[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                      SUCCESSFUL HOMEOWNERSHIP AND
                   RENTING THROUGH HOUSING COUNSELING

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 18, 2004

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-73


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSSELLA, New York              CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              ARTUR DAVIS, Alabama
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  BRAD MILLER, North Carolina
JEB HENSARLING, Texas                DAVID SCOTT, Georgia
SCOTT GARRETT, New Jersey            CHRIS BELL, Texas
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
           Subcommittee on Housing and Community Opportunity

                     ROBERT W. NEY, Ohio, Chairman

MARK GREEN, Wisconsin, Vice          MAXINE WATERS, California
    Chairman                         NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska              JULIA CARSON, Indiana
RICHARD H. BAKER, Louisiana          BARBARA LEE, California
PETER T. KING, New York              MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          BERNARD SANDERS, Vermont
    Carolina                         MELVIN L. WATT, North Carolina
DOUG OSE, California                 WILLIAM LACY CLAY, Missouri
PATRICK J. TOOMEY, Pennsylvania      STEPHEN F. LYNCH, Massachusetts
CHRISTOPHER SHAYS, Connecticut       BRAD MILLER, North Carolina
GARY G. MILLER, California           DAVID SCOTT, Georgia
MELISSA A. HART, Pennsylvania        ARTUR DAVIS, Alabama
PATRICK J. TIBERI, Ohio
KATHERINE HARRIS, Florida
RICK RENZI, Arizona
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 18, 2004...............................................     1
Appendix:
    March 18, 2004...............................................    59

                               WITNESSES
                        Thursday, March 18, 2004

Bibby, Douglas M., President, National Multi Housing Council.....    48
Canfield, Anne C., Executive Director, Consumer Mortgage 
  Coalition......................................................    49
Couch, Robert M., President and CEO, New South Federal Savings 
  Bank, on behalf of the Mortgage Bankers Association............    46
Diaz, Lautaro, Deputy Vice President for Community Development, 
  National Council of La Raza....................................    31
Grist, Lisa-Nicolle, Executive Director, Neighbors Helping 
  Neighbors, Inc.................................................    32
Jordan, Rodney, Vice Chairman, Norfolk Redevelopment and Housing 
  Authority, Norfolk, VA.........................................    34
Obloy, Gary F., Executive Director, Community Action Commission 
  of Belmont County, Inc., Clairsville, OH.......................    36
Smith, William, President and CEO, Mutual Community Savings Bank, 
  on behalf of America's Community Bankers.......................    51
Spriggs, William E., Executive Director, National Urban League 
  Institute for Opportunity and Equality.........................    52
Wade, Kenneth D., Executive Director, Neighborhood Reinvestment 
  Corporation....................................................    29
Walsh, Chapman, Housing Director, Green Forest Community 
  Development Corporation, Decatur, GA...........................    38
Weicher, Hon. John C., Assistant Secretary for Housing-Federal 
  Housing Commissioner, U.S. Department of Housing and Urban 
  Development....................................................    11
Williamson, Odette, Staff Attorney, National Consumer Law Center.    54

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    60
    Bibby, Douglas M.............................................    61
    Canfield, Anne C.............................................    69
    Couch, Robert M..............................................    77
    Diaz, Lautaro................................................    83
    Grist, Lisa-Nicolle..........................................    92
    Jordan, Rodney...............................................   101
    Obloy, Gary F................................................   104
    Smith, William...............................................   109
    Spriggs, William E...........................................   113
    Wade, Kenneth D..............................................   118
    Walsh, Chapman...............................................   130
    Weicher, Hon. John C.........................................   151
    Williamson, Odette...........................................   158

              Additional Material Submitted for the Record

Bibby, Douglas M:
    Written response to questions from Hon. Nydia M. Velazquez...   172
Canfield, Anne C.:
    Written response to questions from Hon. Nydia M. Velazquez...   173
Couch, Robert M:
    Written response to questions from Hon. Nydia M. Velazquez...   176
Williamson, Odette:
    Written response to questions from Hon. Nydia M. Velazquez...   182
AARP, prepared statement.........................................   185
American Financial Services Association, prepared statement......   191
American Society of Home Inspectors, Inc.........................   194
Association of Community Organizations for Reform Now, prepared 
  statement......................................................   198
Financial Services Roundtable, prepared statement................   200
Housing Partnership Network, prepared statement..................   207
The National American Indian Housing Council, prepared statement.   212

