Kucinich: Bailout Must Protect Home Ownership
Rep. Dennis Kucinich
Washington, Sep 30 -
Congressman Dennis Kucinich (D-OH) today sent the following letter to Speaker of the House Nancy Pelosi and Chairman of the House Financial Services Committee Barney Frank:
September 30, 2008
Congresswoman Nancy Pelosi Congressman Barney Frank
Speaker of the House Chairman
U.S. House of Representatives Committee on Financial Services
H-232 The Capitol 2129 Rayburn House Office Building
Washington, D.C. 20515-0001 Washington, D.C. 20515-0001
Dear Madam Speaker and Chairman Frank:
I believe that the failure of the Emergency Economic Stabilization Act was due in part to the absence of language to ensure it would achieve its stated purpose of preserving homeownership.
It is important to keep in mind that this current financial crisis is, at its core, a housing crisis. To weather the financial storm in which we find ourselves, it is necessary to mitigate the disastrous effects of the housing crisis. As drafted, the Act would not be able to accomplish this.
The Act gave the Secretary of the Treasury great latitude to determine “criteria for identifying troubled assets for purchase”<1>, but the legislation did not require or even contemplate that the Secretary would acquire troubled assets in such a way as to give the Secretary the ability to compel mortgage servicers to engage in loan modifications on a massive scale. Lacking this ability to achieve loan modifications on a massive scale, Sections 109 and 110 of the Act are mere window dressing. Furthermore, it was suggested in floor debate that the Secretary would seek to acquire the mortgage related securities that are most troubled or illiquid. If the provisions of this legislation that focus on foreclosure mitigation and homeownership are to have any meaningful chance of success, the Secretary would need to acquire a majority stake in the entire mortgage pool, of which such troubled assets are a part. This would give the Secretary the contractual ability to compel loan modifications of the underlying whole mortgages in the mortgage pool.
I would like to bring to your attention correspondence I received from Frank Alexander, Professor of Law at Emory University, who testified before my Subcommittee on Domestic Policy on targeting federal assistance to help neighborhoods affected by the foreclosure crisis. He is an expert on housing law and community development. In his letter, Professor Alexander succinctly points out this deficiency and suggests a simple amendment which would address this problem: priority acquisition of majority or controlling interest in securities backed by pools of whole mortgage loans. This would provide the Secretary with the authority to dictate to mortgage servicers modifications of the mortgage terms, thus fulfilling the stated purpose of the Act of home preservation. Enclosed please find a copy of Professor Alexander’s letter.
There are millions of Americans at risk of losing their homes to foreclosure. As you rewrite an emergency package, I hope that you correct this significant deficiency in order to put substance behind the legislation’s stated goal of preserving homeownership. Thank you for your attention to this matter.
Sincerely,
/s/
Dennis J. Kucinich
Member of Congress
<1> Emergency Economic Stabilization Act, HR 3997, § 101(d)(4).
http://kucinich.house.gov/News/DocumentSingle.aspx?DocumentID=104160
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