NSP Termination Act
Floor Speech
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Ms. WATERS. Mr. Chairman and Members, I think that my colleague from Minnesota said it all: Whose side are you on? Are you on the side of the American taxpayers who trusted us to regulate this industry that had responsibility for these mortgages? Are you on the side of taxpayers who simply wanted to live the American Dream, who simply wanted to get into a mortgage so that they could own a home and do what it is the American Dream says we can do and we can accomplish?
They trusted us to make sure that our regulators did their job. We all let them down. We allowed these mortgage firms, these loan initiators, these big banks to create these exotic products, products we had never heard of before.
Nobody questioned what was a no doc loan. Nobody asked what is this teaser loan. Nobody talked about what happens when these loans reset. And the American taxpayer was confronted with a mortgage with 30, 40 pieces of paper and they signed on the dotted line, because they wanted to live the American Dream. Little did they know that they would not be able to meet the reset amount, 6 months, 1 year, 2 years from now; and so they got caught up in the scheme. It was a huge, fraudulent scheme perpetrated on the American people by major financial institutions.
Americans didn't decide all of a sudden that they didn't want to pay their bills, that they didn't want to pay their mortgage. Something big happened. And what happened was this big fraud that was perpetrated on the American people came to reality and the devil came due, and now it was time to pay, and they couldn't afford it.
Added to that, the recession that was caused by the subprime meltdown caused people to be in situations where they lost their jobs, or they were now in jobs that paid less than the jobs that they had when the economy was good. And so now we have people who have lost all these homes. They're foreclosed on, they're boarded up, they're abandoned. And, guess what, they're bringing down the neighborhoods. Those people who stay in the neighborhoods and keep up their homes, they're losing value because of these boarded-up properties and because of these abandoned properties.
So the government said, and I said and Barney Frank said, those of us who created this program said, we have a responsibility to help the American people, because, through no fault of their own, now their homes are underwater, their homes have lost value, and so we have the Neighborhood Stabilization Program. The Neighborhood Stabilization Program does give money to counties and cities and nonprofits and all to go in and rehab these properties, put them back on the market, upgrade the neighborhood, reduce the cost to fire and police and all of those city agencies that now have got to look after these boarded-up properties, where the animals are coming in and the weeds are growing up and neighbors are saying, My government, please help me.
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Ms. WATERS. That's what the Neighborhood Stabilization Program is all about. And it creates jobs. It creates jobs, because now we've got the contractors, the subcontractors, the painters, the Realtors all involved in helping to rehab this neighborhood, helping to stabilize these communities, creating jobs, assisting the American taxpayers who got into these situations through no fault of their own.
Whose side are you on? Are you on the side of those who rip off our taxpayers? Or are you on the side of the taxpayers who sent you here to look after them and to be responsible?
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Ms. WATERS. Madam Chair, my amendment would simply require the Secretary of the Department of Housing and Urban Development to send a notice to all of the NSP grantees who would have received funding under the third round of NSP that the program has been terminated. Further, the notice would include the name and contact information for the Member of Congress representing that grantee's district, along with a notice saying that the grantee can contact that Member directly for assistance in mitigating foreclosed properties.
As you know, we passed such an amendment off the floor when we took up the FHA bill, which would have basically allowed the homeowners to refinance their properties. So we have one such amendment with the elimination of that program.
The CBO has scored this amendment at zero cost. Since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which provided the NSP funds that are now subject to this repeal, my office has received many calls from potential grantees about the status of the program and what funding they could expect.
Because this act would rescind those funds nearly 8 months after the passage of Dodd-Frank, I think that a simple letter from HUD, sent to States, counties and cities, which would simply notify them of this change, is in order. Moreover, a note to these States, counties and cities saying that their Members of Congress are available to assist them in mitigating foreclosed properties can help these grantees find alternative solutions.
I've discovered there are any number of Members starting to do this kind of thing. They are getting calls from their constituents who are asking for help with loan modifications, and the Members are able to, not get involved with the particular problem, but to help guide them and send them to the proper servicers to get their loan modifications. This is similar to that. Simply, our office has been able to say: Yes, the program is no longer in existence, but this is what you can do if there is an alternative.
Now, I would prefer not to rehash the back-and-forth we saw in the Financial Services Committee about the termination of this program. Members on my side of the aisle showed pictures, talked about the problems caused by abandoned properties, and even showcased letters from their districts, letters which talked about the good work NSP was doing. Yet the debate, it seems, will not sway my colleagues on the other side of the aisle. Instead, I think it's best to focus on my amendment.
I believe this is a commonsense provision that can be accepted by both sides of the aisle regardless of whether they agree with the underlying bill. Grantees should be made aware of this funding recision, and Members of Congress should stand ready to help communities mitigate the effects of blighted properties.
