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Mortgage Cramdown Plan

I voted against legislation considered by the U.S. House of Representatives on March 5, 2009 that would encourage more Americans to file for bankruptcy as a way to lower their mortgage payments. H.R. 1106, the Helping Families Save Their Homes Act of 2009, would allow judges to adjust the terms of a mortgage for borrowers only during bankruptcy proceedings.

The problems in the housing market that led to the current economic crisis are very real and must be addressed. Our priority must be restoring consumer confidence and freeing up credit for qualified individuals to buy homes. I am concerned H.R. 1106 will have the opposite effect on the housing market and create a chilling effect on future lending.

The mortgage cramdown provisions in H.R. 1106 are overly broad and do not effectively target those Americans who need help the most. I advocated for tighter restrictions on judicial authority to renegotiate the terms of a mortgage because I am concerned that credit unions, community banks and their customers across Northern Michigan – which were not engaged in risky subprime lending – would be hurt by the legislation.

I have heard from our community banks and credit unions across Northern Michigan. I have also heard from individuals who are struggling to pay their mortgages because they lost their job or face unimaginable medical expenses. Rather than targeting these individuals and helping them stay in their homes, H.R. 1106 rescues those who knowingly entered into risky mortgages.

Rather than creating new programs with additional administrative costs, I would have preferred that H.R. 1106 focused on reforming existing the Hope for Homeowners program, created in July 2008 with a goal of helping 400,000 homeowners through the subprime mortgage crisis. Only 25 loans have been renegotiated nationwide so far under that program.

There is no need to start another initiative, costing millions in taxpayer dollars. We should focus on fixing the problems that exist with the current program instead of starting another government program.

My staff collected foreclosure information for counties in the First Congressional District for which data was available. While foreclosures were slightly higher in 2008 than 2007, the problem was not nearly as dire as has been portrayed by some interest groups.

We are facing tough times in Michigan and all across the country. But even during these tough times, Northern Michigan residents are playing by the rules and doing everything they can to meet their financial obligations. I support policies that will provide these individuals a helping hand when they need it; not legislation that encourages irresponsible borrowing.

Despite my opposition, H.R. 1106 passed the U.S. House of Representatives by a vote of 234-191. The legislation awaits consideration in the U.S. Senate, where I hope changes will be made to strengthen it. I hope the Senate is successful in limiting the scope of this legislation, and establishing conditions that will target relief to those families who are facing foreclosure because they are out of work or facing high health costs, not simply anyone willing to file for bankruptcy.