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Joint Economic Committee Democrats Chairman - Senator Martin Heinrich (D-NM)

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May 13 2007

Happy Mother's Day? New Joint Economic Committe Report Reveals Military Moms Face Tough Challenges to Get Mental Health Care, Child Care, and Family Leave

HAPPY MOTHER’S DAY? NEW JEC REPORT REVEALS MILITARY MOMS FACE TOUGH CHALLENGES TO GET MENTAL HEALTH CARE, CHILD CARE, AND FAMILY LEAVE
 
Retaining Qualifies and Trained Service Members Is A Growing Problem Because Military Can’t Provide Child Care for 35,000 Kids, Lacks Comparable Federal Family Leave Benefits, and Offers Limited Mental Health Services
 
Schumer and Maloney Release Joint Economic Committee Report Highlighting Progress Made and Work Still to Be Done to Give Military Moms the Benefits They Deserve
 
Washington, DC – U.S. Senator Charles E. Schumer and Rep. Carolyn Maloney (D-NY). Chairman and Vice Chairman respectively of the Joint Economic Committee (JEC), released a Mother’s Day report revealing that mothers serving in the military and spouses of soldiers face difficult child care access, leave and health care services challenges. Women represent one in seven U.S. military personnel in Iraq. Like all mothers, military moms face challenges in meeting monthly expenses, getting good child care and health care for their families and themselves. But military moms face the added burden of longer deployments and frequent separation from their children and spouses. While the military has taken steps to address the needs of mothers, the JEC report finds that more still needs to be done.
 
Sen. Schumer said, “Military moms are a special breed who sacrifice a lot for very little in return. America owes them a tremendous debt for their service and the service of their loved ones. Military moms should have easy access to mental health care, quality child care, and enough time off to spend with their newborn and sick children. If the military want to keep its best and brightest, it should wish them a Happy Mother’s Day in action, not just words.”
 
The full report “This Mother’s Day: Helping Military Moms Balance Work and Longer Deployments” can be found at www.jec.senate.gov.
 
The Joint Economic Committee report found big challenges facing military mothers:

* Child care services are not meeting current needs, which doesn’t reflect increased deployment demands;

* Short family leave periods after child birth and adoption hurt retention of women; and

* Limited resources for mental health services to help military mothers and their children cope with the periods before, during and after deployment
 
“Making sure military mother have the quality child care, generous family leave, and access to mental health services they need is key to their family well-being and our national security,” said Rep. Maloney. “Our military families are sacrificing so much in the defense of our nation. We need to do all we can to support our troops. Not addressing these issues could have serious implications for the retention of women in the military, and the readiness and effectiveness of our forces.”
 
Child Care Costs:
Since the U.S. military’s presence in Iraq, hundreds of thousands of children have seen one or both parents leave for deployment. According to the Department of Defense, in September 2006, approximately 230,000 children had parents in Iraq, Afghanistan, or the Horn of Africa.
 
The military has increased the number of available child care centers, but the National Military Families Association estimates that the military is approximately 35,000 short expected need.
 
Short Family Leave:
A 2002 Government Accountability Office (GAO) study found that more than one third of attrition for female enlistees in 1993 wad triggered by pregnancy and child-care concerns and approximately 10 percent of all active duty women become pregnant every year and evidence indicates this problem will continue to be a problem during the current conflict.
 
New mothers may only take six weeks of paid convalescent leave after the birth of a child. Both new mothers and new fathers may also use annual leave. New mothers on deployment receive a 4-to-6 month deferment from deployment duty away from the home station for the period immediately following the birth of a child.
 
Access to Mental Health Services:
Studies showed that after Operation Desert Storm and Operation Desert Shield, women with children reported a higher rate of emotional health problem after deployment (64 percent) than women without children (39 percent), including anxiety and difficulty readjusting after deployment. In addition, children reported emotional stress during their parents’ absence. At the time, mothers had difficulties accessing appropriate services, negatively impacting their and their children’s’ mental health and relationships.
 
This month, a Department of Defense study released found that lengthier deployments in Iraq are adversely affecting service members’ mental health.
Important Facts about Military Mothers:

* Women make up approximately 14.3 percent of the active duty military (one in seven).

