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Neighborhood Stabilization Act of 2008

August 4, 2009
Floor Statement
Rep. Maxine Waters [D-CA]: Madam Chairman, I would like to first thank Chairman Frank and all of the members of the Financial Services Committee, and particularly those members who serve on the subcommittee that I chair, the Subcommittee on Housing and Community Opportunity. I'm thanking Members on both sides of the aisle for helping to bring this bill to the floor today.

H.R. 5818, the Neighborhood Stabilization Act, authorizes a $15 billion HUD administrative grant and loan program to State and local governments to purchase, rehabilitate and resell or rent foreclosed homes. To understand the urgent need to enact this legislation, one need only consider the sobering figures on foreclosures recently released by RealtyTrac, which show that foreclosure filings during the first quarter of 2008 are 112 percent higher than 1 year ago, and that actual bank repossessions of homes during March were a shocking 129 percent above March 2007.

The human reality behind these numbers is revealed if you visit, as I have the past year, cities and communities in cities like Cleveland, Ohio; Detroit, Michigan; or the San Bernardino and Stockton metropolitan areas in California, where block after block is dotted by foreclosed properties, many of them suffering from neglect or actual vandalism. These abandoned and foreclosed properties drag down the value of homes still occupied by working families, and contribute to a cascade effect whereby plummeting home prices erode the tax base of State and local governments and cause real estate related industries such as the construction trades to suffer.

States and most local governments must balance their budgets each year and, as a result, 20 States have already had to make or are proposing budget cuts due largely to revenue losses resulting from the subprime crisis, which further reduces demand in the economy and deepens the recession.

On April 10, the Financial Services Committee heard from Mayor Thomas Menino of Boston, Governor Martin O'Malley of Maryland, and others, that despite severe physical constraints, many States and cities are already dedicating their own shrinking tax revenues to purchase foreclosed properties and attempt to stabilize these neighborhoods. But they are overwhelmed by the scale of the problem in comparison to their shrinking tax revenues. For this reason, the National Governors Association has stated that a "one-time Federal funding commitment to support the acquisition and rehabilitation for foreclosed properties is vital."

The Governors are joined in their support for the stimulus contained in H.R. 5818 by the U.S. Conference of Mayors, National Association of Counties, National Association of Local Housing Finance Agencies, and the National Council of State Housing Finance Agencies. H.R. 5818 is also endorsed by nearly 40 civil rights, community development, labor and low income housing groups, including the AFL-CIO, Catholic Charities, Lutheran Services of America, the NAACP, the National Urban League, the National Low Income Housing Coalition, and the National Foreclosure Prevention and Neighborhood Stabilization Task Force.

This bill targets assistance where it is most needed. The $7.5 billion in grants and $7.5 billion in loans would be allocated to States based on two factors: The number of foreclosures, and the number of subprime loans 90 days delinquent. This is then subject to a limited adjustment for median home prices, a bipartisan compromise that was worked out in mark-up with the committee's members from Ohio, which, like many midwestern States, has faced skyrocketing foreclosures but did not experience an extraordinary run up in housing prices.

Second, the bill puts flexible resources in the hands of government with the capacity to address the crisis and put funds on the street quickly enough to stimulate the economy. Rather than expect HUD to process plans from 1,200 entitlement jurisdictions, the balance we struck at mark-up was to allocate funding to States and to the Nation's largest 100 cities, largest 50 counties, and cities over 50,000 with especially high foreclosure rates. The areas of States outside of those cities and counties would be addressed in the State's plans.

Under the bill's timelines, fund obligation must begin within 6 months of enactment, be completed within a year, and fully spent within 2 years of enactment. This is no "big government," immortal program, as our colleagues across the aisle suggest. Rather, it is a timely, targeted and temporary shot in the economy's arm, exactly where one is needed.

Indeed, using well-accepted construction activity multipliers, the National Foreclosure Prevention and Neighborhood Stabilization Task Force calculates that the bill's proposed $15 billion investment will generate at least $38 billion in direct and ripple effect economic activity nationwide, employ about 120,000 people, and restore nearly $225 million per year in local real estate tax collections.

