Wait a minute. Can we get a little history lesson here? Does anybody remember the $700 billion that we gifted to the banks? When they were on their knees, they took Federal money. Many of us voted against it because we wanted to know what…
Wait a minute. Can we get a little history lesson here? Does anybody remember the $700 billion that we gifted to the banks? When they were on their knees, they took Federal money. Many of us voted against it because we wanted to know what was going to happen to the American public.
Why is my friend talking about the young people who were hurting in the administration before us? They hurt more than young people. They told us that we needed $700 billion of government money to give to the banks. We asked the banks to voluntarily modify the loans. We begged them to do it. We worked with them. We spoke with them. They did not do it.
Today, we vote for the little person, for the individual who has been responsible, who has been working like a constituent in my constituency for 18 years as a cafeteria worker, saving up money, who has got a small bungalow, but it was at an adjustable rate. That's not that lady's fault. She is still working, but she has fallen behind. She will go into court under this bill. She will be able to use the FHA and VA. They will be able to look to voluntarily modify before the court.
The only thing that this does is it allows, after all things have happened, for you to be able to go into the courthouse, stand before a judge and be assessed on your own responsibility. We have a manager's amendment. If there's any profit to be made, it goes back to the lender, to the bank. Mr. Bank and Mrs. Bank, why didn't you do this on your own? We would have preferred you to have done it.
I'm looking forward to introducing legislation where, for people who've been responsible and who go in to redo their mortgages, their issue will not be part of their credit score, of their potential foreclosure, of their back payments, because it is not their fault. We've fallen into a crisis, into an abyss.
So, my friends, I don't know how we can stand on the other side of the aisle talking about the poor little banks. We asked the banks to reorder people's mortgages. People in my district begged for them to do so, but when they called, there was nothing but a 1-800 number.
Support this legislation. It's the little fellow's day today. We want people to save their homes. We're saving America.
Mr. Chairman, I rise in strong support of H.R. 1106, ``Helping Families Save Their Homes in Bankruptcy Act of 2009.'' I would like to thank Chairman Conyers of the House Judiciary Committee and Chairman Barney Frank of the Financial Services Committee for their leadership on this issue. Mr. Chairman, I urge my colleagues to support this bill because it provides a viable medium for bankruptcy judges to modify the terms of mortgages held by homeowners who have little recourse but to declare bankruptcy.
This bill could not have come at a more timely moment. Just a day after the President's address before the Joint Session of Congress where President Obama outlined his economic plan for America and discussed the current economic situation that this country is facing.
To be sure, there are many economic woes that saddle this country. The statistics are staggering.
Home foreclosures are at an all-time high and they will increase as the recession continues. In 2006, there were 1.2 million foreclosures in the United States, representing an increase of 42 percent over the prior year. During 2007 through 2008, mortgage foreclosures were estimated to result in a whopping $400 billion worth of defaults and $100 billion in losses to investors in mortgage securities. This means that one per 62 American households is currently approaching levels not seen since the Depression.
The current economic crisis and the foreclosure blight have affected new home sales and depressed home value generally. New home sales have fallen by about 50 percent. One in six homeowners owes more on a mortgage than the home is worth raising the possibility of default.
Home values have fallen nationwide from an average of 19% from their peak in 2006 and this price plunge has wiped out trillions of dollars in home equity. The tide of foreclosure might become self-perpetuating. The nation could be facing a housing depression--something far worse than a recession.
Obviously, there are substantial societal and economic costs of home foreclosures that adversely impact American families, their neighborhoods, communities and municipalities. A single foreclosure could impose direct costs on local government agencies totaling more than $34,000.
I am glad that this legislation is finally on the floor of the United States House of Representatives. I have long championed in the first TARP bill that was introduced and signed late last Congress, that language be included to specifically address the issue of mortgage foreclosures. I had asked that $100 billion be set aside to address that issue. Now, my idea has been vindicated as the TARP today has included language and we here today are continuing to engage in the dialogue to provide monies to those in mortgage foreclosure. I have also asked for modification of homeowners' existing loans to avoid mortgage foreclosure. I believe that the rules governing these loans should be relaxed. These are indeed tough economic times that require tough measures.