* Nearly half of all women in active duty force have been deployed to Iraq or   Afghanistan, and according to the Department of Defense in February 2007, 24,475 women are currently deployed to Iraq or Afghanistan.

* Nearly half of women in the active duty force are in the lower pay grades, earningbetween $14,436 and $24,744 as their base salary.

* Forty Percent of Women in the Active Duty Force Are Mothers.
 
* Majority of First-Time Military Moms are Young and Low-to-Moderate Income Mothers.
 
* Military spouses and their children make up a significant percentage of the larger military community and 93 percent of military spouses are women.
 
The full report “This Mother’s Day: Helping Military Moms Balance Work and Longer Deployments” can be found at www.jec.senate.gov.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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May 10 2007

Schumer: 'Higher Trade Defecit Pours Fuel on Fire -- Bush Administration Must Act Quickly On China Trade Policy

SCHUMER: ‘HIGHER TRADE DEFICIT POURS FUEL
ON FIRE – BUSH ADMIN. MUST ACT QUICKLY ON
CHINA TRADE POLICY’
 
Overall Trade Imbalance Grows to $64 Billion, a Six-Month High,
 Even With U.S. Exports Rising Slightly
 
Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, responded to new and rising trade deficit trade figures released by the Census Bureau today. The Census Bureau reported that for the month of March the trade deficit expanded to $63.9 billion, even though U.S. exports rose slightly.
 
Sen. Schumer said, “Higher monthly trade deficit numbers pour more fuel on the fire burning under this Administration to really do something on trade policy, especially when it comes to trade with China. The trade deficit numbers are critical because they represent I.O.U.s that our kids and grandkids will have to pay back later. This Administration needs to clamp down on high deficits and in particular force China to play fairly when it comes to currency valuation and free access to economic markets.”
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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May 04 2007

Schumer: Slowest Job Growth Since November 2004 Combined with Weak Housing Market, Raises Serious Concern

SCHUMER: SLOWEST JOB GROWTH SINCE NOVEMBER 2004 COMBINED WITH WEAK HOUSING MARKET, RAISES SERIOUS CONCERNS
 
Increased Unemployment Rate, Downwardly Revised Employment Figures for Last Two Months, and Lower Labor Force Participation Rate Indicate Job Growth Must Be a Higher Priority for Administration
 
 
Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, responded to new jobs numbers from the Bureau of Labor Statistics which indicated that the unemployment rate edged up to 4.5 percent in April, and only 88,000 total payroll jobs were created, the slowest monthly job growth since November of 2004. Non-government jobs grew by only 63,000. Job creation in February and March was also revised down from earlier estimates.
 
Sen. Schumer said “The slowest job growth since November of 2004, coupled with a weak housing market, raises important concerns about the health of the overall U.S. economy. Job creation needs to be a higher priority for this administration if we’re going to make sure that families can achieve their aspirations and America can maintain its global economic leadership.”
 
Highlights of today’s employment figures:

    *  Growth in payroll employment has been modest by the standards of past economic recoveries. Payrolls have grown by 1.4 percent over the past year, and the 12-month pace has been slowing since the start of last year. By comparison, at the same point in the 1990s recovery, 12-month growth in payrolls was 2.2 percent and rising.

    * While the unemployment rate has come down from its peak of 6.3 percent in June 2003, April’s 4.5 percent rate is still higher than the 4 percent rate achieved in the expansion of the 1990s.

    * Many labor market indicators remain weaker than they were at the start of the 2001 recession in March 2001.
         1. The labor force participation rate is 1.2 percentage points lower than when the recession began and the fraction of the working-age population with a job is 1.3 percentage points lower.
         2. One in every six unemployed people – 1.2 million Americans – have been jobless for more than 26 weeks, the maximum number of weeks for receiving regular unemployment insurance benefits.

    * Overall, there are 6.8 million unemployed Americans, and 4.8 million additional    workers who want a job but are not counted among the unemployed (including about 1.4 million who have searched for work enough to be considered marginally attached to the labor force). An additional 4.4 million people work part-time for economic reasons.

