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| 4/17/2007 12:00:00 AM |
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| Biggert Voices Concern about Spike in Mortgage Foreclosures; Urges Congress to Act on her Federal Housing Administration Bill |
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Opening Statement of the Honorable Judy Biggert
Ranking Republican Member, Subcommittee on Housing and Community Opportunity
U.S. House Committee on Financial Services Committee
Hearing on
“Possible Responses to Rising Mortgage Foreclosures”
Tuesday, April 17, 2007
Thank you, Mr. Chairman and thank you for holding this hearing today.
I would like to welcome today’s witnesses. I look forward to hearing their views on ways to help Americans avoid foreclosure and stay in their homes.
Over the past several years, the housing market has helped to drive the national economy, as Americans bought and refinanced homes in record numbers. Many regions were spared the worst of the recent recession due to the strength of some local housing markets.
The benefits of homeownership are undeniable and for this reason there has been a significant focus on improving homeownership opportunities for everyone including the lower income borrower. The subprime market has flourished and provided credit to many families that may not have qualified under conventional standards and today this country enjoys record high homeownership rates. Today, more than 68 million Americans own a home. Of this 68 million, 50 million homeowners have a mortgage, and 13 million homeowners with a mortgage have a subprime loan. According to a recent Chicago Tribune article, “Subprime loans, often with adjustable rates, made homeownership possible for millions of Americans whose credit ratings or income levels made them ineligible for cheaper prime loans.”
However, what brings us here today is not the good news of homeownership but the troubles of the predatory market and increases in foreclosure rates. In my home state and district, foreclosures have touched homeowners in affluent and non-affluent communities alike. A study titled “Paying More for the American Dream: A Multi-State Analysis of Higher Cost Home Purchase Lending” determined that in the six-county Chicago region, which includes my entire district, foreclosures went up by 36 percent last year. Rates are on the rise. According to statistics issued by the Center for Responsible Lending, about 4 percent of U.S. homeowners, or a little over 2 million homeowners, in the U.S. may lose their homes. On the flip-side, this predication estimates that 96 percent of homeowners will likely keep their homes. Nevertheless, the increase in mortgage foreclosure rates raises eyebrows and calls into question what actions can be taken to help homeowners keep their homes.
I want to issue a word of caution as we begin to discuss ways to assist those that have been harmed due to predatory and/or subprime lending practices. The housing market has been the engine for our economy over the last several years and the availability of credit has been crucial to that engine. While we may need to look at ways to resolve this current crisis, we must take care to not stifle the market going forward. There are clear indications today that the market is taking steps to correct itself. I am most interested today to hear from the witnesses on steps that the public and private sectors are taking to address those that are facing foreclosure.
I am very anxious to hear from Assistant Secretary Brian Montgomery on ways that the FHA program may be able to be of assistance in this current crisis. In recent times, FHA has been a mortgage insurer of last resort. Potential homeowners who can participate in the private mortgage insurance market do so. While the prime market relatively remained constant, the non-prime market between 2003 and 2005 grew from $118 billion to $650 billion in mortgages while FHA went from insuring 9.2% to 4.1% of the nation’s mortgages. Some will argue that the government is involved where the private sector is not. I believe that it raises questions about the proper role of FHA and its intended mission.
By modernizing FHA, we can provide a safe alternative for low-income borrowers who, today, would be forced into the predatory-subprime market.
Last month, both Mrs. Waters and I introduced legislation aimed at reforming the FHA program. In your testimony, Mr. Montgomery, you have outlined just why that legislation is crucial to the topic of this hearing. I look forward to working with both the Chairwoman of this Subcommittee and the Administration to pass this important legislation. There is no doubt that the FHA program can be an important tool and program for the lower income borrower.
The legislation would make FHA more efficient and competitive with the sub-prime industry by decreasing premiums for borrowers, permitting no-down payment loans, and increasing access to homeownership. If the program is quickly overhauled, more qualified homeowners are likely to avoid losing their homes by taking advantage of FHA refinancing. It is my strong hope that last year’s bi-partisan bill will move quickly and that the Senate, too, will act so that more homeowners can qualify to refinance under FHA, refinance, and keep their homes.
Finally, I hope that we can shed some light on actions that Congress or federal regulators can take to help homeowners enter into realistic and affordable loans in the future. As we consider our options to take action at the federal level to help Americans keep and own homes, I would urge my colleagues to carefully weigh the potential consequences of such actions. What’s good for one goose may not be good for the gander. We should allow the secondary mortgage market to adjust to the rise in foreclosures accordingly and to continue to supply liquidity to the primary mortgage market. Simultaneously, we should ensure that people continue to have access to financial education and counseling, credit, and viable mortgage options so that people in future generations can realize the American dream of homeownership.
Again, I welcome today’s witnesses and thank Chairman Frank for holding this hearing.
I yield back the balance of my time.
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