 
                      SUCCESSFUL HOMEOWNERSHIP AND
                   RENTING THROUGH HOUSING COUNSELING

                              ----------                              


                        Thursday, March 18, 2004

             U.S. House of Representatives,
 Subcommittee on Housing and Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 1310, Longworth House Office Building, Hon. Bob Ney 
[chairman of the subcommittee] presiding.
    Present: Representatives Ney, Miller of California, Renzi, 
Waters, Velazquez, Lee, Clay, Scott and Davis.
    Chairman Ney. [Presiding.] Everybody got quiet before I 
banged the gavel. What a great group of people. It is because 
you are in smaller quarters. We could not have the hearing in 
the regular hearing room so we are here in House 
Administration, so we are just in a little bit tighter 
quarters.
    Today, the subcommittee meets to discuss the importance of 
housing counseling, specifically on H.R. 3938, Expanding 
Housing Opportunities Through Education and Counseling. I would 
like to thank the gentlelady from New York, Ms. Velazquez and 
her staff for their hard work and diligence in helping draft 
this important piece of legislation. I want to thank the 
gentlelady. We also worked in conjunction with the gentleman 
from Georgia, Mr. Scott, and we produced a bill designed I 
think that enhances the counseling programs currently operating 
through HUD and to foster other private counseling activities 
which I really firmly believe are so important to so many 
people.
    Currently, HUD laws and various documents show a variety of 
counseling activities scattered throughout the agency. This 
year, the Bush administration's budget proposal recommends 
increasing funding for the housing counseling assistance 
program to $45 million and funding it through a separate 
program dedicated to housing counseling. In previous years, 
counseling was funded as a set-aside within the HOME program. 
In fiscal year 2005, it is estimated that this $45 million will 
support 550,000 families with home purchase and homeownership 
counseling and about 250,000 families with rental counseling. 
During the previous 3 years, this administration more than 
doubled funding for the program.
    H.R. 3938 will consolidate all HUD counseling services and 
programs under a single office within HUD entitled the Office 
of Housing Counseling. The mission of this office will be to 
coordinate and oversee HUD's many housing counseling programs, 
to improve the efficiency and effectiveness of the counseling 
services provided through the HUD programs. The director of 
this office will be responsible for the oversight and 
coordination of both homeownership and rental housing 
counseling programs.
    Today, homeownership and counseling programs take on a 
variety of forms. Counseling is provided with grants through 
separately administered programs, nonprofit organizations, 
government agencies and lenders. The programs offered are 
delivered through a wide variety of different means, including 
telephone, classroom, home study, and individual counseling. 
Information provided and the timing of the counseling also 
varies I think significantly, but can be generally divided into 
two separate categories, pre-and post-purchase.
    Pre-purchase counseling education prepares families for the 
responsibility of homeownership by providing information on the 
home buying and the financing process. Counseling also can 
include information on financial planning, money management and 
home maintenance and repairs. Post-purchase includes the above-
mentioned items, but often has a greater emphasis on issues 
pertaining to maintenance and repair and to individual 
budgeting techniques.
    Extending homeownership opportunities to American families 
continues to be a primary focus of this housing subcommittee. I 
want to thank the members I mentioned previously, and the two 
members that have joined us, Mr. Renzi of Arizona and Mr. 
Miller of California. They have been also great members on a 
wide variety of issues. Last year, our bipartisan approach to 
legislation in 2003, and I want to thank everybody, and our 
Ranking Member, Maxine Waters, on this subcommittee, and of 
course the full committee Chairman Oxley and Ranking Member 
Barney Frank.
    Last year, our bipartisan approach to legislation in 2003 
led to the enactment into law of 11 pieces of legislation out 
of here, which I think was a tremendous effort. I also want to 
thank the staff from both sides of the aisle for that.
    In December of last year, the President signed into law the 
American Dream Down Payment Act, which will assist an estimated 
40,000 low-income families each year to share in the dream of 
owning their first home. Critical to increasing homeownership 
is helping families learn more about the important elements in 
the purchase or retention of a home, which for people is the 
most major thing practically that could happen in their lives.
    With that, without objection, I have more for the record. I 
do not want to take up the time of other statements and also 
the witnesses.
    Does the gentlelady have remarks?
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Chairman, achieving the American dream of owning a home 
is unfortunately still out of reach for many hard-working 
families across the nation. Despite that more than 68 percent 
of Americans now own a home, minorities still lag behind. Only 
50 percent of Hispanic and Afro-American families own a home, 
as compared to 76 percent of Caucasian families.
    The number of foreclosures are increasing nationwide, and 
are skyrocketing in many local communities. In Queens, New 
York, which is part of my congressional district, over 200 
families defaulted on their mortgages last year and the 
foreclosure rate is twice the national average. Housing 
counseling is not just an important initial step in the process 
of purchasing a home. It is critical to ensuring that new 
homeowners know what is on the table and what is at stake when 
they sign on the bottom line.
    In neighborhoods across the country, certified housing 
counselors are meeting with low-income families helping, them 
determine if they are ready to purchase a home. They walk 
potential homeowners through the buying process, clarifying 
loan terms, fees and costs, as well as their rights and 
responsibilities. Housing counseling empowers individuals to 
meet with mortgage lenders knowing what that they have the 
information they need to successfully purchase and maintain a 
home for their families.
    However, many families caught up in the excitement of 
purchasing their first home are often ill-informed or 
misinformed about the loan agreement they are signing. As a 
result, they end up with mortgage payments they cannot afford 
and, with alarming frequency, face default or foreclosure. 
While not a solution to curbing predatory lending, housing 
counseling is an important part of educating families about all 
aspects of purchasing, maintaining and refinancing a home.
    I want to thank Chairman Ney for working together to draft 
this bill, which we believe is the first step in strengthening 
housing counseling services at the federal level. The Expanding 
Housing Opportunities Through Education and Counseling Act will 
elevate the importance of housing counseling at HUD. With 
establishment of the Office of Housing Counseling, the bill 
consolidates and expands the existing patchwork of counseling-
related services under one roof. The director of housing 
counseling will be charged with strengthening services and 
ensuring that the agency is providing comprehensive assistance 
to counseling organizations in all neighborhoods across the 
country.
    The federal investment in housing counseling is critical to 