    * The unemployment rate would be 8.2 percent if the figure included those who are marginally attached to the labor force and those who are forced to work part-time for economic reasons.



The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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Apr 27 2007

Joint Economic Cmte Chair Calls Weak Housing Market And High Trade Deficits ‘Body Blows To U.S. Economy’

JOINT ECONOMIC COMMITTEE CHAIR CALLS WEAK HOUSING MARKET AND HIGH TRADE DEFICITS ‘BODY BLOWS TO U.S. ECONOMY’
 
Four Consecutive Quarters of Slower-Than-Expected GDP Growth Call into Question Administration’s Economic, Tax, and Trade Policy
 
Schumer: ‘Body Blows to U.S. Economy Must Be Countered by Sound Economic Policy from the Bush Administration’
 
Washington, DC:  Today U.S. Senator Charles E. Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), reacted to the Department of Commerce advance report of slower-than-expected, 1.3 percent growth in the nation’s Gross Domestic Product (GDP).  The GDP is the most comprehensive measure of our domestic production. While China’s GDP growth in the last quarter was 11 percent, the United States experienced its worst quarter of growth in four years, due in part to a continuing serious slowdown in housing investment and a widening trade deficit. 
 
Sen. Schumer stated, “The anemic U.S. economic growth of 1.3 percent this quarter is not surprising given the weak housing market and an increasing trade deficit.  These body blows to U.S. economy must be countered by sound economic policy from the Bush Administration.  Their economic, tax, and trade policy have been in a tailspin from the start, but it is not too late to shift course.”
 
“The gross domestic product is the clearest indicator of U.S. economic growth, but in this quarter and for the last four quarters straight, our GDP growth has been weaker than expected,” Sen. Schumer continued.  “As China experiences break-neck, double-digit GDP growth, this Administration must work with the Congress to reduce U.S. trade and budget deficits and take control of our economic future.”
 
The Joint Economic Committee provided additional analysis of today’s economic news:
  • Gross domestic product (GDP) growth slowed sharply to a 1.3 percent annual rate during the first quarter of 2007.  That first-quarter growth was 1.2 percentage points below the economy’s 2.5 percent pace in the fourth quarter of last year and the slowest quarterly gain since early 2003.  In the first quarter, real GDP was 2.1 percent above its level a year earlier. 
 
  • Economic growth remains below the 3 to 3¼ percent pace that most economists believe to be sustainable over the long term.  The first quarter is the fourth consecutive quarter of sub par economic growth.
 
  • Investment in housing declined 17 percent in the first quarter shaving one percentage point off the overall GDP growth rate.  Though slightly less than the decline in the fourth quarter of last year, the  first-quarter drop was the fourth consecutive double-digit quarterly decline in housing investment.
 
  • A widening trade deficit, slower growth in consumer spending, and a decline in federal government spending were significant factors in the first-quarter slowing in economic growth.   The trade deficit widened in the first quarter (reflecting a downturn in exports and an uptick in imports); real (inflation-adjusted) consumer spending on nondurable goods grew at a 2.9 percent annual rate in the first quarter, as compared with its 5.9 percent pace in the fourth quarter; and real federal government spending decreased at a 3.0 percent annual rate in the first quarter after gaining 4.6 percent in the fourth quarter, reflecting a first-quarter decline of 6.6 percent in real defense spending.
 
The Department of Commerce releases its advance first-quarter estimate of GDP before March data are available on some components on GDP (particularly, the trade deficit and inventory change).  The Department will revise its first-quarter estimates in late May, using more complete data.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
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Apr 24 2007

Schumer: Plunging Home Sales Across U.S. Cause For Concern As Subprime Foreclosures Mount

SCHUMER: PLUNGING HOME SALES ACROSS U.S. CAUSE FOR CONCERN AS SUBPRIME FORECLOSURES MOUNT

Previous Report by Joint Economic Committee on Subprime Mortgage Fallout Indicates More Subprime Foreclosures to Come, Compounding Already Sinking Existing Home Sales Revealed by the Nat’l Assn of Realtors

JEC Chairman Urges Curbing of Subprime Foreclosures to Shore Up Sagging Housing Market; Buyers’ Anxiety About Home Prices Falling Could Add to Further Sales Slowdown

Washington, DC: Today the National Association of Realtors (NAR) released figures showing an 8.4 percent drop in existing home sales. That is the largest monthly decline in 18 years according to news reports.

