Dodd Seeks Solutions to Housing Foreclosures
HOUSING
New London Day
Erin Kutz
Boston University Washington News Service
January 31, 2008
WASHINGTON – Citing the housing crisis as a driving force behind the economic downturn, U.S. Sen. Christopher Dodd, D-Conn., stressed the urgency Thursday of steps to remedy the effects of sub-prime mortgages and prevent similar future crises.
“The epicenter of this economic crisis is the housing crisis,” Dodd said.
At a hearing before the Senate Committee on Banking, Housing and Urban Affairs, which he chairs, Dodd and other senators questioned the effectiveness of solutions offered by the Treasury Department and the Federal Deposit Insurance Corporation, suggesting that they have not garnered the necessary results to prevent home foreclosures and loan defaults by Americans with sub-prime mortgages.
“This is not the American dream,” Sen. Robert Menendez, D-N.J, said. “In many respects, it is an American nightmare.”
On Oct. 10, the Bush administration established the Hope Now alliance of lenders, credit counselors and investors to counsel homeowners at risk of foreclosure. To date, 94percent of those with sub-prime loans have used the service, testified Robert Steel, the Treasury undersecretary for domestic finance. Steel said the alliance hotline receives 4,000 calls a day.
FDIC chairman Sheila Bair told the committee her agency has taken time to study the enormity of the housing crisis and hopes to implement systemic solutions.
Dodd expressed disappointment with the current solutions and said the committee held hearings a year ago to examine remedies to sub-prime mortgages, but action in the meantime has lagged. Initially, he said, the committee had hoped the market would correct the housing crisis and legislation would not be necessary.
“It seems to me we’re fiddling around,” he said. “We need to put something out there to freeze this thing so we can get a handle on it….I can’t sit around and watch another year of this and not get the answers we should have had.”
Though committee members and hearing witnesses cited the economic effect of questionable lending practices, they stressed the need to heal the pain and prevent its causes.
“This is about more than economic statistics,” Steel said. “It’s about individuals, families and homeowners.”
Dodd said Bridgeport, with a population of only 100,000, has experienced 6,000 foreclosures.
“It’s not some far-off, esoteric problem, it’s a crisis,” said Sen. Robert Casey, D-Pa. “The goal is keeping people in their homes and stabilizing neighborhoods.”
Both the conservative-leaning American Enterprise Institute and the Center for American Progress, which identifies itself as a progressive think tank, advocated an approach similar to the Home Owners’ Loan Corporation, President Franklin Roosevelt’s response to the housing crisis during the Great Depression. That agency issued longer-term, easier loans to replace those on which homeowners had defaulted.
Dodd hailed the two organizations’ similar recommendations as indicative of the broad interest in finding solutions for Americans facing foreclosures.
Dodd said he supported a $10 billion increase in the Community Development Block Grant program, which allows state and local governments to acquire, renovate and resell homes that have been abandoned as a result of foreclosures.
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