Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Ms. SHAHEEN. Mr. President, I rise today to introduce the Mortgage Modification Reform Act, which is designed to protect homeowners and communities from big banks who fail to modify mortgages in a timely fashion.

In the past year I have heard from hundreds of families in New Hampshire who have fallen behind on their mortgages. Often, they tell me that they can no longer afford their payments because of circumstances beyond their control. A family member has been laid off or had her hours reduced. Medical bills have started piling up. Higher interest payments kicked in at just the wrong time. And since value of the average home has declined over 15 percent in New Hampshire, they now owe more on their home than it's worth.

But these families want to make it work, so they reach out to their bank or ``mortgage servicer'' to figure out a way to make payments they can afford. Often, when a homeowner comes to a servicer, they can work together to bring the homeowner's payments down to an affordable level. When a servicer modifies a mortgage, everybody wins: the homeowner can stay in their home; the servicer avoids the costly foreclosure process; and communities are spared from the devastating effects that foreclosures have on home values and communities.

That is why these families in New Hampshire and others across the country breathed a sigh of relief when they heard that a new program, called the Home Affordable Modification Program, or HAMP, would provide powerful incentives to servicers to work with borrowers to keep them in their homes.

We were told that HAMP would help 3-4 million homeowners stay in their homes by reducing the amount a family owes each month to 31 percent of its monthly income. The big, national servicer banks who signed up for the program would avoid the foreclosure process and receive incentive payments. Most importantly, communities would have benefitted by stemming the tide of foreclosures, which have so drastically lowered home values and the equity of millions of homeowners.

But a year into the program, it is clear that many of these big banks are unwilling or uninterested in helping people in our communities. The banks routinely lose documents and ask the borrower to send them in again, delaying the process for months at a time. They don't respond to calls and voice messages that are only returned weeks or months later--if they are returned at all. And as homeowners wait for a decision, the banks charge them late fees, which puts them even further behind. When homeowners finally receive modification offers, they often come at the last minute--just days before the borrower's home is set to be auctioned.

As a result of these abuses, instead of helping the millions of homeowners that they promised would be able to stay in their homes, servicers have offered trial modifications to less than 30 percent of eligible homeowners. The banks participating in HAMP have only provided permanent relief to only 116,000 homeowners.

We know that the servicers are capable of success in this program because some servicers have been better than others. According to the latest Servicer Performance Report from the Treasury, some servicers have helped as little as 2 percent of their eligible borrowers, while others have helped over 50 percent. And it's not surprising that some of the servicers with the worst numbers are the same big banks that were happy to be bailed out by TARP not too long ago.

It is time to tell these big banks that enough's enough. We need protections for homeowners, and we need to penalize the servicers who have failed to offer the help they promised.

That is why I am introducing legislation today, the Mortgage Modification Reform Act, to stop the big banks from abusing homeowners and to start penalizing those who do not live up to their promise to provide homeowners with the relief they need.

The Mortgage Modification Reform Act would charge banks ``late fees'' for every month that they fail to evaluate a homeowner for this program. After 3 months, if a homeowner has not received an answer on whether their mortgage will be modified, the banks' payments will be reduced 10 percent for each month that it fails to evaluate the homeowner. By reducing payments to the banks over time, the bank will be encouraged to evaluate these borrowers earlier and more frequently. This also protects the taxpayer by only rewarding those banks that respond quickly and punishing those that fail to act. Banks will have to perform to get paid, and if they don't, their compensation will stay with to the taxpayer.

This legislation would also require banks to stop the foreclosure process until it determines whether a borrower qualifies. This would also give much-needed peace of mind to homeowners who aren't sure which will come first: the modification they need, or the sale of their home.

In addition, the legislation would prevent banks from imposing fees while they wait for a decision. There is no reason that a bank should charge a homeowner for being delinquent while waiting for evaluation in the program. There is no reason for a homeowner to pay fees for an unnecessary foreclosure process. This legislation would put an end to these abusive practices.

Finally, the Mortgage Modification Reform Act provides a protection for borrowers that has been missing from day one of this program: a way for homeowners to request a review of the bank's decision. Right now, the banks make all the decisions whether a homeowner qualifies for the program or not. There is no way for the homeowner to appeal that decision. But we know that those decisions aren't always right. Many homeowners were originally told that they didn't qualify, but ask their Senator or get legal assistance to ask the servicer to take another look. Often, they did qualify for the program, but the servicer did not evaluate the borrower properly.

But not every homeowner should have to involve their Senator or a lawyer to get their bank to respond. They should be able to make their case on their own to an independent arbiter. This legislation requires the Treasury Department to create a separate, independent review process to allow homeowners who feel they have been wrongly denied the chance to stay in their home. In addition, to ensure transparency, this legislation would require the servicer to submit documentation to the Treasury for each denial that it makes.

Making this program work isn't just important for these homeowners, it's also critical to our economic recovery. With million homeowners across the nation behind on their mortgages and at risk of foreclosure, we need this program achieve its potential of stopping millions of homes from flooding the housing market and further depressing home values.

I urge my colleagues to join me to prevent banks from continuing to abuse this program, and to get it on track to provide help to the millions of homeowners who need it.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

There being no objection, the text of the bill was ordered to be printed in the RECORD,

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