Mortgage Foreclosures

Delivered on the floor of the United States Senate

Madam President, there was a debate last week on the floor of the Senate about the mortgage foreclosure crisis facing America. It was estimated a year ago we were going to lose 2 million homes to mortgage foreclosure. The new estimate from Moody's is 8 million homes. What does that mean? It means one out of every six home mortgages will face foreclosure. That is a national crisis. It is at the heart of this recession. The problem, of course, is that those people who have loaned money on these mortgages are content to see them go all the way through foreclosure and become vacant eyesores in neighborhoods across America. That is not good for the family who lost the home, it is certainly not good for the neighbors next door who watch their real estate values plummet. It turns out, it is not good for the bank.

A bank in foreclosure will lose some $50,000 in the process, with all the fees that are associated with it, and then end up with an empty house. Some 99 percent of homes in foreclosure go back to the bank, and they sit there as eyesores because banks are not landlords; they do not cut the grass, they do not worry about whether the flowers are going to be planted in the spring. They are waiting for something to change economically. While they are waiting, that neighborhood is changing because of that foreclosed home. A foreclosed home in your neighborhood is going to bring down your property values. We offered the banks this option: We said to the banks and those who hold the mortgages: If you will invite in the borrowers at least 45 days before they would file for bankruptcy, have them bring the legal documents in and calculate what it would take to offer them a mortgage to stay in the home, if you make them the offer of a renegotiated mortgage and they turn it down, then they go to bankruptcy court and, frankly, have no recourse there to turn to, because, you see, bankruptcy courts will not change the mortgage on your home, even if you are in bankruptcy facing foreclosure. They will change the mortgage on your vacation home, your farm or your ranch but not your primary residence. I literally negotiated with banks for months to try to find out some way we could protect these homeowners to give them a second chance, if, in fact, they had an income and they could, in fact, pay a mortgage, and say to the banks: You have the last word if someone ends up in bankruptcy.

Well, we went through months of negotiations. In the end, virtually all the banks, all the banks except Citigroup, picked up and walked out of the negotiation. They said: We are not interested in negotiating. So the amendment was defeated last week. I did not receive a single vote on the other side of the aisle and lost several votes on the Democratic side. Some of the people who watched this debate said: Well, why did you call up this measure? It was not going to pass. I called it up for the same reason this year as I did last year. This crisis is getting worse. I have met these people who have lost their homes in foreclosure. I feel a responsibility to them to make an effort so they have a chance to save their homes. Three of them came to a press conference in Chicago on Monday, each one of them telling a heartbreaking story of a home they worked hard for, and because of some deception in their mortgage or being misled by a mortgage broker or being given a stack of papers they could not possibly absorb and understand, these people were going to lose their homes, many of them in tears after being in these homes for years. Their neighbors came and talked about the same problem. What is it going to mean with this empty house in foreclosure? So now we find that many of the same people who opposed the idea of dealing directly with mortgage foreclosure are now coming forward when it comes to the bankruptcy of the Chrysler Automobile Corporation.

This morning in the Washington Post, Harold Meyerson had an article entitled: "What's Good for Chrysler." He tells the story of a court hearing. The court hearing is over the potential bankruptcy of Chrysler. The attorneys representing the hedge funds have come out in opposition to the Chrysler bankruptcy workout. Judge Arthur Gonzalez noted, and I quote from the story, in denying the request of the attorneys for the hedge funds: Blocking the loan--Which is being asked for--would force Chrysler (and, he could have added, many of its suppliers and dealers) to liquidate--throwing tens (perhaps hundreds) of thousands of Americans out of work during the most serious recession since the 1930s and terminating medical benefits to tens of thousands of Chrysler retirees. Liquidation--Which is what the hedge fund attorneys are asking for in Court--would also compel the American public [the taxpayers] to write off the loans the government has made to the company, rather than become shareholders in the slimmed-down Chrysler, as the Treasury's plan suggests. What the Department of the Treasury and the workers are trying to do is to save the car company. They understand they have to make massive concessions. They have to change the way they do business. But their ultimate goal is to see Chrysler survive so that jobs will be protected and so that retirees' health benefits will not disappear.

So, ultimately, the taxpayers of America who loaned money to Chrysler will be paid back. The hedge funds, many of them also involved in the mortgage crisis, have turned the same deaf ear to Chrysler's situation as they did to mortgage foreclosures. They are in it for one reason--to make a buck, take the profit and go home. They don't care about the ultimate consequence. The ultimate consequence of Chrysler liquidating is, of course, misfortune for the workers and retirees, but more burdens on taxpayers. What happens to workers who lose their jobs at Chrysler? They draw unemployment benefits, benefits paid for, some by the company and others by taxpayers. What happens to retirees who lose health care benefits? They become more dependent on government programs to help them survive. Once again, this part of our economy, the financial industry, has shown an insensitivity to the reality of the recession. Whether it is mortgages in Albany Park in the city of Chicago foreclosed upon, changing that neighborhood, or whether it is the Chrysler employees and retirees fighting for their economic lives, the hedge funds on Wall Street have said: We are going to turn a blind eye. We are not going to get involved. We will not make a commitment.

There will come a time, and I hope soon, when there will be a reckoning--it didn't happen last week; it may happen soon--when the Senate stands up for a lot of people who need a voice in this Chamber, many of whom can't afford a lobbyist in the hallway, many of whom are just struggling, hardworking families. Whether they are in Michigan, where Senator Levin represents the State, as does Senator Stabenow, or in the State of Illinois which I represent, these people need folks who will stand up and fight for them. It won't be easy. For those who are prepared to stand up and fight, also be prepared to lose. I lost on my amendment last week. But I am not going to give up. The defeat of the amendment on mortgage foreclosure is postponing the inevitable. The inevitable is that we are going to have to reckon with the financial institutions in this country and the fact that they do not have the national interest in their hearts when it comes to some of these basic decisions that need to be made. It is time for us to work with the will of the people of this country and to establish some order that gives working families and homeowners across America a fighting chance.

I yield the floor.