Hearing of the Senate Committee on Banking, Housing and Urban Affairs - "Preserving Homeownership: Progress Needed to Prevent Foreclosures"

Statement

Hearing of the Senate Committee on Banking, Housing and Urban Affairs - "Preserving Homeownership: Progress Needed to Prevent Foreclosures"

The text of Senator Reed's opening statement (as submitted for the record) follows:

MR. REED: Thank you, Chairman Dodd, for convening this hearing.

We are here today because we recognize that we are in the midst of a national emergency. According to the Center for Responsible Lending, there have already been more than a million foreclosures this year. Nationally, 9.12% of mortgages were delinquent at the end of the first quarter—nearly one out of ten.

As we all know, these are more than statistics. They represent individuals and families uprooted and finances destroyed. Beyond the tragic impact that foreclosure has on households, we have witnessed their impact on communities. The homeowners who remain are left to watch blight take hold and the value of their own homes continue to plummet.

The Bush Administration's limited actions failed to forestall this crisis. The Obama Administration has implemented the Making Home Affordable program and, with the help of Congress, improved the previous Administration's Hope for Homeowners program. Today's testimony indicates that 325,000 homeowners have been offered trial modifications and others have been helped by government refinance programs.

However, too many homeowners are still struggling to access programs and get the help they need. I continue to hear from Rhode Islanders about how hard it is to get assistance, and I would like to submit for the record two letters that I sent, joined by my colleagues, to highlight these issues. One is to Secretary Donovan and the other to Secretary Geithner.

I was encouraged to learn that Secretary Geithner and Secretary Donovan have written to participating loan servicers urging them to devote more resources to ramping up and requiring them to submit written plans for improving their capacity—something I previously proposed.

But it will take more for these programs to fulfill their potential. Servicers will need to continue to expand their capacity—hiring new staff, providing ample training, and ensuring they have the necessary technology to meet new demands. Servicers must also be held accountable for their performance, which the new data collection system being finalized will help to do. But other improvements must be considered, including making the process more transparent for homeowners and developing appropriate penalties for servicers who are lagging. We need to make sure that the system has both carrots and sticks.

I look forward to continuing to work with the Administration to improve its foreclosure prevention programs. However, in this environment in which the national unemployment rate is racing towards 10% we have to continue thinking broadly about what types of additional policies are needed to help homeowners.

Soon, I plan to introduce foreclosure prevention legislation that would provide mortgage assistance payments to homeowners. I first introduced this idea in 2007 legislation—since then, the need for something like this has only grown more urgent. This program, administered by state housing finance agencies and other entities, would be for homeowners who have lost income through no fault of their own and who have reasonable prospects of employment. Qualified homeowners will receive grants or loans to help make past due mortgage payments and to pay a limited number of future payments. Homeowners whose circumstances simply make keeping the home impossible would be eligible for relocation assistance.

Additionally, my bill would establish a comprehensive national database to more effectively track foreclosures and delinquencies. It will also address the affordable housing crisis that continues to plague us as the number of foreclosures has increased competition for affordable rental housing.

Stabilizing housing is the key to economic recovery, and we must continue to use all of the tools at our disposal to ensure that homeowners get the relief that they need.

These are complex issues, and I look forward to discussing these matters of critical importance to our country.

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