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I rise today because I believe that the Durbin Amendment we are considering today is more
than a tool for solving America’s current economic problems.
It's the right thing to do for millions of American homeowners.
Like many of you, I had the opportunity recently to spend two weeks with my constituents.
Talking with people at Town Halls and community get togethers around New Mexico, I heard one
message over and over.
My constituents feel that—too often—America has one set of rules for the rich and powerful—and
a different set for working families.
Wall Street can fail and still make millions.
On Main Street, even people who work hard get dragged down.
Irresponsible lenders thrive while credulous borrowers lose their homes.
Everywhere you look, you see middle class Americans paying for other people’s mistakes.
It just doesn’t seem fair.
Of course, the law rarely contains an explicit double standard.
But today, we are dealing with a situation in which it does.
If a real estate speculator borrows millions to buy a city block, and then finds himself
unable to pay—he can walk into court and ask the judge to reduce the
principal on his loan.
If a working American borrows $30,000 dollars to buy that first home for her children, she's
stuck with that loan.
If she has lost her job, she's stuck with that loan.
If the value of her house has plummeted, she's stuck with that loan.
If she was the victim of predatory lending, she is stuck with that loan.
I have yet to hear a good reason why that working Americans should not have the same
rights as every real estate speculator and vacation homeowner in this
country.
My constituents don’t think that’s fair.
And you know they're right.
Now, sometimes you hear people defend unfair rules because they're good for the overall
economy.
They say that efficiency should be prized over equity.
But that argument does not work here.
By limiting judges’ ability to reduce the principal on home loans, we are delaying the
resolution of this country’s mortgage crisis.
Homeowners continue to struggle with loans they cannot pay, and the toxic assets based
on those loans remain on the balance sheets of America’s financial
institutions.
Elizabeth Warren—the head of TARP’s Congressional Oversight Panel—has made the point very
clearly.
And she says I quote, “The law recognizes everywhere the importance, in a financial
crisis, of recognizing losses, taking the hit and moving on.” Close quote.
That's why she supports the mortgage modification provision we are considering here today.
When judges have the power to provide a fair resolution for banks and borrowers, we will
be one step closer to recognizing those losses in our housing sector,
taking the hit and moving on.
In other words, the Durbin Amendment puts us one step closer to fixing the financial
system.
But this proposal’s benefits will not be felt primarily on Wall Street.
Credit Suisse estimates that as many as 1 in 6 mortgages in America will be lost to
foreclosure in the next four years.
Homeowners know what happens when a neighbor goes into foreclosure—the whole neighborhood
takes a hit.
Property values drop.
Local governments face another drain on their resources.
In some cases the foreclosed property becomes a magnet for crime, an embarrassment to the
community.
For most Americans, their home is their largest investment.
The best way to protect this investment is to stop unnecessary foreclosures.
In my home state of New Mexico, the Durbin Amendment would protect an estimated 6,665
homes and almost $376 million dollars in equity.
Without spending a dime in federal money, this Congress can make a significant contribution
to stabilizing my state’s housing market and keeping thousands
of families in their homes.
This is not a tough choice.
Opponents of this provision make two related arguments.
First, they claim that a mortgage modification provision will raise the cost of home loans.
Congress has heard testimony about this issue, and the evidence suggests otherwise.
I wouldn't go too deeply into this right now, but I encourage you to look at the testimony
before the House Judiciary Committee of Adam Levitin of Georgetown
University Law Center.
Professor Levitin is one of a chorus of academics who have poked holes in the arguments against
mortgage modification.
Opponents of mortgage modification also argue that loan restructuring should be handled
by bankers and borrowers and not judges.
I could not agree more.
Unfortunately, banks have so far been very reluctant to voluntarily restructure home
loans—despite a host of federal incentives.
A considerable body of evidence suggests that banks would actually do better if they were
more willing to restructure loans.
Foreclosure is bad for everybody, and bankruptcy is even worse.
Congress and the president have worked hard to encourage banks to modify home loans.
We have handed out carrots like a farmer’s market, and yet we still have a foreclosure
crisis.
It's time to give the homeowners a stick.
The Durbin Amendment does not let every homeowner march into court and demand a principal reduction.
Banks have the opportunity to work with homeowners on a reasonable compromise.
As long as banks are willing to negotiate, they will not face a court-ordered principal
reduction.
All this legislation says is that banks cannot ignore their borrowers.
They cannot stand around while working families struggle with unpayable loans.
That sounds fair to me.
Mr. President, the debate on this issue can get extremely complicated.
But in the final analysis it is simple.
The current system is unfair—it's bad for working families—and it's devastating for
the American economy.
The Durbin Amendment is a step in the right direction.
I hope you will join me in supporting it today.
Thank you.