U.S. Sen. Jeff Merkley opened his first-ever town hall meeting Tuesday by telling a Roseburg audience he sees three things hurting the United States economy.
First, banks are afraid to lend because businesses are having a rough time. Second, consumer spending is down because people have lost their jobs — or are afraid they may be next — and because of that, businesses are selling less and laying off workers.
Third, the drop in property values has caused many homeowners to owe more than their homes are worth. As a result, they can’t afford to sell their homes and they’re unable to refinance.
“We haven’t had a situation like that since the Great Depression,” Merkley said. “We don’t want to sit around for several years and let the problem get a lot worse, which is what happened under (President Herbert) Hoover.”
Merkley, a Democrat who served as speaker of the Oregon House before defeating two-term Republican Sen. Gordon Smith in November, said he has been urging the administration of President Barack Obama to develop an aggressive plan to address the failing mortgage situation and give people the ability to refinance their loans and keep their homes.
Any mortgage recovery plan will be complicated, he said, because home loans are typically bundled together and sold to investors.
The banks that initiated the loans, even though they may still collect mortgage payments, no longer control them.
“The actual holder of the loan can no longer renegotiate the terms because they’ve sold off the rights to the cash flow. That’s the mess we’re in,” Merkley said.
During the Depression, President Franklin D. Roosevelt pushed for changes in the mortgage system. Back then, most homeowners made interest payments for three to five years, then were supposed to pay off their mortgage with a balloon payment. The system exploded when they weren’t able to meet their obligation.
“This was when the fully amortized mortgage, with a fixed interest rate, was created. They solved that, refinanced millions of families across the country and restored the financial foundation,” Merkley said. “We need to do something similar but the problems we have are much more complicated because of what’s happened.”
President Obama is scheduled to release his mortgage reform plan today.
About 100 people attended the hourlong town hall meeting, held at the Douglas County Museum. During the campaign, Merkley promised to follow the lead of Sen. Ron Wyden, who holds a town hall every year in all 36 Oregon counties. Wyden held his 500th town hall Tuesday in Fossil.
Merkley later toured Roseburg Forest Products’ Laminated Veneer Lumber plant outside Riddle. The 700,000-square-foot plant produces I-joists for primary support in floors and ceilings along with headers used for support over windows and doors.
Merkley chose Douglas County for his first town hall because it’s the county in which he was born. Merkley was born in Myrtle Creek and he attended kindergarten and first grade in Roseburg before his family moved to Portland.
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