local agencies seeking to deliver their services to more 
families in more neighborhoods across the country. The 
Expanding Housing Opportunities Through Education and 
Counseling Act authorizes federal grants to provide a central 
source of funding to local agencies and not-for-profit 
organizations. The bill also targets low-income families, the 
elderly, individuals who face language barriers and other 
consumers who are more vulnerable to the predatory practices of 
unscrupulous lenders. This will ensure that these individuals 
are better prepared for the home-buying process and know the 
benefits and risks of their loan options.
    Today, we will hear testimony from HUD, housing counseling 
agencies, and lenders. Their testimony will help highlight just 
how important a strong federal investment in housing counseling 
is for families in underserved neighborhoods. I look forward to 
hearing everyone's testimony today and I am sure that it will 
provide momentum to move this legislation forward and enact it 
into law.
    Thank you, Mr. Chairman.
    Chairman Ney. I thank the gentlelady.
    The gentleman from Arizona?
    Mr. Renzi. No comments here.
    Chairman Ney. Thank you.
    The gentleman from Georgia, Mr. Scott?
    Mr. Scott. Thank you very much, Chairman Ney. I want to 
commend you for the sterling leadership that you have provided 
on this issue. Ms. Velazquez, it has certainly been a pleasure 
working with you, and certainly our ranking member, Ms. Waters, 
for the leadership that she has provided on this issue over 
many years, and to other members of this committee.
    I do not think that there is a more pressing issue today 
that we can deal with than how we can assist our citizens in 
first purchasing a home, maintaining that home, and then 
keeping that home. Our country is plagued from one end to the 
other with unscrupulous lending practices, with predatory 
lending, with threats coming from every direction. So much of 
this is targeted, it is targeted at the most vulnerable people; 
it is targeted at our senior citizens; it is targeted at our 
minority communities; it is targeted at those places where 
people believe that they do not have the information, that they 
are not armed with the essentials to be able to protect 
themselves, protect their homes, and make sure that their 
dreams are manifested.
    Throughout my career in the State of Georgia, I have been 
working on this very important and serious issue. Any of us 
sitting at this table and in this room that have been familiar 
with this issue knows that Georgia has been at the forefront 
unfortunately of so many abusive practices. In many respects, 
it represents a trend across the nation. One of the things that 
we have learned has been, one, that an ounce of prevention is 
worth a pound of cure; and that we must prepare for the storm 
before the hurricane is raging.
    That is why I am so proud to work with this bill because 
that is exactly what we are doing. We are putting counseling in 
place. We are putting in a very important feature that I think 
is somewhat the basis of this legislation, which is a toll-free 
800 number. This toll-free 800 number will provide a help-line 
for many of our constituents to be able to have access to help. 
We know that this is a targeted activity, so why not try to 
target the information and target the help-line to those 
communities. To have a toll-free 800 number where individuals 
can reach out and call for help, and then to have grants that 
we can put down to the local community levels, so that groups 
who have the credibility with many of these targeted groups 
will be able to get this information to them.
    The NAACP, with a sterling history of working in this area, 
has certainly utilized the grants to work to get the toll-free 
number. Many church groups, senior citizens groups, AARP, folks 
that have the credibility of these individuals, and grassroots 
organizations that can use these grants to get the toll-free 
number out. We can use it to advertise. We can use it to put 
this number on radio stations, in newspapers, and those 
entities where these individuals listen and receive their 
information.
    And then the bottom line, ministers, senior citizens who 
hold ministers in high regard, can say in their pulpits, before 
you sign on the dotted line, call this 1-800 number. I think 
this is going to go a long way to help with a very needed, 
needed problem.
    So Mr. Chairman, I appreciate this opportunity. I want to 
thank you for letting me work with you. I am especially pleased 
that we have put forward a bill with the help of many members 
on this committee, that we have authored, called the Prevention 
of Predatory Lending Through Education Act, and Mr. Chairman, 
you have seen fit to include a number of the features of our 
bill in this bill. I want to say on the record how much I 
appreciate that.
    Chairman Ney. Thank you.
    Mr. Scott. As a freshman Democrat coming on the committee, 
I appreciate certainly the opportunity of working with you, Mr. 
Frank, Ms. Waters and all of the leadership in a bipartisan way 
to move this issue forward.
    I close my remarks by just recalling the words of Alexander 
Hamilton, one of the great founders of this country. As we 
know, Alexander Hamilton founded the cornerstone of our 
commercial and enterprising activities. He said that a country 
that remains illiterate of its commerce and handling of its 
money will not remain free and enterprising for long.
    I think that this measure goes a long way to take charge of 
those words from Hamilton and build on them because, Mr. 
Chairman, there is nothing more important than getting the 
information to this needed targeted group, and providing the 
counseling and the funding to make sure we can put a serious 
dent into many of these financial abuses by protecting and 
giving our targeted constituencies the armor to defend 
themselves. There is no greater armor than education and 
counseling.
    Thank you.
    Chairman Ney. I thank the gentleman for his comments.
    The gentleman from California, Mr. Miller?
    Mr. Miller of California. Thank you, Mr. Ney.
    I would like to applaud you for this legislation. I have 
been involved in the housing industry privately for over 30 
years and I have watched the industry change dramatically and 
the impact on the private sector and how that has really had 
direct correlations to the cost of housing. Much of the reason 
for the scarcity of housing and the cost of housing is 
government and government regulations and processes.
    I remember 25 or 30 years ago in California, and California 
is unusual because about 56.9 percent of the population in 2000 
own a home in California. That is more than 10 percent under 
the national average. But I remember 25 or 30 years as a young 
builder, I could apply for a tentative tract map and in 58 days 
they had to say yes or no; 59 days, if they did not act, the 
government, you were approved by law. Now, with CEQA and the 
EIR process and the application and the way the law is drafted, 
your application is not even deemed complete until every `i' is 
dotted and `t' is crossed in the perspective of government. 
What used to be a 2-month process to be able to move forward to 
provide housing can be a 2-, 3-, 5-, 8-, 10-year process, as 
you know.
    That is extremely disturbing from any perspective, 
especially from California. We are going to discuss things that 
I think should be discussed. Predatory lending is huge, but I 
think we need to move very cautiously because there are 
individuals out there in society who have less than perfect 
credit. Borrowers generally understand that if you pose a 
somewhat higher risk, there should also be reasonable 
expectations that the fees are going to be somewhat higher. But 
there is a huge difference between predatory and sub-prime. I 
