Congressman Barrett Opposes Borrower “Bailout” Plan
Congressman Barrett Opposes Borrower “Bailout” Plan
WASHINGTON, D.C. - In a floor speech opposing a housing bill meant to bail out borrowers and lenders who made poor financial decisions, Congressman Gresham Barrett (SC, 03) voiced strong dissatisfaction with an amendment offered by Rep. Barney Frank to HR. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008. The bill would use taxpayers’ money to create a potentially $300 billion new government program to “bailout” irresponsible housing lenders and borrowers.
“I am concerned that this program would allow lenders to burden the American taxpayers with the risk from their worst performing loans,” said Congressman Barrett. “While I agree that the government should take steps to help struggling borrowers and to stabilize the housing market, this bill puts taxpayers at risk and would unfairly bail out irresponsible lenders and borrowers.”
It is estimated that in 2007, there were approximately 1.5 million foreclosures, and the U.S. Department of the Treasury is estimating that there will be two million foreclosures during 2008. Last week, Congressman Barrett introduced an amendment to H.R. 5830 – a bill which was added to H.R. 3221 as the Frank amendment — in the Financial Services Committee that would have protected taxpayers by allowing the Federal Housing Administration (FHA) more discretion when choosing which borrowers can enter the new program to have their loans insured by the taxpayer.
“It is unfair to ask our taxpayers to put themselves at risk for those who may have made financial mistakes. Instead of creating a massive new risky government program, we need to look at legislation that supports responsible homeownership, helps victims of foreclosure, promotes financial literacy, and most importantly, that also protects taxpayers,” said Congressman Barrett.
The Frank amendment to H.R. 3221 requires the FHA to guarantee up to $300 billion of refinanced residential mortgages that are at-risk of foreclosure. Mortgage holders would be allowed to unload certain at-risk mortgages into the new program by writing down the loan to 85% of the home’s appraised market value. The reduced loan would then be refinanced through an FHA approved lender at 90% of the property’s value. In order to qualify for the program, the borrower must have a mortgage debt-to-income ratio greater than 35%.
Members voted today on House amendments to the Senate amendment to H.R. 3221.
The bill has received a veto threat from the Administration if sent to President Bush’s desk.
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