Press Conference with Senator Charles Schumer (D-NY). Subject: The Bush Administration's Proposals to Address the Mortgage Crisis
Press Release
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PRESS CONFERENCE WITH SENATOR CHARLES SCHUMER (D-NY)
SUBJECT: THE BUSH ADMINISTRATION'S PROPOSALS TO ADDRESS THE MORTGAGE CRISIS
SEN. SCHUMER: Okay. Hello, everybody. Some of you, it's twice in a week. I'm on duty this week. You know, in the leadership, we split up who's on duty. So I got the fourth week, the last week of -- Patty Murray was the first week; Durbin, the second -- or Harry, the second; Durbin, the third.
Q Is that -- (off mike)?
SEN. SCHUMER: I don't know. Yeah, that's true. I guess it ended up -- God works in mysterious ways.
Q (Chuckles.)
SEN. SCHUMER: Okay. I'm here to respond to President Bush's remarks on mortgages. And I was very pleased this morning to hear both President Bush and Federal Reserve Chairman Bernanke address the escalating crisis in the mortgage market. Their attention to this matter is encouraging, because the current situation is simply out of hand. It's bad and getting worse, with upwards of 2 million homeowners threatened with foreclosure over this year and next.
We Democrats in Congress have been calling for the federal government to take common-sense steps to respond to this situation because otherwise too many Americans stand to lose their homes, and too many innocent people will be caught in the whirlwind of economic trouble that the mortgage market is creating.
And now, just when it looked like millions of homeowners would be left with nothing more than a Hail Mary pass to save their homes, the president has decided to call a few plays from the Democratic playbook.
This is a good and promising first step, but of course we must do more.
When it comes to the mortgage crisis, the president is starting to sound like a Democrat. Before today, the glass was completely empty. Now, given the president's expression of support for many of the Democratic proposals on this issue, the glass is half full. And today -- and I'm going to first focus on that half, not because we don't have a lot more to do, not because these steps are good first steps but not enough, but because we have so little before and the president was so wrapped up in his ideological constructs that he was unwilling to take any steps to help innocent homeowners and to help the economy.
So today the president indicated he believes that FHA can be tapped to help facilitate refinancings by insuring new loans for good- faith borrowers who have gone into default after being socked by a reset. The president indicated his support for measures to increase FHA's ability to aid borrowers. One idea is to increase the size of the loans they can insure, and I support this idea, and why this summer -- sorry, I support this idea, and it's why earlier this summer I introduced a bill to do just that. We welcome the president's support of that legislation.
The president also signaled support for another measure being taken up by the Senate Banking Committee under Chairman Dodd that would reduce the downpayment requirement on loans eligible to be insured by the FHA and -- and ease off on other requirements that prevent FHA from stepping in and helping mortgagors in trouble. Now he's changed his tune and he's backing such legislation, which the House has already passed, and this would help FHA-backed loans better compete on the open market with this type of subprime loans that fueled the current crisis.
I was also heartened by the president's show of support for a proposal that my friend and colleague on the Finance Committee, Debbie Stabenow, has worked hard to advance, eliminating tax liability for foreclosure victims.
No American who loses their home should be hit with a double whammy by the IRS. So these are all good steps.
And the best point of all here is that the president has gotten out of his ideological straitjacket and seen that in times of crisis, one of the jobs of government is to help.
However, there are many other things that have to be done, and I'm going to focus on three. And I'm hoping -- hopeful that both the president and Chairman Bernanke will focus on these three. I have talked at length, as recently as this morning, to Secretary Hank Paulson, to Chairman Bernanke as of Wednesday. As you know, in the letters that I issued to them early -- later -- earlier this past week, I urged other steps be taken. Many interpreted Bernanke's response to me as some -- as that he would be open to increasing or decreasing interest rates, but I think his response was really aimed at this, the issue of the mortgage markets that we're talking about today.
But let me say three things that have to be in addition.
First, as the president acknowledged -- he almost sounded like Chuck Schumer on this issue -- there are thousands and thousands of homeowners who are in foreclosure or about to go in foreclosure, and there's no one there to help them because the mortgage markets have changed. There is no bank, there is no bank loan officer to come in and help them out. And so we have to -- I think the number one problem we face is when a homeowner is facing foreclosure and the mortgage broker is gone and the mortgage lender is gone and the loan is chopped up into 50 different pieces in the securities market, who is going to help the homeowner with refinancing -- not so much with the financial resources, but with the know-how of how to do it?
Well, there are two ways this can be done.
The first is to supplement the funding that nonprofits who do this for a living can obtain. As I have mentioned before, I had put $100 million in the Transportation appropriations bill; Patty Murray helped me with that to do this, but 100 million (dollars) isn't close to enough.
We need the president to step up to the plate and help us put more money so that these nonprofits can come in and do the job that bank loan officers used to do in the old mortgage market: help people on the edge of foreclosure refinance. That's point number one.
There is one other way to do it, which Chairman Bernanke is exploring, and that is, to service the loans is very lucrative; we can have people who service the loans come in and do the refinancing, and as a reward they get to service the loan -- the refinanced loan. That has to be done as well, and it's up to the Fed and Treasury to think of ways to bring them in.
