3/03/2011 — 

Mr. President, today I am introducing the Preserving Homes and Communities Act. I introduced an earlier version of this legislation in 2009. I am pleased to again be joined by Senators Durbin, Leahy, Merkley, Whitehouse, and Franken as cosponsors of this bill.

   The sheer number of foreclosures across the country is startling. Since the beginning of 2009, there have been approximately 5 million foreclosures, and the Center for Responsible Lending estimates there will be a total of 9 million foreclosures between 2009 and 2012. In my home state of Rhode Island, the numbers are similarly shocking because 1 in every 10 mortgaged homeowners is in foreclosure or seriously delinquent on their mortgage payment.

   Rhode Island families have felt the effects of the recession and the national housing crisis harder than most, which is why I worked with the Obama Administration and led the effort to expand the Hardest Hit Fund to include Rhode Island. This program is just getting underway, and my hope is that it will provide much needed targeted assistance to struggling homeowners and expand the number of loss mitigation tools in order to prevent more Rhode Islanders from falling into foreclosure.

   Unfortunately, additional efforts are needed because the foreclosure crisis has grown in complexity as a result of the revelations last fall pointing to poorly handled, if not illegal, foreclosure processing. Cutting these corners at the risk of severe legal consequences raises serious questions about not only the value of mortgage related investments, but also the loan modification efforts of servicers.

   I will persist in my efforts to fight improper foreclosures and to bring Rhode Islanders the relief they deserve, and this commitment continues today with the introduction of the Preserving Homes and Communities Act. This bill has been updated and enhanced from its predecessor in the last Congress to reflect the fact that some provisions have been enacted into law and to address emerging issues that are standing in the way of saving as many homes as possible.

   Most importantly, this bill, like the one I introduced in 2009, eliminates the so called ``dual-track'' in which a homeowner is evaluated for a home loan modification while simultaneously being foreclosed upon. The prospect of losing one's home is daunting enough, and unfortunately, too many troubled homeowners have received a modification notice one day followed by a foreclosure notice the next day. This is just too confusing and injects additional uncertainty at the most unnerving time for a troubled homeowner. Simply put, there should be no dual track. There should be one track, and while a troubled homeowner is being evaluated for a loan modification, they should have the comfort of knowing that foreclosure proceedings will not be initiated. This bill establishes this single track.

   Second, in light of the repeated difficulties that troubled homeowners have faced in contacting and remaining in touch with their servicers, this bill continues to provide a means for more State and local governments to establish mediation programs. These programs provide a process by which a neutral third party presides over discussions between homeowners and servicers to review and discuss alternatives to foreclosure.

   Third, with this bill, I continue my efforts to fund the National Housing Trust Fund, which would enable the building, preservation, and rehabilitation of affordable rental housing through the proceeds received from the warrant provisions I crafted for the financial rescue package in 2008. These warrant provisions ensured that as banking institutions recovered from their near collapse, American taxpayers, who bankrolled their recovery, would also benefit from the upside. To date, more than $8 billion in warrant proceeds have been recouped by taxpayers. As I have stated before, my view is that some of these returns from providing a firmer foundation for our financial institutions would be put to good use by providing a firmer foundation for affordable rental housing in our country by finally funding the National Housing Trust Fund.

   This bill also has several new provisions. First, in response to repeated concerns that the loan modification process has been lacking in transparency, this bill creates a dispute resolution mechanism within the loan modification process itself. Under this bill, troubled homeowners and servicers may work out their disagreements with a neutral third party on a fair playing field with all the information required to evaluate whether a home loan modification application was properly evaluated.

   Second, this legislation addresses the recent robo-signing allegations by requiring servicers, if a home loan modification is denied, to prove that they actually have the legal right to foreclose.

   Third, this bill responds to difficulties faced by individuals who, for example, have come to own and live in a mortgaged home through the death of a loved one. These unfortunate life events are tough enough. As long as these individuals live in these homes as their primary residences and are having difficulties paying their mortgages due to financial hardship, they too would have to be evaluated for a loan modification before banks could foreclose under my legislation.

   Fourth, this bill adds another provision to the section placing reasonable limits on foreclosure fees and costly markups by prohibiting abusive fees charged in response to lapsed home insurance policies. Under this bill, when a home insurance policy lapses, the servicer may only charge a fee in an amount equal to the cost of continuing or re-establishing the home insurance policy. No more, and no less.

   Lastly, I think it's important to make one final point about this bill. It provides the means for servicers to legitimately evaluate struggling homeowners for loan modifications, but it does not require servicers to work with homeowners who have clearly abandoned their homes, as determined by the Secretary of Housing and Urban Development. This bill is narrowly and responsibly tailored to prevent foreclosures that can be avoided and to ensure that all finalized foreclosures are properly and objectively processed. In short, this legislation is fair.

   The foreclosure crisis has persisted for far too long, and it is time to finally address this issue once and for all. The Preserving Homes and Communities Act provides a path to stabilizing the housing sector as a means of bolstering and sustaining our economic recovery. I hope my colleagues will join me and Senators Durbin, Leahy, Merkley, Whitehouse, and Franken in supporting this bill and taking the legislative steps necessary to address foreclosures.