The U.S. Senate today approved H.R. 3221, the Housing Reform Act, which makes sweeping changes to government housing programs in an effort to shore up lenders holding troubled loans. Senate Republican Whip Jon Kyl (R-Ariz.) voted against the bill, citing concerns that the bill would do more harm than help.
“The Senate must be careful not to respond to the housing market downturn by rushing to ‘do something,’ which can lead to bad results,” said Kyl. “It’s important that the actions the federal government takes do not interfere with the correction that must ultimately occur in the housing market. The federal government should not bail out irresponsible lenders or speculators on the backs of American taxpayers."
“I support some of the bill’s provisions, like the creation of a strong, independent regulator to ensure that mortgage lenders Freddie Mac and Fannie Mae maintain healthy portfolios and curb risky lending habits. But, I could not support the overall legislation because of the additional risk they are asked to bear and because of the huge infusion of money into government programs that, I believe, will have little positive impact on stressed homeowners.”
The bill authorizes the Federal Housing Administration (FHA) to refinance up to $300 billion of subprime loans into 30-year fixed mortgages if a lender voluntarily agrees to write down the value of the loan. This policy would give lenders an incentive to shift their riskiest subprime borrowers to government-backed loans. Experts estimate that approximately 35 percent of these loans will default, forcing American taxpayers to assume the responsibility of repaying the defaulted loans.
This legislation would also provide federal grants to state governments to purchase foreclosed homes. Lenders would benefit from this plan more than homeowners struggling to stay in their homes because lenders own vacant or foreclosed properties. Moreover, Kyl cited the program’s inefficiency and poor management, questioning, “why, in good conscience, would we hand over $3.9 billion to a program that was given an efficiency rating of 27 out of 100 points by the White House budget office?”
The bill would also increase the federal standard tax deduction for non-itemizing taxpayers. Over the past several years, property taxes have skyrocketed in states across the country, but most citizens do not see an increase because they deduct the increase from their taxes. Further increasing this deduction would allow state governments to continue raising state property taxes.
“Arizonans are hurting and need help. The Department of Housing and Urban Development has organized an assistance program, called Hope Now, for homeowners in distress. This voluntary program has helped over a million Americans having trouble paying their mortgage, and I fully support these efforts. In less than a year, Hope Now has helped almost 17,000 Arizonans negotiate repayment plans with their lenders. Additionally, over 6,000 Arizonans received loan modifications. The Hope Now program was just expanded this past week to help even more struggling homeowners in Arizona and nationwide. This is a better approach than the costly bill passed by the Senate.”