Congressional Black Caucus

Floor Speech

CONGRESSIONAL BLACK CAUCUS -- (House of Representatives - March 16, 2009)

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Ms. JACKSON-LEE of Texas. Allow me to thank the gentlelady from Ohio for really taking up the very important mantle of leadership in communicating to our colleagues why we really need to be in a team effort. I was with Senator Rodney Ellis, a State senator in my State, just yesterday. We have to use time when we can, and that was Sunday. We were standing up, along with certainly many members of the State legislature and many Members here in the House, on the great need for receiving stimulus dollars and unemployment dollars in the State of Texas. $555 million is presently being rejected by this Governor of our State.

And the quote that comes to mind from that State senator was that when people are hurting or unemployed or in foreclosure, they don't see Democrats or Republicans. They just see pain. And that is why I think it is important that we convey to our colleagues that their constituents don't see a Democratic or Republican Congressperson. They just see a major dilemma from which they are wondering how they can get out.

So this evening, I would like to emphasize something that seems to have been lost, and that is that this ongoing foreclosure crisis was percolating way before the inauguration of our present President. And in fact, I'm reading from a document that was dated 2006, and it says ``foreclosures up 72 percent from last year.'' That would have been 2005. That was the last administration. The previous administration was a Republican administration. But I imagine that this number, 72 percent, was not coded according to Democrat or Republican homeowners. But it did say that it was up 72 percent. And it goes on to say that ``national foreclosure filings continued to climb in the first 3 months of 2006, evidence that more U.S. homeowners are struggling to stay current on their monthly mortgage payments.''

Why, then, wasn't it addressed by the administration during that time? That is 2006, ``a total of 323,102 properties nationwide entered some stage of foreclosure in the first quarter of 2006.'' Again, it mentions ``a 72 percent year-over-year increase from the first quarter of 2005 and a 38 percent increase from the previous quarter.'' It specifically talks about the fact that Texas, Florida and California report the most foreclosures. Now we are a prosperous State, or at least we are defined as such. It must be because we have government officials suggesting that we don't need unemployment dollars. Texas reported the most first-quarter foreclosures of any State with 40,236, and Florida reported the second most with 29,636, and California was a close third with 29,537 properties entering some stage of foreclosure in the first quarter, again, this is 2006. And let me just say I do know this is 2009.

I think it is important to note that we did not create this crisis. The election of 2008 didn't all of a sudden make it where people are foreclosing. This has been happening. And what we are trying to do is to emphasize that we have to act now. That is why the President is so interested, the administration is so interested in making sure that there is a moratorium, that there is $75 billion that is being set aside, something that we debated when we were working with the previous administration that you can't give then-Secretary of the Treasury a carte blanche utilization of then the $350 billion. So many of us argued vehemently about that.

Let me say to my good friend from Ohio that these numbers are not ignoring the fact of how difficult it has been in the Midwest and in Ohio in particular. Again, this was emphasizing the high numbers of big States. But certainly it has Ohio. And it mentions, of course, that you, too, were in the midst of huge foreclosures. In 2006 it looks like you were in the 8,000, 9,000. You kept going up. In February you had 9,000. So you were going up, and the other States were going up as well, which means that this is not an issue for small States, big States, or middle States.

So I come to the floor really to suggest that we are in a crisis that has to be acted upon. That is why so many of us rallied around the Helping Homes legislation that is not a giveaway. It is not a refuge for deadbeats and people who can't handle their finances. It is really, as I indicate on the floor of the House, the bankruptcy provision is the little guy's helping hand, because we bailed out every large entity that we could possibly bail out. Just give the roll call of the big banks, the big investment houses, the big AIGs. We have bailed them out.