think we are moving in a direction to really make it very 
difficult for predatory lenders, and understand that if you are 
a predator, that there is going to be a consequence and a price 
to be paid.
    We need to move gingerly to not impact in any fashion the 
sub-prime market, because that sub-prime market is absolutely 
essential and important to homeownership for those who have 
less than perfect credit, and there are a lot of people in this 
country who have less than perfect credit for different given 
reasons and different problems.
    But a real concern I have, and I hope you will address 
this, is RESPA. I worked with Secretary Martinez 3 years ago 
and I think we were moving I think very well through the RESPA 
process, the concept of bundling, other ones were thrown out 
there and debated back and forth, and compromise occurred. I 
really believed at that point in time we were heading in a 
reasonable direction on RESPA that would benefit consumers and 
provide the information that they needed and an understanding 
of how to best be able to proceed with the acquisition of a 
home, and clarify all the processes and such.
    But I am really, really concerned, and I have always had a 
great relationship with HUD, as you know. We have never had 
disagreements. We have always been able to work problems out. 
But the new process that you are going through really disturbs 
me because we do not know what it is. All I know is I have a 
letter here that FTC has come out with and said that the new 
RESPA reform proposal that they reviewed, which we have not 
reviewed, could cost mistakenly buyers $400 million and $800 
million per year.
    Now, I do not know what that breaks down to per applicant, 
but when we are talking about $400 million to $800 million a 
year impact on people trying to get a loan because the new 
RESPA proposal is perceived from their perspective to be vague 
and ambiguous and could lead people to make the wrong decision 
rather than the right decision, it really concerns me because I 
thought we were really off in a good direction. Right now, I do 
not know if we are off in a good direction or we are off in a 
bad direction. All we can glean is that from what we are 
getting it could be concerning. So I hope you would address 
that.
    Again, Chairman Ney, thank you very much for this hearing 
and I look forward to hearing the testimony.
    Chairman Ney. Thank you. I do not know what direction we 
are in RESPA, period. I know that issue will continue and we 
will go down the road at some point in time with that.
    The gentlelady from California, Ms. Lee?
    Ms. Lee. Thank you, Mr. Chairman, and I want to thank 
Ranking Member Waters for convening this hearing today on this 
very important issue.
    Last year when we were marking up the American Dream Down 
Payment bill, we discussed and offered amendments to provide 
not only foreclosure assistance, but also foreclosure 
counseling to participants in the program of the American Dream 
Down Payment bill.
    Mr. Chairman, one thing that I wanted to just note for the 
record is that we all recognize that the key to successful 
wealth-building is comprehensive counseling for both homeowners 
and renters and also increasing the stock of affordable 
housing. We were pleased to know that this bill was in the 
hopper and that this hearing was going to be held today, but 
Mr. Chairman I wanted to ask you a couple of things, and just 
mention them in my opening statement, with regard to 
specifically section six of the bill that requires the 
preliminary report and study as it relates to foreclosure and 
default of home loans, and report back within 24 months.
    Some States I believe have conducted these studies and I 
would like to work with you as this bill moves forward to 
possibly talk about the States that have already conducted 
studies with regard to default and foreclosures, how we can 
provide maybe a provision for real foreclosure assistance and 
counseling in those States so that in fact we do not have to 
wait for 24 months. People are losing their homes right and 
left, and I think it would really be very helpful. Yes, the 
national study, but also, Mr. Chairman, I think it would be an 
added element to this bill where we can add some real help in 
terms of foreclosure assistance to those States that already 
have the studies in place.
    I think this is an excellent first step. It will streamline 
housing counseling services in HUD and I think it is a starting 
point. I look forward to this hearing and I hope to work with 
you to try to add some language to this bill.
    Chairman Ney. I want to thank the gentlelady. I am assuming 
you would like to go towards foreclosure counseling and you 
want to get also some of the state statistics that are out 
there to find out how many people are losing their homes and 
what can be done about it.
    Ms. Lee. Mr. Chairman, yes, but also some States already 
have conducted those studies and we know what the issues are 
and what the problems are. For those States that already have 
studies relating to this, I would like to provide a provision 
that says we are going to provide some foreclosure assistance 
and counseling, rather than just the study.
    Chairman Ney. I am sure we will have further discussions on 
the issue as it progresses.
    Ms. Lee. Okay. Thank you, Mr. Chairman. I would like to 
work with you on that, as we move this bill forward.
    Chairman Ney. Thank you.
    Ms. Lee. Okay, thank you.
    Chairman Ney. Our Ranking Member, the gentlelady from 
California.
    Ms. Waters. Thank you so much, Mr. Chairman, for scheduling 
this hearing on the important subject of housing counseling and 
on H.R. 3938, the bill that you introduced last week with 
Congresswoman Velazquez and Congressman Scott to expand housing 
opportunities through education and counseling.
    You have assembled large, balanced, and diverse panels of 
witnesses for this hearing, and I appreciate the care and 
attention that went into assuring that a wide range of views 
will be presented here today. I also commend you, Mr. Chairman, 
for making good on the pledge that you made last year to 
Congresswoman Velazquez to work with her on homeownership 
counseling legislation.
    Pre-purchase housing counseling is extremely important to 
ensuring that consumers are well informed and protected when 
they evaluate whether, when and how to purchase a home. Post-
purchase housing counseling and foreclosure prevention 
counseling are essential to protecting consumers in times of 
financial stress. Yet it is critical to emphasize that housing 
counseling must be supported by strong, effective laws and 
regulations against predatory lending. Housing transactions are 
complex, intimidating transactions for many consumers, and 
counseling will better prepare consumers to deal with the 
unethical.
    We also should emphasize that while homeownership is an 
important goal for many Americans, there are millions of 
Americans who choose to rent and will always be renters. We 
need a balanced approach that recognizes that housing 
counseling is broader than just homeownership counseling. H.R. 
3938 has some very attractive components. It establishes an 
office of housing counseling within HUD to consolidate and 
strengthen housing counseling offered by the federal 
government. It directs that standards be developed for 
materials used by counseling agencies in providing rental 
housing counseling and homeownership counseling.
    Based on legislation that was introduced by Representative 
Scott, H.R. 1865, the bill includes a toll-free number and Web 
site for a listing of housing counseling information. It 
provides that only HUD-certified housing counseling programs 
may receive assistance. It also has provisions for multi-media 
