Recently, President Bush signed into law a housing bill to restore stability to the housing market, and help businesses and communities recover from this crisis. I supported this landmark legislation, which was passed in the House and Senate by wide margins of Democrats and Republicans alike, to prevent more Americans from losing their homes and to combat falling property values.
With widespread foreclosures, this bipartisan legislation comes not a moment too soon. The crisis has hit Wisconsin communities particularly hard. Compared to last year, housing foreclosure filings in Milwaukee County have spiked upward by an unprecedented 40 percent. The misery inflicted by foreclosures is compounded when abandoned houses, left vacant and boarded up, cause neighborhood property values to plummet. The situation has become just as bad, if not worse, in regions throughout the United States.
The origins of this crisis can be traced to an increased use of subprime home loans and predatory lending practices that push unsuspecting homebuyers into unrealistic mortgage plans. Large banks and Wall Street investors exacerbated the situation by failing to appreciate the riskiness of the debt they were holding. As the number of defaults grew, the problems with our lending system snowballed, exposing homeowners and communities to problems few had predicted.
In response, the Federal Reserve lowered interest rates so these financial institutions could borrow at lower rates, giving banks the liquidity they needed to stay afloat. The Federal Reserve also helped JPMorgan Chase acquire the sinking investment bank, Bear Stearns, and kept the markets from panicking. These steps were taken to foster an orderly market correction and avoid a deepening credit crunch. But, as the crisis continued in our communities, it became clear more needed to be done to help troubled homeowners, borrowers and neighborhoods bounce back from the hard losses they have suffered.
The legislation I voted for represents a first step in reversing this terrible trend by replacing risky loans with government-backed mortgages. It also will provide federal grants for communities to purchase and rehabilitate foreclosed properties, tax credits for first-time homebuyers and increased funding for foreclosure mitigation to help distressed homeowners avoid losing their homes and equity.
The housing package also will enable the federal government to shore up mortgage giants Fannie Mae and Freddie Mac to ensure their solvency and prevent massive, widespread turmoil in the housing market. The proposal also mandates the creation of a single regulator of the two government-sponsored enterprises. The new regulator will ensure that Fannie Mae and Freddie Mac, which own over half of the country's mortgages, are operating in a financially safe manner.
By addressing different aspects of a complex crisis, this landmark legislation will help end the pain and frustration felt by homeowners and communities impacted by the housing downturn while preventing another crisis of this magnitude from happening again. Homeownership remains a cornerstone of the American Dream. We should do everything we can to make sure it remains within reach for our citizens and future generations.
- Sen. Herb Kohl is a Democrat from Wisconsin.
With widespread foreclosures, this bipartisan legislation comes not a moment too soon. The crisis has hit Wisconsin communities particularly hard. Compared to last year, housing foreclosure filings in Milwaukee County have spiked upward by an unprecedented 40 percent. The misery inflicted by foreclosures is compounded when abandoned houses, left vacant and boarded up, cause neighborhood property values to plummet. The situation has become just as bad, if not worse, in regions throughout the United States.
The origins of this crisis can be traced to an increased use of subprime home loans and predatory lending practices that push unsuspecting homebuyers into unrealistic mortgage plans. Large banks and Wall Street investors exacerbated the situation by failing to appreciate the riskiness of the debt they were holding. As the number of defaults grew, the problems with our lending system snowballed, exposing homeowners and communities to problems few had predicted.
In response, the Federal Reserve lowered interest rates so these financial institutions could borrow at lower rates, giving banks the liquidity they needed to stay afloat. The Federal Reserve also helped JPMorgan Chase acquire the sinking investment bank, Bear Stearns, and kept the markets from panicking. These steps were taken to foster an orderly market correction and avoid a deepening credit crunch. But, as the crisis continued in our communities, it became clear more needed to be done to help troubled homeowners, borrowers and neighborhoods bounce back from the hard losses they have suffered.
The legislation I voted for represents a first step in reversing this terrible trend by replacing risky loans with government-backed mortgages. It also will provide federal grants for communities to purchase and rehabilitate foreclosed properties, tax credits for first-time homebuyers and increased funding for foreclosure mitigation to help distressed homeowners avoid losing their homes and equity.
The housing package also will enable the federal government to shore up mortgage giants Fannie Mae and Freddie Mac to ensure their solvency and prevent massive, widespread turmoil in the housing market. The proposal also mandates the creation of a single regulator of the two government-sponsored enterprises. The new regulator will ensure that Fannie Mae and Freddie Mac, which own over half of the country's mortgages, are operating in a financially safe manner.
By addressing different aspects of a complex crisis, this landmark legislation will help end the pain and frustration felt by homeowners and communities impacted by the housing downturn while preventing another crisis of this magnitude from happening again. Homeownership remains a cornerstone of the American Dream. We should do everything we can to make sure it remains within reach for our citizens and future generations.
- Sen. Herb Kohl is a Democrat from Wisconsin.
