Mr. President, in the absence of the majority leader, who will be here a little later, I have been asked to say that following leader remarks, the Senate will resume consideration of S. 896, a bill…
Mr. President, in the absence of the majority leader, who will be here a little later, I have been asked to say that following leader remarks, the Senate will resume consideration of S. 896, a bill to prevent mortgage foreclosures and enhance credit availability. We hope to reach an agreement today on a finite list of amendments--the leader does.
We have been working at that, I can say to the Presiding Officer, so we can complete the bill on Tuesday.
There will be no rollcall votes today. Senators should expect the first vote on Monday to begin at approximately 5:30 p.m. Senators should note we could have more than one vote Monday evening.
With that, I see my colleague from Oklahoma.
Mr. President, the pending business before the Senate is S. 896, the Helping Families Save Their Homes Act. I would like to take a few minutes and review the provisions of this bill that Senator Shelby of Alabama and I have offered in the form of a substitute. It is similar to the original bill, but there are some changes. We have been told there are somewhere in the neighborhood of a dozen amendments, maybe a little less, that our colleagues have proposed. We are trying to work out a finite list of amendments, to consider them on Monday, with the hope of getting to conclusion of this bill either by Monday or Tuesday--Monday may be a little optimistic but by Tuesday to be able to complete work before moving on to other business.
This is a very important piece of legislation. Many of our residents and citizens are deeply concerned about the foreclosure problems. I have repeated the numbers over and over. I suspect many people are aware, but 10,000 people a day run the risk of losing their homes through default or the auction process. Those numbers have not been shrinking at all. In fact, there are estimates that the numbers may actually increase.
We have tried over the last 2 years any number of steps to reduce and mitigate the foreclosure problem, including inviting the major lending institutions to step up and voluntarily talk about mitigation. That process began as early as the late winter of 2007 and the spring of 2007. Regretfully, those institutions did little or nothing to try to mitigate this problem.
In fact, the previous administration refused to accept the magnitude of the problem, despite overwhelming evidence, even in early 2007, that the foreclosure issue was going to mushroom
far beyond early predictions. Of course, that is exactly what has happened.
Today, most analysts tell us that while there are a lot of elements that contributed to the present condition the economy is in, no one disagrees that a major source of economic hardship began with the residential real estate market. This problem will not be solved until we get to the bottom of it. While there are a lot of other issues to talk about, and we are doing that, until this issue of keeping people in their homes at rates and mortgages they can afford is resolved, this problem will persist.
The legislation Senator Shelby and I offer, along with the support of committee members--and I note the Presiding Officer is a very distinguished member of the committee--is to try to offer some relief. I will explain briefly the provisions of the bill. I invite my colleagues to review it and, hopefully, be supportive on Monday or Tuesday when we try to reach final passage.
We expand the ability of the Federal Housing Administration and rural housing to modify loans. Servicers of the Federal Housing Administration and rural housing do not have the same ability to modify these Federal Housing Administration or USDA loans as they do for non- Government loans they service. Our legislation authorizes the Department of Housing and Urban Development and the U.S. Department of Agriculture to give these servicers the opportunity and incentive to participate in the Obama Loan Modification Program or to otherwise modify the loans in ways that are not presently available to distressed homeowners, including reducing interest rates, reducing principal, or stretching out the terms of these Government-insured loans. This is a major provision of the bill. To be able to provide the FHA and USDA with the authority to expand these opportunities can bring a tremendous amount of relief to people under those programs.
Secondly, we expand the access to the HOPE for Homeowners Act. This was legislation we adopted last summer. The legislation makes a number of changes to the HOPE for Homeowners Program to make it more user friendly and effective, including the option to lower fees, streamlining borrower certification requirements, giving the Secretary of Housing and Urban Development limited discretion to determine the amount and the distribution of future appreciation. It bans millionaires from the program and allows for incentive payments to servicers and originators who participate in the program.
The HOPE for Homeowners Act that passed overwhelmingly here, while the intentions for the bill were high, the reality is, the bill didn't even come close to achieving the goals those of us who crafted it thought it would. We have listened to a lot of people over the last number of months as to what could be done to make the proposal more effective and efficient to reach more people. The proposals I have mentioned were the ideas we have accumulated that we believe, and others believe, should make the program far more effective. It will not solve all the foreclosure problems, but it will be a major step in the right direction.
Thirdly, the bill creates more enforcement tools for the Federal Housing Administration to eliminate bad lenders. The bill empowers the Secretary of HUD to expeditiously drop lenders that break Federal Housing Administration rules, including, one, by authorizing the Department of Housing to go after lenders that break the rules but then withdraw from the program to avoid enforcement actions. We put a stop to that. We crack down on the misuse of FHA insurance issued on mortgages originated through unapproved third-party entities, and we authorize HUD to impose penalties on entities that misuse the Federal Housing Administration Ginnie Mae designations, another important housing program.