When I got on the floor to debate this bankruptcy provision, which we have been trying for a number of years, it would have been helpful if the previous administration had allowed this to go forward in 2006 with these high numbers. And then we could have had individual, responsible families who simply wanted to get time, that is what the bankruptcy does. Nobody goes to the bankruptcy court and says ``take my house.'' We are trying to keep them from going through that humiliating experience of seeing your house auctioned off. And all of us have seen the video on television where we see families sit there with tears in their eyes. Yes, some people benefit by maybe being able to buy a house. But mostly the people with tears in their eyes, some hoping they could buy it back, others watching their house peter away in an auction process. The Helping Homes that I know my colleague voted on and understood how important it was as a lawyer and former mayor and understands about the tax base that just deteriorates when we lose our home, this just allows the homeowner to go into the courthouse with a trained bankruptcy judge who is not prone to go lightly on people who are frivolously coming in masquerading themselves, never paid a bill in their life, but it allows them, just like you've allowed the big corporations that have gone into bankruptcy to be able to reorder.

And so, it is truly important to ensure, to help the little person, that this bankruptcy bill that has been passed by the House and the Senate, as I understand it, it may be that we move this bill along that will allow the cramdown that everybody talked about, you're going to disadvantage the lender. No, you're not. Because there are now different provisions that puts in that any value that comes through the sale of that house goes back to the lender, there are protections about the cramdown, there are notices that have to be given so that maybe you can modify the loan without going into bankruptcy. And if any lender is smart, they will do that. But at the bottom line, this bankruptcy provision helps hardworking Americans wherever they live to save their house with dignity. Mr. and Mrs. Jackson-Lee, Mr. and Mrs. Lee, Mr. and Mrs. Fudge, Mr. and Mrs. Jones, Mr. and Mrs. Smith, Mr. and Mrs. Gonzalez can go in and fix that problem through the courts and save the house for them and their four children or two children. In USA Today, there was an article that you, as a former mayor, would understand, the dumbing down of the amount of money that is going to school districts because we were reaching a crisis of how many homes were being foreclosed and seeing the tax base just dwindle away, in fact, I would say, go rapidly down a fast moving tube.

So it is a ripple effect of not only destroying neighborhoods, which is why these neighborhood stabilization moneys in the stimulus package are crucial, but also destroying obviously paramount families, lives, and then the ability to pay for the education of your children, and then, of course, the ultimate dump of a whole town, whole city, a whole hamlet, village, being just blocks and blocks of foreclosed homes.

So I think it is important that we begin to stand on the floor of the House to support America's families. And I can't help but as I speak with you this evening and to my colleagues, I just have to hold this up because it certainly shows the strength of our President, it says, this is a headline, Obama berates AIG and vows to try and block bonuses. Well, we know there are some legal issues that have been represented to us that provides a problem, but I will just simply say that having practiced in the courts, it is a shame that we couldn't just say, ``sue me,'' which would have just had those individuals who thought that they were owed the bonus to be able to go into the courthouse and try to get the money.

I think I would like to commend our Speaker who has indicated that these moneys should then be paid back now by AIG. If you figured that you couldn't have any other out, you couldn't stand the impact of a lawsuit for people who were getting these huge bonuses, $160 billion plus, then why don't you go ahead and put on the requirement that they should pay the taxpayers back. But I use this as an example that we have to be able to help these hardworking taxpayers who themselves have suffered because we have not been able to provide the relief.

I just want to add that new home sales have fallen by about 50 percent. One in six homeowners owes more on a mortgage than the home is worth which raises the possibility of default. Home values have fallen nationwide from an average of 19 percent from their peak in 2006, and this price plunge has wiped out trillions of dollars in home equity. That is the sadness of it. Many people were going to use this for retirement, had the ability to pass on a debt-free house to their children. This was the bottom line or the first line of wealth for many Americans. We were told to buy that wonderful nest egg, buy that home that will be a nest egg. The tide of foreclosure might become self-perpetuating. The Nation could be facing a housing depression something worse than the recession.

Of course, we know about the TARP bill that has helped us to move forward. But then again, we realize that there have been, certainly in the first issuance of the dollars, these major problems. And so that is why we have turned our attention, and I want to congratulate Chairman Conyers, who had been on this issue, in the previous administration we had attempted to get the language put in the TARP.

