Responding to the Foreclosure Crisis
Problems in the subprime mortgage markets have helped push the housing market into its worst slump in 16 years. As many as 2 million Americans will see their mortgage rates increase in the next two years, with many of them losing their homes as a result of bad lending practices. Home foreclosures have shot up to an all-time high. As a result of the overall housing slump, tens of millions of homeowners could see the value of their home—their primary investment—drop in value.
In the months following passage of the Emergency Economic Stabilization Act of 2008, Congress has conducted vigorous oversight on implementation of the Troubled Assets Relief Program and the lack of addressing the foreclosure crisis. As Financial Services Committee Chairman Barney Frank said at a recent hearing, “the fundamental policy issue is our disappointment that funds are not being used out of the 700 billion to supplement mortgage foreclosure reduction…the negative effect of this cascade of foreclosures goes far beyond the individuals who lose their homes. It has to do with neighborhood deterioration. It has to do with municipal inability to make their governments work. And it impacts, obviously, the macro economy…it is essential that we do something to use some of the TARP funds for the diminution of the rate of mortgage foreclosures.”
Watch Chairman Frank's opening statement:
Frank Urges Paulson to Use TARP Funds to Stem Foreclosures>>
In a statement following House Democratic leaders' meeting with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Speaker Pelosi said, "Our country faces a serious and worsening foreclosure crisis that is affecting millions of Americans. Addressing the underlying problem of home foreclosures, and stopping the continued drop in home values, is essential to restoring confidence in our financial system, freeing up the flow of credit consumers and small businesses, and spurring renewed economic growth." Read the full statement>>
Read the Gavel's posts on the foreclosure crisis>>
Housing Rescue and Foreclosure Prevention
On July 23, the House passed the most comprehensive response yet to the American mortgage crisis, which was signed into law on July 30. The American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, will help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process. To shore up the housing market and ensure the availability of affordable home loans, the bill would put a tough, independent new regulator in charge of the housing Government Sponsored Enterprises, or GSEs (Fannie Mae, Freddie Mac, and the Federal Home Loan Banks), which are vital to both the financial markets and American homeowners. The new regulator will be far better prepared to quickly and effectively respond to issues affecting the safe and sound operation of these enterprises. The centerpiece of the bill will help significant numbers of hard-working American families in danger of losing their home refinance into lower-cost government -insured mortgages they can afford to repay – at no cost to the American taxpayer.
Learn more about this legislation>>
Watch House Democrats on the American Housing Rescue & Foreclosure Prevention Act>>
Watch Speaker Pelosi speak in support of the bill>>
The 110th Congress is acting to strengthen the housing market and the economy, expand affordable mortgage loan opportunities for families at risk of foreclosure, and strengthen consumer protections against risky loans in the future. In February, Congress passed and the President signed economic stimulus legislation that included measures to help ease the subprime crisis. The bill, the Recovery Rebate and Economic Stimulus for the American People Act, expands financing opportunities for Americans in danger of losing their homes because of the mortgage crisis, increasing affordable refinancing opportunities and liquidity in the housing market.
Learn more>>
We have made real progress – passing crucial reforms to the Federal Housing Administration so it can help people at risk of foreclosure stay in their homes, pushing financial institutions to create more affordable housing options, and working on comprehensive anti-predatory lending legislation to stop these bad loans from being made in the first place--strengthening consumer protections against abusive practices and making sure that consumers get mortgages they can repay. We have held a series of oversight hearings on the subprime crisis, investigating causes and developing solutions.
Report: Stabilizing Housing Is Key to America’s Economic Recovery>>
We have taken the following actions to provide relief to millions of families:
Measures Enacted into Law
- Expand affordable mortgage loan opportunities through the Federal Housing Administration for families in danger of losing their home by increasing the FHA loan limits up to $729,750 (Economic Stimulus);
- Prevent homeowners from facing a tax bill at the same time that they are losing their homes (H.R 3648, Mortgage Forgiveness Debt Relief); and,
- Expand financial counseling for families in danger of losing their homes through foreclosure (FY 2008 Omnibus Appropriations).
Measures Passed by the House
- Strengthen consumer protections against risky housing loans in the future (H.R. 3915, Mortgage Reform and Anti-Predatory Lending Act);
- Expand affordable mortgage loan opportunities for families in danger of losing their homes through Federal Housing Administration reform (Expanding American Homeownership Act of 2007, H.R.185). This bill, passed by both the House and Senate and supported by the White House, has been held up by Republican Sen. Shelby due to his opposition to continuing the temporary FHA loan limit increase in the economic stimulus bill;
- Strengthen regulations of Fannie Mae and Freddie Mac and raise their loan limits to increase liquidity in the mortgage market (H.R. 1427, Federal Housing Finance Reform Act); and
- Increase the supply of affordable rental housing to address the current shortage and help families who have lost their homes in the current crisis. (H.R. 2895, The National Affordable Housing Trust Fund Act).
Oversight Hearings on the Housing Foreclosure Crisis
- Financial Services Hearing on Mortgage Foreclosures – 9/20/2007
The Financial Services Committee held a hearing, “Legislative and Regulatory Options for Minimizing and Mitigating Mortgage Foreclosures.” Witnesses included Secretaries of Treasury, Housing and Urban Development, and Chairman of the Federal Reserve System Ben Bernanke, as well as the heads of Fannie Mae and Freddie Mac. - JEC Hearing on Subprime Crisis & the FHA Bill – 9/19/2007
The bicameral Joint Economic Committee held a hearing, “Evolution of an Economic Crisis?: The Subprime Lending Disaster and the Threat to the Broader Economy.” Witnesses included Peter R. Orszag, Director of the Congressional Budget Office; Dr. Robert J. Shiller, Stanley B. Resor Professor of Economics at Yale University; Martin Eakes, Chief Executive Officer of the Center for Responsible Lending; and Alex J. Pollock, Resident Fellow at the American Enterprise Institute. - Hearing on the Secondary Market and Subprime Mortgage Lending – 5/8/2007
The Financial Services Subcommittee on Financial Institutions and Consumer Credit Committee held a hearing, “The Role of the Secondary Market in Subprime Mortgage Lending.” - Financial Services Hearing: Subprime Mortgages, Predatory Lending – 3/27/2007
The Financial Services Subcommittee on Financial Institutions and Consumer Credit, chaired by Rep. Carolyn Maloney (NY-14), held a hearing: “Subprime and Predatory Mortgage Lending: New Regulatory Guidance, Current Market Conditions and Effects on Regulated Financial Institutions.”
Take A Look
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