Tuesday, October 13, 2009

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on Expanding the Homebuyer Tax Credit
Remarks as Delivered on the Senate Floor

Mr. President, I come to the floor to discuss our economy and the pending termination or sunset of the first-time home buyer tax credit and the potential implications and effects it certainly is going to have on what is at best a very fragile economy today.

First, I wish to reference this morning's USA TODAY business section where it was reported that existing home sales trailed down in the month of August off of the month of July. They did note they were better than August of a year ago but still deplorably low. Of all of the sales that were made in the month of August, 30 percent were attributable to the first-time home buyer tax credit. Unfortunately, substantially all the rest were attributable to short sales or foreclosures.

I was home Friday. In my State of Georgia, we have a law that says that if you foreclose on a deed to secure debt or a mortgage, you must advertise for four successive Fridays preceding the first Tuesday in the following month in order to foreclose. So every Friday in the legal organ of every county in Georgia, there is a section for foreclosure advertisements. I hold before the Senate today all 74 pages of the Marietta Journal legal notices announcing the foreclosure on 1,157 homes in a county of 700,000 people.

Houses continue to decline in their value because the market demand is down. The foreclosures we see today are not subprime loans; they were the loans that were foreclosed on a year or a year and a half ago. When we read the addresses of these 1,157, which I won't do, they are the addresses of mainstream America and the mortgages that are being foreclosed on are what are called conventional loans that were made to people who had jobs, had income sufficient to make the payments, and had downpayments of 5, 10, or 20 percent. These are the good loans a year ago that today are the loans being foreclosed on. In my State, 1 out of every 13 houses shows mortgage holders right now behind in their payments. Foreclosures are at record rates.

The first-time home buyer tax credit is about to expire. What does that have to do with this foreclosure problem we have and the problem of declining values of houses and shrinking equities for the American people? It has everything to do with it. We have a great demonstration project in the first-time home buyer tax credit that shows this Congress the way to continue and get a recovery in our housing market. In the time the first-time home buyer tax credit has been in effect, it is estimated that 350,000 home sales were made. That is 357,000 sales that would not have taken place.

What we need to do is look at the value of the home buyer tax credit and see whether an extension makes sense and, if it does make sense, how it should be structured. First of all, I say it makes sense because we had modest success the first time. But I think the limitation of a first-time home buyer at a maximum of $150,000 in income actually restricts us from helping the part of the market that is represented in these foreclosure pages because these are houses of people with more than $150,000 in income who would need to qualify. These are what are known as the move-up homes, the homes the executives and transferees from around the country sell when they leave their home county and are transferred to a job in another city or another State. We need to energize that market because the move-up market is where the problem exists.

So I would submit that when we look at the sunset date of November 30 on the first-time home buyer tax credit, we should extend it--not forever but through midyear next year, to the end of June 2010. There is a reason for that recommendation. The worst 3 months of the year in any housing market anywhere in the United States are December, January, and February because it is winter and because it is the holidays. So there is not much of a market to begin with in those 3 months. If this tax credit dies in November and then it dies the day before the declining market takes place, by the time the spring market comes back in March and April, it is too late and we will have a protracted period of even poorer sales than we have had recently. But if we pass and extend the credit through June 30 of next year, we continue to buoy the housing market around the country. If we take away the first-time home buyer limit and raise it to any home buyer who buys a home for their principal residence and resides in it for 3 years and we raise the income limitation from $150,000 for a family to $300,000, we stimulate the entire marketplace. That has a cost to it, a score of $16 billion. That is a lot of money, but it is less than 3 percent of the amount of the stimulus, and we know from what has happened in the last 9 months that it works.

It is very important that we stimulate and continue the existing stimulation of the housing market. The recession that began in December of 2007 began with a collapse of housing, first because of the subprime mortgage failures, but it continues to today, a continuing collapse, and the failures aren't subprime, high-risk credits, they are mainstream America. There is a point in time when we owe it to our country, we owe it to our economy, we owe it to mainstream America, where we know we have a proven program that works, to extend it and buoy the marketplace.

I wish to deal with some of the negatives some people have expressed about extending the tax credit.

The first negative I have heard in a lot of interviews is: Well, isn't all you are really doing is moving forward some sales that are going to take place anyway? Well, of course. That is the object. The problem is, we don't want them to take place in 2011 and 2012; we would like to move them forward to take place now. We want people back in the business of making the decision that it is a good time to buy.

Secondly, people will say: Well, it costs too much. Let's look at what we have done in 2 1/2 or 1 1/2 years in terms of cost to try to save an ailing economy. We have put $85 billion in 1 night in AIG. That is a lot more money than $16 billion. The Federal Reserve has at one place or another invested over $5 trillion. That is a lot more than $16 billion. The stimulus, which is a 2-year stimulus, which is just in its infancy of trying to make some difference, was $787 billion. The Troubled Asset Relief Program, or TARP, which was passed in October of last year, was $700 billion. Yet we have a proposal that has generated 350,000 sales, costs $16 billion, that is about to die, where all of those other programs and trillions of dollars have only saved a collapse but not regenerated an economy.

So I come to the floor today to ask everybody in the Senate to think about what is happening. Six weeks from now, the tax credit sunsets. When it fails, the market again will have downward depression on values, on sales, and most importantly on consumer confidence. Let's try to slow down the rate of foreclosure. Let's help Middle America, which right now faces difficult times. Let's take them out of the newspaper and let's take them back into a buoyant economy that has jobs, has growth, and has promise for the future.

I submit that an extension of the first-time home buyer credit by removing the means test, raising the income limitation, and extending it to midyear is good for America, makes good sense for this Senate, and I hope we will find the time before the current bill sunsets to pass it and do it for America.