President Obama this afternoon signed two significant bills that he hopes will help fix the struggling housing market.
“These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us into this crisis never happen again,” Obama said.
One is designed to clamp down on mortgage fraud and would set up a $5 million independent commission to investigate the cause of the worldwide financial meltdown.
The $265 million a year from the bill, which supporters say will pay for itself through additional fines and penalties, would go to hire about 160 more FBI agents and 200 more Justice Department prosecutors to work on mortgage fraud cases.
The other encourages banks to help homeowners avoid foreclosure by expanding a $300 billion program that pushes lenders to write down an individual's mortgage if the homeowner agrees to pay an insurance premium.
His full remarks are below, followed by a White House.
Because of the current strict eligibility requirements, only about 50 homeowners are refinancing through the program, compared to the 400,000 it was supposed to help. The bill does not include the so-called cram-down provision that would have allowed bankruptcy judges to reduce mortgage payments. Obama wanted the proposal, but banks and other lenders vehemently opposed it.
Earlier today, Obama huddled with more of his economic brain trust, attending the first quarterly meeting of the President’s Economic Recovery Advisory Board.
Afterwards, Obama thanked its chairman, former Federal Reserve chief Paul Volcker, for the panel's "extraordinary work."
The committee has an "impressive" though not unanimous consensus on the potential of clean energy jobs, Obama told reporters. It is also helping advise him on an overhauled financial regulation plan the administration plans to put before Congress this year, Obama said.
THE PRESIDENT: Good morning, everybody -- good afternoon. Please, everybody, have a seat. Everybody have a seat. It is wonderful to see all of you. Four months ago today, we took office amidst unprecedented economic turmoil. And ever since that day we've worked aggressively across all fronts to end this crisis and to build a new foundation for our lasting prosperity. Step by step, I believe we're moving in the right direction.
I know my administration will be judged by various markers. But there's only one measure of progress that matters to me, and that's the progress that the American people see in their own lives, day to day, because right now, despite progress, too many Americans are hurting. They're Americans desperate to find a job, or unable to make ends meet despite working multiple jobs; Americans who pay their bills on time but can't keep their heads above water; Americans living in fear that they're one illness or one accident away from losing their home -- hardworking Americans who did all the right things, met all of their responsibilities, yet still find the American Dream slipping out of reach.
Now, much of what caused this crisis was an era of recklessness where short-term gains were too often prized over long-term prosperity. And too often in our nation's capital, we said the right words, we patted ourselves on the back, but ultimately failed to do what we were actually sent here to do -- and that is to stand up to the special interests, and stand up for the American people.
Well, standing up for the American people is exactly what we're doing here today with two bills that I'm about to sign -- The Helping Families Save Their Homes Act, and The Fraud Enforcement and Recovery Act. These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us to this crisis never happen again.
Thanks in large part to some of the men and women here, both onstage as well as in the audience, each bill passed by overwhelmingly bipartisan majorities. But we wouldn't be here without the leadership of my good friend, Chris Dodd. And I want to thank him and Senator Richard Shelby. (Applause.) Chris and Richard Shelby over on the Senate side; and then on the House side, Chairman Barney Frank and Representative Maxine Waters -- have done a great job. (Applause.) And I want to thank Senators Patrick Leahy and Chuck Grassley, as well as Representatives Conyers and Bobby Scott for leading the way on the fraud enforcement bill. (Applause.)
These two laws, together with the comprehensive credit card reforms that I hope to sign later this week, represent fundamental change that will help ensure a fair shake for hardworking Americans. And I think it's important for people to understand the significance of this week. This has been one of the most productive congressional work periods in some time. And I am grateful to have Harry Reid here, as well as Nancy Pelosi, who could not be here, and the other key members of Congress for assigning these measures the urgency that they deserve and that the times demand.
Let me talk a little bit about the housing bill. The Helping Families Save Their Homes Act advances the goals of our existing housing plan by providing assistance to responsible homeowners and preventing avoidable foreclosures. Last summer, Congress passed the HOPE for Homeowners Act to help families who found themselves "underwater" as a result of declining home values -- families who owed more on their mortgages than their homes are worth. But too many administrative and technical hurdles made it very difficult to navigate, and most borrowers didn't even bother to try.
