you.

I don't know how you explain that to people, not to mention the damage you do, of course, to every other neighbor in that community whose property value declines because of the foreclosure, that family who is affected, neighborhood that is affected, economy that is affected.

What the Senator from Illinois has proposed is a very narrow, restricted, commonsense idea. As I mentioned earlier, meeting with bankruptcy judges in Connecticut on Monday, I raised with them what they thought of the Durbin amendment. They thought it was a wonderful idea. I half expected they would say the courts are crowded, already overcrowded. That was not the argument at all.

Again, I hope my colleagues, as they come to this Chamber, give this that additional consideration. This ought not be a matter that divides us here. This is one that could make some sense, even if it doesn't do as much as we hope it does. I mentioned earlier some 15,000 homes in my State could be positively affected by this amendment. What if it were only 5,000? What if we were off? Is it wrong to try to save 5,000 homes in my State? Or the 325,000, or a number like that, in California, not to mention States that have numbers that vastly exceed what Connecticut could benefit from?

We will not know unless we try. All the things we have tried--and I have been involved with most of them--have never done quite as much as we hoped they would. But until we get to the bottom of the mortgage market problem, until you get to the bottom of that, all these other economic problems are going to be more difficult to solve.

I applaud my colleague from Illinois. He has been tireless in his effort. I express my strong support for what he is trying to achieve here and hope my colleagues will do so as well in the few moments remaining before they come to cast a ballot on this important issue.

You may never do anything that will allow for as much relief to as many families as you will if you cast a positive vote on the Durbin amendment. I would love to tell you these other ideas we are going to work on will have great opportunity, but I must tell you candidly, as the chairman of the Senate Banking Committee, this idea offers more hope for more people than any other idea you possibly ever will vote on.

This is the moment, this is the hour, this is the day to make a difference and I know all my colleagues would like to make a difference for the people in their States who are going through job loss, home loss, retirement loss. Here is one answer that could very well provide the kind of relief all of us would like to see.

I urge the adoption of the Durbin amendment.

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