Durbin Holds Hearing on Looming Foreclosure Crisis in Illinois and Nationwide

CHICAGO, IL – December 04, 2008 – (RealEstateRama) — U.S. Senator Dick Durbin brought the Senate Appropriations Committee to Illinois today in order to examine firsthand strategies to help families at risk of losing their homes to foreclosure. Durbin, Chairman of the Financial Services and General Government Appropriations Subcommittee, held the hearing in Chicago, where foreclosure rates have increased by more than 50% in the last year.
“With the economy officially in a recession and the foreclosure rate continuing to rise dramatically, voluntary efforts to stop the economic slide are not enough,” Durbin said. “The sooner we can solve the problems in the mortgage markets, the sooner we can begin to turn around the economy as a whole.”

Today’s hearing focused on the effectiveness of the Treasury Department’s programs to help at risk homeowners keep their homes. Durbin also highlighted the efforts of the FDIC and the private sector to address the foreclosure crisis and discussed whether bankruptcy law should be altered to allow at-risk homeowners modify the terms of their mortgages in bankruptcy.

Testifying at today’s hearing was Illinois Attorney General, Lisa Madigan. Last October, Madigan announced that after a year-long investigation, the she had reached a settlement with Countrywide –the largest mortgage lender in the nation. In that settlement, Countrywide agreed to modify approximately 400,000 mortgages nationwide.

“As we here today already know, the most immediate need at this moment is to help homeowners to stay in their homes and stabilize our communities,” Madigan said. “We need to incentivize servicers quickly to enter into more sustainable loan modifications and require that they make their process more transparent so that we can evaluate it.”

Durbin, one of the first in the Congress to warn that the subprime mortgage meltdown could have a disastrous effect on the economy, has argued that the financial crisis will not ease, and the economy will not begin to recover, until we address the root cause of the crisis: the failed mortgage market.

In the fall of 2007, Durbin introduced the Helping Families Save Their Homes in Bankruptcy Act; a bill which would allow mortgages on primary residences to be restructured in bankruptcy – like virtually every type of personal debt, including vacation homes and family farms. This small change to the bankruptcy code could help hundreds of thousands of homeowners avoid foreclosures while continuing to fulfill their new mortgage obligations.

Over the past year, Durbin has tried three times to pass this proposal – as part of Majority Leader Reid’s housing bill in the spring, as part of the Senate Banking Committee’s housing bill in the summer, and as part of the financial rescue bill this fall.  Each time, the Mortgage Bankers Association and most of the financial services industry opposed the proposal.

“The question that faces us now is this: after committing over one trillion dollars in taxpayer money to what has largely been an unsuccessful effort to address the foreclosure crisis and save our economy from a devastating recession, why don’t we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?” Durbin asked.

Others testifying at today’s hearing were: Neel Kashkari, Interim Assistant Secretary for Financial Stability, Department of the Treasury; Michael Krimminger, Special Advisor to the Chairman, Federal Deposit Insurance Corporation; Matthew Scire, Director, Financial Markets and Community Investment, U.S. Government Accountability Office; Bruce Gottschall, Executive Director, Neighborhood Housing Services of Chicago; Marguerite E. Sheehan, Senior Vice President and Home Lending Senior Executive, JPMorgan Chase.