This bill removes those hurdles, getting folks into sustainable and affordable mortgages, and more importantly, keeping them in their homes. And it expands the reach of our existing housing plan for homeowners with FHA or USDA rural housing loans, providing them with new opportunities to modify or refinance their mortgages to more affordable levels.
Because many responsible renters are being unfairly evicted from homes that go through foreclosure because the owners haven't been paying their mortgages, it requires banks to honor existing leases, or provide at least 90 days notice for renters on month-to-month leases.
And because far too many Americans go homeless on any given night, this bill provides comprehensive new resources for homeless Americans, focusing specifically on families with children -- the fastest-growing segment of the homeless population.
So altogether, it's a bill that builds on the housing plan we already put into action to stabilize the housing market and stem foreclosures. And because of that plan, all of you should know that interest rates are down, refinancings are up, and Americans who participate can save up to $2,000 a year -- in effect, a $2,000 pay cut per family -- tax cut -- excuse me. They don't need pay cuts. (Laughter.) That wouldn't be a good bill. (Laughter.)
Any American who wants to learn more about this plan should visit makinghomeaffordable.gov. And thanks to the efforts of the men and women gathered up here, more families will stay in their homes, more neighborhoods will remain vibrant and whole, more dreams will be defended, and America will take another step from recession to recovery.
So what I'm going to do now is I'm going to sign the housing bill, and then I'll talk a little bit about the anti-fraud bill. All right.
(The bill is signed.) (Applause.)
Let's get the rest of this crew up here.
The other bill that I'm signing today gives prosecutors and regulators new tools to crack down on what's helped cause this crisis in the first place -- and that's the twin scourges of mortgage fraud and predatory lending.
Last year, the Treasury Department received 62,000 reports of mortgage fraud -- more than 5,000 each month. The number of criminal mortgage fraud investigations opened by the FBI has more than doubled over the past three years. And yet, the federal government's ability to investigate and prosecute these frauds is severely hindered by outdated laws and a lack of resources.
And that's why this bill nearly doubles the FBI's mortgage and financial fraud program, allowing it to better target fraud in hard-hit areas. That's why it provides the resources necessary for other law enforcement and federal agencies, from the Department of Justice to the SEC to the Secret Service, to pursue these criminals, bring them to justice, and protect hardworking Americans affected most by these crimes. It's also why it expands DOJ's authority to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes -- institutions where more than half of all subprime mortgages came from as recently as four years ago.
And furthermore, it allows DOJ to prosecute anyone who fraudulently obtains Recovery Act or TARP funds -- precious taxpayer dollars we've carefully invested in order to turn this crisis around. And finally, it creates a bipartisan Financial Markets Commission to investigate the financial practices that brought us to this point, so that we make sure a crisis like this never happens again.
Our current troubles were born of eroding home values and portfolio values, but also an erosion of our common values. So if we want to fully dig ourselves out of this crisis, we're going to need to do more than just change policy. We need all of us to live up to our responsibilities. Government must set the rules of the road that are fair and fairly enforced. Banks and lenders must end the practices that added to this mess. Individuals must take responsibility for their own actions. And all of us must learn to live within our means again.
I believe we're moving in the right direction. But I want to remind everybody that it took many years and many failures to get us here, and it's going to take some time to get us out. The stock market will rise and fall. The job market has taken a beating and won't be back immediately. The housing market still has a long way to go. But I'm confident we will get there. And if we keep at it, if we all do our part to usher in a new era of responsibility, then I'm convinced that we will recover from this recession, and we're going to come out on the other side stronger and more prosperous as a nation and as a people.
So with that, I'm going to sign The Fraud Enforcement and Recovery Act, along with these extraordinary legislators who helped to make it happen. Give them a big round of applause.
WHITE HOUSE SUMMARY
The Helping Families Save Their Homes Act is an important step towards stabilizing and reforming our nation’s financial and housing markets – helping American homeowners and increasing the flow of credit during these difficult economic times. This legislation will strengthen our nation's housing sector and facilitate the goals of the Administration's Making Home Affordable Program by helping millions of American homeowners stay in their homes.