outreach to vulnerable populations at greatest risk of 
predatory lending, such as seniors, people with language 
barriers, low-income households, and ensures that all 
counseling materials and outreach are language and culturally 
appropriate.
    I know that some concerns have been raised about what 
culturally appropriate materials would mean in this context. I 
hope that our witnesses will address this issue in their 
testimony. While H.R. 3938 has many valuable elements, it also 
appears to me that certain aspects of the bill may require some 
fine-tuning. Some have raised concerns about the work of the 
proposed advisory council. It is important to determine what 
role, if any, such body would play in granting housing 
counseling funds. I believe that it is important that housing 
counseling funds be awarded on a competitive basis, and that 
the advisory council have no role in awarding these funds.
    H.R. 3938 also mandates the use of housing counseling 
software, that is on page 13 beginning at line 15, and carrying 
over to page 14. This legislation mandates the Secretary to 
certify mortgage software programs for consumer use and 
authorizes the development of such mortgage software systems 
using private sector software companies. During the pilot 
phase, these mortgage software programs can only be offered in 
conjunction with counseling by a housing counselor. Following 
the pilot phase, they do not need to be.
    The Secretary is encouraged to make them widely available 
in public places and throughout the Internet. Thus, while 
initially the bill would require face-to-face counseling, the 
door is left open for this software to replace this human 
contact. Research suggests that this type of virtual counseling 
is far less effective than human contact.
    The legislation also appears to open the door to groups 
other than nonprofits and government bodies doing counseling. 
On page 17, line 10, the legislation authorizes HUD to make 
financial assistance to States, units of local government, 
nonprofit organizations and other entities. These other 
entities could include for-profit businesses, including 
affiliates of lenders. Given the huge potential for conflicts 
of interest, if we allow those with an interest in profiting 
from this industry to provide advice that should be given by 
impartial groups, we need to proceed with great caution in this 
area.
    Finally, it is worth noting that this bill provides no new 
money for housing counseling beyond what President Bush has 
already proposed. We should be discussing the scope of the 
unmet needs for housing counseling and how best to address 
those needs.
    I look forward to hearing from our witnesses and hearing 
them examine many of these issues in the course of this 
hearing. I want to thank you, Mr. Chairman, and if I have to 
leave early, it is because H.R. 1375, the Financial Services 
Regulatory Relief Act, is on the floor and I have offered an 
amendment as you know that would retain the 15-day waiting 
period after the department of justice has signed off on a bank 
merger or mergers between bank holding companies. That is 
important to our consumers and I will have to go up and present 
my amendment. So if I leave early, it is because of that.
    Thank you.
    Chairman Ney. We understand. Before you came in, I thanked 
you and also want to do it again for all your work, last year 
working with us, and producing I think some good bills, about 
11 or so that got to the floor. We appreciate that.
    Ms. Waters. Thank you.
    Chairman Ney. Before we move directly on to the witnesses, 
I did want to clarify to the gentlelady from California, 
Congresswoman Lee, because you and I had not discussed it 
previously, but are you talking about, I have no problems with 
the counseling and also the counseling on foreclosure and 
looking at what the States have done, but are you talking about 
grants directly in the bill for foreclosure?
    Ms. Lee. That is part of it, Mr. Chairman. When there is a 
real need, if an individual or family can stay in their house 
based on 30 days of assistance while they go through 
foreclosure counseling and restructure their loan or whatever 
is necessary, then I think we should be able to provide 
something to tide them over for those 30 days or 60 days.
    Chairman Ney. I do not want to mislead you at all. The 
scope of this bill, and I will work with you on this and I will 
be glad to talk to you later about that other issue, but the 
scope of this bill is counseling. I do not know if we could 
place into here something that directly funds, I am not saying 
it is not a good issue, but I do not know if it will fit in the 
counseling bill. I did not want to mislead you.
    Ms. Lee. No, Mr. Chairman. I understand that. I just would 
like to work with you on it. I know under section six we do 
talk about the preliminary report that should be submitted to 
Congress on the root causes of default and foreclosure of home 
loans. So because this provision with regard to foreclosure is 
in there, I would like to see if there is any way we can figure 
that out under that section.
    Chairman Ney. Again, I do not think probably in this bill 
we will be able to go beyond counseling. I do not think we will 
be able to get into the direct grants, although it is an issue 
I would like to talk to you about. I think it is something 
important.
    Ms. Lee. Yes. Last year, we discussed this during the 
markup of the American Dream Homeownership bill, and I think 
that is a very important issue concept that this committee 
needs to address, because we could save a lot of homes and a 
lot of families from being thrown out as a result of a 30-day 
or a bridge kind of assistance.
    Chairman Ney. On the history of this issue, I am trying to 
recall, has there been a bill or do you have a bill or does 
anybody have a bill?
    Ms. Lee. We had amendments to the American Dream Down 
Payment bill that would have provided the framework for this 
kind of assistance. I would like to talk to you about those 
amendments and maybe turn that into some form of a bill. We 
talked about this during committee and said we would do that.
    Chairman Ney. We will talk later then.
    Ms. Lee. Because the point I believe you made at the 
hearing was that you did not want to tinker with the American 
Dream Down Payment bill, but most members understood the 
validity and the necessity to ensure that families stay in 
their homes. Sometimes it may be necessary just to help them 
through that 30-day or 60-day period.
    Chairman Ney. That is what actually led us here today, 
because I did not want on the counseling, I made a commitment 
on the counseling that I did not want to in fact take the 
counseling issue into that particular area. That is why I just 
wanted to clarify. I do not know if this bill would be the 
appropriate vehicle, because it is counseling, of direct grant 
assistance for foreclosures, but maybe we ought to look at a 
piece of legislation, or further discuss the issue. I just did 
not want to mislead you that when I realized you were talking 
about direct grants, I do not know if this would be the vehicle 
for it.
    Ms. Lee. Okay. No, Mr. Chairman. I understand that. I would 
just like to look at an appropriate vehicle so we can bring 
that to the committee because I think the time is now to do 
that.
    Chairman Ney. Thank you. I appreciate it. Thank you.
    We will move on to Mr. Weicher. Thank you for being here. 
He is Assistant Secretary for Housing and Federal Housing 
Commissioner at the United States Department of Housing and 
Urban Development, HUD, a post he has held since June of 2001. 
Prior to his appointment to HUD, Mr. Weicher was the Director 
of Urban Policy studies at the Hudson Institute and a member of 
the Millennial Housing Commission.
    Welcome, thank you.

