FHA Modernization Act of 2007

Floor Speech

FHA MODERNIZATION ACT OF 2007 -- (Senate - December 14, 2007)

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Mr. DURBIN. Mr. President, first, I wish to thank my colleague, Senator Schumer from New York, for his leadership on this issue and Senator Martinez of Florida and Senator Carper, who played an important role in making certain this bill came to the floor. It is timely. It is important.

Back the late 1920s, the United States faced an overwhelming housing crisis. The values of homes were plummeting, and the availability of credit to buy homes was in jeopardy. At that time, President Franklin Roosevelt and others stepped in, in 1932 and beyond, to make a massive commitment to restoring the American dream for thousands, if not millions, of American families.

One of the means by which it was restored was the creation of the Federal Housing Administration. This Government agency stepped into the process of mortgages and said: We will provide backing and guarantee and assurance it is safe to buy a home, and it is safe to loan the money.

That started to restore the confidence of the American consumers in our housing market--a confidence which led to the dramatic expansion of home ownership in America, the expansion of personal wealth, as families invested in their homes and saw their assets grow, and then the investment of the growth of America's communities, neighborhoods, and towns. It is part of the American dream.

Not a single one of us will forget the first home we ever purchased. Moving from being a renter to a homeowner is a watershed in anyone's life. Your feeling about where you live and what you want to put into where you live changes when you become a homeowner.

Now we are involved in another housing crisis. It is a crisis which many want to minimize. But they should not. The fact that 2.2 million Americans face foreclosure is not just your neighbor's misfortune, it is a misfortune for your neighborhood. It is a misfortune for our Nation.

That is why this bill is so important. We are trying to find ways to bring that same type of confidence and liquidity back into the housing market. That is why this bill is timely and should be passed on an emergency basis.

When the Federal Housing Administration, the FHA, steps up and increases the loan limits, it means it is a realistic appraisal of today's housing market, so they are relevant to the needs of average families who pay higher costs now for housing than they did a few years ago. When we reduce the downpayments, it means some families will have their chance to move into a home even earlier in their earning years, rather than waiting and renting and perhaps missing that opportunity.

I am heartened by the fact that this bill includes counseling--not only counseling for the purchase of a home but counseling when a family is troubled and worried about whether they can continue to make their mortgage payments.

All of these are moves in the right direction. I can tell you many think this housing crisis is an isolated crisis in America. It is not. Mr. President, 2.2 million foreclosures will lead to the reduction in value of 44 million single family residences, condos, and other units of home ownership. Forty-four million homes will lose value because of foreclosures. I have seen it on the West Side of Chicago, where gentrificaton and modernization have taken neighborhoods that were nothing more than vacant lots and turned them into town homes and row houses that are worth hundreds of thousands of dollars. Now one of the houses on the block is boarded up, facing foreclosure and an auction, realizing at the auction the asking price is likely to be at least 20 percent to 30 percent lower than the value that was originally assessed on the home. That means every home in the neighborhood takes a hit.

What does it mean when 44 million homes lose value in America? It means 1 out of 3 homeowners in America will see a decline in the value of their home. It is not just the house you are living in, it is also the most important asset in most family's lives. That is why this bill is needed. That is why we need to move forward as quickly as possible.

Let me say, even with this bill, even with Secretary Paulson's proposal 2 weeks ago, these are modest steps that need to be built upon. It is not enough. It is good. I want to see it move. It is important. We need to do more. This housing crisis has become an economic crisis in America, and we need to face it squarely. Franklin Roosevelt did in the 1930s. We need to do that today.

Let me add a word too. I want to change the bankruptcy law so a family facing foreclosure, going into bankruptcy, has one last chance in the bankruptcy court to renegotiate the terms of their mortgage. You can do that today if you take a vacation home into your bankruptcy or your family farm into a bankruptcy. But the law prohibits the renegotiation of the terms of your mortgage for your principal residence. That makes no sense whatsoever. A foreclosure can cost the parties involved up to $50,000. The ultimate sale of the home, after foreclosure, can bring maybe 70 percent or 80 percent of the actual value of the home. Now what we need to do is look at a comprehensive approach to deal with the housing crisis which threatens our economy.

I urge strong support for this legislation.

I yield the floor.

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