Madam Speaker,  I rise in strong support of the American Housing Rescue and Foreclosure Prevention Act of 2008 (H.R. 3221).  This measure will provide a helping hand for those reeling from the mortgage crisis.  Just as importantly, it will restore confidence in our largest mortgage backers, Fannie Mae and Freddie Mac. 

We have all seen how unscrupulous lending practices and skyrocketing interest rates associated with nontraditional mortgages have devastated families nationwide.  Sadly, these families are often left with few options other than to see their homes foreclosed upon.  In Rhode Island, foreclosures have increased by 20 percent in the last six months, and it is our most vulnerable communities that have been disproportionately affected. 

Fortunately, today we are considering a package that will stem the tide of foreclosures by authorizing $300 billion in loan guarantees to establish HOPE for homeowners, a voluntary program administered by the Federal Housing Administration (FHA) to help at-risk borrowers refinance into viable mortgages. I want to emphasize that this assistance is not a bail-out.  On the contrary, the program will require lenders and mortgage investors to take significant losses in the form of a reduced loan principal, and borrowers must agree to share any profit from the resale of a refinanced home with the federal government.  Furthermore, only primary residences will be eligible, not investment properties, vacation homes or speculators’ purchases.

In addition, this package will provide $3.92 billion in Community Development Block Grants for local governments to purchase abandoned and foreclosed properties – a provision that is fully paid for.  I am glad the President has finally lifted his misguided veto threat over this provision and will not stand in the way of local governments attempting to reduce the number of vacant properties in their communities and invest in affordable housing.

This legislation will also revitalize the FHA, which was established to provide a reliable source of affordable mortgage loans for first-time homebuyers.  The lack of affordable housing has long plagued many communities throughout America, and the problem is particularly acute in high cost areas like Rhode Island. Through our efforts today, the FHA will be able to better assist America’s working families by offering loans at affordable rates with fair terms.  This legislation will also allow the FHA to raise loan limits in high cost areas and to offer zero- and low-down-payment loan options for borrowers that can afford mortgage payments, but lack the resources required for a down payment.  I also strongly support this bill’s creation of a National Affordable Housing Trust Fund, which will construct, rehabilitate and preserve 1.5 million housing units over the next ten years.

Above all, this measure will help safeguard the interests of the American taxpayer and ensure that our nation’s largest mortgage-backers, Fannie Mae and Freddie Mac, remain strong.  I’m pleased that H.R. 3221 will create a new independent agency – the Federal Housing Finance Agency (FHFA) – to regulate Fannie Mae, Freddie Mac and the Federal Home Loan Bank System.  Fannie Mae and Freddie Mac currently back nearly half of our nation’s mortgages, and the FHFA will ensure both entities remain financially strong.  The creation of a strong independent regulator for our Government Sponsored Enterprises is long overdue.  Four years ago I shared Alan Greenspan’s concerns that the GSE’s were involved in risky investments, saying on the House Floor: “It appears as though the increased risk that GSE’s have been taking on is not related to their primary operation of purchasing affordable housing loans in the secondary market.  Rather, much of their risk comes from derivative investments in an effort to maximize profits for shareholders.  As we learned from Enron, complex derivative schemes may boost profits in the short-term, but the long-run risks can be too difficult to manage.”  While I regret that it took far too long for this problem to be taken seriously, I believe we are taking the proper action today.

This measure will also provide temporary, emergency authority through the end of 2009 to the Treasury Department to purchase stock in Fannie Mae and Freddie Mac to provide stability to our financial markets, prevent disruptions in the availability of mortgage finances, and protect taxpayers.  While many, including the Congressional Budget Office (CBO), predict this authority may never be used, it is necessary to ensure a last-resort federal guarantee for our largest mortgage backers.

The American Rescue and Foreclosure Prevention Act also includes several key tax incentives designed to spur home buying and put money back in the hands of home owners.  This legislation creates a $7,500 credit for first-time homebuyers, designed to serve as an interest-free loan to be paid back after fifteen years.  H.R. 3221 will also provide taxpayers that claim the standard deduction with an additional property tax deduction of up to $500 for single filers and $1,000 for joint filers.

Finally, the bill before us will combat unscrupulous lending practices and increase transparency by establishing a nationwide loan originator licensing and registration system that will set minimum standards for licensing and substantially improve oversight of mortgage brokers and loan officers.  Additionally, it improves disclosure requirements to help ensure that borrowers fully understand their mortgage loan terms.  

This legislation is an important and common-sense response to the housing crisis and will help stabilize families and our economy.  I thank Chairman Frank for his leadership, and I urge my colleagues to support this bill.