Fourth, this bill provides a safe harbor for servicers who modify a loan consistent with the Obama plan or refinance a borrower into a HOPE for Homeowners loan. This is a somewhat controversial provision because we end up having a contest between investors and bankers.
The problem is simply this: Even as more and more homeowners have fallen behind in their loans, the response of loan servicers has been inadequate to the issue. In part, their reason for not responding is because they fear they will be sued by investors or competing interests for doing so. The House of Representatives passed a very broad safe harbor provision, very similar to the one our colleague from Florida, Senator Martinez, offered and passed by a voice vote in this body as part of the Senate-passed stimulus bill several months ago. The provision was dropped in conference. The safe harbor provision in this bill is much more narrowly drawn than was the proposal by Senator Martinez. I thank him for it. He was very creative in offering the idea, but there were concerns raised that it was too broad, that we should make it more narrow in its application. So as to not disadvantage investors where they have a legitimate complaint and provide a safe harbor for those who don't deserve it, the safe harbor we crafted is much more narrowly drawn than the House provision or the one that passed the Senate in order to ensure that only servicers that provide modification consistent with the Obama plan get the benefit of the safe harbor.
In addition, this bill ensures that the HOPE for Homeowners refinances are covered as well. That will not satisfy all of the investor community, but it is far better than what was in the House bill or previously authored.
The fifth provision of this bill authorizes an additional $130 million for foreclosure prevention activities. We owe a special thanks to the majority leader, Senator Reid, for its inclusion. He has been consistent over the months that I have been involved in these issues since becoming chairman of the Banking Committee 2 years ago, along with Senator Schumer and others, about providing additional resources for counseling. This bill provides these additional moneys. We have found in the past that where consumers are aware of what is available to them and they get advice as to how to proceed, we are able to reduce the problems of people losing their homes. Once you are in the foreclosure legal web, it is very difficult to help people. Once you are in that court setting, it is hard. So the goal is to try to catch individuals who qualify for some assistance, who would qualify for some relief before they end up in the legal bureaucracy. That is why counseling services have been so valuable over the last number of months, because they have been overwhelmed by the amount of work.
I know in my case, the head of my office in Connecticut, who has been with me for many years, literally every morning he arrives at work, he has e-mails--30, 40, 50 a day--from constituents seeking help because they fear they are about to lose their homes. I know other congressional offices as well as, of course, counselors are also being inundated with requests for help. Obviously, getting good counseling, good solid advice, is important. Senator Reid has provided a very valuable contribution to this legislation with this proposal.
The sixth provision of this bill extends the $250,000 deposit insurance level for 4 years. Presently, that level would expire at the end of this year under an agreement reached earlier with the Chairperson of the Federal Deposit Insurance Corporation. Most people are aware that normally deposits are insured up to $100,000 per account. However, the Emergency Economic Stabilization Act increased coverage through the end of this year. This legislation extends the higher deposit insurance limit for banks, thrifts, and credit unions to the year 2013.
Deposit insurance has been a stabilizing force in our banking system since its inception in 1933. It is worth noting that the Federal Deposit Insurance Corporation originated in the Depression years. There were three things done at that time that had as much to do with the 60 years of relative stability in our economy. One was the formation of the Securities Exchange Commission, which played a very valuable role in beginning to govern those markets and to prohibit or limit some of the wildcatting that went on that created in good part the Depression of the 1930s.
Secondly was Glass-Steagall, which has been controversial with the separation of commerce and banking. We have begun to blur those lines. I was
involved in that effort back a number of years ago when we dealt with the Community Reinvestment Act. Like everyone else in this Chamber, I suspect if we were all asked if we could have anything back and redo, I wish that was one we could go back and revisit. Candidly, it seemed reasonable at the time, the firewalls. But, frankly, I think we could have done a little more to protect and separate those activities.
Third, in addition to the SEC and Glass-Steagall was the FDIC, the Federal Deposit Insurance Corporation--the run on banks. The very day Franklin Roosevelt took office in March of 1933--do not hold me to this number, but something like 5,000 banks declared a holiday, and there was a substantial run. People were frightened they were going to lose the savings they had accumulated, the deposits they had invested or put in these banks.
The Federal Deposit Insurance Corporation, providing that insurance to people that their accounts would be protected in an economic difficulty, had as much to do, if anything, in providing the kind of stability we have seen over the years. But that level of $100,000 has been around for a while. I forget how long, but it goes back several decades--well, 1980. My good friend and colleague in the Chamber, Jonathan Miller, tells me it has probably been since the 1980s for the $100,000, maybe even earlier. So there has been a desire to move this level up with good cause, even in the absence of the predicaments we are in.
