CONCERN ABOUT HOUSING

The following podcast was recorded April 4th, 2008.

Hello everybody, this is John Dingell and welcome to my podcast.

It’s no secret that homeowners across America are facing dangerous times. Our economy is hurting, particularly the financial sector. We have a bonafide credit crisis and it is devastating our homeowners and our housing market.

The rest of the country is catching up with all of us in Michigan, where we have some of the highest foreclosure rates in the nation.

To protect our neighbors worried about losing their homes, we need to:

1)   Prevent further crisis through increased regulation of the market.

2)   Ensure homebuyers continue to have access to credit where appropriate.

3)   Take steps to assist individuals facing foreclosure. 

On the first matter, we need to require all mortgage originators and brokers to be registered or licensed at the state level, which would create an alternate national licensing system for states, such as Michigan, with inadequate licensing schemes. We have strong regulation for our banks, but other lenders are not required to meet the same standard.

U.S. Treasury Secretary Henry Paulson recently announced a proposal to overhaul our nation's system of regulating the financial industry. This announcement marks a step in the right direction - the Bush Administration has finally acknowledged that a better regulatory structure is needed to safeguard the American economy. However, it is not clear that the Administration's proposal would go far enough. That's why House Financial Services Committee Chairman Barney Frank has announced that his Committee will hold a series of hearings this spring to discuss comprehensive regulatory reform of the financial services industry. Chairman Frank has indicated that he would like to discuss proposals that provide greater transparency for institutions and markets; consolidate regulatory functions where appropriate; enhance safety and soundness; and provide better protections for consumers and investors.

To assist new homebuyers who can’t get access to credit or a home for rent, the House passed the National Affordable Housing Trust Fund Act.  We also passed the Expanding Homeownership Equity Act, which makes Federal Housing Administration loans more marketable by increasing the loan amount insured under the program. 

The most critical challenge will be helping those who have lost or will lose their homes through foreclosure. House Financial Services Chairman Barney Frank has worked on a bill that would create a new FHA fund to guarantee refinancing of at least $300 billion in troubled mortgages on primary residences. While there are those who say helping the lenders behind these loans amounts to a bailout, I say that my first priority is to help homeowners.

I don’t believe we will cover all the lenders’ outstanding debts in their entirety, but the FHA can provide enough support to keep homeowners in their homes and prevent more lenders from going into bankruptcy. During the Great Depression, one of FDR’s greatest inventions was the Homeowners’ Loan Corporation - which saved the homes of countless American families. This organization bought mortgages at discounts from mortgage firms and banks, and then based on the reduced value of the properties, created new reasonable payments for homeowners. Under this plan, banks would lose money but did not go under. The homeowners could keep the roof over their heads. In fact, the government turned a profit. We need a similar idea in place today.

Recently, the Senate announced a package of proposals to address the housing and foreclosure crisis. This package includes some good things, including:

• $4 billion in grants to local governments to buy and refurbish foreclosed homes
• new authority for states to issue bonds to be used to refinance subprime mortgages and;
• a $7,000 tax credit for people buying new homes or properties in foreclosure.

But I fear the Senate’s package does not go far enough. I am disappointed this bill does not include language that would change bankruptcy laws to help borrowers trapped in subprime mortgages keep their homes – despite the efforts of Democrats to have such a provision included in this bill. I believe the House must work to allow bankruptcy judges to reset the terms of home loans. I am also concerned that the Senate bill is loaded with tax breaks for business, without identifying any corresponding cuts in spending to pay for them or adequate contributions by business to help those loosing their home by foreclosure.

Late last year, President Bush announced a plan that would allow some homeowners to get relief directly from their mortgage lender. The Bush Administration’s voluntary plan falls short of what we need.  This plan allows only about 170,000 out of millions of individuals to freeze their adjustable-rate mortgages for up to five years.  The plan is voluntary and anytime this Administration says it wants something voluntary, it means something that looks good but does not do much.  In states like Michigan, with high unemployment and foreclosure rates, the plan automatically excludes too many people. Since the plan was implemented I have heard from dozens if not hundreds of my constituents who have said that they were told they were not eligible for assistance under this plan, so clearly more needs to be done.

At the 2004 Republican Convention, the President promised to create an ownership society and get more Americans in their own homes. Now that Americans are struggling to hold onto those homes, we need to be just as aggressive about keeping them in as we were about getting them in.

This is John Dingell. Thank you for listening.