Democrats call for ‘mortgage czar’ to tackle sub-prime crisis

By Jessica Holzer THE HILL

October 04, 2007

Standing alongside senior Democratic lawmakers, Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) attacked the Bush administration on Wednesday for a sluggish and feeble response to the sub-prime mortgage crisis, likening it to a nationwide Hurricane Katrina that Republicans could have averted. But they unveiled no fresh ideas for forestalling the wave of foreclosures, other than urging President Bush to appoint a housing czar to oversee the federal response. And the remarks invited a sharp rebuke from the White House, which argued that it had acted promptly to address the mortgage turmoil and that it was Congress that had been slow to respond. “If we do not act, sub-prime lending could end up eliminating more homeowners than it created, and the number of Americans foreclosed out of their homes could exceed the number of Americans from the Gulf Coast forced out of their homes by Hurricane Katrina,” Reid said. “This is unacceptable, and Democrats are leading the way to do something about it.” Senate Banking Committee Chairman Chris Dodd (D-Conn.) blamed the administration for what he argued was poor progress on prodding lenders to devise loan “work-outs” that help to keep troubled borrowers in their homes. “The fact that we’re watching this collapse occur around us raises some serious questions,” he said. “We need leadership from this administration.” Arguing that the current crisis was largely the administration’s doing, Dodd criticized the Federal Reserve for not cracking down on lending abuses years earlier. Rep. Barney Frank (D-Mass.), the House Financial Services chairman, echoed Dodd’s sentiments, accusing former House Majority Leader Tom DeLay (R-Texas) of blocking a bipartisan effort to tighten mortgage-lending standards when Republicans controlled Congress. “We would have had action well over a year ago and a lot of these bad loans wouldn’t have been made,” Frank said. A spokesman for the White House, Tony Fratto, disputed the notion that Congress had seized on the problems in the mortgage market before the president and criticized lawmakers for not moving faster. “We’re pleased that Democrats have finally decided to get involved in this issue. We know they were probably away on vacation back in August.” Fratto continued: “We should remind them that more than five weeks ago, President Bush unveiled a robust plan to deal with problems in the housing market and to assist troubled homeowners. The president didn’t wait for Congress to act.” Aside from urging Bush to appoint a mortgage czar, Democrats repeated calls for the administration to temporarily lift the portfolio caps on Fannie Mae and Freddie Mac, the mortgage giants that provide liquidity to the mortgage market. And they demanded more federal funds for counseling programs that help people stay in their homes. Talking to reporters after the press event, Frank named Jack Kemp, the former GOP vice presidential candidate, as his top choice for the role of mortgage czar, citing his career as a star quarterback: “You need to be an energizer. Jack would be great.” Fratto flatly rejected the idea of a mortgage czar: “I understand that because the Democrats have come late to this issue that they’re fishing for flashy ideas to gain attention, but adding another layer isn’t the answer.” He also noted that legislation to modernize the Federal Housing Administration (FHA) still awaits further congressional action, as do the appropriations bills with funds for homeowner counseling. Fratto reiterated the administration’s view that temporary portfolio caps on Fannie Mae and Freddie Mac, collectively known as the government sponsored enterprises, or GSEs, should be raised only in the context of fundamental GSE reform. Several lawmakers have advocated cracking down on sub-prime mortgage abuses and acting to help people hold on to their homes. But only legislation to reform the FHA has gained much traction so far. Having been approved overwhelmingly by the House and by the Senate Banking Committee, it now awaits a vote by the full Senate. Sen. Dick Durbin (D-Ill.) on Wednesday introduced legislation to allow homeowners to renegotiate the terms of their mortgage loans in bankruptcy. Frank is expected to introduce a broad bill to rein in lending abuses this month, but Dodd only announced his intention to tackle such legislation on Wednesday. The House Ways and Means Committee this week approved mortgage-tax relief so that homeowners who refinance their mortgages don’t get taxed on the loss of value in their home. The Bush administration supports the legislation, but it is unclear whether the Senate Finance Committee will tackle it. Meanwhile, the House passed legislation to beef up the regulator overseeing Fannie Mae and Freddie Mac, but the Senate has yet to act on GSE reform. Sen. Charles Schumer (D-N.Y.), a member of the Banking panel, has proposed legislation to lift the GSEs’ portfolio caps by 10 percent temporarily as long as Fannie Mae and Freddie Mac use half the additional funds from the loosened caps to buy refinanced loans from borrowers who had adjustable-rate mortgages. The Senate has passed a Schumer-backed provision securing $100 million for nonprofits that counsel troubled borrowers on avoiding foreclosure.