Major Foreclosure Legislation Passes House

Press Release

MAJOR FORECLOSE LEGISLATION PASSES HOUSE
McNerney provision to raise loan limits included

Today, the House passed a major legislative package to address the housing and foreclosure crisis that is gripping the country and having a negative impact effect on our nation's economy. The package included a provision authored by Congressman Jerry McNerney (CA-11) to permanently raise the loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration.

"There were nearly 170,000 foreclosure filings in California in the first quarter of this year and over 7,500 in Stockton alone. Those are staggering numbers," said Rep. McNerney. "Families are losing their homes, neighborhoods are becoming destabilized and the impact of the foreclosure crisis is rippling throughout all sectors of the economy. We've got to do more to help families in financial difficulty and to stabilize the market. Today we made an important step in that direction."

Rep. McNerney's provision, introduced this past Monday as H.R. 5958, the Homeowner Opportunity Act of 2008, makes permanent the loan limit increases for Fannie Mae, Freddie Mac and the Federal Housing Administration that were raised temporarily through the Economic Stimulus Act signed into law in February.

The provision will ensure that the maximum limits of $729,750 are maintained, creating responsible opportunities for families to obtain fixed-rate mortgages and helping to alleviate the current market difficulties by increasing the availability of credit in the market. The provision would mean increased access to stable mortgage products in all four counties in the 11th district: Alameda, Contra Costa, San Joaquin and Santa Clara.

"When we considered the Economic Stimulus Act I personally discussed the importance of raising the loan limits with Speaker Pelosi. Increasing loan limits that were too low to be of use in California helped inject stability into a turbulent market - but only temporarily," Rep. McNerney said. "Fortunately, my provision to make that increase permanent was incorporated into the package the House voted on and passed today."

The housing crisis has significantly affected California, particularly Stockton and surrounding San Joaquin County, which have found themselves at the top of the national foreclosure list. Statewide in California, according to the Pew Charitable Trusts, one in 20 homeowners is projected to lose his or her home to foreclosure over the next two years.

Homeowners who do not lose their homes have also been hurt by the crisis. Pew also estimates that 64 percent of all California homeowners will feel the ripple effects of the housing crisis and that the collective statewide loss in state and local taxes will reach $107 billion as a result of declining property values. According to Senate Banking Committee Chairman Chris Dodd, the foreclosure of a home on a typical city block generates two immediate related outcomes: the value of every other home on that block declines by one percent and the crime rate climbs two percent.

The bill voted on today, the American Housing Rescue and Foreclosure Prevention Act of 2008 will provide mortgage refinancing assistance, which will help keep families from losing their homes and protect neighboring home values.

This plan requires both homeowners and lenders to take responsibility. In order to qualify for refinancing and new government backed mortgages, lenders and mortgage investors will be required to take a loss and borrowers must share any profit from the resale of a refinanced home with the government. Additionally, the new plan is open only to owner-occupied homes. Speculators, investors and vacation/second-home owners are not eligible to participate.

Other provisions of the legislation include an increase in the loan limit for VA-backed originating loans and increased oversight for Fannie Mae and Freddie Mac.

The House also passed the Neighborhood Stabilization Act of 2008, which provides $15 billion in loans and grants to states to acquire vacant, foreclosed homes. The legislation will allow local communities to rehabilitate foreclosed properties, which currently drive down surrounding home prices, and place these homes back on the market.

Rep. McNerney's spoke on the House floor this afternoon in support of the legislation. Below are his remarks as prepared for delivery.

"Thank you, Mr. Speaker. I represent Stockton, California, which unfortunately suffers from the highest foreclosure rate in the country. Many families throughout Northern California have lost their homes, and the foreclosures have led to personal hardships, community instability, and economic turmoil.

"When constituents ask me what Congress is doing to fix the economy, I tell them we're pushing to create family wage jobs and put money back in people's pockets. Today, we're building on these efforts and considering legislation that will provide fiscally responsible options for families struggling to stay in their homes.

"Last December, I hosted a foreclosure workshop in Stockton with my colleague, Congressman Cardoza, to provide housing counseling to local families. While we expected turnout to be high, participants started lining up two hours early, and ultimately, more than 500 people showed up. I heard heartbreaking stories from my constituents, and this is just a single illustration of why today's legislation is so important.

"One of the biggest challenges facing the housing market in high cost states like California is that housing programs have not kept pace with the times. Unrealistically low loan limits for Fannie Mae, Freddie Mac, and FHA mean that people living in high cost states have not fully benefited from these programs.

"I worked hard to make sure that the Economic Stimulus package included loan limit increases to nearly $730,000. Raising the loan limits injects liquidity into the mortgage market to provide access to credit and opens new opportunities for refinancing. However, these increases are only temporary, and it is clear that making them permanent will have beneficial effects for the housing market.

"I introduced the Homeowner Opportunity Act to permanently raise the loan limits, and I am particularly pleased that today's legislation includes my bill. I want to thank Chairman Frank for his all of his support and assistance. This change will benefit my constituents and the entire country.

"I urge all of my colleagues to support this provision, and I yield back."

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