Press Conference with Senators Schumer and Klobuchar on Subprime Mortgage

Statement

Press Conference with Sen. Charles Schumer (D-NY), Sen. Amy Klobuchar (D-MN) and Allen Fishbein, Director of Housing and Credit Policy, Consumer Federation of America on Subprime Mortgages

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SEN. SCHUMER (D-NY): And now I'd like to call on somebody -- you know it's said we have a great freshman class. We do. And one of the brightest stars in that class is somebody who has an amazing ability to understand issues and explain them to the voters in ways that are crystal clear, in ways that motivate them to be involved.

She's really made a major mark already in this United States Senate. She has the affection and respect, both, I'd say, of every one of our colleagues in the caucus, Amy Klobuchar of Minnesota.

SEN. AMY KLOBUCHAR (D-MN): Thank you.

Well, thank you very much, Senator Schumer, for that nice introduction. And I'll try to put this in words that people at home will get, and this is maybe because I've been spending too much time at the farm markup.

But I would say that today's report underscores that in the world of subprime lending, the chickens have come home to roost. We are seeing all over our state people losing their homes, losing their dreams. And I spent the last two years doing a series of living room forums in our state where we would just call people together, often in suburban locations, and we'd talk about what was going on in their life.

And what they would say is, well, I've got a job, but I realize that my kids can't afford a house. And I was able to afford a house when I started out, and my kid can't. And they're going to have a baby, and they can't get a house, and I feel guilty, I don't know what to do. Should I take another job?

Or, I can't afford health care. And it basically was something that I think you saw reflected in the ballot boxes. And that was something of a middle class revolution -- you know, people saying, we are doing everything we can to get by in this country, and the forces are against us.

And I think that's what we're seeing with this subprime lending and what's been happening. In a perfect world subprime lending products enable borrowers with limited capital and less than a perfect credit history to purchase a home and establish credit. But we have witnessed a proliferation of abuse in this market, as our report shows. Too many borrowers have been offered loans that lenders know they cannot afford, and cannot sustain, ultimately leading to foreclosure and financial devastation, not only for families in jeopardy of losing their home, but also for the neighborhood and the communities in which they live.

I have talked to bankers who've looked at some of these cases. And they said that they couldn't design a loan in a better way to try to get someone to foreclose or not be able to make payments, the way the interest rate is low, and then it suddenly balloons up. These people prey -- these predatory lenders preyed on innocent people who were just trying to fulfill their dreams.

This is an issue that I witnessed first hand as a country prosecutor in Minnesota. We worked closely with the U.S. Attorney's office on many of these cases. Across Minnesota the number of homes in foreclosure is skyrocketing. In my home county of Hennepin, just this year, we've seen an 81 percent increase in the number of share sales as a result of foreclosure, while in neighboring Ramsey County the number of foreclosures jumped 125 percent over the same period.

And the foreclosure crisis is by no means isolated to the Twin Cities metro area. It is a problem being experienced across our state. It is estimated that foreclosures in greater Minnesota will increase by 93 percent in just one year.

And you have to understand, the economy of Minnesota is strong. We're eighth in the country for corporate headquarters. We have a very low unemployment rate. But here are people that were just trying to get a house for their families. They had jobs. They were doing what they could. And this is what's happening to them. So if it's happening in our state, which has, as I said, low unemployment rate, strong economy, diversified economy, you can imagine what it's doing to some people in other states across this country.

As today's report shows, unless action is taken now, these foreclosure rates are only going to increase. The results of this spike in foreclosures will be devastating for our state.

As Senator Schumer pointed out, it's not necessarily just the individual who gets the mortgage. It's the homeowners down the street, once there's a big foreclosure sign. It's the people in the community.

As the number of foreclosures increase, property values are likely to drop, resulting in decreased tax revenues and increased municipal maintenance costs. Slumping housing values are also likely to result in decreased consumer spending and jeopardize the overall economy.

Unfortunately, today's report underscores that this situation is expected to worsen rather than improve, and the effects of the subprime crisis are likely to extend beyond the housing market to the broader economy.

For too long, the Bush administration has ignored this problem and pretended that it's just going to go away. They have insisted that it will not impact the economy as a whole. However it's clear now that this problem is not just going to correct itself. It's not just limited to some very poor areas, or people that were fooled by one bad -- one bad lender or a few lenders out there engaged in fraud. It is across this country in every area, in every town.

If we are to contain the economic spillover effect of the subprime lending disaster, the federal government must act now. Minnesota has taken action to combat abusive lending practices by passing the strongest anti-predatory lending law in the country. It's time for Congress to enact equally tough legislation to protect America's homebuyers.

I commend Senator Schumer for taking the lead on this issue, so critical to our nation's economy. And I look forward to working with Congress and our committee to take action on behalf of America's homebuyers.

Thank you very much.

SEN. SCHUMER: Thank you, Amy.

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