Oh MY!!! Someone else has gotten on the 'Clue Train.' Slowly but surely, folks... slowly but surely...


August 20, 2008

Weezie
Cedar Park, Texas 78613

Dear Weezie:

Thank you for taking the time to contact me regarding your opposition to government intervention in the housing market. Your input is important to me, and I appreciate the time you took to share your thoughts.

A number of housing-related issues have been prominent during the last few months due to the prevalence of subprime loans and growing mortgage default and foreclosure rates. There is no doubt that this downturn is constraining the home lending and home building industries as well as severely affecting families facing foreclosure. I have a great deal of sympathy for families caught in these situations and I am very supportive of tax credits for the purchase of a primary residence and similar incentives that would counter the downward trend in the housing market.

Although the primary causes of foreclosure are traditionally personal financial setbacks such as job loss or medical calamity, the recent rise in subprime foreclosures may be partly due to imprudent underwriting standards during the housing boom. House prices rose rapidly in certain markets, which may have encouraged some borrowers in hot markets to assume more debt than was prudent. Rapidly rising prices encourage excess debt to refinance the house on more favorable terms. In order to take advantage of anticipated appreciation, some subprime borrowers turned to mortgage products with low introductory payments, but which risked higher further payments. The increase in unsustainable loans during relatively strong economics condition raises the question of how the loans were qualified by the lenders in the first place.

I have serious concerns about recently passed legislative proposals related to housing reform. These bills have been cobbled together without thorough vetting by the responsible committees, and amendments to fix the more objectionable portions of the bills were disallowed by House leadership. In my opinion, these legislative attempts at addressing the downturn in the housing market may represent a cure that is more dangerous than the disease.

The legislation gives the Federal Housing Administration the authority to insure an additional $300 billion in mortgage loans. The program is called HOPE for Homeowners, which will use the $300 billon to help borrowers at risk of foreclosure to refinance their current loans into manageable loans. Elements of these proposals punish responsible homeowners and taxpayers by forcing them to fund up to $300 billion in liabilities incurred by borrowers who made risky financial decisions and lenders who lowered their standards to accommodate those decisions. Further, the legislation contains no protections against obligating taxpayers to subsidize borrowers who deliberately default on their loan in order to participate in the mortgage trade-in program or those who may have committed mortgage fraud but were not convicted.

The legislation modernizes the FHA and establishes a new Federal Housing Finance Agency to oversee the Government-Sponsored Enterprises (GSEs) of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It also prohibits the use of down payment assistance programs funded by those who have a financial interest in the sale. Another provision creates an affordable housing trust fund that will be financed by profits from the GSEs. The primary purpose of the fund, called the Affordable Housing Fund, is to increase housing opportunities for extremely low- and very low-income homeowners and renters.

The legislation also gives the Treasury Department temporary authority to purchase an unlimited amount of debt or stock in Fannie Mae and Freddie Mac. The Secretary of the Treasury will establish the terms of the agreement.

I am not prepared to commit taxpayers who own their home, or have made budget adjustments to maintain their payments and / or borrowed responsibly to assume the liabilities of the borrowers who are facing foreclosure - especially when some of these borrowers may have committed mortgage fraud and others made a conscious decision to bet on the continued appreciation of their home values.

For these reasons, I could not support the housing reform package that came before the House of Representatives. However, I do look forward to supporting more fiscally sound proposals to incentivize home ownership across our country. I have always been a firm proponent of increasing American homeownership, as long as our policies are financially sound. Housing has always been a good, long-term investment, and though the housing market in some cities is experiencing a downturn right now, over the long haul housing will continue to steadily appreciate. It should continue to be the stated mission of our government to make buying a home a realistic and attainable goal for every American. I will continue to work diligently to create a fiscally responsible answer to the housing market reform in the House of Representatives.

Again, thank you for taking the time to contact me on this important issue. Please do not hesitate to contact me in the future should you need any further assistance.

Sincerely,

John Carter