Madam Speaker:
Today we consider the Senate Amendments to the American Housing Rescue and Foreclosure Prevention Act to assist struggling homeowners, help stabilize the housing market, and help those homeowners who are being financially hurt by rising foreclosures in their neighborhoods.
Originally passed by this body in August of last year, this bill represents a compromise between the Administration and Democratic and Republican congressional leaders, and retains most of its original provisions while incorporating the Administration’s plan to provide explicit government backing for Fannie Mae and Freddie Mac. The bill also provides emergency assistance for the redevelopment of abandoned and foreclosed homes to help stabilize the housing market and our neighborhoods.
To address one of the root causes of the mortgage crisis, the bill specifically targets the Federal Housing Administration and Fannie Mae and Freddie Mac.
The bill overhauls the FHA to increase the market share of mortgages they insure, raises loan limits for FHA-backed loans, boosts loan limits in high-cost areas, allows the agency to vary the premiums it charges borrowers based on their credit risk, and modifies disclosure requirements to provide more information concerning mortgage choices. The bill also creates a new independent agency to regulate Fannie Mae and Freddie Mac to place these entities into conservatorship or receivership in the event of a financial crisis.
In addition to providing assistance to home buyers and home owners in the form of tax credits, and a reduction for real property taxes, the bill also provides assistance for low-income rental housing, and four billion dollars in additional Community Development Block Grant resources to help states and localities rehabilitate neighborhoods harmed by rising foreclosures.
Despite much evidence to the contrary, there are still many who think this bill is about bailing out Fannie Mae. As we all know, as mortgage defaults have risen and home prices have fallen, Fannie Mae and Freddie Mac have reported billions of dollars in realized and unrealized losses. Freddie Mac, for example, reported at the beginning of this month that if it had been forced to liquidate its holdings at the end of the quarter, it would have been left with a deficit of $5.2 billion.
It is crucial to American economic health that we work to keep these two important institutions on sound financial footing. According to the Center for Economic and Policy Research, due to the collapse of the housing bubble and the subsequent collapse in housing values, the vast majority of Americans is accumulating little or no wealth and is in danger of becoming completely reliant on Social Security and Medicare to support them in their retirement years. Since homeownership is the way most Americans accumulate wealth, and since Fannie Mae and Freddie Mac own or guarantee more than 40 percent of U.S. home mortgages, they cannot be allowed to fail.
This bill will help keep them from failing by increasing their available credit lines, allowing the Treasury Department to purchase their equity and allowing the Federal Reserve to reset their capital requirements. The funds provided by this bill will only be made available if the home loans these institutions guarantee default. By making additional financial support available to these institutions, Congress sends a clear message to investors that we stand by Fannie Mae and Freddie Mac and will not allow them to fail. If investors are reassured, Fannie Mae and Freddie Mac may not need to draw upon this funding.
Our economy is in crisis mode. The American Housing Rescue and Foreclosure Prevention Act is a necessary response to stabilize the housing market and to come to the aid of those Americans who are threatened by the rising number of foreclosures in their neighborhoods.
This is not a perfect bill, but it provides an urgent response to an urgent problem. I urge my colleagues to join me in supporting it.