U.S. Senator Charles E. Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), released a report earlier this month showing that rising subprime mortgage foreclosures could lead to further weakening of the housing market as more supply is dumped onto the market. In response to today’s disappointing housing numbers, Sen. Schumer reiterated his support to help existing homeowners by stemming the tide of avoidable subprime foreclosures.

“Every day we are seeing new evidence that it is getting tougher for Americans to buy a home, keep a home, and now sell a home. With a brewing storm of subprime mortgage foreclosures on the horizon, the quickest way to instill more confidence in the overall housing market is to curb the wave of foreclosures,” Sen. Schumer said.

The Joint Economic Committee released a report “Sheltering Neighborhoods from the Subprime Foreclosure Storm,” which found that certain areas in the manufacturing belt of the Midwest, cities along the Northeastern corridor, Colorado, and the Sun Belt states—areas that experienced high foreclosure rates in 2006—are also seeing rises in the subprime delinquencies in the early months of 2007, indicating more foreclosure trouble to come.

The NAR report showed that existing home sales fell in all major U.S. regions. Sales were down 8.2% in the Northeast, down 10.9% in the Midwest, down 9.1% in the West, and down 6.2% in the South.

The 8.4 percent March decline in existing home sales is larger than the drop analysts had predicted, and attests to the ongoing weakness in housing. The steepness of the March drop can be partially attributed to weather-related factors (warmer temperatures earlier in the winter skewed sales forward).

On the price side, the NAR reported that the median sales price of existing homes of $217,000 in March. That was 0.3 percent below the level a year earlier, as compared with a 1.0 percent 12-month drop in February.

 

 

 

 The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

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Apr 23 2007

Trustees' Report Indicates Medicare Trust Fund Troubles Almost Twice as Imminent as Social Security Trust Fund

TRUSTEES’ REPORTS INDICATES MEDICARE TRUST FUND TROUBLES ALMOST TWICE AS IMMINENT AS SOCIAL SECURITY TRUST FUND
 
Schumer Urges Renewed Effort to Shore Up Medicare, Which Will Face Financial Difficulties in 12 Years, Decades Before Projected Shortfalls in Social Security
 
Joint Economic Committee Chairman Says Any New Social Security Privatization Efforts Should Be Dead on Arrival
 
Washington, DC:  Today the Social Security and Medicare Trustees released their annual reports showing that Social Security does not face an impending funding crisis, but Medicare funds are less secure.  The reports indicated that the Social Security Trust Fund would be solvent one year longer than was predicted in last year’s report – until 2041; but the Medicare Trust Fund would be exhausted as soon as 2019.  U.S. Senator Charles E. Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), released the following statement in reaction to the Trustees report:
 
“The Trustees’ reports today make clear that we have more than enough time to make the modest changes needed to keep Social Security financially sound, but that we will need to address issues in Medicare soon.  With high budget deficits, slowing GDP growth, and skyrocketing health care costs, we need to get our fiscal house in order, act to curb rising health care costs, and shore up Medicare before it’s too late.”
 
“Instead of peddling an ill-conceived Social Security privatization plan that has already been overwhelmingly rejected by the American people, the Administration should turn its attention to strengthening Medicare.  Any new Social Security privatization scheme will be dead on arrival in this Congress.”
 
“The so-called 45-percent general revenue trigger for Medicare is nothing less than another way to choke off funds to seniors who need help.  If there has to be a choice between preserving unnecessary tax cuts for the superrich or keeping good on our promise to 42 million Medicare beneficiaries, I’d choose the latter every time.”
 
The 45 percent general revenue trigger is an arbitrary threshold designed to take revenue increases, such as scaling back the President’s tax cuts, off the table in addressing Medicare’s solvency problems. 
 