But first and foremost we need people on the ground to help innocent mortgagors -- innocent homeowners -- refinance when they're on the edge of foreclosure and yet they have the wherewithal for refinancing. Somebody's got to fill that void. The president's remarks didn't deal with it today except in the abstract. And the two solutions that we need are more money for the nonprofits and to have loan servicers help do this.
Second, we need money to help these refinancings. We actually need new mortgage money. And one of the first places that that should come from should be Fannie and Freddie, which are willing to do this.
I talked to Secretary Paulson today, and the president still is not for the idea of allowing Fannie and Freddie to put more money up for these loans, for changing their portfolio caps. But a good compromise would be to allow them to lift the portfolio caps, but only for specific loans that would go to homeowners about to go into foreclosure. And I'll be introducing legislation to do just that when we get back.
Secretary Paulson said that he'd be interested in that. He said he and the president are against just allowing Fannie and Freddie to grow and scoop up more money, but in return, when -- if they'd have to use that new money to help finance mortgages or refinancing, that's a possibility.
And third, as Chairman Bernanke acknowledged today in Jackson Hole, and in response to my letter, the whole industry has changed, and there are large numbers of mortgage brokers who prey on innocent potential homeowners. These are people who want to get the highest interest rate with the worst terms from the homeowner. They make their big, fat commission, and then they vanish from the scene.
Why are they allowed to do that? Because the mortgage market changed, but our federal regulations didn't. Banks and their mortgage officers are highly regulated when they issue a mortgage. Mortgage brokers independent of banks, mortgage companies that are not banks, have almost no regulation, and Senators Casey and Sherrod Brown and myself have introduced legislation to curb the mortgage brokers.
This won't do anything about what happened in the past, but it will prevent the present crisis from getting worse, because mortgage brokers are still preying on these people, and prevent another crisis from occurring.
We urge the president to take off his ideological blinders and support legislation of this type.
But at the end of the day, today was a very good day for homeowners on the edge of foreclosure and for the economy in general, because at long last the president stepped up to the plate and made some constructive suggestions -- suggestions that Democrats have been putting out there for a long period of time. And that's encouraging, and I hope it's an indication of more and better steps to come.
Ready for your questions. Yes?
Q How do you keep from essentially bailing out Wall Street -- (off mike) --
SEN. SCHUMER: Okay. Yeah. Wall Street, the people at the high end of these mortgages, who bought them, should pay the price.
None of the proposals that have been made today bail out Wall Street. Lowering interest rates might do that. Now, if there's a credit crisis, you know, that's a problem. But focusing on homeowners about to go into foreclosure and helping them refinance is the right way to approach this problem. It's sort of a bottom-up theory as opposed to a top-down theory in how you deal with it.
Q (Off mike) -- the letter that y'all put out yesterday -- (off mike) -- talked about the idea of Fannie selling off some of its assets in order to provide for -- (off mike). (Off mike) -- it's a bad idea?
SEN. SCHUMER: Well, you know, people like myself and Chairman Frank, we believe in Fannie and Freddie, and we don't want to see them have to shrink. We don't believe their roles should be to take the place of the private sector, but they should fill in the holes when the private sector isn't there. And so I think it's a much better idea to raise their portfolio limits but focus that raise on providing money for this specific situation as opposed to just letting Fannie and Freddie grow and doing whatever they want.
Okay?
Q Senator, quickly --
SEN. SCHUMER: Yeah, please.
Q On the president, I mean, you saw his speech. You saw the way he mentioned -- (off mike) -- and it seems like a very different -- (off mike) --
SEN. SCHUMER: You bet. Let me say -- that's a very good point. This is a larger political point.
Since Karl Rove left and Attorney General Gonzales announced his resignation, many of us have been wondering, is the president about to change course, to move to the middle of the road, to work with Democrats, to stop his political tactic or to certainly decrease it of standing on Mount Olympus and throwing thunderbolts and not caring about the consequences? This is the first really concrete action we have seen where the president is indeed moving to the middle, abandoning the sort of hard-right ideology which has been rejected by the American people and moving to be constructive and work with us. And I hope that what he did today on mortgages is going to be an indication of what he'll be doing on many, many other issues in the future. It'll be a better presidency, a better America if he does it.
It's a good question.
Q Could I change subjects?
SEN. SCHUMER: Yes. Are we finished with this subject? Okay.
Q We're going to hear from Senator Warner today on whether or not he plans to retire or --
SEN. SCHUMER: Right. I'm going to let Senator Warner speak before I say anything, but I'll probably say something after he speaks.
Q But how would that change --
SEN. SCHUMER: Well, let me let him speak first.
Okay? Thank you, everybody.
Q What about Senator Craig?
SEN. SCHUMER: Again, I think that Senator Craig -- the Republican leaders put this in the ethics committee, and that's the appropriate place in terms of Senate discipline. It's up to Senator Craig in gauging the feeling of his party members and his constituency whether he can stay here and be effective, and we'll see what he has to say today.
Okay? Thank you.
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