New Direction for Energy Independence, National Security, and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007--Motion to Proceed

Floor Speech

NEW DIRECTION FOR ENERGY INDEPENDENCE, NATIONAL SECURITY, AND CONSUMER PROTECTION ACT AND THE RENEWABLE ENERGY AND ENERGY CONSERVATION TAX ACT OF 2007--MOTION TO PROCEED -- (Senate - February 29, 2008)

BREAK IN TRANSCRIPT

Mr. MENENDEZ. Mr. President, I thank my distinguished colleague from Michigan for her attribution, and I rise this morning to echo some of the comments of my colleague and others who have lamented what the Senate did yesterday.

We have a situation across the landscape of this country in which our economy is headed onto the shoals of a recession, with some economists believing that we are there already, and the very essence of that recession, which hurts American families in real terms, stems from the housing crisis that exists in this country. Instead of having responded to the storm clouds of the crisis that were on the horizon a year ago--in the Banking Committee, of which I am privileged to be a member, I said we are going to face a tsunami of foreclosures--the administration said, oh, no, no, no, that is an overexaggeration. Well, unfortunately, we haven't even seen the crest of that tsunami.

The reality is that as the administration hit the snooze button then, instead of responding to the oncoming crisis and limiting its scope, yesterday our colleagues on the other side of the aisle did exactly the same thing, opposing the majority leader's opportunity to make sure we address the housing crisis that exists in this country in a way that not only saves American families from having the American dream become an American nightmare, but also, at the same time, in dealing with the very core underpinnings of where this economy is headed--in a negative direction--and turning it around. That is what yesterday's vote was all about.

Everyone except President Bush and some of his colleagues seems to understand that we are in some very serious economic situations. I saw the President's press conference yesterday. Even as gas prices in some parts of the country are already at $3.60 a gallon, when he was told what it was going to do when it hits $4 a gallon, he said: What $4 a gallon?

Well, I guess if you never have to pay for gas, you are totally disconnected from the realities of average Americans. But, yes, that is where we are headed. He doesn't seem to understand we have a serious economic situation.

But let us get real. It isn't largely those of us in this body who understand what is going on, it is the American people, across the landscape of this country, who are feeling the effects of this downturn firsthand. They are the ones receiving foreclosure notices; they are the ones struggling to balance their checkbooks; and they are the ones reaching out to Congress for help.

Yesterday the majority leader tried to bring up a bill to help those struggling in this economic downturn, and yesterday Republican Members of this Chamber blocked that bill, in essence blocking help for those American homeowners who are on the verge of losing their home. The Foreclosure Prevention Act gets to the heart of our economic crisis--that is, the housing market.

As I and others on the Banking Committee have said, the downward spiral of the housing market is the reason we are facing such a difficult economy. We cannot think we will get the Nation back on track without legislation to address the weaknesses in the housing market. The bill that Republicans blocked would have done one major thing: Keep families in their homes.

Beyond the economy, this goes to the very heart of our families' ability to grow and prosper. Home. Home is where we are brought from the hospital when we are born. It is home w e come to. Home is where we are nurtured as we grow. Home is where we get to celebrate, most of the time, our birthdays. Home is where, in fact, we also share moments of sorrow. Home is where we often take care of a sick or dying loved one. Home is the very essence of the American dream.

Beyond what it means to us and our families in the context of the development of our lives, home is also the single foundation of the individual American's economic ability to prosper. It is the single biggest asset mos t Americans will have in their lifetime. It is the asset they will use very often to borrow in order to educate their child and send them to college. It is the asset they may draw upon if they have a significant illness. It is the asset they will rely upon as they grow older and seek retirement.

When it means so much to us as a society, both in the personal context of what home is and the values that surround it mean, and when it means so much to us individually and collectively as communities and as a nation in terms of our economy, it is unthinkable that we could not get progress on a bill that saves the very essence of that American dream.

Yet that is what happened yesterday in the Senate. The bill that was up provides funding for counseling in order to reach and help families at risk of losing their homes. Many American families are sitting around the kitchen table looking through their mortgage bills and their finances and those bank notices. Many of them have turned to their credit cards to float their personal debt.

They are lost. They do not know where to turn. And these counselors who were part of the bill could help offer them real solutions and options to help in averting a foreclosure. Does not that make sense? It does to me. That is what the bill allows.

The bill also provided funding to allow communities with high foreclosure rates to access an existing program, community development block grants. With these funds communities can purchase foreclosed properties for rehabilitation, rent, or resale.

There are some who have said in this debate: Well, you know, those borrowers, they are responsible for making their own decisions; it has nothing to do with me. Well, for every foreclosed property in a neighborhood, those who have their properties adjacent to or nearby within that neighborhood have a decrease in value. Having a series of foreclosed properties, as we have seen in some parts of the Nation, having communities abandoned does not benefit anyone. It decreases surrounding home values; it attracts crime and vandalism.