Surpluses in Social Security have been used to finance the administration’s large tax cuts, increasing the federal debt substantially and increasing financial burdens on future generations.  Under the Bush budget, all of the Social Security surplus will be used to meet general government expenditures over the next 10 years.  Reigning in the budget deficit outside of Social Security will allow us to save the Social Security surplus in anticipation of the retirement of the baby boom generation.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
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Apr 16 2007

On Eve of Tax Day, Schumer Urges Free Electronic Tax Filing for All Taxpayers Directly With IRS

ON EVE OF TAX DAY, SCHUMER URGES FREE ELECTRONIC TAX FILING FOR ALL TAXPAYERS DIRECTLY WITH IRS

Joint Economic Committee Analysis Reveals Taxpayers Would Save Over a Billion Dollars Annually with Free E-filing; E-filing also Reduces Errors Dramatically from Standard Paper Filing

IRS Agreements with Software Companies Allows Them to Monopolize Efiling Market; Will Prevent IRS from Reaching E-Filing Goal of 80% by this Year
Washington, DC: On the eve of tax day, U.S. Senator Charles E. Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), released a JEC fact sheet revealing that free e-filing would save taxpayers and the federal government billions of dollars and reduces tax return errors dramatically. Online tax filing is clearly the easiest, cheapest,and most efficient way for Americans to pay their taxes. Sen. Schumer today called on the IRS to offer free e-filing for ALL taxpayers to save taxpayers and the federal government money and to meet the IRS goal of 80% e-filing as soon as possible.

 “This report shows that paying a fee for the ‘privilege’ of filing your taxes, costs taxpayers and the IRS billions of dollars,” Sen. Schumer said. “The bottom line is that the IRS is imposing an additional ‘tax’ on people paying their taxes, when billions could be saved by both if e-filing were free for all taxpayers.”

The Joint Economic Committee analysis includes a state-by-state breakdown for how much taxpayers spent in 2006 to file their taxes online and also charts the progress of efiling from 1995-2006. The full JEC paper can be found at: Free E-Filing Makes Sense For Both Taxpayers and the IRS

Though filing electronically saves the IRS millions of dollars – fees are imposed to do so, although more expensive to process paper returns do not have an additional charge. The IRS made agreements with paid tax preparers and software companies to not offer free filing because the companies were concerned it would hurt their business. In exchange for the IRS staying out of the software business the companies agreed to offer free electronic filing for people whose income is under $52,000. Everyone else has to pay to e-file by going through a third party, even though the e-filing system saves the taxpayer and the government money. Even those who qualify for free filing must go through an incredibly complicated system to e-file and may be pushed into buying other services for additional fees from third party preparers.

 

 Free E-filing Saves Money: Taxpayers can save over $1 billion annually in e-filing fees if taxpayers earning more than $52,000 could e-file for free. For the IRS, there are enormous cost savings from e-filing. While processing each paper return costs $2.65, an e-filed return costs only $0.29.

E-filing Reduces Errors: The IRS finds roughly 1 error in every 100 returns filed electronically (regardless of whether the return was prepared professionally of selfprepared by the taxpayer), compared to about 1 error in every 5 paper returns.

E-filing Is Easy: Filing income tax returns electronically also has significant advantages for taxpayers. Filing online is more convenient, return processing is faster, and refundscan be sent out more rapidly.

Sen. Schumer will be sending a letter to IRS Commissioner Mark Everson today to communicate his concerns over the e-filing program.

 

The JEC e-filing analysis can be found by clicking here.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

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Apr 12 2007

Schumer: All Stakeholders in Subprime Mortgage Mess Must Be Responsible for Helping Homeowners and Communities Hit Hardest by Foreclosures

SCHUMER: ALL STAKEHOLDERS IN SUBPRIME MORTGAGE MESS MUST BE RESPONSIBLE FORHELPING HOMEOWNERS AND COMMUNITIES HIT HARDEST BY FORECLOSURES

Joint Economic Committee Report on Subprime Mortgage Bolstered by New Realtors Report Showing Falling Home Prices Due to Rising Foreclosures