  STATEMENT OF HON. JOHN C. WEICHER, ASSISTANT SECRETARY FOR 
   HOUSING-FEDERAL HOUSING COMMISSIONER, U.S. DEPARTMENT OF 
                 HOUSING AND URBAN DEVELOPMENT

    Mr. Weicher. Thank you, Mr. Chairman and members of the 
subcommittee. It is a pleasure to testify this morning 
regarding HUD's housing counseling programs.
    Housing counseling plays a key role in support of the 
administration's goal to increase homeownership and close the 
ownership gap between minority and non-minority households. The 
President's blueprint for the American Dream Partnership 
establishes a goal of 5.5 million additional minority 
homeowners by the end of the decade, and specifically 
recommends educating more people regarding the home buying 
process to help achieve this goal.
    Counseling funds have doubled in this administration and we 
have requested a further increase to $45 million for fiscal 
year 2005. We have gone from $20 million to $40 million already 
and we think this is part of the President's continued 
commitment to expanding homeownership opportunities in this 
country.
    About half of HUD's housing counseling funds support pre-
purchase counseling and homebuyer education. Based on our 
experience in recent years, we project that the fiscal year 
2003 funds will help about 60,000 families become homeowners 
this year. An additional 140,000 families will continue to work 
with their counselors so that they will become ready to buy a 
home during the following year.
    The counseling program also helps to ensure that these new 
homebuyers remain in their homes. About 20 percent of the 
housing counseling grant funds support the delivery of post-
purchase counseling to help families pay their bills on time, 
perform basic home maintenance and make their mortgage 
payments. The fiscal year 2003 funds will help about 135,000 
families to stay in their homes.
    The housing counseling programs accounts for more than two-
thirds of HUD's direct grants for counseling. There are only 
two other programs within HUD that directly fund counseling-
related activities. The fair housing initiatives program will 
devote $3.8 million in fiscal year 2004 for education and 
outreach grants to nonprofits and the resident opportunities 
for self-sufficiency program will provide $13.2 million in 
grants for life skills training, including financial literacy.
    In addition, funds from a number of other programs may be 
used to pay for counseling services, including HOME, CDBG, HOPE 
VI, Self-Help Homeownership, the SHOP program, and special 
needs assistance grants for the homeless. The decision to 
allocate any of those funds for counseling, however, is up to 
the grantees.
    I would like to describe some aspects of the program. To 
participate, an organization must first be approved by HUD as a 
housing counseling agency. Approval involves meeting various 
requirements relating to experience and capacity, including 
nonprofit status, a minimum of 1 year of housing counseling 
experience in the community, and sufficient resources to 
implement a housing counseling plan. We maintain a list of HUD-
approved housing counseling agencies so that individuals and 
families in need of assistance can easily access the nearest 
HUD-approved housing counseling agency through HUD's Web site 
or through our automated 1-800 hotline.
    Currently, there are almost 1,700 HUD-approved housing 
counseling agencies, including over 600 local housing 
counseling agencies, with another 600 branch offices, and 
almost 500 affiliates and branches of national and regional 
intermediaries. The national and regional intermediaries 
provide and manage sub-grants to networks of affiliated local 
housing counseling agencies and they also provide training and 
technical assistance. In addition, 16 state housing finance 
agencies provide counseling services with HUD housing 
counseling grant funds.
    Every 2 years, HUD performs an on-site review of every HUD-
approved housing counseling agency to ensure that their 
performance is consistent with their housing counseling plan 
and that they are in compliance with program requirements. 
Reviewers may provide technical assistance based on their 
findings and results of the review are factored into grant 
application scores.
    For the past 3 years, HUD has given the AARP Foundation 
significant funding to develop training and quality control 
measures for congressionally mandated counseling related to 
home equity conversion mortgages. The money has supported 
development of a network of specially trained counselors who 
are employees of local HUD-approved nonprofit agencies. Based 
in part on this successful partnership, HUD will soon publish 
an $8 million housing counseling training notice of funding 
availability to train counselors, produce training and 
educational materials on a broad array of housing counseling 
topics.
    Also, we are in the process of procuring an Internet-based 
client management software system that is designed to improve 
the analysis of a client's financial situation and readiness 
for home purchase, and also improve the collection of program-
related activity data.
    Finally, a draft housing counseling regulation is making 
its way through HUD's clearance process. This will be the first 
set of regulations for the housing counseling program. I hope 
that this overview of our counseling program clearly 
demonstrates the department's commitment to the program and to 
the delivery of high quality counseling services across the 
nation.
    This concludes my statement, Mr. Chairman. Thank you again 
for the opportunity to meet with you today to discuss this 
important program.
    [The prepared statement of Hon. John C. Weicher can be 
found on page 11 in the appendix.]
    Chairman Ney. I want to thank the gentleman for his 
testimony and move to questions.
    Ms. Velazquez?
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Weicher, as you know, there has been discussion of 
creating a mortgage software system to be used to supplement 
housing counseling services. It has been suggested that HUD 
could use resources from the working capital fund for such an 
activity. Could you please clarify whether or not the funding 
for HUD's working capital fund could be used for the creation 
of a mortgage software system?
    Mr. Weicher. Ms. Velazquez, very simply, yes it can, and 
further, we are in the process of doing that. We are in the 
process of acquiring a client management system. I alluded to 
this a bit in my statement. We are very excited by this 
opportunity. We think this will enable us to track the 
performance of individual counseling agencies more precisely 
than we can now, and we think it will also enable us to track 
the outcomes of individual families who receive housing 
counseling far more precisely than we can now.
    We are very excited by this and we hope to complete that 
procurement as expeditiously as we can. As you know, the 
continuing resolutions that we have had in each of the last 2 
years have complicated, for us in particular, IT procurement. 
Things have gone more slowly than we would like.
    Ms. Velazquez. Thank you. It is my understanding that 
current HUD guidelines prevent local nonprofits from combining 
community development block grant funding and housing 
counseling funding for housing counseling activities. HUD 
considers this double-dipping. While this requirement is to 
prevent organizations from getting paid twice for providing the 
same service, it severely limits funding sources for local 
housing counseling agencies. It is also my understanding that 
CDBG requires rigorous reporting standards to prevent the 
misuse of federal funds, and therefore the double-dipping 
guideline is unnecessary. It has been brought to my attention 
that this issue has been raised to HUD by housing counseling 
