Neighborhood Stabilization Act of 2008

NEIGHBORHOOD STABILIZATION ACT OF 2008 -- (House of Representatives - May 07, 2008)

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Mrs. CAPITO. Madam Chairman, today I want to thank, first of all, the chairwoman of the Subcommittee on Housing, of which I'm the ranking member, for her good hard work and dedicated service. We've had a lot of hearings and a lot of information, and I think we all want to try to achieve help for the homeowners or those who are on the edge.

But today I rise in opposition to H.R. 5818, the Neighborhood Stabilization Act of 2008. We all recognize that we are experiencing a sharp increase in foreclosure statistics and starts. Over the past year alone, approximately 550,000 homeowners with subprime loans began the foreclosure process.

However, we shouldn't rush to act. We must guard against adopting policies which create moral hazards and unintended consequences.

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Unfortunately, we believe H.R. 5818, the Neighborhood Stabilization Act of 2008, is a bill which does both. H.R. 5818 is an unnecessary government intervention in the housing market which will bail out real estate speculators, servicers, and lenders while doing nothing to assist hardworking Americans struggling to make their mortgage payments. This bill will not keep one person in their mortgage or in their home.

The bill does this through a $15 billion authorization for grants and loans to be used to purchase already foreclosed homes from lenders, servicers, and speculators who have made bad loans or unwise investments. The Neighborhood Stablization Act will allow investors and servicers to unload their foreclosed properties to the government with the taxpayer footing the bill. Servicers and investors might even be encouraged to pursue foreclosure if this bill is enacted.

Instead of incentivizing foreclosure, Congress should be encouraging services to engage in voluntary loan work-outs and modifications. Furthermore, this bill calls on States and local governments to convert foreclosed properties into affordable rental and single-family housing. The increase in housing supply and decrease in prices creates housing affordability without government intervention.

I'm also concerned that the overly broad income targeting provisions in this bill, which will allow families making 100 percent and 140 percent of area median income respectively, to rent and purchase properties acquired with funds from this act. It is not appropriate for the government to provide housing assistance to individuals who can afford market-rate housing.

Congress should focus its efforts on keeping hardworking Americans in their homes. We should not unnecessarily intervene in the housing market in the process of adjustment after years of what has proved to be unsustainable growth. It is imperative that we recognize the primary beneficiaries of this bill will not be the thousands of Americans struggling to hold on to their home, but the lenders, servicers and speculators who bear much of the responsibility for the current housing slump.

Putting aside the issue of how massive this new program would be, the bill's ultimate beneficiaries, as I said, could be our lenders and investors and speculators; and indeed the FHA commissioner, Brian Montgomery, stated in testimony before our committee that ``this legislation may have the unintended consequences of making foreclosure a more attractive option for lenders thereby compounding the very problem of rising foreclosures that the bill purports to address.''

Madam Chairman, I oppose this bill, and I would like to reserve the balance of my time.

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