White House Blamed Homeowners for the Subprime Mortgage Mess When Confronted with Schumer’s Call for Immediate Federal Action

Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, expanded on statements from a news conference to release a JEC subprime mortgage report, a new National Association of Realtors report and today’s Los Angeles Times story where the White House took the opportunity to blame homeowners for signing up for deceptive subprime mortgages. The JEC report, entitled “Sheltering Neighborhoods from the Subprime Foreclosure Storm,” argued that foreclosure prevention is cost-effective and it was bolstered by yesterday’s Realtors’ report that indicated that housing prices nationwide are in decline. The JEC report also urged policy makers to act to both prevent future foreclosures and mitigate the negative impact of current home foreclosures. The report revealed scores of seriously affected communities nationwide.

Schumer said, “Much like the infamous Daily News headline, this White House hasbasically said to homeowners facing foreclosure: Drop dead.”

According to the Los Angeles Times this morning, White House spokesman Tony Fratto said "individuals need to make smart decisions in taking on debt, and there has to be some responsibility for making those decisions." He also said that any federal action would be unwelcome and would only encourage risky behavior.

Schumer noted that fast government action to coordinate emergency funds, including federal money, could prevent massive foreclosures around the country. “One of the best ways to avert a terrible foreclosure storm is for the federal government to coordinate stakeholders to create an emergency set of public and private funds to assist in the refinancing process for 2 families in need. “Taxpayers should not be on the hook for deceptive practices by dubious mortgage brokers, but the federal government has a responsibility to protect those who were taken advantage of and also intervene where the markets have failed,” Schumer stated.

Schumer continued, “The report by the National Association of Realtors yesterday echoes the fundamental findings of our report, with increased subprime mortgages being foreclosed and lower home prices, we must act quickly to prevent a potential economic disaster for families, communities, and markets.”

 

 The JEC report found:

  •  Subprime foreclosures are expected to increase in 2007 and 2008 as 1.8 million hybrid ARMS—many of which were sold to borrowers who can not afford them—reset in aweakening housing market environment.
  • Varying local economies, housing markets and state regulatory regimes mean that some local areas are getting hit by the subprime foreclosure crisis much harder than others and deserve immediate attention.
  • It pays to prevent foreclosures in these high-risk cities – every new home foreclosure can cost stakeholders up to $80,000, when adding up the costs to homeowners, lenders, neighbors, and local governments; while foreclosure prevention costs estimates are about $3,300 per household.
  •  Policy responses to the subprime crisis should be designed to address the local foreclosure phenomenon and include both foreclosure prevention strategies and improved mortgage lending regulations.

The full report can be found at www.jec.senate.gov.

The JEC report argued that preventing foreclosures is cost-effective and recommends increasing federal support for local foreclosure prevention programs and strengthening and reforming the FHA.

The JEC report also suggested a number of policy proposals to prevent a reoccurrence of a large number of unsuitable loans originated by inappropriate lending practices, including:

• Better regulation of mortgage origination at the federal level;

• Establishing a federal anti-predatory lending law that bans unfair and deceptive practices;

• Establishing a borrowers’ ability to pay standard; and

• Requiring plain language, bold disclosure practices for all mortgage products.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

 

Apr 11 2007

New Joint Economic Committee Report Reveals Serious Local Economic Impact of Subprime Mortgage Fallout Across Country

NEW JOINT ECONOMIC COMMITTEE REPORT REVEALS SERIOUS LOCAL ECONOMIC IMPACT OF SUBPRIME MORTGAGE FALLOUT ACROSS COUNTRY
 
Report Exposes Numerous Localities in Danger of Increasing Subprime Foreclosures; Each New Foreclosure Could Impose $80,000 in Costs to Families, Communities, and Businesses
 
JEC Chairman Schumer:  ‘As Lenders Try to Protect Their Bottom Lines, We Need to Protect American Families and Communities Too’
 
Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, joined by Senators Sherrod Brown (D-OH), Bob Menendez (D-NJ), released a report today analyzing the subprime mortgage foreclosure problem and its economic impact on the most vulnerable communities nationwide.  The report, entitled “Sheltering Neighborhoods from the Subprime Foreclosure Storm,” argues that foreclosure prevention is cost-effective and presents policy suggestions for curbing future subprime foreclosures.  Schumer was joined by other members of the Joint Economic Committee and Senate Banking Committee as they pointed to the report’s finding scores of seriously affected communities from the Rust Belt, to the Sun Belt, to the Northeast. 
 