And many times, Congresswoman Fudge, the Congress doesn't get the recognition. And certainly none of us are saying me, me, me or I, I, I. And we also know that we are in a business that we are responsible enough to take criticism. But they need to know that we were fighting the Judiciary Committee to get the bankruptcy language into the TARP legislation a way long time ago, recognizing the importance. But it would not, could not be moved forward because of opposition from the then-White House.

And so it is important to note tonight that I am very glad that you had this particular Special Order so that we could provide the basis of the work that we have done and also ask our colleagues to encourage all of their constituents to seek foreclosure modification in their loan, to not sit by silently, that the banks are now under a burden to not foreclose but to be able to talk to you about loan modification. Everyone should seek loan modification now. Do not suffer in silence, because we realize that it is not only a predatory lending issue which has occurred, but there are people who have regular loans that may be finding themselves in difficulty and have the right for loan modification.

We do want to say that we want to get out of this issue that whenever we see certain economic or certain neighborhoods that that particular lendee is a prime target for subprime mortgages. Now some people have indicated to me that subprime mortgages have been used sometimes favorably to allow someone with some challenges. But certainly subprime should not equate to predatory. And there has been predatory lending going on. And so these subprimes have equated to that. And I want the bankers to be able to be more creative than to see certain neighborhoods, certain, if you will, ethnicities or racial groups, and the only thing you can give them is a subprime when their particular portfolio suggests that they are equal or able to take on any regular loan. And what happened is they put more people in subprime based on ethnicity and race.

So I wanted to add as I draw to a close, and I welcome your participating in this legislation that I intend to drop, and that is to ensure that individuals who are in mortgage foreclosure because of subprime and predatory lending will not have that foreclosure on their credit score. You know what happens with credit scoring. When you go into a bank and they pull that score up, hardworking families suffer because of the credit score. Probably they were thrown into the subprime and predatory markets because of that.

So the language says in particular that a foreclosure on a subprime mortgage of a consumer may not be taken into account by any person in preparing or calculating the credit score as defined in subsection F(2) for or with respect to the consumer.

Subprime defined. The term ``subprime mortgage'' means any consumer credit transaction secured by the principal dwelling of this consumer that bears or otherwise meets the terms and characteristics of such a transaction that the board has defined as subprime mortgage.

So if you have been a victim of predatory lending, we will add that. And you have made every effort through loan modification or you have been caught up in this whirl of confusion, then we don't want to impact your credit score even more, make it worse, if you will, by adding this foreclosure to you; and, therefore, making it even more impossible for you to then move into a home or buy another home or to transition to get your life in order.

I want our colleagues to realize that this is going to be an ongoing concern. And the fact that it is an ongoing concern means we have to work with our local communities. That is why I have supported the TARP funding to be as responsive to community, regional and private banks as they are to the big banks. I think it is important that we invest in the smaller banks by making sure that they get TARP funds. And I think it is enormously important for the President's mission that says that we should in fact for every dollar lent to these banks, they must lend it out, and we must lend it not only to those who are attempting to modify their loans, but to the new generation of homeowners. Let us not kill off the incentive for others to buy homes, co-ops, condominiums, brownstones, the two stories, the split levels, if you will, two families in one home scenario, we should not take away the American dream of a house.

I believe that if we can watch AIG with some sort of cavalier attitude, giving $160 million in bonuses and not wanting to issue a report on where the moneys went, we can certainly be helpful to those who are struggling.

I would like to engage the gentlelady in a conversation, particularly as she comes from Ohio, and just get a sense of the impact that comes about when homes are foreclosed. With your experience as a former mayor and how important those local resources are, what happens to a community when there are massive foreclosures and that income doesn't come in any more?

Ms. FUDGE. There are a couple of things that I would like to address. Many people know that Cleveland, which is a major part of my district, has been one of the poorer cities in America for the last 3 years. So when we are talking about more than 10,000 vacancies in a city, which is the case in the city of Cleveland, not only does it destroy neighborhoods, but there are less resources to go to the school or to go to the city for city services, and all of the things that go along with tax dollars. As well, it deflates and devalues all of the property around it.

