FORECLOSURE:

With as many as 8,100 foreclosures devastating the lives of American families each day, the federal government needs to take immediate action to stop this tidal wave before it causes more serious damage to our economy.

The numbers are staggering. Almost one in every 11 homes was either in default or in foreclosure as of March 2008, the highest level since 1979. More than 1.5 million families lost their homes to foreclosure last year alone. In Massachusetts, communities saw a 37 percent increase in the number of foreclosure notices during the first quarter of 2008 from the previous year. 73 Massachusetts communities have experienced an increase of at least a 75% in foreclosure filings over the past year. From July 2007 to March 2008, banks filed 1,000 foreclosure petitions in the City of Brockton alone. Prices for Massachusetts home sales that closed in March 2008 were down 11% from March 2007, the largest decline since 1990; and sales of homes in March 2008 were down 32% from March 2007.

Given these shocking numbers, it�s only natural to wonder how we got here. The fundamental problem is that lenders lowered their standards but didn�t appropriately plan for the increased risk they had incurred. They flooded the market with mortgage loans, ignoring the risks to borrowers and to their own bottom line. Some of these loans were predatory, and some came from the very same lenders that the Fed bailed out!

Since 2000, I have been concerned about predatory lending and have supported legislation to stop the excesses that these lenders have too often hoodwinked homeowners into accepting. At the same time, some borrowers inflated their incomes and misrepresented themselves in order to get bigger homes than they could actually afford.

I supported the Housing and Economic Recovery Act when it passed the Senate in July to assist well-intentioned homeowners who, with a little assistance, can make their payments and avoid foreclosure and a downward spiral into bankruptcy. The families this legislation aims to help are not trying to get a free ride. They aren't scam artists trying to get away without paying their mortgage. They are hard-working, tax-paying, honest people who too often had the misfortune of being taken advantage of by mortgage lenders unconcerned with the chaos they were creating.

The legislation brings much needed reforms to Government Sponsored Entities (GSEs), modernizes the Federal Housing Administration, includes a new Hope for Homeowners program to limit foreclosures, provides approximately $4 billion in immediate funding for the Community Development Block Grant program, provides $150 million in additional foreclosure prevention counseling and includes the provisions the Senate passed earlier this year in the Foreclosure Protection Act.

All together, this bill will reduce foreclosures; provide more access to safe and fair mortgage credit for homebuyers; increase the strength our housing markets; and help expand our economy. The bill also includes four key provisions which I have supported including:

• The bill contains a provision I authored with Senator Gordon Smith (R-Oregon) to expand the Mortgage Revenue Bond program to provide an additional $11 billion of tax-exempt private activity bonds to housing finance agencies. The provision would allow the proceeds from the bonds to be used to refinance subprime loans, provide mortgages for first time homebuyers and for multifamily rental housing. This would mean that approximately $209 million in targeted mortgage relief will be available to the homeowners of Massachusetts, which could result in as may as 1,000 new loans in Massachusetts. Nationwide this would result in close to 87,000 additional loans.
• The bill also contains provisions I authored to amend the Service Members Civil Relief Act (SCRA) by extending the period a lender must wait before starting disclosure procedures from 90 days to nine months after a service member has returned from active duty and capping interest on mortgages at 6 percent for one year after a serviceperson completes his/her services.
• The bill also establishes a National Affordable Housing Trust Fund, similar to the bill I introduced with Senator Olympia Snowe (R-Maine) to require Fannie Mae and Freddie Mac to set aside a portion of their profits (approximately $3.4 billion over ten years) to build affordable rental housing. In 2000, I wrote the first National Affordable Housing Trust Fund legislation to construct, rehabilitate, and preserve 1.5 million units of housing over the next 10 years.
• The bill includes $3.92 billion for the Community Development Block Grant (CDBG) program which will help local communities fight the effects of foreclosure. Earlier this year, along with Senator Edward Kennedy, I sent a letter to the Senate leadership underscoring the need for $2 billion in additional funding for CDBG in the upcoming housing legislation.