Fourth District Report

Housing Bailout Bill Hurts Kentuckians

Last week, Congress passed the most sweeping and potentially damaging housing legislation in a generation: the Foreclosure Prevention Act of 2008 (H.R. 3221). I joined 151 of my colleagues and voted against the bill because it will harm Kentucky taxpayers.

Over 95 percent of American homeowners are making their mortgage payments, often at significant sacrifice. It is unfair to force the vast majority of homeowners and renters to pay for bad decisions and risky financial deals made by irresponsible lenders and borrowers.

The bill will allow irresponsible lenders to hand off bad loans to the federal taxpayer through a new program run by the Federal Housing Administration. This program could refinance as much as $300 billion of the worst home loans out there today.

The bill also provides an unprecedented blank check to bail out Fannie Mae and Freddie Mac. Fannie and Freddie are Government Sponsored Enterprises (GSEs). GSEs are private corporations chartered by Congress to improve the credit markets. While they were intended to provide additional stability to the mortgage market, any potential failures were never intended to be the responsibility of the taxpayer.

Fannie and Freddie serve an important role in the mortgage market. Not only has their success contributed to the housing boom that we experienced over the past decade, the companies were also designed to absorb some of the shock of financial crises like the one the housing market is experiencing now. Fannie and Freddie currently hold about $5.2 trillion in mortgages. The non-partisan Congressional Budget Office estimated that bailing out Fannie and Freddie would cost at least $25 billion, with the potential to cost over $100 billion. Handing the Treasury Secretary a blank check of this magnitude without committee hearings, open debate and mandatory additional oversight is an abdication of Congressional responsibility.

As private corporations, this proposal would allow Fannie and Freddie to continue making and keeping profits private while nationalizing their risk. Instead of a bailout, I have consistently supported strong reform measures for the GSEs, including a more powerful regulator with the authority to implement stricter safety and soundness requirements.

While the housing market in the Fourth District does not compare to the downturn in California or Florida, we have seen an increase in foreclosures and excess of unsold homes. If you or someone you know is having trouble with their mortgage, please act now. Foreclosures are costly and time-consuming for everyone involved, so many lenders are willing to work out an alternative. I encourage you to call 888-995-HOPE today or call my Fort Mitchell office at 859-426-0080 to find out what options are available.

The bailouts for bad loans and Fannie and Freddie are only two of the most dangerous provisions of H.R. 3221. With this bill, Congress has abdicated its responsibility to be good stewards of the taxpayers’ hard-earned money. I cannot support legislation that bails out irresponsible lenders while at the same time putting hundreds of billions of taxpayer dollars on the line.