The Fraud Enforcement and Recovery Act will protect the American people by giving the federal government new tools and resources to prevent fraud. This reform bill will help the federal government keep markets free and fair, so that American consumers can thrive.
Fact sheets on both pieces of legislation are below.
The Helping Families Save Their Homes Act
Expanding Reach of Making Home Affordable to Help More Homeowners
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Since January, the Administration has made significant progress in developing and implementing a comprehensive plan for stabilizing our housing market, the centerpiece of which is the Making Home Affordable Program (MHA). By reducing foreclosures around the country, the average homeowner could see their house price bolstered by as much as $6,000 as a result of this plan, and as many as 9 million homeowners may increase the affordability of their mortgages and avoid preventable foreclosures.
Our progress in implementing MHA to date has been substantial. We have introduced detailed guidelines for loan modifications which will establish a new standard practice for affordable modifications in the industry. Servicers covering more than 75 percent of loans in the country have now begun modifications and refinancings under the Administration’s MHA Program. We have also launched MakingHomeAffordable.gov, a consumer website for the program, which has had more than 17 million page views in less than 2 months, announced details of our Second Lien Program, Home Price Decline Protection Incentives and Foreclosure Alternatives Program, strengthened Hope for Homeowners as a part of the MHA program, and expanded the efforts of the federal government to combat mortgage rescue fraud.
· Improvements to Hope for Homeowners
The legislative improvements to Hope for Homeowners included in S.896 should significantly improve the ability of borrowers to benefit from the opportunities provided by Hope for Homeowners in the context of the Administration’s housing plan. On April 28th we announced new details describing how Hope for Homeowners will be strengthened as a part of the Administration’s Making Home Affordable Program. Incentive payments will be available for successful Hope for Homeowners refinances and servicers will be required to evaluate all applicants for eligibility for Hope for Homeowners as well as the Home Affordable Modification Program.
Hope for Homeowners targets help to underwater borrowers, who often face heightened risks of foreclosure, by requiring principal writedowns to help homeowners increase the equity they own in their homes. The legislative modifications to the Hope for Homeowners program included in S.896 will ease restrictions on eligibility and enable refinancing of underwater mortgages for a greater number of borrowers.
· Modifications to FHA and federally guaranteed farm loans
Legislative changes to FHA and federally guaranteed farm loans will facilitate cost-neutral loan modifications for federally guaranteed rural housing loans and FHA loans. These changes will improve the Administration’s ability to provide assistance to responsible borrowers with federally guaranteed rural housing loans and FHA loans as part of the Making Home Affordable Program.
Increasing Flow of Credit by Expanding FDIC and NCUA Capabilities
The Helping Families Save Their Homes Act of 2009 contains provisions that will help to restore and support the flow of credit in the US economy. The act authorizes new important tools to assist in stabilizing the financial system during the current economic downturn. Together these provisions, described below, should provide additional support for increasing the flow of credit in the US economy.
· Extension of temporary increase in deposit insurance
Extending the temporary increase in deposit insurance will provide added confidence to depositors. This will provide depository institutions with a more stable source of funding and enhanced ability to continue making credit available across our economy.
· Increase in borrowing authority of the FDIC
Increasing the borrowing authority for the Federal Deposit Insurance Corporation (FDIC) to $100 billion will allow the FDIC to spread out premium increases over time. This will reduce near-term costs for banks and thrifts, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the FDIC to borrow additional amounts through December 31, 2010.
· Increase in NCUA borrowing authority and creation of a stabilization fund
The legislation will increase the borrowing authority for the National Credit Union Administration (NCUA) to $6 billion and create a Stabilization Fund to address problems in the corporate credit union sector. This will reduce near-term costs for credit unions, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the NCUA to borrow additional amounts through December 31, 2010.
Increasing Consumer Protections Related to Housing
· Establishes protections for renters living in foreclosed homes
One of the often overlooked problems in the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure. To address the problem of these tenants being forced out of their homes with little or no notice, this legislation will require that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which cases a minimum of 90 days notice will be required. Parallel protections are put in place for Section 8 tenants.