And it clogs the courts. The foreclosure process is a timing issue because of all the notice requirements. It is a domino effect. It hurts everything that you can think of that has to do with housing. But most importantly, it puts people on the street. We have thousands and thousands of people waiting to get into public housing. We have people who have moved in with other family members. Where do these people go? No one addresses the issue where do these people go. Everyone doesn't have a family that they can move in with. Everyone cannot get a voucher or stay with a friend. Where do these people go?

And then what is compounding the problem is we are now having landlords who have renters in their homes, and haven't told the renters they are in foreclosure. One day the renters wake up and they have a notice on their door saying that they have to move in three days. Or the sheriff saying you must move from these premises. So it becomes a very difficult experience to watch someone lose their home.

I am hopeful that some of the things that we have done in this Congress will stop the bleeding. We may not cure the problem over the short run, but I am very confident that we will over the long run. I certainly hope that some of these things are given a chance. We have given 8 years of opportunity to make things work and they haven't. Give us the same opportunity. I do believe our President is doing the right thing. It is just going to take some time.

Ms. JACKSON-LEE of Texas. I think it is important for people to hear stories from all over the country. I think one of the salient points that you have made is how it puts people on the street and how it clogs the courts. Different from the bankruptcy proceedings which allows people to stay in their homes, the foreclosure proceeding is so long and protracted, most people will be abandoning doing their home before it concludes.

I thank the gentlelady from Ohio for being able to both express some of the outrage and pain. And this was not created under this administration. We are trying to be the problem solvers, and it would have just been great if we had looked at this issue from the administration's perspective in 2006 and before. We might then have been able to put our finger in the dike and help those who were on the verge of going over the cliff.

But now we are holding an enormous burden, and I guess the parting words are let's look at the people who are rolling up their sleeves. The media pundits who can criticize rain, if you will. If it is raining, they can criticize that. But people who are trying to build banks backs and make them responsive to our neighborhoods and school districts, let's look at the Federal legislation trying to help people modify their loans and keep them off the streets and save families and school districts. Why don't we listen to that explanation, which I am sure will give us a better understanding than national pundits who make their money off of worrying about whether it is raining and therefore if it is, that gives them a mouthful to criticize. I would rather stand with those who are trying to stand with the American people, and I believe that is what your Special Order has been about tonight. I thank you for giving me this opportunity.

Mr. Speaker, home foreclosures are at an all-time high and they will increase as the recession continues. In 2006, there were 1.2 million foreclosures in the United States, representing an increase of 42 percent over the prior year. During 2007 through 2008, mortgage foreclosures were estimated to result in a whopping $400 billion worth of defaults and $100 billion in losses to investors in mortgage securities. This means that one per 62 American households is currently approaching levels not seen since the Depression.

The current economic crisis and the foreclosure blight has affected new home sales and depressed home value generally.

New home sales have fallen by about 50 percent. One in six homeowners owes more on a mortgage than the home is worth which raises the possibility of default. Home values have fallen nationwide from an average of 19 percent from their peak in 2006, and this price plunge has wiped out trillions of dollars in home equity. The tide of foreclosure might become self-perpetuating. The nation could be facing a housing depression--something far worse than a recession.

Obviously, there are substantial societal and economic costs of home foreclosures that adversely impact American families, their neighborhoods, communities and municipalities. A single foreclosure could impose direct costs on local government agencies totaling more than $34,000.

I am glad that recently we have seen legislation on the floor the United States House of Representatives. I have long championed in the first TARP bill that was introduced and signed late last Congress, that language be included to specifically address the issue of mortgage foreclosures. I had asked that $100 billion be set aside to address that issue. Now, my idea has been vindicated as the TARP today has included language and we here today are continuing to engage in the dialogue to provide monies to those in mortgage foreclosure. I have also asked for modification of homeowners' existing loans to avoid mortgage foreclosure. I believe that the rules governing these loans should be relaxed. These are indeed tough economic times that require tough measures.