I would ask for the support of my colleagues.
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Ms. WATERS. Madam Chair, I have heard so many convoluted arguments today about this legislation from the opposite side of the aisle.
My colleague from California, my friend and someone I highly respect, knows that he does not have to wish what an amendment would say. If he is interested in an amendment, he can offer it. My colleague from California did not offer the amendment that he has just alluded to, and he did not suggest when we were in committee that somehow he would like to have an alternative. So I find it rather curious that he would come to the floor and start wishing what my amendment would say.
Secondly, I want to straighten out something. My colleague from California keeps talking about how this bill does not stop any foreclosures. The NSP legislation was not intended to stop foreclosures. It was intended to do exactly what the name implies, which is to stabilize communities by taking these boarded up and abandoned properties, rehabbing them or tearing them down so that they discontinue the devaluing of the properties of those homeowners who are trying to keep their properties up and stay in the community.
If he, in fact, was concerned about helping homeowners, he would have supported the FHA refi programs. That program, he voted against. The FHA refi program was basically a program for middle class people who paid their bills on time, but who simply knew that their homes were underwater. They were not worth what they thought they should be worth when they got into the market, and they want to refinance them. He voted against that.
So I am not so sure, when he talks about this NSP program not helping anybody stay in their homes, whether or not he really, really wants to help people stay in their homes when he is voting against something like the FHA refi.
As for jobs, this bill creates jobs; and I think my colleague knows that.
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Ms. WATERS. Madam Chair, I yield myself such time as I may consume.
My amendment would direct the Secretary of HUD to conduct a study to determine the approximate number of foreclosed and abandoned properties that will not be purchased or rehabilitated in the district of each Member of Congress as a result of the rescission and termination of funding under this act. The Secretary would then report these findings to Congress. CBO has scored this amendment at zero cost.
Now, personally, I do not believe that the Neighborhood Stabilization Program should be terminated because NSP creates jobs. So far, about 72,000 housing units are projected to be impacted by round one of NSP. HUD projects that an additional 24,000 housing units are projected to be impacted by NSP2.
Each of these projects requires the work of contractors, such as roofers and painters and landscapers and pavers. And through the program, other real estate professionals like Realtors and title insurance agents have also received employment and contracting opportunities. This NSP program really does create jobs, and this is a program that creates jobs by doing important work in the community.
Contrary to what some say, the problem of homes abandoned by banks is common, and it is difficult for municipalities to mitigate their effects. As GAO has noted in a report from November 2010, servicers sometimes charge off properties or fail to formally foreclose on borrowers because the costs of maintaining the property post-foreclosure exceed the costs of just writing the property off. These charge-offs typically occur after the foreclosure proceedings were initiated. However, borrowers aren't aware that the servicers are stopping short of taking their title.
Because borrowers think that their servicer has finalized the foreclosure process, they may move away and become unreachable by the municipal agency now dealing with the upkeep of the property.
Additionally, it may become logistically difficult or cost prohibitive to track down thousands of borrowers now responsible for property maintenance, taxes, and code violations because of servicers' failure to formally foreclose.
Additionally, NSP provides an alternative to speculative investors purchasing foreclosed properties. Unlike homeowners and municipalities, some speculative investors often purchase properties for cash and in bulk, sometimes sight unseen, buying them up before others have a chance to bid. Some of these investors may not resell properties to owner-occupants, but let them sit on the market without any improvements while the investor waits for housing prices to rebound.
Alternatively, anecdotal evidence suggests that investor-owners sometimes rent properties out to tenants with little or no rehabilitation or maintenance of the property.
We had a field hearing in Minneapolis in January 2010. At that field hearing, State Senator Linda Higgins said, ``Homes are being snapped up by investors. Some are clueless about how to rehabilitate a building and get good tenants. Others think that the laws really aren't meant for them. They buy a house for pennies, paint the wall, scrub the kitchen appliances, and rent it out. They forget the small details like the condemnation order and the requirements for lifting the condemnation and getting a new certificate of occupancy and the need for a rental license.''
That is not to say that all private investment is bad, but we must recognize that the work NSP is doing is a critical counterweight to some of these bad practices. For all of these reasons, I will defend the work that NSP is doing across the country. However, we are here now because we need to talk about this amendment and what it would do once this program is terminated.
My NSP study amendment would provide critical information to Members of Congress. If Members knew the number of abandoned and foreclosed properties in their district that will not be mitigated because of this rescission of funds, they would be better prepared to help grantees access responsible private market sources of funds that can help community revitalization. I would ask my colleagues' support.
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