Wednesday, January 30, 2008

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on Legislation Offering Tax Credit to Homebuyers
Remarks as Delivered on the Senate Floor

Mr. President, I commend Senator Cornyn on his remarks, and I want to add that I too think it is important to address the stimulus package that has come from the House quickly and decisively. I fall in the category of one of those who has some other ideas as well, but I think while the iron is hot and while we do have a surgical and strategic proposal before us, we should act.

Immediate action can make a large difference in when the infusion comes back into the economy, when the tax breaks can be taken advantage of by business in terms of depreciation and expensing, and in particular for the housing market, the increased loan limits for Fannie Mae, Freddie Mac, and FHA loans will be essential in saving some houses in foreclosure and those ultimately facing foreclosure, because they will be purchased by people who will qualify under the new loan limits and who will be able to take that loan and make it a performing asset.

It is to that subject I want to talk for a second. Experience is a great teacher. There is an old saying if a cat sits on a hot stove, it will never sit on a hot stove again. Of course, they never sit on a cold stove; they just get out of the business of sitting on stoves. In my experience in the private sector as a businessman, for years I was in the real estate business in the 1970s, in particular, in the period of time between 1968, as a matter of fact, and 1999. In the mid 1970s, the United States faced a housing crisis almost identical to what is about to happen in this country today. In 1973 and 1974, we had a huge housing boom, with increasing values, where credit got easier, loan limits got higher, and underwriting got lower. What ended up happening was that a lot of bad loans were made. In that particular period of time, many were to homebuilders rather than homeowners. But suffice it to say it was the same underwriting problem and the same deficiency in terms of loans. A plethora of foreclosures took place, new homes went back, and the United States found itself in 1975 in a recession with a 3-year supply of single-family houses on the market, unsold and with no housing market.

The President and the Congress took action. They passed a $2,000 tax credit, where a family could collect $2,000 if they purchased any standing new home in inventory and occupied it for 3 years. Within the course of a year, we had reduced as a country a 3-year supply of housing to a 1-year supply of housing. We had reinvigorated the construction trade, the subcontractors, the building suppliers, those who manufactured carpet, washing machines, dryers, and all the components so important in the overall economy that are spurred by a home purchase.

Yesterday, I introduced, along with Senator Gregg, Senator Craig, Senator Allard, and Senator Chambliss, S. 2566, calling for us to repeat history in this country, to reenergize the housing market that is so sluggish, at a strategic time. We can save houses in pending foreclosure from actually being foreclosed upon and turn them into occupied single-family dwellings. Very simply, S. 2566 would do the following:

It would provide a $15,000 tax credit--$5,000 for 3 years--to any individual, couple, or two people living together filing separately, if they purchased and occupied as their home any single-family dwelling on the market that was: A, a new home permitted for construction before September 1 of 2007 and now vacant; B, a home that has been foreclosed on that was owner occupied and is now in an REO--real estate-owned--category of any lender, bank, or financial institution; and, C, any property pending foreclosure that is owner occupied.

We all know from reading the paper that foreclosures are going up in geometric proportions. What is about to happen in the first quarter of this year is the largest realm of foreclosures that has taken place in this country in years. What is going to go into the second quarter of this year is those banks being told by regulators they have to get rid of that inventory, that they can't keep it on their books, and banks and lenders are going to do what they have always done. They are going to get rid of them by deeply discounting the prices to try to get people to come and buy those houses.

Now, what that does to Mr. and Mrs. America who live in a house making their payments is it depresses the value of their house, it lowers their home equity line of credit available because the value has gone down, and it stagnates the very consumer the economy has depended on over the last decade for the longest protracted period of growth in our history.

I come to the floor today to ask all the Members of the Senate to take a look at S. 2566, to take a hard look at it, and to make sure they look back at the history of 1975, when we faced almost an identical problem, took the strategic action this bill recommends, and had a result that was absolutely right for the economy and right for the American homeowner.

I understand all kind of incentives, I understand giving money back, I understand trying to send people to do things, but there is nothing better than helping to make the No. 1 investment every American family wants to make. An incentive to do that, at a time that very market is in trouble, is one of the keys to seeing to it that whatever lies ahead for us in our economy is a much lower trough, and maybe even a peak, where we at the right time strategically invest in the American family, in homeownership, and take those houses in ownership by lenders and put them in the ownership of families.