Press Conference with Senate Majority Leader Harry Reid (D-NV), Richard Durbin (D-IL), Senator Charles Schumer (D-NY), Senator Patty Murray (D-WA), and Senator Jack Reed (D-RI); Subject: The Economy
Statement
Press Conference with Senate Majority Leader Harry Reid (D-NV), Richard Durbin (D-IL), Senator Charles Schumer (D-NY), Senator Patty Murray (D-WA), and Senator Jack Reed (D-RI); Subject: The Economy
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SEN. REED: We are at a very critical moment. The economy is slowing dramatically. We have a liquidity crisis. It is spreading from the housing market to other aspects of our economy.
But with respect to the housing market, one of the most staggering figures is the fact that experts project, if we do nothing, let the economy simply find an equilibrium, we could lose 20 to 30 percent of the value of homes from their peak values. That translates to 4 (trillion) to $6 trillion -- trillion dollars -- in wealth for the American family.
Now, from a national perspective, that is chilling. But when you sit around the family table, it takes on a much more immediate and consequential effect. It means that your children may not be able to go to the college or university they've been accepted in, because you can't afford it. You were counting on a little bit from your house to help defray the costs. If you're getting ready to retire, a lot of your retirement plans was rested on the value of your home. If you have an unexpected medical emergency, now there's no cushion in your house to help you.
We have to move quickly, because this will get worse long before it gets better. And the essence of the legislation that my colleagues and I are proposing, is to deal effectively
SEN. REED: We are at a very critical moment. The economy is slowing dramatically. We have a liquidity crisis. It is spreading from the housing market to other aspects of our economy.
But with respect to the housing market, one of the most staggering figures is the fact that experts project, if we do nothing, let the economy simply find an equilibrium, we could lose 20 to 30 percent of the value of homes from their peak values. That translates to 4 (trillion) to $6 trillion -- trillion dollars -- in wealth for the American family.
Now, from a national perspective, that is chilling. But when you sit around the family table, it takes on a much more immediate and consequential effect. It means that your children may not be able to go to the college or university they've been accepted in, because you can't afford it. You were counting on a little bit from your house to help defray the costs. If you're getting ready to retire, a lot of your retirement plans was rested on the value of your home. If you have an unexpected medical emergency, now there's no cushion in your house to help you.
We have to move quickly, because this will get worse long before it gets better. And the essence of the legislation, that my colleagues and I are proposing, is to deal effectively and critically, in a timely way, with this housing problem. One way to see it is whether we want to see this housing bubble explode, or we want to try to deflate it in an orderly manner that will help people get on with their lives and continue moving forward.
The worst case would be a total sort of inversion of people's housing values; i.e., their mortgage is greater than the value of the house. And for a lot of people, that means you just walk away and put the keys in the mail and find another option. We've got to prevent that, and that's what's at the heart of our efforts today.
One thing I want to highlight is preventing something like this from happening again by increased disclosure at the time a mortgage is issued. Legislation I proposed, incorporated in this bill, would require seven days before closing that the terms of the mortgage be made available to the borrower. Three days before any closing, if changes are made, again, those changes have to be made clear to the borrower.
And I think a very important point has to be clearly spelled out. What is the maximum payment involved in this mortgage? We know many people walked in, thought they'd have a teaser rate that would be $1,000 a month. But really, within a very few months, their rates would climb to 2,000, 2,500, et cetera. That has to be spelled out.
You know, if there's going to be sticker shock, it should happen at -- before the closing, not in the middle of the mortgage. We can do more, but I think we have to act quickly, and I'm pleased and proud to be part of this effort.
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