Helping Families Save Their Homes Act of 2009

Floor Speech

HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009 -- (Senate - April 30, 2009)

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Mr. WHITEHOUSE. Madam President, we face a grave economic crisis, and it is our responsibility, our duty as representatives of the American people, to give them every tool they need to weather this economic storm.

There is much we have already done to help. Working with President Obama, we cut taxes for middle-class families--because in times like this, every little bit helps. We gave an extra $250 payment to seniors on Social Security and disabled veterans to help them make ends meet when their household budgets are stretched to the breaking point. Preserving jobs means preserving our families' livelihoods, so we are investing billions of dollars in new infrastructure to create and support jobs all across America.

Today, Madam President, we want to take on one piece of America's unfinished economic business. Many families in this country--too many--have found that making ends meet is impossible, and they are in the process of filing for bankruptcy. Four years ago, when Congress overhauled the Bankruptcy Code, our Republican colleagues suggested that those who file for bankruptcy had carelessly lived beyond their means and were trying to game the system--at best, irresponsible; at worst, engaged in fraud. But in the years since, we have seen that was not true.

Families don't enter bankruptcy casually to save a few dollars. Bankruptcy is a last resort for individuals and families on the brink of financial collapse. The vast majority of those who seek bankruptcy are struggling, working families. With the economy in its weakest condition in decades, bankruptcy filings are soaring. Tragically, the most common reason for bankruptcy has been health care costs--compounding the heartbreak of illness or injury with the strain of financial distress--but a lost job or ruined pension can be just as devastating. And many families file for bankruptcy because the mortgages on their homes have gone through the roof and they simply can't afford them any longer.

Too many homeowners were coaxed into bad mortgages--with the promise that values would keep going up and up and up--in many cases, without even understanding the hazards built into the small print of the mortgages they assumed. Well, the bubble has burst, and now these homeowners are stuck with mortgages that are larger than the home itself is worth.

Ordinarily in a bankruptcy, judges can modify the terms of debts or obligations, including loans on vacation homes and on family farms. These modifications help prevent foreclosure and permit people to keep making payments on their reset loans. That is good because when a house is foreclosed, neighboring property values decline, tax collections decrease, and schools and communities suffer. Helping prevent foreclosures, as this amendment would do, will help rescue falling home prices and get the housing market back on track--and that will help all homeowners, not just those who are facing bankruptcy.

Under current law, Americans looking to bankruptcy to escape unbearable financial strains cannot modify the terms of the very contract most dear to any family facing bankruptcy--their principal residence, the place they call home, where they raise their children, where they know their neighbors, where they live their lives. They can face foreclosure, even homelessness. The neighborhood erodes, and a cascade of dire consequences ensues.

To remedy this, the distinguished Assistant Majority Leader, Senator Durbin of Illinois, has offered an amendment that would temporarily, and with conditions, give primary residence mortgages the same treatment in bankruptcy as other types of secured debts. Like any secured creditor, the mortgage holder would be entitled to adequate protection of his or her property interest during the bankruptcy. The modification of the mortgage would be limited to a market rate and a term of no longer than 30 years.

Given the cost of foreclosures, which average $60,000 per incidence--setting aside the harm to the family of losing their home, or the neighborhood of having another shuttered, plywood-covered building on the block--it would seem that this amendment to the code would ultimately benefit all of the parties to the mortgage. But on this question, the big banks seem to be inured to suffering and deaf to common sense.

Despite requirements protecting banks that families give their lender 45 days' notice before filing for bankruptcy--that allow lenders to prevent forced modifications if they offer voluntary modifications as part of President Obama's Housing Affordability and Stability Plan; that sunsets the program at the end of 2012--the big banks are still opposed. They gorge on taxpayer funds and support, but they will not help these customers.

I would note this is not a problem with the small banks, the community banks that held their loans and work with their distressed customers in their community every day. This is a problem with the big banks that sold families' mortgages off in strips to investors far away, leaving the homeowner no one to talk to, no one who can make a decision about modifying the mortgage.

What is the homeowner supposed to do? Call an investor in Switzerland, in Japan? Ring up the hedge fund in New York that owns a strip of their mortgage and get them to all come together and agree on a workout? It is impossible.

When we allowed mortgage securitization, we created this hole, and we are obliged to fill it. Only a judge can cut through the nightmare of bureaucracy that a homeowner faces trying to sort through this mess. Securitized mortgages caused it, and there is only one practical way to clear it up, and that is the Durbin amendment.

I am very proud to have cosponsored this amendment, as well as the Helping Families Save their Homes in Bankruptcy Act, the bill on which this amendment is based. I thank my colleague from Illinois for his passionate and tireless work on this legislation. I share his belief that this is the most direct and effective way to mitigate the foreclosure crisis.

I also share Senator Durbin's frustration that although he and others--Senator Schumer in particular--have worked tirelessly to negotiate in the interest of all parties, this powerful banking lobby has been greedy, stubborn, and unreasonable. It refuses to recognize the human problem that poor homeowners have when they have to try to reassemble a mortgage that got sold in strips around the world and try to get those people together to reach an agreement. It is asking ridiculous things of that family to expect them to handle that problem, and they have no other mechanism, except a court, which can settle it once, and quickly, for all.

I have been here only a short time, Madam President, but this is one of the most extreme examples I have seen of a special interest wielding its power for the special interest of a few against the general benefit of millions of homeowners and thousands of communities now being devastated by foreclosure.

Bear in mind that the big banks opposing this legislation can reset their own obligations in a receivership or bankruptcy, but what's fine for them is obviously too good for their long-suffering customers, who--uniquely--don't get the same rights for their home mortgage.

The scale of this is immense. Senator Durbin's commonsense measure would help as many as 1.7 million American families stay in their homes and preserve $300 billion--nearly one-third of a trillion dollars--in home equity for the neighboring homeowners whose home values get knocked down when a bank will not negotiate with an owner and comes in and forecloses, hammers up the plywood over the windows, lets the lawn grow out, and often lets the property be looted. In my home State of Rhode Island alone, 6,600 homes and over $1.4 billion in home equity could be preserved.

Homeowners are up against an impossible situation. It was one that was created by the big banks and the investment world when they securitized these mortgages and spread them to the four winds. This is their only hope to redeem it, their only hope to have somebody sensible to talk to, and I urge my colleagues to support this amendment.

I thank the Chair, I yield the floor, and I suggest the absence of a quorum.

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