The Senate Committee on Banking, Housing, and Urban Affairs held a hearing today focusing on the Administration’s Homeowner Affordability and Stability Plan (the Plan). Chairman Christopher Dodd (D-CT) opened the hearing with scathing criticism of industry participants and regulators who failed to act late last year to prevent the increasing number of mortgage foreclosures. Ranking member Richard Shelby (R-AL) followed Senator Dodd’s statement with criticism of the Plan, arguing that the Plan both fails to appropriately target the homeowners who need the most assistance and creates unneeded waste. Senators Robert Menendez (D-NJ), Mel Martinez (R-FL), Sherrod Brown (D-OH) and Jack Reed (D-RI) also delivered their respective opinions about the merits and deficiencies of the Plan.
The sole witness at the hearing, Shaun Donovan, Secretary of the Department of Housing and Urban Development, followed with testimony supporting the Plan. In particular, he argued that the Plan would help responsible homeowners avoid foreclosure and also protect the home values of Americans broadly by stopping blight from infecting neighborhoods. He also said the Plan would protect the owner of an “average- valued home” in the U.S. from as much as a $6,000 decline in value. He outlined three primary goals of the Plan, utilizing Fannie Mae and Freddie Mac and partnering with private lenders to achieve them:
- Encouraging home ownership by helping to keep mortgage rates low,
- Providing support for refinancing up for up to four to five million homeowners in order to make their mortgages more affordable, and
- Establishing a $75 billion stability initiative for mortgage modifications for up to three to four million “at-risk” homeowners.
However, he did not address the Plan’s ability to distinguish between homeowners in need and “speculators,” which the President has stated would be specifically excluded from benefiting from the Plan. The Administration has announced it will release more details of the Plan next week.