So for those reasons, we raised it. I, for one, would have preferred we almost make it permanent--the $250,000--but others wanted to restrain this by the amount of time, and I respect their judgment. So there was a debate whether it should be 1 year or permanent. We settled on 4 years. My sense is, we are not going to roll this back in 4 years; it is going to be at least $250,000.
So for those out there who are concerned about whether there is enough certainty in all of this, while I know they would have preferred a permanent increase, when you are serving with 99 other colleagues here and you are trying to get things done, you have to make some compromises. So the chairman would have liked it permanent, some of my good friends in this Chamber wanted far less than that, and we settled on 4 years. That is the reason that timeframe has come up.
This is going to be tremendously important. The significant extension of the increase in deposit insurance will be especially helpful to smaller financial institutions in our respective States that are worried there would be a run from these institutions, including community banks that derive 85 to 90 percent of their funding from deposits.
So to the community bankers across the country that rightly have been disappointed that every time we talk about banks, we fail to distinguish between the more conservative, responsible activities of our community bankers across the country and the activities of other financial institutions that have had far less than that level of responsibility--so to our friends in the community banking system across the United States: We heard you on this. Many of you would have preferred a permanent raising. I agree with you about that, but this is the best I could do with this bill. It will not roll back, in my view. Eventually, I think we will make this permanent. For the time being, it is 4 years.
By helping community banks protect and grow their deposit bases, this legislation contributes to the effort to improve the availability of capital for lending. That, of course, affects small businesses, microbusinesses, and our constituents across the country. So while this is seen as some security and stability, particularly in the community banking system, this also is very important to small businesses and investors and depositors as well. That is why this legislation needs to be seen in the full context of those who will benefit from it--not only those facing foreclosure but obviously businesses that need borrowing, need that capital to stay alive, let alone try to expand and grow during these difficult times.
The eighth provision of this bill increases the permanent borrowing authority for both the Federal Deposit Insurance Corporation and the National Credit Union Administration. The bill increases the permanent borrowing authority for the FDIC from $30 billion to $100 billion. It has been since the 1990s--I think 1991, if I am not mistaken, was the time we settled on the $30 billion. It has been since then that there has been--actually long before this economic crisis--a desire to raise that borrowing authority level. So in this bill, we raise the authority from $30 billion to $100 billion. In the credit unions, we raise it to $6 billion.
We establish temporary additional borrowing authority from the $100 billion to $500 billion in the case of the FDIC and from $6 billion to $30 billion in the case of the National Credit Union Administration, to which the regulators may gain access only with--by the way, you only get beyond that $100 billion with the FDIC or beyond the $6 billion if you are part of the National Credit Union Administration if you are able to get the following agreements: The regulators may gain access only with a two-thirds vote by the Federal Deposit Insurance Corporation or the National Credit Union Administration, a two-thirds vote by the Federal Reserve Board, and agreement by the Secretary of the Treasury, in consultation with the President of the United States. Again, you have to have a two-thirds vote by the Federal Reserve Board, a two-thirds vote by the FDIC or National Credit Union Administration, approval by the Secretary of the Treasury, in consultation with the President of the United States. I hope my colleagues would feel those are enough safeguards that you would not find regulators being able to raise those amounts without going through some significant hoops, and the circumstances would have to be such that these various offices would agree.
FDIC--Federal Deposit Insurance Corporation--Chairman Sheila Bair has said that the temporary authority would allow the FDIC to reduce the special assessments on banks by as much as 50 percent, increasing lending by as much as $75 billion.
Again, going back to our banking community and their concerns about assessments, the fact that we are doing it, reducing those assessments by as much as 50 percent, is no small achievement. Again, it is real relief. By doing so, there is the likelihood these institutions can provide additional lending because those assessments will not be too high, which helps small businesses and borrowers across the country. Again, it is not unlike raising insurance levels.
We think these provisions will also make a great contribution to getting lending going again. The one thing we all hear from our constituents over and over again is: We are having a hard time accessing capital. So we hope these provisions will provide some additional relief in that area.
The ninth provision of this bill stretches out the payment of assessments to rebuild the bank, thrift, and credit union deposit insurance funds to 8 years. This is a very important provision. Again, it goes and relates to the last two provisions I talked about because, again, while we think we are providing some relief in terms of the amount of assessments, over what period of time you have to pay them is also a critical issue for these smaller lending institutions. By doing what I have just suggested--stretching it out to 8 years--community banks and credit unions will be able to devote more of their resources to making loans in the communities they serve.
This provision is especially important for credit unions because of the way their deposit insurance system is structured; otherwise, these institutions would have to rebuild their fund in 1 year, which could lead to a severe reduction in lending. So it is a major provision for both community banks and credit unions but particularly in the case of credit unions.