Sen. Schumer said, “As subprime mortgage lenders scramble to protect their bottom lines, we need to redouble efforts to protect American families and communities who are at the losing end of this mess.  The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act,” Schumer said. “It makes good economic sense to make sure our families and neighborhoods are protected from rogue lenders and lax government oversight.”
 
Increases in payment delinquencies and foreclosures in the subprime mortgage market have raised widespread concerns about the possibility of increasing, concentrated foreclosures throughout the country. While lenders and banks figure out how to insure themselves from the consequences of increased subprime mortgage defaults, local communities are also struggling to stem the tide of foreclosures that impose significant costs on families, neighborhoods and cities.
 
Some of the key findings of the JEC report are:       
  • Subprime foreclosures are expected to increase in 2007 and 2008 as 1.8 million hybrid ARMS—many of which were sold to borrowers who can not afford them—reset in a weakening housing market environment.
  • Varying local economies, housing markets and state regulatory regimes mean that some local areas are getting hit by the subprime foreclosure crisis much harder than others and deserve immediate attention.
  • It pays to prevent foreclosures in these high-risk cities – every new home foreclosure can cost stakeholders up to $80,000, when adding up the costs to homeowners , lenders, neighbors, and local governments.
  • Policy responses to the subprime crisis should be designed to address the local foreclosure phenomenon and include both foreclosure prevention strategies and improved mortgage lending regulations.
“No region of the country has been harder hit than the Midwest. And no state has a higher rate of foreclosed properties than Ohio. Almost one in four subprime loans is delinquent in the Cleveland area, and statewide it is one in five. Over the past decade, foreclosures have increased almost fourfold in Ohio. We are facing a full-blown housing crisis,” said Sen. Brown.
 
Sen. Menendez said, “What we are facing is a tsunami of foreclosures. Just a few short years after home ownership levels soared to record highs, the harsh reality brought on by unreasonable mortgages has come crashing down on millions of homeowners. This report digs past the overall story to detail the devastation in America’s communities. It is clear that a number of New Jersey communities have been hit hard, as have many others from coast to coast, and I am working in the Banking Committee to solidify the mortgage system. I applaud Chairman Schumer for shedding additional light on this widespread problem.”
 
The JEC report includes state and local rankings by foreclosures and delinquencies using RealtyTrac’s and First American Loan Peformance’s data.  The report shows that the Midwest “Rust Belt” (Ohio, Michigan, Illinois, and Indiana), the South and West “Sun Belt” (Florida, Georgia, Texas, California, Arizona and Nevada), and Colorado experienced the highest rates of foreclosures in 2006. The hardest hit metropolitan areas also include cities in the Northeastern corridor in New York, New Jersey and Pennsylvania.
 
The report also analyzes metropolitan areas that are most at risk of rising foreclosures, using February 2007 delinquency data, employment statistics, and housing market indicators. 
 
“All predictions are that we are facing a tsunami of default and foreclosures in the subprime market as homeowners face steep increases in their monthly payments and housing values remain flat, making refinancing virtually impossible,” said Rep. Carolyn Maloney (D-NY), Vice Chair of the Joint Economic Committee and Chair of the House Financial Services Subcommittee on Financial Institutions. “The specific local crises documented by this study require swift action at both the state and national level.  We will be looking closely at the report’s recommendations in the Financial Services Committee.”
 
The report argues that preventing foreclosures is cost-effective and recommends the following foreclosure prevention strategies for policymakers:
  • Increase Federal Support for Local Foreclosure Prevention Programs. In the short-term, local community-based non-profits may be best positioned to implement foreclosure prevention programs.  The federal government can assist established community-based organizations aid families facing foreclosure. Estimates suggest that foreclosure prevention costs approximately $3,300 per household, substantially less than the $80,000 in estimated costs of foreclosure. 
  • Strengthen and Reform FHA. The Federal Housing Authority (FHA) currently issues more than $100 billion in mortgage insurance annually for loans made by private lenders to low-income, minority and first-time buyers, but FHA has not provided insurance for borrowers in the subprime market.
 
