An Oregon Perspective: Securing Financial Stability through Home Ownership

During my time as Director of Portland Habitat for Humanity, I saw how home ownership transformed families.  I had the privilege to work side-by-side with parents who put in thousands of hours and enormous effort to build a safe home for their children.  A home provides the foundation for families to thrive and for children to reach their full potential.  Right now in America, this basis of financial security for families is being threatened by a series of three entangled financial crises: a job crisis, a lending crisis, and a mortgage crisis.

This past week, we took a major step toward economic recovery by passing a significant economic growth package.  The American Recovery and Reinvestment Plan will create jobs, provide tax relief to working families, and invest in our long-term economic future.

This plan is not a complete solution to the challenges facing working families, but it does provide a means to create American jobs and halt our current economic freefall.

The next major challenge before us is to provide assistance to American families caught up in the mortgage crisis.  More Americans lost their homes to foreclosure in 2008 than in any year since the Great Depression and with Americans currently losing their homes at a rate of almost 50,000 per week, economists are predicting millions more foreclosures over the next few years.  These foreclosures are not only disasters for the families involved, but for communities, banks, and the entire economy.

One of the major reasons we are in this sinking mortgage situation is that a huge number of families who actually qualified for prime loans were instead advised to take out high-cost subprime loans.

When home buyers started looking at mortgages, many did not know that mortgage brokers who they thought were helping them would in fact receive bonuses for directing people towards expensive and risky loans.  If you have a realtor, you know whether they work for the home buyer or the home seller.  But mortgage brokers do not have to disclose who signs their paycheck.  This has been damaging for families who wound up with unaffordable mortgages, but it’s also proven devastating for the economy as a whole.  We need to ban these types of steering payments and make it mandatory for brokers to disclose who they are working for.

We also need to put an end to prepayment penalties that trap families in loans with ballooning interest rates.  Families are enticed into certain loans by low interest rates and are then stuck in those loans when the interest rate skyrockets.

One other way we can assist homeowners at risk is to allow homeowners to renegotiate the terms of their loan as an alternative to foreclosure.  Current law allows federal bankruptcy judges to modify the terms of debt repayment for luxury items like sports cars, yachts, and vacation homes, but it doesn’t allow families to restructure their mortgages.  To rectify this discrepancy, I have co-sponsored legislation with Senator Durbin of Illinois to provide judges with greater power to modify existing mortgages, giving many families a chance to avoid foreclosure and keep their home under new terms. This type of case-by-case mortgage modification process can be effective for some families, but unfortunately the process is too slow to be of help to many homeowners.  It is clear that we need to put in place a broad mortgage modification program that would allow millions of homeowners to reduce their monthly mortgage payments and keep their homes.

I have been urging the Obama Administration to use a significant portion of the second half of the Troubled Asset Relief Program (TARP) funds to support these types of modifications to unsustainable mortgages and provide direct help to homeowners.  It’s important that we act quickly to stem the tide of foreclosure and prevent these types of bad loans from damaging the financial security of even more American families in the future.  I will continue fighting in Washington to change these unfair mortgage rules and restore the foundation to success that a home provides.