Washington, DC—Senate Majority Leader Harry Reid made the following statement today on the floor of the U.S. Senate about the subprime mortgage and foreclosure crisis, calling for consideration of the FHA Modernization Act. However, Republicans objected. Just as new evidence emerges every day of the severity of our country’s housing emergency, Republicans continue to find new ways to stand in the way of America’s real priorities. Even though the FHA Modernization Act – which comprehensively addresses the housing emergencies – passed out of committee by an overwhelming, bipartisan 20-1 vote, Republicans today blocked our efforts to send this bill to the President.
Below are his remarks as prepared for delivery:
“It seems that every day, new evidence of the depth and severity of our country’s subprime mortgage and foreclosure crisis emerges. Hundreds of thousands of mortgages are now delinquent nationwide. That’s fully twice as many as last year – and it means that roughly one in every 500 homes in the United States could face foreclosure.
“But the most alarming fact is that this could just be the beginning. Experts agree that as more introductory mortgage rates continue to expire, not thousands, not tens of thousands, but hundreds of thousands of American families could be at risk. When introductory ‘teaser’ rates expire and higher rates arrive, the mortgages that many families can afford today will become impossible to pay off tomorrow. This will leave many with just two options: Either lose their homes through foreclosure or work with counseling agents and lenders to refinance into safer, longer-term loans.
“Some may say if a borrower gets into financial trouble, it is his obligation and their alone to find a way out. I couldn’t disagree more. The costs of a foreclosed home impact all of us. Not just the borrower, but all of us. Families lose the roof over their heads and the equity they have gained. Neighborhoods suffer the loss of property values. Cities and towns lose tax revenue. Lenders and their shareholders lose, too, and it’s no exaggeration to say that the entire national economy is put at risk.
“The Chairman of the Federal Reserve Board, Ben Bernanke, recognized that a ‘sharp increase in foreclosed properties for sale could weaken the already struggling housing market and thus, potentially, the broader economy.’
“This crisis is hitting Nevada particularly hard. Since August 2006, the number of foreclosure filings has gone up by more than 200 percent, and we could see another 21,000 foreclosures in Nevada by 2009. A problem like this takes a local approach. Last month, I organized a roundtable discussion in Reno with lenders, mortgage services, housing counseling agencies and other federal and local officials. I heard from Michelle Johnson and Gail Burks, the respective leaders of the Consumer Credit Counseling Service of Nevada and Utah and the Nevada Fair Housing Center. They told me that the resources available to these Nevada agencies have been dramatically cut by the Bush Administration.
“Together, we have organized a number of ‘Mobile Resource Centers’ in Nevada that will serve as workshops where borrows behind on payments can learn about their options. But a problem of this magnitude requires more than local organizing and education. The federal government must come to the aid of those at risk due to circumstances beyond their control.
“Let me be clear: I am not advocating a federal government bail out for speculators, lenders, or even borrowers who should have known better. I am talking about efforts to aid deserving families so they can stay in their homes if possible. A columnist for the Wall Street Journal – not typically an advocate or apologist for government intervention – wrote in today’s edition that he agreed the federal government has a role to play here to help ‘those who are making payments, would have refinanced easily if not for the housing bust and dysfunction of mortgage markets and can’t afford the reset payments.’
“Earlier this fall Democrats in the Senate and the House of Representatives announced their intent to address this problem comprehensively, and we have diligently worked toward that goal. We said there were three items we needed to do in the near term: Provide funding for foreclosure prevention counseling; modernize the Federal Housing Administration; and provide temporary but necessary tools to the government sponsored enterprises – Fannie Mae and Freddie Mac – so they can keep funding available to make or refinance subprime mortgages.
“We are poised to deliver on these and urge the President and our Republican colleagues to work with us to finish the job. First, the Transportation HUD appropriations conference report has $200 million for foreclosure prevention counseling. We urge the President to not veto this important bill at a time when these resources are most needed.
“Second, the Senate Banking Committee passed the bipartisan FHA Modernization Act of 2007 on September 19, 2007, by a vote of 20 to 1 and has broad support from consumers and industry alike. As the name of the bill indicates, this legislation is intended to bring needed changes to the Federal Housing Administration that will make the agency more capable of providing the services that homeowners need in today’s all-too-perilous environment. The FHA program encourages the private sector to make mortgages by offering government-backed insurance for the full balance of the loan. Traditionally, since its inception in 1934, the FHA has played a major role in providing home purchase financing to minority, first-time and lower-income home buyers. Beginning in the mid-1990s and until now, however, as more exotic loans entered the marketplace, FHA saw its overall market share drop dramatically.
“In some cases borrowers considered the more exotic loans easier to get. In many other cases, borrowers were directed into those loans by brokers who often didn’t have the borrower’s best interests at heart. Unfortunately, these exotic loans often lured borrowers with false or misleading information and contained ‘teaser’ interest rates that, once expired, borrowers couldn’t afford. These were predatory loans – and the consequences of these shady practices are becoming more evident every day.
“This crucial reform bill modernizes the FHA program by, among other things, lowering mortgage-down-payment requirements and raising the loan limits for FHA-backed loans. The result will be a better loan option for families that are having trouble keeping up with their exploding mortgage payments. They will have the option of refinancing to an FHA-backed loan with the peace of mind that comes with it. And for future homebuyers, a fully backed FHA loan with honest, up-front terms, will help prevent crises like we now face, and ensure that more American families will experience all the safety, comfort and stability that comes with homeownership.
“Third, the PROMISE Act would temporarily lift the cap on the amount of loans Fannie Mae and Freddie Mac can purchase as investments for a period of six months. The bill could bring as much as $145 billion dollars into the subprime mortgage marketplace and prescribes that the vast majority – at least 85 percent of these resources — be used to refinance subprime loans.
“The past decade has seen remarkable growth in American homeownership. What’s more, these gains have been enjoyed from coast to coast and among groups that have traditionally been shut out. We need to ensure that this progress continues.”