America Cannot Risk Worsening of Housing Crisis (Rep. Carolyn McCarthy)
July 31st, 2008
We are all feeling the impact of the nation’s housing crisis. Long Island, like most of the country, is in the midst of a sea change in our housing market and the ripple effects are being felt throughout the entire economy.
Long Island offers an interesting example of how the housing and mortgage crisis developed throughout the nation. For a number of years, home prices on Long Island were soaring while credit and lending opportunities became more and more available to consumers. Many of us either refinanced our homes for renovations, moved into larger or more expensive houses and many first time home buyers took the plunge and purchased homes with variable rate interest loans.
As the housing market bubble burst and monthly mortgage payments increased when introductory interest rates that enticed so many to venture into the new housing market reset to higher levels, many consumers were unable to afford the increased payments and could not refinance into loans they could afford.
These practices combined with other changes in the economy lead to an alarming increase in foreclosures and ultimately, many of the financial and homeownership dreams of millions of Americans were destroyed.
That’s why on Wednesday, July 25, 2008, the House passed H.R. 3221, the American Housing and Foreclosures Prevention Act, the most comprehensive response yet to the American mortgage crisis. I was proud to include important language in the bill calling for improved credit counseling practices.
The House-passed measure will help prevent more mortgage foreclosures, keep American families in their homes, aid local communities hit hard by foreclosures, and strengthen the economy by ensuring that Fannie Mae and Freddie Mac, two of the nation’s most important financial institutions, have access to credit if necessary.
American families need relief now and we can not risk a worsening of the current housing crisis. The American Housing Rescue and Foreclosure Prevention Act will allow more than 400,000 hard-working American families in danger of losing their home to refinance into lower-cost government-insured mortgages they can afford to repay – at no cost to the American taxpayer.
Additionally, my amendment ensures that funding will be targeted to organizations that provide early outreach, in-person counseling, and on-going consultation to people that are at-risk of foreclosure. The amendment will encourage credit counseling organizations that already have relationships with loan servicers to reach out to those behind on their mortgage payments.
Statistics show that over 50% of borrowers in default will not contact their lenders when faced with foreclosure. If we provide homeowners with the right amount of information, assistance, and outreach, we will succeed in saving millions of homeowners from foreclosure.
Furthermore, the bill increases the FHA high-cost loan limits so that families who live in high-cost areas, including Long Island, will be able to take advantage of the FHA home loan program.
The following are some other important provisions included in the bipartisan bill:
• strengthens neighborhoods hardest hit by the foreclosure crisis by providing resources to allow cities and states to buy up and rehabilitate vacant, foreclosed properties that are currently driving down home prices, reducing state and local revenues, and destabilizing neighborhoods;
• expands homeownership opportunities for veterans and helps returning soldiers avoid foreclosure and stay in their home;
• provides tax breaks to spur home buying; and
• creates a new fund to boost the nation’s stock of affordable rental housing in both rural and urban areas for low- and very low-income individuals and families.
Finally, the bill provides the Department of the Treasury with emergency and temporary financing authority for Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are important institutions that hold or guarantee nearly half of all mortgages in the United States. Last week, the Congressional Budget Office Director Peter Orszag said there was “a significant chance, probably better than 50 percent, that the proposed new Treasury authority would not be used before it expired at the end of December 2009.”
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