The following policy proposals are being considered to prevent a reoccurrence of a large number of unsuitable loans originated by inappropriate lending practices:
  • Strengthen Regulation of Mortgage Origination at Federal Level.  Although bank lenders are subject to bank regulatory standards, mortgage brokers and loan officers in non-bank companies are not subject to federal enforcement of lending laws, only to state regulation. While some states have taken measures to improve the licensing and education requirements for non-bank brokers and lenders, many states could further enhance these requirements.  Federal standards could include licensing for individual brokers and lenders (not just companies) and minimum education and experience standards.
  • Create a Federal Anti-Predatory Lending Law that Bans Unfair and Deceptive Practices. Currently, no anti-predatory lending law exists at the federal level, but such a law is being considered in Congress. In the process, lawmakers should investigate whether they should prohibit certain types of harmful loan provisions and practices, like pre-payment penalties, stated income or low documentation loans.  In addition, lawmakers should also consider requiring all subprime loan borrowers to escrow property taxes and hazard insurance.
  • Establish Borrowers’ Ability to Pay Standard.  In the financial services sector, investors are required to meet a “suitability standard” prior to being allowed to invest in certain products, based on their ability to afford the risk. A similar test should be considered for mortgage borrowers and lenders.  Many exploding ARMs were approved based on the borrower’s ability to pay the mortgage payment during the initial “teaser” rate period, not over the life of the loan. A stricter standard to determine borrowers’ ability to make mortgage payments will protect homeowners and prevent foreclosures.
  • Enhance Disclosure Practices for Mortgage Products: The details of teaser rates, interest-only payments and “pick a payment” products should be clearly and effectively communicated to potential borrowers. These disclosures must be written in plain language and be prominently displayed in a manner that is clear and understandable to the borrower.  Enhanced disclosure practices should include a table that clearly displays a full payment schedule over the life of the loan, all fees associated with the loan, an explanation of the “alternative” features of the loan (i.e. negative amortization), and a full explanation of the risks associated with taking advantage of these features, including the timeframe in which borrowers are likely to feel the negative effects of such risks.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

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Mar 27 2007

Federal Reserve Chairman Bernake to Testify at Joint Economic Committee on the U.S. Economic Outlook

FEDERAL RESERVE CHAIRMAN BERNANKE TO TESTIFY AT JOINT ECONOMIC COMMITTEE ON THE U.S. ECONOMIC OUTLOOK

Schumer to Seek Insight from Fed Chair on Economic Risks of the Subprime Loan Defaults, Evolving Stance on Inflation and Economic Growth

Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, will hold a hearing on the United States’ Economic Outlook with Chairman of the Board of Governors of the Federal Reserve System, Ben Bernanke on Wednesday, March 28, 2007 at 10:30 am in 216 Hart Senate Office Building. Due to a conflict with a Senate Finance Committee hearing on China currency, Fed Chairman Bernanke agreed to adjust the start time of the JEC hearing. This will be the first Congressional appearance for Chairman Bernanke after the March 21 FOMC statement, which showed greater uncertainty about the future direction of the economy and Fed policy than previous statements but without specifically mentioning the subprime mortgage market. As the subprime loan market continues its downward spiral, trade deficits continue to be large and unsustainable and other economic news breaks, Sen. Schumer and the JEC members will ask Chairman Bernanke for his views and guidance on the economic outlook.

WHAT: Joint Economic Committee Hearing on “The Economic Outlook”

WHO: The Honorable Ben Bernanke Chairman, Board of Governors of the Federal Reserve System

WHEN: 10:30 a.m., Wednesday, March 28, 2007

WHERE: 216 Hart Senate Office Building

(PLEASE NOTE ONE HOUR LATER START TIME TO HEARING)

THE HEARING WILL BE WEBCAST AT WWW.JEC.SENATE.GOV

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov