OUR PRINCIPLE: House Republicans are committed to addressing the housing crunch in a responsible fashion by putting the needs of needy homeowners who are truly victims first. By rewarding speculators, scam artists, and liberal special interests, the Democrat majority’s proposals do not live up to this commonsense standard. Our efforts should be geared towards keeping the dream of homeownership within reach of middle-class families, not making them subsidize a bailout for irresponsible decisionmakers.

The Democrat proposal lets speculators and scam artists off the hook for their role in causing the housing crunch, using taxpayer dollars to reward irresponsibility.  Independent experts, including the nonpartisan Congressional Budget Office, have warned Congress about the dangers of a taxpayer-funded bailout of speculators and scam artists.

• In an analysis released last month, the Congressional Budget Office, Congress’s official scorekeeper, held that “if the federal government is expected to step in when economic times are bad, then lenders and borrowers do not need to consider the possibility of bad times when making decisions.” (“Policy Options for the Housing and Financial Markets,” April 2008)

• Sure enough, the CBO’s analysis of the Democrat bill makes clear that the rate at which taxpayers are forced to subsidize new FHA loans reflects its previous “view that mortgage holders would have an incentive to direct their highest-risk loans to the program.”  (H.R. 5830, Cost Estimate, 5/2/08)

• Federal Reserve Board Chairman Ben Bernanke: “Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. … Finding the right balance – particularly the need to avoid programs that give borrowers who can make their payments an incentive to default – is difficult.”  (Remarks at the Columbia School of Business, 5/5/08)

The Democrat proposal forces taxpayers to foot the bill for massive handouts to liberal special interests. House Democrats lay the groundwork for a feeding frenzy of trial lawyers to benefit from the misfortune of innocent Americans.

• This bill would require that $35 million of the funds dedicated to foreclosure counseling “be used for grants to state and local legal organizations with experience in foreclosure law.” Rep. Tom Price (R-GA) offered an “amendment to bar the use of the funds for civil litigation,” but it was voted down by committee Democrats. (CQ, 4/30/08) NOTE: According to the Center for Responsive Politics, lawyers and law firms gave $85 million to Democrat candidates in the 2006 cycle.

House Republicans have offered the American people two viable alternatives for addressing the housing crunch – without raising taxes and rewarding irresponsibility. These proposals would address the housing crunch in a way that guarantees fairness for responsible homeowners.

• Reform and transparency must be front and center in any efforts to stabilize the housing market. Last month, Financial Services Ranking Member Rep. Spencer Bachus, along with Reps. Judy Biggert (R-IL) and Shelley Moore Capito (R-WV) introduced H.R. 5857, the Homeownership Protection and Housing Market Stabilization Act of 2008. This bill breaks the logjam on bipartisan reforms that will help homeowners right now. Federal Housing Administration (FHA) reform, modernization of Fannie Mae and Freddie Mac, additional funding for housing counseling are among the central planks of this proposal. (NOTE: For more information, see releases from Rep. Bachus, Rep. Biggert, and Rep. Capito.

• The best way out of the housing crisis to get Americans purchasing homes again. The housing market needs a jump-start, not a bail-out. To that end, Rep. Lee Terry (R-NE) proposed yesterday a market-based plan that will help restore the promise of homeownership by stabilizing housing prices, reducing housing inventory, and providing incentives to buyers. Rep. Terry’s proposal features a one-time tax credit equal to 10% of the purchase price of a primary residence – up to $10,000; this tax credit is similar to legislation President Clinton signed into law for the District of Colombia. (NOTE: For more information, see release from Rep. Terry.)

There are a number of government and private initiatives already on the books that have been successful in helping homeowners weather this storm. Lawmakers’ time would be better spent educating homeowners on the plethora of options at their disposal, as opposed to passing measures that reward recklessness and provide a safety net for irresponsibility.

• HOPE NOW is designed to preserve homeownership and prevent foreclosures by freezing the interest rates of borrowers with adjustable rate mortgages. More than half a million homeowners were able to stay in their homes during the first quarter of this year because of loan workouts facilitated by HOPE NOW. Loan workouts have been provided for nearly 1.4 million homeowners since last July. (Release, 4/28/08)

• Earlier this year, six of the nation’s biggest mortgage lenders agreed to participate in Project Lifeline, an initiative that lets “qualified homeowners who are at least 90 days late on their mortgage payments pause the foreclosure process for 30 days.” Project Lifeline is targeted to all types of mortgages, not just subprime loans. (CNN, 2/12/08) 

• FHASecure was launched last summer to stave off the rise in foreclosures by offering refinancing options to homeowners who had been keeping up with their mortgage payments before their loans reset. The Administration has recently expanded this program to include “borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lenders” and expects “about 500,000 families to refinance into prime-rate FHA-insured mortgages in total by the end of this year.” (Release, 4/9/08)

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NOTE: Last month, House Republicans unveiled a set of principles designed to guide bipartisan consideration of legislation addressing the housing crunch. You can access these principles here.