The bottom line is that foreclosures destabilize neighborhoods.

The funds in this bill, which the Republicans have not allowed to move forward, allow communities to stop the spiral before it starts. Does that not make sense?

The bill's most controversial piece--there are many others, many others that I think we re pretty universal; that is, that should have been supported. But its most controversial piece put in by my friend, Senator Durbin, his bankruptcy provision would, in essence, change the bankruptcy law to give judges the discretion to modify loan terms for a primary residence, in essence, where you call home.

Right now the law allows for modifying those loan terms for vacation homes, something that is not your primary residence. So you can have a vacation home, a time share; you can have any other second home under existing law. If you have some financial trouble, you can actually get the bankruptcy judge to modify those terms. But when it comes to your core home, your principal residence, the place where you nurture and grow your family, oh, no, you cannot do that.

Does it make sense that we have greater value for a vacation or secondary home and less value for the primary residence of American families? That would be the equivalent of something along the line of: You can get a modification on C amp David, but you could not get any modification at 1600 Pennsylvania Avenue.

Now, of course, in this particular case, that example does create so vividly for people what we are talking about. In either case, the President does not have to pay a mortgage on either of those properties because they are owned by the American people. But my point is here is the primary residence, you cannot get any help. The secondary residence, you can get help. It does not make any sense. The thing is, most Americans do not have a Camp David, and they are asking for help to save their house on Main Street. This makes sense.

Now, the majority leader and Senator Durbin and others worked out a compromise to make sure this provision that was in the bill was even more narrowly tailored. More narrowly tailored? How so? Under their compromise, the only families who could request a court-ordered change to their mortgage are families who would otherwise lose their homes to foreclosure.

But that was not even all. It went on. It went beyond that and it said: Only those families who can pass a strict means test, their ability to pay in bankruptcy, and therefore can prove they cannot afford their current mortgage are eligible. That was not it. They went beyond that. They said: Only families who are currently struggling with what type of mortgage? Any mortgage? No. Only nontraditional and subprime loans, the very essence of the types of mortgages that have created the crisis in America that were spun out there in a way, attracting people into mortgages without the appropriate credit counseling, that they should have never been attracted into anyhow.

So the universe was further limited, further limited. And furthermore, to give the lenders some additional guarantees, if the families, after the bankruptcy judge made some decision to make an accommodation in that loan, if they sell their home after that mortgage modification, any increase in the home value would go back to whom? To the lender. So lenders would have a chance to recoup the loss in that home value.

Now, let me say, there is going to come a point in time that lenders understand that as values continue to go down and down and down, when they foreclose on a piece of property, they are not even going to get that which they, in fact, loaned against.

Is it not far better to be able to sustain a family in their home and to help that value reestablish itself over time and grow and be able to make the lender more whole than to put that family out on the street? Lende rs will come to that conclusion at some point.

So these provisions, each time more and more and more narrower, so we were talking only of a universe of those people who were being hurt, had no financial ability to pay the mortgages that they should have never gotten into, that was offered by the industry to lure them in, lower interest rates, and then reject afterwards, and with the ability to recoup any value going back to the lender, all conditions that do not exist on a secondary residence.

None o f the things I talked about are part of the law as it relates to a secondary residence; they are all about only this limited prime universe, and, of course, anyone who got a conventional mortgage, anyone who did not get a subprime mortgage or a nontraditional mortgage, they were totally, under the existing law, going to continue to be under the existing law. So we had a narrow universe.

This provision that was in the bill blocked by Republicans was not added to harm the banking industry, was not added t o hurt mortgage brokers, it was added to help homeowners save their home. This provision is only one of the ways we can help a significant number of homeowners without costing the taxpayers a dime.

It would help more than 600,000 families in bad loans keep their homes across the landscape of the country. It would help over 14,000 families in m y home State of New Jersey avoid foreclosure. That would be a savings of almost $5 million in home values. But if we do not do anything, if we sit back, we risk losing much more. In New Jersey over the next 2 years, we expect more than 57,000 homes to be lost to foreclosure. That means 57,000 families who will have to hand over their keys to their home, 57,000 families who will be forced to say goodbye to the place where they were nurtured and comforted, the place they lived with the good and bad, the place they came home to every night, the place they call home.

In the words of families who know what it feels like to lose a home, they will feel like they will have lost everything. But this is not even about those homeowners. Foreclosed properties have a ripple effect on surrounding homes and the community at large.

In New Jersey, these 57,000 foreclosed homes could cost a $10,000 decrease in the home prices of over 2 million surrounding homes. And, overall, that loss would be about $19.6 billion in home values. That is just in my home State.

The fact is, no one is immune from the ripple effect of this housing crisis. The potential loss to families and communities in New Jersey and across the Nation is far too great for us to sit this one out. I, personally, cannot stand by while Members of the Chamber play games with my home State and with the American dream of millions of people across the landscape of this country.