The 10th provision of the bill improves the FDIC's systemic risk special assessment authority. Again, it is related to the last three provisions I have mentioned. The Government's recent use of its systemic risk authority benefited large bank holding companies and their nonbank affiliates, shareholders, and creditors as well. Yet to recover any losses from systemic risk, the FDIC may now only charge banks and thrifts themselves. Obviously, this would unfairly burden community and other traditional banks, particularly
those with few or no nonbank activities.
What we have done in this bill would allow the FDIC, with the Treasury Secretary's concurrence, to directly assess bank holding companies if they stand to benefit from the Government's actions and correspondingly to reduce the cost to our community banks. Again, this is a major provision. It is a technical one, maybe, to many, but again, since a lot of these institutions do not have any nonbanks--and therefore run the risk in the absence of this provision--they could end up being assessed for those charges. This would allow the Secretary of the Treasury and the regulators to seek those assessments for the institutions that ought to be assessed since they are the ones benefiting from that program.
So these provisions, while they are technical in nature, I say to my colleagues--and they are not the kinds of issues you can explain necessarily in a quick sentence before a townhall meeting--let me tell you, they are very important. Are they going to solve the economic crisis? Absolutely not. Are they going to make a difference? Absolutely. Absolutely. So while this bill does not get the same degree of notoriety that others have, it is a critical component to getting our economy moving again.
For those of you who have heard--as I have heard over and over--from our community bankers, our community small businesses: Where is the lending, we think this bill, while it is not going to cause a floodgate to open in terms of lending, it lifts a lot of those barriers and restraints that people have otherwise felt when it comes to lending practices.
So do some of these community banks and thrifts and credit unions benefit as a result of this? Yes, they do. But let me remind you, when they do, the borrowers, the homeowners, the small businesses who are desperate for that lending, that capital, or to mitigate foreclosure, are a direct beneficiary of this legislation. So this is a bill where literally both the lending institutions and the borrowers are direct beneficiaries, and one of the reasons I think it is so important we try to adopt this as quickly as we can.
My hope is that on Monday or Tuesday we will be able to handle a few of these amendments, some of which have nothing to do with this bill. We have to deal with the TARP money and others things, and I appreciate people's concerns about that issue. But let's not miss an opportunity now to get this right.
If this bill becomes loaded down with a lot of other amendments--and I am always hesitant to speak for the majority leader, but in my conversations with him, he has indicated he is not going to spend forever on this. We will come back to it--recognizing that at some point, whether it is later this summer or next fall or maybe next winter, we could come back to this, I think that would be a tragedy because I think we can get this done. Senator Shelby and I have worked hard on a bipartisan basis to put this legislation together. We have a very good Banking Committee that has worked on this legislation as well. And I think we would miss an opportunity not to get this done.
So to my colleagues who would like to bring up a lot of other issues--and I do not question their motives or sincerity behind those ideas that have little or nothing to do with this--I would urge restraint or we may run the risk of losing an opportunity to get this bill done.
There are a lot of other matters before this body that the leader has to get up for consideration. He cares deeply about this issue, as I have evidenced by the fact that he has contributed directly to this bill. But he also has other matters that deserve our attention. He has provided me the opportunity, along with Senator Shelby, to get this bill done. Let's not miss this opportunity.
People talk about bipartisanship, working together. That is exactly what Senator Shelby and I have done with our respective staffs to produce this product. It is not exactly everything Senator Shelby would agree on. It is not everything I would agree on. But together we feel this is a product that deserves the support of our colleagues.
Let me, lastly, if I can, suggest to you that there are a number of very diverse groups that support our efforts. The Center for Responsible Lending is a strong advocate of this bill. The Credit Union National Association supports this bill. The Independent Community Bankers Association strongly supports this bill. The National Consumer Law Center supports this legislation. The American Bankers Association, the National Association of Consumer Advocates supports this bill, the Financial Services Roundtable, and the Housing Policy Council. To those who think this is just another list of organizations, let my remind those who are not familiar with these organizations, that is a very diverse list. You do not normally find consumer groups and the American Bankers Association, community bankers and the Center for Responsible Lending all agreeing on a bill. Yet that is exactly what has occurred with this legislation. So if you have any doubts about the importance of it, I would invite my colleagues to contact any of these organizations and ask them how significant this bill is.
Technical, it may be, in nature, and yet it is these technical corrections and improvements which can make a difference in the lives of our fellow citizens who are anxious--to put it mildly--that we step up and get the job done, get our economy moving again, restore our optimism and confidence as a people, and provide the kinds of steps that will move us in that direction.
Mr. President, lastly, I ask unanimous consent that letters of endorsement from various organizations I have just recited be printed in the Record.
Mr. President, I thank the Presiding Officer, and I yield the floor.
I suggest the absence of a quorum.