organizations. Can you please explain HUD's thoughts on this 
issue and how the agency plans on addressing these concerns?
    Mr. Weicher. Certainly, Ms. Velazquez. I think there may be 
some confusion about our position on this issue. We certainly 
encourage agencies to seek out and use as many sources of 
funding as possible. We do not provide all of the funding for 
any of the agencies which we fund. They have to use other 
sources besides ours.
    However, the issue becomes that funds from two different 
sources cannot be used to pay for the same service to the same 
client. And that is a government-wide policy. It is not simply 
a HUD policy. It is a policy of the federal government. You 
cannot pay twice for the same service to the same client. I 
know that from the standpoint of an individual counseling 
agency this may be a complication in terms of record keeping, 
but it is a government-wide requirement. It is not simply a HUD 
requirement.
    Ms. Velazquez. So if we want to change that, then we will 
have to do it through legislation.
    Mr. Weicher. I believe you will, Ms. Velazquez. It is not 
something we at the department can change.
    Ms. Velazquez. Okay. Thank you.
    As you are aware, it has been proposed that housing 
counseling services should be consolidated under one roof. The 
intent would be to create a more efficient system that better 
meets the needs of counseling organizations and the families 
that benefit from those services. Can you please comment on 
what your views are of the benefits in consolidating housing 
counseling services at HUD?
    Mr. Weicher. Let me start by saying that in each of the 
last three budgets, we have requested a separate account for 
housing counseling funding. As you know, the housing counseling 
program which I administer is in fact funded as a set-aside in 
the HOME block grant. The funds are transferred from that block 
grant to my office for purposes of awarding the funds and 
managing the program.
    We felt all along that housing counseling should have a 
more elevated position in policymaking. We do have some 
concerns with the proposal, and Assistant Secretary Roy 
Bernardi for Community Planning and Development, and I have 
both testified on this subject previously. We both have 
expressed concerns that we think a shift in the program 
operations of this sort would disrupt the service delivery for 
some period of time. We think it would well be 
counterproductive.
    We have ourselves revised the standards and performance 
measures relating to the 1,700 HUD-approved counseling agencies 
that participate in our program. We do not think there is a 
reason for another office to assume these responsibilities and 
begin to operate them. We think it is easier and quicker for us 
to continue to manage our program, and we as I said are over 
two-thirds of the total direct grants for housing counseling in 
the department. There are small programs in Fair Housing and in 
Public and Indian housing for specific clients, for specific 
purposes. We think they work well enough separately.
    Ms. Velazquez. Mr. Weicher, I have a list here of all the 
housing counseling programs that I want to make part of the 
record. Do you think that this is more manageable and that it 
would allow for you to provide better assistance to those 
counseling services organizations in our districts?
    Mr. Weicher. Yes, because there are only three counseling 
programs which directly fund counseling, and our program is 70 
percent of it. All the other programs on that list, counseling 
is an optional use of funding at the discretion of the grantee. 
That is true for CDBG; that is true for HOME; that is true for 
the Indian housing block grant. It is all at the discretion of 
the grantee. In some cases in addition, there is a requirement 
in a program that someone receive counseling, but there is not 
a requirement that the counseling be provided with HUD funds.
    We have a requirement that any borrower receiving a home 
equity conversion mortgage should receive counseling before 
obtaining that mortgage, but we do not make direct grants for 
that purpose. We leave that to the lender and the buyer to 
obtain the counseling. It comes down to three programs, and our 
program is over two-thirds of the total.
    Ms. Velazquez. The foreclosure rate is getting worse, not 
better, in our communities. It seems something is not working.
    Thank you, Mr. Chairman.
    Chairman Ney. Your time has expired.
    Mr. Miller?
    Mr. Miller of California. Thank you, Mr. Chairman.
    Whenever I look at legislation, I say how can anybody in 
the private sector be held liable in court by mistake and 
oversight on our part. Under the Section 8 updating and 
simplification of mortgage information booklet, you put out a 
book on RESPA currently, correct?
    Mr. Weicher. We put out a special information booklet which 
is to be distributed to any----
    Mr. Miller of California. Is that given to everybody who 
wants to buy a house, they are given a copy of the booklet in 
the process?
    Mr. Weicher. They are supposed to receive that, yes. We do 
not ourselves distribute that booklet, but it is supposed to be 
provided by the lender.
    Mr. Miller of California. The concern I have, in my 
community probably 12 years ago when my son was in elementary 
school, they spoke 37 different dialects. Among those dialects 
there were basic differences in cultural backgrounds even. This 
section talks about preparing a booklet to help consumers 
applying for federally related mortgage loans to understand the 
nature and cost of real estate settlement services. It says 
they have to be accessible to homebuyers of different ethnic 
and cultural backgrounds.
    Now, we can talk about that here and we might think that is 
very simple. In California, in reality it could be very 
difficult and complex to do this. How is this information to be 
distributed once HUD prepares it?
    Mr. Weicher. The information is distributed by the lender. 
It is to be provided by the lender, by the loan originator, by 
the broker at the time that the borrower obtains the mortgage. 
It is intended to be useful to the borrower.
    Mr. Miller of California. To a borrower in RESPA, if they 
do not, what liability do they face for that?
    Mr. Weicher. I cannot tell you what the specific liability 
is for failure to provide a booklet. I can certainly provide 
that for the record, but I cannot tell you what the penalty is 
on that particular matter.
    Mr. Miller of California. Mr. Chairman, I would strongly 
suggest that we try to get an answer to that question and 
define in this bill clearly that we are not intending to 
propose a significant impact upon an unintentional mortgage 
broker or a lender who might not necessarily have the proper 
information to deal with different ethnic and cultural 
backgrounds. A lot of people I know specifically in the Muslim 
community, for example, and in that community even though the 
dialect is similar, the cultural backgrounds and beliefs are 
completely different. What is acceptable in one is not 
acceptable in another. I know certain Muslims, the women are 
not allowed to shake your hand, because I am heathen, 
basically. That is the rule.
    So this concerns me because I think we are making an effort 
to do something good, but can we accomplish this and create 
legal roadblocks for the private sector down the road. I would 
like to see, at least consider it, I do not know if we can do 
it here, but consider trying to come up with something to add 
to this what the intent is and not create a tort issue out 
there that in the future some attorney is just going to try to 
make a fortune off some little guy who went out there and tried 
to help a person get a loan and did not give him or her the 
proper information based on this legislation.