· Establishes right of a homeowner to know who owns their mortgage
Often mortgage loans are sold and transferred a number of times. Borrowers often have difficulty determining who owns their loan, and who to contact with questions, problems or complaints about their loan. This legislation requires that borrowers be informed whenever their loan is sold or transferred, so that they will always know who owns their loan.
Provides Comprehensive New Resources for Homeless Americans
This legislation significantly increases aid to homeless Americans, appropriating $2.2 billion dollars to help solve the crisis of homelessness, and address the enormous costs homelessness can impose on individuals, families, neighborhoods and communities. In addition, the legislation consolidates homelessness programs to improve effectiveness and streamline administration, and targets assistance to families with children – the fastest growing segment of the homeless population.
The Fraud Enforcement and Recovery Act
Strengthening the Capacity to Fight, Prevent, and Deter Fraud
The legislation strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud. The amendments expand the Department of Justice’s authority to prosecute crimes involving mortgage fraud, commodities fraud, and fraud involving U.S. government assistance provided during the recent economic crisis.
· Covering private mortgage brokers and other companies
Over 50% of sub-prime mortgages issued as recently as 2005 involved private mortgage institutions and similar entities not currently covered under federal bank fraud criminal statutes. FERA amends the definition of a “financial institution” in the criminal code (18 U.S.C. § 20). This will extend Federal laws to private mortgage brokers and companies that are not directly regulated or insured by the Federal Government.
o This law will expand the Department of Justice’s authority to prosecute mortgage fraud involving private mortgage institutions under a variety of statutes, including 18 U.S.C. § 215 (financial institution bribery); 18 U.S.C. § 225 (continuing financial crimes enterprise); 18 U.S.C. § 1005 (false statement/entry/record for financial institution); and 18 U.S.C. § 1344 (bank/financial institution fraud).
o The bill changes the definition of “financial institution” to include private mortgage brokers and other non-bank lenders will enhance our ability to prosecute criminals under the bank fraud statute who commit fraud involving loans from those companies.
· Prohibiting manipulation of the mortgage lending business
The new law changes the mortgage applications statute (18 U.S.C. § 1014) to make it a crime to make a materially false statement or to willfully overvalue a property in order to influence any action by a mortgage lending business. Currently, the offense only applies to federally-regulated institutions.
· Protecting the Integrity of TARP and the Recovery Act
The legislation amends the major fraud statute (18 U.S.C. § 1031) to protect funds expended under TARP and the Recovery Act.
· Covering commodity futures and options in anti-fraud statutes
This law amends the Federal securities statute (18 U.S.C. § 1348) to cover fraud schemes involving commodity futures and options. Currently, the statute does not reach frauds involving options or futures, which include some of the derivatives and other financial products that were part of the financial collapse.
· Broadening the False Claims Act
FERA modifies the False Claims Act (FCA) to eliminate the requirement that a false claim be presented to a federal official, or that it directly involve federal funds. It also amends the FCA reverse false claims provision to ensure that the knowing retention of an overpayment is a violation.
Providing the Resources to Keep Markets Free and Fair
There is no shortcut to effective fraud enforcement and prevention. FERA will also provide needed resources to help the Department investigate and prosecute those who engage in fraudulent schemes.
· Investing in fraud prevention and enforcement
The legislation authorizes up to $165 million in new resources for FY 2010 and 2011 to hire fraud prosecutors and investigators.
· Strengthening the federal government’s full regulatory and enforcement capacity
The legislation authorizes $140 million for the FBI, $50 million for U.S. Attorney’s Offices; $20 million for the Criminal Division, $15 million for the Civil Division, $5 million for the Tax Division, $30 million for the US Postal Inspection Service, $30 million for the Inspector General at the Department of Housing and Urban Development, $20 million for the Secret Service, and $21 million for the Securities and Exchange Commission.
Addressing the Causes and Consequences of the Crisis
This legislation creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point, so that we make sure it never happens again.
About Political Intelligence
Glen Johnson is Politics Editor at boston.com and lead blogger for "Political Intelligence." He moved to Massachusetts in the fourth grade, and has covered local, state, and national politics for over 25 years. E-mail him at firstname.lastname@example.org. Follow him on Twitter @globeglen.