American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - June 19, 2008)

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Mr. SCHUMER. Madam President, I rise in support of this much-needed legislation. I find it difficult to believe that with our economic crisis, the President issued a veto threat today. I would like to explain why the bill is good, why it is needed; there are some changes I would like to see made; and then talk a little bit about the President's veto threat.

First, I commend Senator Dodd and Senator Shelby for working so long and hard on this bill. This is not an easy bill, particularly when you have so many different concerns and considerations. I know how hard the chairman worked on this bill. I know how hard Senator Shelby did. They were wide apart in what they believed in. They came together in the middle with a compromise that is a very good step forward.

There are parts of this bill that are extremely important. The foreclosure counseling--this is something I have been championing for a long time. We need counselors. For about half of those who are about to go into foreclosure, or will be delayed in their payments, a mortgage counselor could be the difference between them saving their home and losing it; between the neighborhood going down the drain or staying decent; even between our economy going into a deep recession or on the edges of one--the way it is now.

We need these counselors. They are not expensive. They do a world of good. They take the place of the banker who used to be on the scene when banks held mortgages. The CDBG money is extremely important. We have communities in Queens and Long Island and particularly in upstate, places such as Buffalo and Rochester and Syracuse, where neighborhoods have a tough go. You get a few foreclosed homes that are abandoned and then vandals come in and rip out the plumbing and the electric parts. Then drug dealers come in and make these a haven for crime. One foreclosed home can have the whole neighborhood go down the drain.

In the suburbs, a foreclosed home may not have those consequences, but it certainly can mean a difference in the values of the home on the surrounding block or the surrounding area going up or going down. For so many Americans, their home is their little piece of the rock; it is all they have. They put all their sweat equity in it. For no fault of their own, because somebody else lost their home on their street or in their neighborhood, they should not have to lose value. CDBG will help deal with that.

We also have in this bill mortgage revenue bonds. I am very proud of the way these have been crafted. It is $11 billion to refinance subprime loans for struggling borrowers. There is a recycling provision. It is very important to my State, where we use our mortgage revenue bonds very quickly because there is so much need.

The HOPE for Homeowners Act--again, it is not going to save everybody. But for the people who are underwater but not so deeply underwater, this is a lifesaver. It basically says to them: You can refinance your mortgage at a lower rate. It says to the mortgagor, you are going to get repaid, not everything but at least most of what you put in. It is not a panacea. In my point of view, it would be a lot better to have the bankruptcy provision here as a club to get the lenders into these, to use these provisions. But it sure does a lot more good than not doing anything at all.

Of course, there is FHA modernization, which we have been seeking for a long time--GSE modernization and reform which creates, for the first time, a world-class regulator. We are going to need Fannie and Freddie in future years. We have to have them both be safe and sound and flexible. They
should not be just private government agencies and only do the same thing banks do but with the Government imprimatur. On the other hand, they cannot, because the Government is behind them, do anything they want, be reckless or lose their capital.

The reform creates the right balance. I am proud of the reform. It raises capital requirements, it puts a regulator in who can go in and look over their shoulder--which they need. But at the same time, by and large, it preserves the flexibility that Fannie and Freddie need to fill the hole between the private sector and what the Government does--and they do it well.

In addition, we are going to need Fannie and Freddie to be strong because right now they finance about 80 percent of the mortgages in this country. We are going to need them to be strong to help us get out of this crisis. To veto this bill when we need them so badly is almost--it edges toward irresponsibility.

Finally, the Affordable Housing Fund--to help those who cannot on their own achieve the dream of owning a home but who struggle so mightily to get there. My colleague from Rhode Island, Jack Reed, has done a masterful job, persistent, knowing when, and cut his deal at just the right time.

It is a good bill. I have two concerns where I agree with the House, frankly. I say to my good colleague from Alabama, who I know has differences on these, that the House--and many of us on this side of the aisle--are of a different mind than he. I hope we can compromise this quickly.

First, the effective date. It is unheralded, when you have a major change in the law with a new regulator, to say the effective date is immediate. You need time. More important, I am worried that because this regulator, while he is great on safety and soundness, doesn't like Fannie and Freddie very much and will go too far in the regulations and tie Fannie and Freddie's hands for a very long time way on into the future, with unintended consequences of which we are not aware. To give the new powers to the new agency overnight, with no time to establish itself or prepare, particularly when you have someone who would be in charge who does not--at least share my views on how Fannie and Freddie ought to function, is a bad idea.

I hope when we meet with the House--I have spoken with Chairman Frank and he agrees with our side--I hope he, Senator Shelby, will realize how strongly some of us feel.

Second is the idea of Fannie being able to securitize. There is language on the portfolio regulation that could unnecessarily restrict the portfolio business of the GSEs by creating a bias toward securitization. If Fannie and Freddie want to hold some of these mortgages, they should--particularly now, when the securities market is either nonexistent or weak and fragile and in some places hard to find. I hope we can address this issue as well. I do not understand why we would not allow Fannie and Freddie to hold mortgages; why we put such an impetus on them to securitize when the security market is weak.

If this provision stays in the bill as is--there is a debate. I know some believe it has more flexibility in it than I do. But, if--if, if, if--I am right, it could actually handcuff Fannie and Freddie in their role of rescuing us out of this housing crisis at a time when they are very much needed.

