With Congress confronting the nation's real estate downslide, Rep. Ed
Perlmutter is trying to help the kind of people whose money he used to
go after as an attorney.
The Golden Democrat previously represented lenders in bankruptcy cases
involving consumers unable to pay their debts. He also worked for
banks, credit unions, mortgage companies and homebuilders forced into
bankruptcy.
Now he represents a slice of Colorado walloped by housing price
declines. Perlmutter's district includes Adams County, which according
to realtytrac.com in February had the state’s highest foreclosure rate.
One in every 133 Adams County households faced a foreclosure filing.
Realtytrac.com said that’s 4.2 times the national average. Meanwhile
Arapahoe County in his district posted the state’s second highest
foreclosure rate, with one in every 171 households receiving a
foreclosure filing.
Perlmutter sits on the House Financial Services Committee, which on
Wednesday heard testimony about how the country’s mortgage foreclosure
crisis is affecting the economy.
The committee is considering legislation aimed at containing the
nation's mortgage mess. It would provide Federal Housing
Administration-backed loans some homeowners could use to refinance.
Lenders in most cases would have to agree to reduce the total mortgage
amount for the home to qualify.
Perlmutter answered questions about his unique views on the problem and what he thinks should and shouldn't be done.
Q. Your district has some of the highest foreclosure rates. Tell me about what you see in neighborhoods when you are there.
A. If you were to go into the areas of substantial growth in Adams or
over in Aurora or Araphoe, that’s where you’re going to see a number of
the foreclosures.
The more recent loans in these newer neighborhoods were based on price
appreciation of homes and not so much about the income of the borrower.
And it’s been a nightmare.
The value of these homes have dropped … the individual doesn’t have the income to pay, and then you get a foreclosure.
Those foreclosed homes then affect other homes in that neighborhood. We
see fewer new homes being built because there’s this stock of
foreclosed properties out there.
Q. Tell me about your background as a bankruptcy attorney. How does that influence your perspective on the mortgage crisis?
A. People over about a 20-year period forget the lessons they learn.
Back in the 80s in Colorado in particular there was this belief that
real estate prices always go up. And they just don’t. There are always
times when the market corrects.
That same kind of euphoria was seen in real estate markets across the
country from the late 1990s all the way to about two years ago.
Q. What are your thoughts about what Congress is proposing to ease the housing foreclosure mess?
A. We really do need to stem the bleeding. That’s number one. Number
two is that we don’t in our desire to help support, underwrite the
economy and the home building businesses, that we don’t overcompensate
and over-regulate.
I think we need to assist homeowners, where we can provide a
FHA-guaranteed-loan at a new lower home price, to try and stabilize a
neighborhood.
Q. Are there any proposals in Congress that you consider particularly problematic?
A. (The bill we’re considering) on FHA, I think there are a lot of good
things in it. There are a few things in it that are problematic.
There’s a lot of pressure put on appraisers and how they might look at
various properties. They’re going to be extra cautious and I don’t want
to see them writing down properties in a way that exaggerates the drop
in values.
Q. (In the bill you’re considering) What’s the motivation for the lender to write down the loan amount?
A. The motivation … is to avoid a foreclosure and the time and the cost
of a foreclosure, to have an FHA-mortgage insurance, which then
protects them from any further defaults or drops and makes it easier
for them then to go sell the loan and get the cash back.
Q. Why would Congress have a role here vs. letting the free market work it out?
A. If you’re prepared to suffer the pain that a free market drop might
cause, then the free market is the proper approach. What we’ve seen ...
is the pain of a deep recession is more than the country could bear.
When the Federal Reserve over a weekend … has to come in and bail out a
Wall Street firm to the tune of $30 billion, then the question is
should we be assisting some homeowners out there in Adams County or
Aurora … and keep the neighborhood filled with owner-occupied
properties.
Q. How much are homeowners to blame here vs. the lenders?
A. There’s a lot of blame to go around on all sides.
Q. You’re a freshman (member of Congress). You don’t really have much
juice here. In the end you’re not going to be much of a decision maker.
How are you going to influence people you’re working with in Congress?
A. I beg to differ. I’ve been participating in all of these lending
kinds of discussions. Leadership of the House as well as the chairman
of this committee respects my background. I do think I have some
influence here.