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12/6/07 Kanjorski Encouraged by Treasury's Recognition of Current Mortgage Problems |
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FOR IMMEDIATE RELEASE
Dec. 6, 2007
Contact: Abigail McDonough
202-225-6511
KANJORSKI ENCOURAGED BY TREASURY'S RECOGNITION OF CURRENT MORTGAGE PROBLEMS
While Many of Kanjorski's Principles to Preserve Homeownership Are Included in the Strategy, More Work Remains
WASHINGTON - Today, Congressman Paul E. Kanjorski (PA-11), Chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, commended U.S. Treasury Secretary Henry M. Paulson, Jr. for recognizing the economic risks created by adjustable rate mortgages. These mortgages are scheduled to reset to higher interest rates causing 1.8 million subprime mortgages to face increases of up to 30 percent in their monthly payments in 2008 and 2009. The Treasury's plan to address these issues conforms with many of the principles that Chairman Kanjorski previously recommended to avoid potential foreclosures.
"In order to adopt effective strategies to prevent foreclosures, a consensus approach among lenders, servicers, and investors is needed. The Treasury-brokered approach represents a compromise among these industry participants," said Chairman Kanjorski. "However, we must continue to work together to expand on the proposal. Therefore, I have developed three principles to help guide decisions aimed to assist homeowners to remain in their homes. While the Treasury's plan generally follows these concepts, the advancement of other initiatives would help generate a sounder strategy. It is vitally important for the Administration and Congress to work in a bipartisan manner on any legislative solutions."
Chairman Kanjorski outlined his recommended principles in a statement delivered to a hearing of the Pennsylvania House of Representatives on November 29 and in letters sent to corporate leaders at major financial institutions on December 5. The letters were also signed by other influential Members on the Financial Services Committee including Congresswoman Carolyn B. Maloney (D-NY), Chair of the House Subcommittee on Financial Institutions and Consumer Credit; Congresswoman Deborah Pryce (R-OH), Ranking Member of the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises; and Congresswoman Judy Biggert (R-IL), Ranking Member of the House Subcommittee on Financial Institutions and Consumer Credit. These principles include:
- Limiting the use of tax dollars
The government should avoid using tax dollars to assist lenders who made bad loans or relied on weak underwriting standards. Unless absolutely necessary, taxpayers who made sensible financial decisions should not have to aid those who acted irresponsibly.
- Relying on the private sector rather than the government
As much as possible, market-based approaches which rely on minimal government involvement should be applied to address foreclosure prevention efforts.
- Replicating effective local solutions at a national level
Policy makers should identify initiatives that worked to address past foreclosure problems and apply them on a national scope.
The Treasury's strategy includes aspects of Chairman Kanjorski's principles such as avoiding using government funding as a bail out option and applying market-driven approaches to prevent foreclosures. According to Chairman Kanjorski, the Treasury's plan poses an initial step to mitigate the effects of a potential surge of foreclosures, but other efforts are still needed.
"Addressing the current mortgage situation involves a multipronged process. One part entails passing legislation to improve underwriting standards and protect borrowers. Such a bill already passed in the House, which was amended to include my bill addressing escrows, appraisals, and mortgage servicing. The second part includes addressing the upcoming wave of foreclosures. The Treasury's effort to preserve homeownership opportunities is a necessary step. The next phase involves passing legislation to help homeowners in trouble," concluded Chairman Kanjorski.
Bipartisan legislation addressing subprime lending abuses, which included Chairman Kanjorski's amendment, was adopted in the House on November 16.
Click Here
to read a copy of the written statement from the Congressman Kanjorski to the Pennsylvania House of Representatives'.
Click Here to read a sample letter to corporate leaders from Chairman Kanjorski and Congresswomen Maloney, Pryce, and Biggert.
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