AMENDMENT NO. 4984

Finally, I wish to take a moment to address an amendment filed by my colleague from North Carolina. While I respect her intentions, I oppose the Dole amendment, which would unravel the strong agreement the New York attorney general reached with the GSEs on appraisal standards. Inflated appraisals are one of the prime causes of the housing crisis. To allow banks to own appraisers without anyone looking over their shoulder is a built-in conflict of interest. We should not do that. I hope we will not.

Finally, on the President's veto message--this President is further and further removed from the economic realities of this Nation. To veto this bill at a time when housing is at the nub of our economic crisis--at a time when housing prices are declining, at a time when foreclosures are increasing--makes no sense whatsoever. It seems the President is on a different economic planet than most Americans because, even if you do not hold a mortgage, even if you fully paid your mortgage, you are being hurt by this economy where foreclosures are rampant and housing prices plummet. The ripple is outward--people buy less, people vacation less, people have less money and feel less free with it. The vise of high energy prices and declining home values cripples our economy.

Here we have a bill passed 19 to 2 out of the Banking Committee, broad bipartisan support, and out of the blue the President issues a veto threat. What is going on here? Which economy is he looking at? It is appalling. In his veto message, there is language and there are things that contradict what his own Secretary of Treasury has said about portfolio loan limits.

I think the veto message indicates the ambivalence within the administration because it is not as strident and even as forthright as many are. But, unfortunately, the ideologues won out. The ideologues say: No government involvement. Let everyone learn their lesson even if the economy, people's savings, their whole lives, and their home goes down the drain.

What kind of thing is that? Maybe that was the predominant thinking in 1893 but certainly not in the America of 2008.

I say to my colleagues, if they want to know one of the reasons the President is so unpopular and why so many Americans think the country is headed in the wrong direction, it is because he threatens to veto a modest bipartisan piece of legislation such as the one Senator Dodd and Senator Shelby have put together.

It defies understanding. I have always believed when ideologues run the show on the far right or far left, we lose. In this case, with this veto message, it feels as though the ideologues have started running the show, and homeowners, neighborhoods, communities, and our country's economy will suffer from that wrongly held belief.

I yield the floor.

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Mr. SCHUMER. Mr. President, I rise against this motion for several reasons.

First, on the specific issue, I do not think there has been a Member of this Chamber who has been more of a scourge against Countrywide than the senior Senator from New York. I do not like their practices. I do not like what they have done. I have criticized them publicly repeatedly. I have even asked Bank of America to make sure Countrywide employees--high-ups--are not hired when the company takes over. So I do not like Countrywide. I think many of us in this Chamber may not, given what we know they have done.

But I do not know of a single special interest provision, as my good friend from Alabama has stated, in this bill that applies to Countrywide. It is a general proposal supported by wide numbers of people on all sides--on the lending side, on the borrower side. Many of the groups that represent the poorest people in America support these provisions. So did my colleagues. Of the 10 Republican members of the Banking Committee, 8 supported this bill.

Furthermore, this bill is not one of those that are concocted in the dark of night and put on the floor 3 hours later. The provisions in the bill have been public for weeks. Not a single one of my colleagues has come up and is able to point to any special interest provision that names any specific lender, that benefits them differently than all the other lenders around.

If there is something we ought to do about Countrywide, we can hold hearings. If there is something we ought to do about the practices Countrywide and other lenders used, we should reform them. The chairman of this committee has been in the lead in trying to make those kinds of reforms. I know because a lot of the legislation he did we worked on together.

So there is no reason to believe--there is not a scintilla of evidence--there is a special interest provision here. We all know what is going on here. We ought to resist it on both sides of the aisle. I want to particularly salute my colleague from Alabama for standing up and saying that.

The second thing I want to say is this: This is beyond petty politics. We have a nation heading into recession. Thousands of people lose their homes every single day. Will the provisions of this bill--introduced by Senators Dodd and Shelby and supported by the Banking Committee, 19 to 2--will they save every one of them? Absolutely not. Will they save a good number of them? You bet.

Will they bring back devastated neighborhoods that have foreclosure signs on all the houses? And innocent homeowners who happen to have a house next to them, who paid their mortgages off 10 years ago and are suffering today because the value of their homes is going down, will this bill help them? You bet it will, with the CDBG provisions.

Will this bill enable Fannie and Freddie--which we are going to need in the next few years more than ever because they back or securitize or hold 80 percent of the new mortgages in this country; it is the only way to get the housing business back on its feet; and this bill wisely strengthens the regulation of Fannie and Freddie and strengthens their capital requirements but at the same time enables them to move forward at a time when we need them more than ever before--will this bill do that? You bet.

Should we be holding this bill up now when we desperately need it, when not a single provision--not a single provision--in this bill can be pointed to as narrow, special interest, or favoring any single institution or individual?

The argument is conclusive. It is not a close one. This is not one of those--by the way, one other reason. We finally have a bipartisan bill on something important. It does not happen very much these days, to the regret of most of us here, whether we be Republican or Democrat. We finally have one because of the hard work of the senior Senator from Connecticut and the senior Senator from Alabama.

Therefore, I urge that this motion be defeated and that we move on and pass this bill tonight so we can get to the business of fixing the housing crisis and, furthermore, trying to make sure the recession we have is as shallow as possible.

Mr. President, I yield the floor.

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