Collectively, we have much too much to lose. I do not know if other Members of this Chamber do not watch the news, or they do not get the same memos, but foreclosures are going to happen nationwide if we do not do something. Analysts anticipate that 2 million American families will lose their homes over the next 2 years, and 40 million of their neighbors will see their home values decline due to projected foreclosures.

When those neighbors see their home values decline as a result, their ability to borrow against their home for their kid's college education, to have the buffer in case of a major illness in their family or themselves, their ability to do all those things will be affected.

It is not time to play games and use delay tactics. The more we delay, the more homes we risk losing. Approximately 20,000 families lose their homes every week. Every week, 20,000 families see the American dream slip away. These families are struggling. They are trying to pay their mortgages, but they cannot. Most of them cannot sell or refinance. Many of them have found, in fact, the value of their properties is less than the mortgage amount. They need other options, and they are looking to the Federal Government and those who lured them, the lenders, as the first place for help.

The fact is that help simply is not there. Loan servicers could modify the loans themselves. They do not have to wait for a bankruptcy judge, would not have to wait for the Congress to act. Under existing laws, the loan officers could modify loans to make them more affordable and simply are not doing so in sufficient numbers.

A report by Moody's found that loan servicers have only modified 3.5 percent of mortgages that increased to higher rates. These are opportunities to keep people in their home, and instead of dealing with the higher rates, maybe adjust those rates in a way where they would still get a borrower who can continue to pay, wait for the value of that home to build up. But they would not make as much as in the loan they lured these individuals into. A report by the Center for Responsible Lending estimates that the administration's plan that has been put out there as the solution to this problem, to streamline modifications, is only going to help about 3 percent of homeowners, 3 percent.

As a member of the Banking Committee, I asked the Secretary of the Treasury, Secretary Paulson, when he was before us about 2 weeks ago, and yesterday Chairman Bernanke, the Chairman of the Federal Reserve: Are we willing to say 97 percent of the projected 2 million homes that are going to be lost in America, that i s a market correction?

Are we willing to accept that 97 percent of those 2 million homes that will go in foreclosure, that is acceptable as a societal value? You hear a lot about family values here. Well, I do not know of any greater family value than the place we call home and a place to call home.

Are we willing to say we will, in our overall economy, accept a 97-percent foreclosure rate as it relates to the nature of our economy and where it is headed, an economy that is stagnant in terms of growth but rising in terms of consumer costs, on gas--notwithstanding the President's lack of knowledge of it--on energy costs as a whole, on rising food prices, and lowering home values? Are we willing to say that?

Are we willing to say to 97 percent of 2 million families: Well, that is a market correction. Yet we heard the rush to get the Federal Reserve to respond to Wall Street and the concerns of shareholders. How about homeowners?

How about homeowners? That is simply not good enough.

Thousands of New Jersey families have already gone into foreclosure. Tens of thousands more are behind on their mortgage payments. How many more are we going to watch have their American dream turn into the American nightmare so many are facing. Let me put a face on these statistics: Charmain Perryman, a resident of Nunellen, NJ, she came home last fall to an eviction notice taped to her front door. Perryman, like so many others, had an adjustable rate mortgage that had reset not once but twice, rising from 7.5 percent to 11 percent. She was on the verge of losing her home. Luckily her story has a happy ending. A community development organization, similar to those we want to help through community development block grant opportunities, is buying her home from the bank and working out a payment schedule so she will be able to stay in her home and make responsible payments .

But there are too many families across the landscape of New Jersey and the country that are not realizing that opportunity. That foreclosure notice taped to their door will soon be replaced by a padlock on their door.

The Foreclosure Prevention Act, of which I am a proud cosponsor, offers real solutions for the American family, neighborhoods, and the entire economy. It would help stop the bleeding in the foreclosure crisis.

I ask Members in the Chamber to think about these families when, hopefully, they have an opportunity to vote again. What happened yesterday was embarrassing. I know some camouflage is being offered that, well, we were not going to be allowed to offer certain types of amendments. The reality is, as the majority leader made clear, all relevant amendments would be allowed. Families who are struggling, at the end of their rope, 20,000 families a week losing their homes, don't want to hear about some amendments that ultimately had nothing to do with the very essence of the housing crisis as the reason they are getting put out of their homes. All we are saying is, come to the table. Offer relevant amendments. Let's have a real discussion about how to help families avoid foreclosure. With 20,000 families losing their homes every week, 10 million on the near horizon; with an economy that is bleeding dramatically and that could go, if we do not stem the hemorrhaging, into a deep recession that would have long-term consequences for us as a Nation, both as individuals, families, communities, and collectively, it is not something with which we can afford to play procedural games.

I look forward to next week having a new opportunity, fresher minds' reflection, and an understanding of the grave consequences before us, and an opportunity to rescue--not to do a Government bailout but to rescue--the opportunity of the American dream being snatched away by the American nightmare.

I yield the floor.

Source