Hillary Clinton Campaign Press Release - A Second Stimulus Package Focused on Housing

Hillary Clinton's Plan to Help Struggling American Families, Not Just Wall Street Banks

Just over a month ago, Congress passed and President Bush signed a $168 billion stimulus package to help our economy avert a housing-led recession. Yet while the legislation contained important tax rebates for working families and seniors, it did virtually nothing to address our housing crisis. It was clear then, as it is now, that the housing and credit crisis is the biggest threat to the health of our economy. Declining home values and record foreclosures threaten to not only devastate millions of American families but send communities across the country spiraling into deep recession.

Senator Clinton believes that if we can extend a $30 billion lifeline to avoid a crisis for Wall Street banks, we should extend at least $30 billion in immediate assistance to at-risk communities and families facing foreclosure. That is why Senator Clinton is calling on Congress and the President to pass a second stimulus package. This time around, the primary focus should be on addressing the growing housing crisis. And by investing new, temporary resources in a housing-focused stimulus package, we can avoid the worst fall-out from the current downturn, keep families in their homes and stabilize communities. The new stimulus package should include:

• A $30 Billion Emergency Housing Fund. The fund will provide states and localities with broad tools to stem the impact of concentrated foreclosures, including purchasing foreclosed properties, providing mortgage restructuring and counseling, and undertaking anti-blight programs.
• Expanding the Mortgage Revenue Bond Program, This reform will give state housing agencies up to $10 billion in additional resources to refinance unworkable mortgages.

While this second stimulus package should focus predominantly on the housing crisis, Congress should also consider temporary measures to help struggling workers like extending unemployment insurance.

I. A $30 BILLION EMERGENCY HOUSING FUND

Since Senator Clinton first called for emergency housing funds in January, there has been a growing recognition of the need for broader and more flexible tools to states and localities to stem the harmful effects of foreclosures. As Federal Reserve Chairman Bernanke recently noted, clusters of foreclosures are negatively impacting entire communities.[1] For every empty house, nearby properties lose over 1.4 percent of their value. In a city like Chicago, this comes to a citywide loss of almost $1.4 billion – an average of $371,000 per foreclosure.[2] Concentrated foreclosures also reduce economic activity and tax revenue, threatening school funding and leaving localities unable to help struggling homeowners.[3] A study by the U.S. Council of Mayors found that the foreclosure crisis will be directly responsible for $6.5 billion in lost tax revenue and 524,000 fewer jobs across ten states.[4]

Senator Clinton's $30 billion Emergency Housing Fund is designed to administer funds quickly and effectively to state, local and community groups to stem further foreclosures and counteract negative economic impacts in these communities. The fund will get money out quickly by using the existing funding formulas in the Community Development Block Grant (CDBG) program, rather than designing an entirely new set of allocation criteria. Local match requirements will be waived to ensure that funds flow out fast even in communities where the local tax base is contracting. Grants will be provided for one of several purposes, including:

• Acquiring foreclosed or distressed properties, making improvements, and putting them back into productive use. As Federal Reserve Chairman Bernanke recently argued, purchasing foreclosed properties is an effective way to avoid the negative impact of concentrated foreclosures in communities. Senator Clinton's Emergency Housing Fund would allow local governments, non-profit organizations and land trusts to purchase and re-sell properties to lower-income borrowers or convert purchased units into affordable rental housing. Buyers who receive the benefit of a reduced price property with an affordable stable mortgage would be expected to pay back some of that benefit as the equity in their home rises. This would allow communities as a whole to profit from the collective efforts of forestalling a downward spiral in property values.
• Offsetting the costs associated with keeping neighborhoods with high numbers of foreclosures safe and secure. Vacant properties encourage crime and vandalism and can impose new infrastructure and public safety costs on localities. In Lee County, Florida, for example, where a quarter of the homes stand empty, robberies are up 58 percent.[5] States could use these grants to help cover the cost, including increased police and fire support, and investments in lighting and maintaining public infrastructure to ward off blight.
• Working with homeowners threatened with foreclosure to restructure their mortgages and providing foreclosure prevention services at the local level. Many states have undertaken efforts to better educate at-risk homeowners with toll-free hotlines, expanded financial counseling and community-based foreclosure prevention education campaigns. In addition, state housing agencies and community groups are working with limited resources to help families restructure at risk mortgages so they can stay in their homes. These efforts need more support, and would be eligible for assistance under Senator Clinton's Emergency Housing Fund.

II. EXPANDING THE MORTGAGE REVENUE BOND PROGRAM

As part of a new housing-focused stimulus package, Senator Clinton is calling on Congress to pass her legislation to expand the Mortgage Revenue Bond program. The straightforward steps that Senator Clinton advocates will give state housing agencies up to $10 billion in additional resources over two years to refinance unworkable mortgages. It will also change existing rules so that state housing agencies can use the funds to help existing borrowers refinance at-risk mortgages. With these changes in place, state housing agencies will be able to help at least 100,000 homeowners secure more affordable, sustainable mortgages and stay in their homes.

Senator Clinton first proposed this action in October 2007. Several months and several hundred thousand foreclosure notices later, the Bush Administration has acknowledged the importance of this legislative change. There is no excuse to delay this needed reform any further.

SENATOR CLINTON'S CALL FOR A SECOND STIMULUS PACKAGE BUILDS ON HER AGGRESSIVE PROPOSALS TO COMBAT THE FORECLOSURE CRISIS

For over a year, Senator Clinton has been urging action to get out in front of the growing housing crisis. In March 2007 and again in August 2007, Senator Clinton outlined a series of reforms to crack down on unscrupulous mortgage lenders and correct oversight failures in the mortgage industry. In December of 2007, she called on the Administration to convene stakeholders and secure a voluntary agreement around a framework that would help keep families in their homes, which included:

• A foreclosure moratorium of at least 90 days on subprime, owner-occupied homes. The moratorium would stop foreclosures until lenders and servicers have an opportunity to implement the freeze in mortgage rates. The moratorium would also give state and city organizations as well as community groups the necessary time to provide financial counseling to at-risk homeowners.
• Freeze the monthly rate on subprime adjustable rate mortgages, with the freeze lasting at least 5 years or until the mortgages have been converted into affordable, fixed-rate loans. This would give the housing market time to stabilize, give families an opportunity to rebuild equity in their homes, and give mortgage industry time, and incentive, to convert mortgages that were designed to fail into loans that are actually affordable.

• [1] "Fostering Sustainable Homeownership," March 14, 2008.
  
  [2] David Abromowitz, "Addressing Foreclosures," Center for American Progress. January 31, 2008.
  
  
  
  [3] "The Housing Crisis and What it Means for State and Local Governments," Urban Institute, March 12, 2008.
  
  
  
  [4] U.S. Conference of Mayors, "Recommendations to Mitigate Economic Distress of Mortgage Foreclosures," January 24, 2007.
  
  
  
  [5] Christopher Leinberger, "The Next Slum?" The Atlantic Monthly, March 2008.