Because of the pervasive home foreclosures, federal legislation is necessary to curb the fall out from the subprime mortgage crisis. For consumers facing a foreclosure sale who want to retain their homes, Chapter 13 of the Bankruptcy Code provides some modicum of protection. The Supreme Court has held that the exception to a Chapter 13's ability to modify the rights of creditors applies even if the mortgage is under-secured. Thus, if a Chapter 13 debtor owes $300,000 on a mortgage for a home that is worth less than $200,000, he or she must repay the entire amount in order to keep his or her home, even though the maximum that the mortgage would receive upon foreclosure is the home's value, i.e., $200,000, less the costs of foreclosure.

I have long championed the rights of homeowners, especially those facing mortgage foreclosure. I have worked with the Chairman of the House Judiciary Committee to include language that would relax the bankruptcy provisions to allow those facing mortgage foreclosure to restructure their debt to avoid foreclosure.

Because I have long championed the rights of homeowners facing mortgage foreclose in the recent TARP bill and before the Judiciary Committee, I have worked with Chairman Conyers and his staff to add language in the Helping Americans Save Their Homes bill that would help Americans stay in their homes that would make the bill stronger and that would help more Americans.

Specifically, I worked with Chairman Conyers to ensure that section 109(h) of the Bankruptcy Code would be amended to waive the mandatory requirement, under current law, that a debtor receive credit counseling prior to filing for bankruptcy relief. Under the amended language there is now a waiver that will apply where the debtor submits to the court a certification that the debtor has received notice that the holder of a claim secured by the debtor's principal residence may commence a foreclosure proceeding against such residence.

This is important because it affords the debtor the maximum relief without having to undergo a slow credit counseling process. This will help prevent the debtors credit situation from worsening, potentially spiraling out of control, and result in the eventual loss of his or her home.

The recent bill before Congress, Helping Homeowners Save Their Home Act, relaxes certain Bankruptcy requirements under Chapter 13 so that the debtor can modify the terms of the mortgage secured by his or her primary residence. This is an idea that I have long championed in the TARP legislation--the ability of debtors to modify their existing primary mortgages. The bill allows for a modification of the mortgage for a period of up to 40 years. Such modification cannot occur if the debtor fails to certify that it contacted the creditor before filing for bankruptcy. In this way, the language in the bill allows for the creditor to demonstrate that it undertook its ``last clear'' chance to work out the restructuring of the debt with its creditor before filing bankruptcy.

Importantly, the Act amends the bankruptcy code to provide that a debtor, the debtor's property, and property of the bankruptcy estate are not liable for fees and costs incurred while the Chapter 13 case is pending and that arises from a claim for debt secured by the debtor's principal residence.

Lastly, I worked to get language in the Helping Home Owners Save Their Homes Act that would allow the debtors and creditors to negotiate before a declaration of bankruptcy is made. I made sure that the bill addressed present situations at the time of enactment where homeowners are in the process of mortgage foreclosure. This was done with a view toward consistency predictability and a hope that things will improve.

RULES COMMITTEE

Over the past two years, debtors and average homeowners found themselves in the midst of a home mortgage foreclosure crisis of unprecedented levels. Many of the mortgage foreclosures were the result of subprime lending practices.

I have worked with my colleagues to strengthen the housing market and the economy, expand affordable mortgage loan opportunities for families at risk of foreclosure, and strengthen consumer protections against risky loans in the future. Unfortunately, problems in the subprime mortgage markets have helped push the housing market into its worst slump in 16 years.

Before the Rules Committee, I offered an amendment to the Helping Americans Save Their Homes Act that would prevent homeowners and debtors, who were facing mortgage foreclosure as a result of the unscrupulous and unchecked lending of predatory lenders and financial institutions, from having their mortgage foreclosure count against them in the determination of their credit score. It is an equitable result given that the debtors ultimately faced mortgage foreclosure because of the bad practices of the lender.

Simply put, my amendment would prevent homeowners who have declared mortgage foreclosure as a result of subprime mortgage lending and mortgages from having the foreclosure count against the debtor/homeowner in the determination of the debtor/homeowner's credit score.

Specifically, my amendment language was the following:

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