Floor Statement Introducing the Homeownership Protection and Enhancement (HOPE) Act
MR. REED: Mr. President, today I introduce the Homeownership Protection and Enhancement Act of 2007, HOPE Act. This legislation would reauthorize and amend Section 106 of the Housing and Urban Development Act of 1968, so that we can improve on Federal efforts to support and sustain homeownership.
As we all know, during the past several years, housing prices in cities and States around the country have far outpaced any increase in wages. Families have been stretching themselves financially to get into homeownership, and many families have started using alternative or exotic mortgages loan products to purchase their homes.
According to First American Loan Performance, in 2006, in my own State of Rhode Island, nearly 16 percent of all home-purchase loans were "interest only." However, as home prices have declined, many people who took out these exotic loans are now finding they owe more than the value of their property.
The Center for Responsible Lending estimates that nationally one in five subprime loans originated during the prior 2 years will end in foreclosure, costing homeowners $164 billion, mostly in lost equity.
It appears that we are just at the beginning of what could be a perfect storm, as many credit-stressed borrowers still face resets of these exotic adjustable-rate and payment option loans. There were 1.2 million foreclosures reported nationwide last year, up 42 percent from 2005, according to RealtyTrac, a database of foreclosed properties. RealtyTrac also reports 430,000 foreclosure filings in the first quarter of 2007, a 35 percent jump over the same period in 2006.
The increasing rate of foreclosures across the country is troubling. Not only are individual families losing their homes and their financial nest eggs, but there is a negative ripple effect across communities and the economy. That is why I am introducing the Homeownership Protection and Enhancement Act, or HOPE Act.
This bill seeks to help states establish and enhance outreach programs to proactively find homeowners at risk of losing their homes and help them avoid foreclosure. States will be rewarded for having set up effective programs to help curtail foreclosures with additional funding and resources. An incentive is provided for more states to follow suit and reach out to delinquent borrowers, offer them access to financial counseling, and, when appropriate, help them negotiate a plan to restructure their debt.
In particular, the HOPE Act provides $50 million for the creation and operation of State Homeownership Protection Centers. The centers can serve as a one-stop resource, offering consumers a broad range of services and assistance, such as financial assessments, counseling, or referrals to families in need. It authorizes $260 million in competitive grants to States who operate State Homeownership Protection Centers for revolving loan funds to offer one-time grants or subsidized loans to qualified families. It increases funding to $300 million for effective HUD-approved counseling agencies. Finally, it sets aside $5 million for the creation of a Federal database on defaults and foreclosures to improve oversight of public and private efforts to sustain homeownership.
In addition, to help prevent future borrowers from taking on unsustainable mortgages and falling into foreclosure, the HOPE Act would create an affirmative duty for lenders and servicers to engage in reasonable loss mitigation prior to foreclosure. It would also require notifications by lenders and servicers to borrowers regarding the full array of counseling services available in their State at every critical step, at application, at closing, and upon delinquency. Finally, if a State has a State Homeownership Protection Center, lenders and servicers would be required to refer borrowers who are 60 days or more delinquent to the center so that it can proactively attempt to reach distressed borrowers.
I am introducing the HOPE Act because when homes get foreclosed on, it is not just the borrowers and lenders who pay the price, whole neighborhoods suffer. Housing industry experts estimate that for every foreclosure within an eighth of a mile of a house, two and a half city blocks in every direction, the property value of surrounding homes drops by about 1 percent. I believe that the federal government has a responsibility to step in and ensure that millions of Americans, including neighbors who never took out a risky loan and have scrimped and saved to pay their bills on time, are not adversely affected by the subprime foreclosure crisis.
This legislation is targeted relief that will help more families keep their homes and save communities nationwide millions of dollars. We need to act swiftly before personal financial tragedies turn into a full blown national financial crisis.
The HOPE Act will set us on the path to meeting an important national goal, creating sustainable homeownership. I hope my colleagues will join me in supporting this bill and other foreclosure prevention efforts.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.