Some Republicans have tried to frame this bill as a bailout bill for investors. This simply is not so. Government and their nonprofit partners will drive a hard bargain with property owners because they are highly incentivized to make this money go as far as possible in their efforts to stabilize neighborhoods where many of them have been working for years, and because they must pay the government back any funds used to purchase homes.

In no event, moreover, can they pay more than 110 percent of the average home sale price in the area. Creaming of properties and "sweetheart" deals are prevented by the requirement that properties sit for 60 days before they are eligible.

What H.R. 5815 does make possible is for States, cities and counties to stabilize a few neighborhoods, especially low income ones, that are in serious danger of an overcorrection and rapid deterioration past the tipping point, where it becomes very difficult to turn them around.

I urge Members to hear the pleas of the Nation's governors, mayors, community-based organizations and ordinary citizens to provide this critical relief to stabilize neighborhoods and stimulate the economy.

The administration and my friends on the opposite side of the aisle in this Chamber argue that we cannot afford to respond. I would like to just remind this body of what Mr. Frank said earlier today, we afforded $30 billion to bail out Bear Stearns, and certainly we can afford half of that amount, $15 billion for the entire country. We simply cannot afford not to.

I urge passage of the Neighborhood Stabilization Act.

CLOSING REMARKS
Madam Chairman and Members, I would like to thank all of the Members who have come to the floor today in support of this legislation because they understand the devastation to neighborhoods all over this country.

I have listened very carefully to the arguments from the opposite side of the aisle, and none of them rise to the merit of being able to oppose this bill because they're substantive arguments.

First of all, I have heard Members on the opposite side of the aisle talk about taxes. They have talked about gasoline. They have talked about everything except what we are here to talk about: the fact that there has been a subprime meltdown in this country and many neighborhoods are devastated. We have homes that are being stripped of the copper. We have homes that have been boarded up with vandals inside those homes, oftentimes living inside those homes, with the weeds growing up in many of these properties, and the value of the homes in the neighborhood where people are attempting to maintain their homes is going down every day.

We had one Member on the opposite side of the aisle talk about how flush these cities are with money. Evidently, he has not looked at what is going on in the cities and States. Many of them are in deficit situations. They're in deficit situations because we're in this recession, this nonperforming economy under the leadership of the President of the United States where the price of food has risen, gasoline prices are up, and the subprime mess is fueling the problems of our economy. And with all of this that has taken place under this President and this administration, you would think that the Members on the opposite side of the aisle would want to come to the aid of their constituents.

We have talked about the $30 billion bailout under the Fed Chairman that was appointed by this President. And I am sure, since we did not get a call in the middle of the night to even discuss with us that the bailout was going to take place, I'm sure that the Fed Chairman called the President that appointed him. And I would give anything--I would place money on the line--to tell you that the President approved of that bailout. And so why not bail out the people who deserve to be helped? People, many of them who got into loans that were lured into these loans, lured into these mortgages by unscrupulous real estate brokers who told them to just sign on the dotted line, by unscrupulous folks representing some of the financial institutions who said get into this ARM and when it resets, I will be there to help you refinance it, and, of course, they're not there. These people, many of them have lost these homes through no fault of their own.

But the neighborhoods are being devastated. We have information here that tells us how much crime will be fostered on the neighborhoods. As a matter of fact, what we have learned is that when there is one foreclosure, it leads to not only vandalism that affects the entire neighborhood, but it also increases the crime. This has all been documented.

I would think that the representatives who have been sent here by the people who have voted for them would want to be able to go home and say to their constituents, I understand what's going on in the neighborhoods; to say to their mayors and to say to their Governors and to say to their county commissioners, "We are here to help.'' Yes, we are spending a lot of money on other things. As a matter of fact, many of the Members on the opposite side of the aisle, in a matter of hours, are going to vote for over $107 billion in supplemental funding to continue the war in Iraq. 

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