Because of the pervasive home foreclosures, federal legislation is necessary to curb the fallout from the subprime mortgage crisis. For consumers facing foreclosure sale who want to retain their homes, Chapter 13 of
the Bankruptcy Code provides some modicum of protection. The Supreme Court has held that the exception to a Chapter 13's ability to modify the rights of creditors applies even if the mortgage is undersecured. Thus, if a Chapter 13 debtor owes $300,000 on a mortgage for a home that is worth less than $200,000, he or she must repay the entire amount in order to keep his or her home, even though the maximum that the mortgage would receive upon foreclosure is the home's value, i.e., $200,000, less the costs of foreclosure.
Importantly, H.R. 1106 provides for a relaxation of the bankruptcy provisions and waives the mandatory requirement that a debtor must receive credit counseling prior to the filing for bankruptcy relief, under certain circumstances. The waiver applies in a Chapter 13 case where the debtor submits to the court a certification that the debtor has received notice that the holder of a claim secured by the debtor's principal residence may commence a foreclosure proceeding against such residence.
This bill also prohibits claims arising from violations of consumer protection laws. Specifically, this bill amends the Bankruptcy Code to disallow a claim that is subject to any remedy for damages or rescission as a result of the claimant's failure to comply with any applicable requirement under the Truth in Lending Act or other applicable state or federal consumer protection law in effect when the noncompliance took place, notwithstanding the prior entry of a foreclosure judgment.
H.R. 1106 also amends the Bankruptcy Code to permit modification of certain mortgages that are secured by the debtor's principal residence in specified respects. Lastly, the bill provide that the debtor, the debtor's property, and property of the bankruptcy estate are not liable for a fee, cost, or charge incurred while the Chapter 13 case is pending and that arises from a debt secured by the debtor's principal residence, unless the holder of the claim complies with certain requirements.
I have long championed the rights of homeowners, especially those facing mortgage foreclosure. I have worked with the Chairman of the House Judiciary Committee to include language that would relax the bankruptcy provisions to allow those facing mortgage foreclosure to restructure their debt to avoid foreclosure.
manager's amendment
Because I have long championed the rights of homeowners facing mortgage foreclose in the recent TARP bill and before the Judiciary Committee, I have worked with Chairman Conyers and his staff to add language that would make the bill stronger and that would help more Americans. I co-sponsored sections of the Manager's Amendment and I urge my colleagues to support the bill.
Specifically, I worked with the Chairman Conyers to ensure that in section 2 of the amendment, section 109(h) of the Bankruptcy Code would be amended to waive the mandatory requirement, under current law, that a debtor receive credit counseling prior to filing for bankruptcy relief. Under the amended language there is now a waiver that will apply where the debtor submits to the court a certification that the debtor has received notice that the holder of a claim secured by the debtor's principal residence may commence a foreclosure proceeding against such residence.
This is important because it affords the debtor the maximum relief without having to undergo a slow credit counseling process. This will help prevent the debtors credit situation from worsening, potentially spiraling out of control, and result in the eventual loss of his or her home.
Section 4 of the Manager's Amendment relaxes certain Bankruptcy requirements under Chapter 13 so that the debtor can modify the terms of the mortgage secured by his or her primary residence. This is an idea that I have long championed in the TARP legislation--the ability of debtors to modify their existing primary mortgages. Section 4 allows for a modification of the mortgage for a period of up to 40 years. Such modification cannot occur if the debtor fails to certify that it contacted the creditor before filing for bankruptcy. In this way, the language in the Manager's Amendment allows for the creditor to demonstrate that it undertook its ``last clear'' chance to work out the restructuring of the debt with its creditor before filing bankruptcy.
Importantly, the Manager's Amendment amends the bankruptcy code to provide that a debtor, the debtor's property, and property of the bankruptcy estate are not liable for fees and costs incurred while the Chapter 13 case is pending and that arises from a claim for debt secured by the debtor's principal residence.
Lastly, I worked to get language in the Manager's Amendment that would allow the debtors and creditors to get to negotiate before a declaration of bankruptcy is made. I made sure that the bill addresses present situations at the time of enactment where homeowners are in the process of mortgage foreclosure. This is done with a view toward consistency predictability and a hope that things will improve.