Housing Crisis

Floor Speech

Mr. DURBIN. Madam President, I would like to close with one brief statement, if I can, on the housing crisis we are facing.

Yesterday, I was in a neighborhood of Chicago named Albany Park. It is one of the most diverse neighborhoods on the north side of our city. I went into this neighborhood on Kedzie Avenue to meet in front of a house that had been boarded up going through mortgage foreclosure. A lot of families gathered around, families who live in the neighborhood. And they looked like America--Black, White, and Brown--all standing there with their neat little homes all around this one foreclosed building. The building was partially boarded up. Windows were broken. The neighbors were outraged that this mortgage foreclosure has resulted in an empty building, which is now being vandalized and turned into a drug haven.

You would be angry, too, if it were in your neighborhood. These folks who care for their lawns, care for their kids, make sure their mortgage payments are paid on time, want to know what we are doing about mortgage foreclosures in this country. The honest answer is, We are doing little or nothing.

We have to change that. For 2 years now. I have tried to pass one simple measure that would change the Bankruptcy Code and say that a bankruptcy judge can, at the last resort, for those who end up in bankruptcy with a mortgage foreclosure, take a look at the terms of the mortgage and change those terms. That is not a radical idea. Currently, the judge can do that for a second home, a farm, a ranch, but they cannot do it for your primary residence. I cannot explain why, but that is a fact.

Now we have primary residences across America that are being subjected to mortgage foreclosure. Initially, it was because of the subprime mortgages with those exotic finance deals that fell apart when the mortgage was reset. Now more and more homes going into foreclosure had fixed-rate mortgages, did not have subprimes, and we are seeing the bottom fall out of the housing market.

It is estimated one out of four mortgage holders in America are paying more principal on their mortgage than the value of their home. They are underwater, as they say. What are we going to do about it? Well, for a long time we said: We will trust the banks, the sanctity of the contract. They will work on it. They will negotiate. It has not happened. As a result, we have record numbers of mortgage foreclosures. The housing market is in a tailspin. No homes are being built, obviously. Most homes end up vacant on the rolls of the bank and become eyesores in a neighborhood.

What I am suggesting is, we have to be honest. We tried to let the banks and the mortgage bankers run this situation for the last year and they have failed and failed miserably. If we do not take control of this situation, if we do not have the bankruptcy court as the last resort that can ultimately change the terms of the mortgage, with reasonable limits--I am prepared to accept reasonable limits; there will not be any prospective use of this; only those existing mortgages today--that is the only way to come to the bottom of this crisis.

We are working with these financial institutions to try to find reasonable terms to work this out, but we have not had a lot of luck. Citigroup stepped forward. We reached an agreement with them. We are trying to reach an agreement with others. But for the mortgage bankers, who brought us into this mess, to still hold this Congress enthralled, to hold us hostage to their so-called sanctity of contract, is to ignore the obvious.

If they have their way, there will be a continued crisis of mortgage foreclosures, the recession will get worse instead of better, and neighborhoods such as Albany Park will disintegrate, deteriorate because of the foreclosures of homes in the neighborhood. Renters who dutifully pay their rent show up one day to be told: Oh, incidentally, your landlord defaulted on the mortgage and now you are going to be thrown out on the street. Over and over again, and it is totally unfair.

We have to do something. I am glad the House is going to take up this measure. We need to move on it. We waited a year. That is long enough.

I yield the floor.

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