    Chairman Ney. One comment, I would like to take credit for 
this, but our counsel, Clinton Jones, actually slipped the idea 
here to me. If you are going in to deal with a broker or 
anybody that is dealing with this issue, I do not know if HUD 
does this now, they all have the computers. Can't this be put 
on the Web in all languages, you know, Creole, Farsi, Spanish, 
you name it? It could be put on the Web and then you click it 
and it prints off and you print one of 50 languages. Is that 
done now? Do you have things on the Web?
    Mr. Weicher. We have many things translated into Spanish, 
in particular, and many of them on the Web. I know that in the 
previous administration there was an attempt to translate some 
basic material into a number of languages, which proved out in 
a couple of cases to be badly translated. The department 
recognizes that if you are going to provide information in 
other languages, you have to be very careful about the quality 
of the translation.
    Mr. Miller of California. Perhaps we need to also consider 
in there that if we had that available on the Web, that it is 
to be supplied to the buyer in what the buyer perceives to be 
the most appropriate form available. That way the mortgage 
broker is not responsible if the mortgage broker shows the 
buyer a list of different languages and information that would 
be applicable, the buyer has the opportunity to pick one that 
he or she deems most appropriate for their needs. That way, we 
remove the liability from the middleman.
    Chairman Ney. We will explore the issue because it depends 
on which area of the country you are in. Florida has Creole.
    Mr. Miller of California. I agree. I would appreciate some 
consideration of that area.
    Thank you.
    Chairman Ney. On to Mr. Scott.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Secretary Weicher, can you tell the committee how many home 
education programs currently exist in HUD and how currently 
they are coordinated?
    Mr. Weicher. We have three housing counseling programs. Our 
housing counseling grants provided by the Office of Housing, 
which we provide grants to over 400 agencies a year, and they 
total about $38 million this year. There are only two other 
programs. There is a $3.8 million program for fair housing 
initiatives counseling operated by the Office of Fair Housing 
and Equal Opportunity. There is a $13.2 million program, 
resident opportunities for self-sufficiency operated by the 
Office of Public and Indian Housing for residents of public 
housing. Those other two programs are both small, targeted to 
specific clienteles for specific purposes. Our program is the 
only general housing counseling direct grant program in the 
department.
    There are a number of other programs where funds can be 
used for counseling, but they are to be used at the discretion 
of the grantee. In the cases of CDBG, they are to be used at 
the discretion of the city or county that receives the funds. 
That is also true in the case of HOME. Funds are available in 
the Indian housing block grant and can be used in the Indian 
housing block grant for that purpose. But funds do not have to 
be used for that purpose in any of those programs. It is at the 
discretion of the grantee. So the Office of Housing provides 
over 70 percent of the funds for housing counseling that the 
department provides in the form of direct grants, and we 
operate the only broad national housing counseling grant 
program in the department.
    Mr. Scott. So we are setting up in this legislation a new 
Office of Housing. How will that help you coordinate these 
programs?
    Mr. Weicher. As I was saying, it is not clear either to me 
or to my colleague, Assistant Secretary Roy Bernardi, that a 
new office is necessary for the management of our counseling 
grant program. We have only the one broad program which I now 
manage, and we have the two smaller grant programs which are 
managed in separate offices because they have separate 
purposes. These programs all run effectively, and we think that 
the transitional costs of combining management of all three 
programs into one office is not really likely to yield 
substantial benefits and is likely to have costs during the 
period of transition.
    Mr. Scott. Okay. Let's look at section three and section 
four here which I think are the heart of this legislation, the 
counseling procedures and the money. Let's take one of these, 
and work with me here on how you see this working in this new 
department. Let's look at the toll-free number and the Web 
site. Let's see how we tie that to the granting at the local 
level and then secondly, is $45 million sufficient to do some 
of this.
    I happen to believe that one of the most critical needs in 
dealing with this whole issue for our constituency is beating 
the predatory lenders to the punch and giving our folks out 
there some help. So we have this 1-800 number. It is coming to 
you. How do you envision this new office handling this 1-800 
number?
    Mr. Weicher. We have a 1-800 number now, as well as a Web 
site, and the number is 1-800-569-4287. A caller who uses that 
number is prompted to enter a zip code, select the type of 
counseling service needed from a menu, and the system will 
provide the caller with the names and the phone numbers of 
three agencies that offer these services that the caller wants 
in the caller's area.
    On the Web site, we provide a list of all of the HUD-
approved housing counseling agencies, categorized by state, 
then categorized by city in alphabetical order, listed by name. 
The Web site has the name of the organization, the address, the 
phone number and the types of counseling services provided.
    Mr. Scott. Mr. Weicher, could I ask you one question.
    Mr. Weicher. Certainly, Mr. Scott.
    Mr. Scott. If it is clear that the people who need the help 
the most are elderly, one of the very reasons why they are so 
vulnerable and why we have this problem is that they do not 
have the sophistication. Don't you think it would be helpful if 
we had a 1-800 number and that we targeted this 1-800 number 
using some of these grants to get that number targeted to these 
elderly folks who simply want to be able to dial the phone 
number and get a human being, get somebody on the phone that 
they could talk to. Don't you think that would be helpful? I 
mean, if they call a 1-800 number and they get a recording, 
they get a lot of confusion, and they get a Web site, we are 
dealing with people who we want to help the most, but people 
that if we get this 1-800 number to them, we want to get them 
to talk to a human being. What is it going to take for us to 
get that?
    Mr. Weicher. I think that the 1-800 number that we have now 
tells you what counseling agencies are available in your 
neighborhood, in your community. I think that information can 
be provided either on an automated basis or by an individual 
answering the phone, but I think that over the phone that 
really is about all the information that can be provided by a 
single 1-800 number. An elderly person calling and asking for 
help on a home equity conversion mortgage or a problem with a 
predatory loan will obtain from the 800 number or from the Web 
site the names, addresses and phone numbers of organizations 
which can provide help to them on their specific concerns. We 
believe that works reasonably well. We do think that process 
works.
    We yield to no one in our opposition to predatory lending. 
I testified before Senator Craig in the Senate Committee on 
Aging about 6 weeks ago on the activities that we have taken at 
FHA to combat predatory lending in our FHA insurance program, 
which is the only place that HUD has direct authority to combat 
predatory lending. We have been aggressively pursuing that with 
literally half a dozen rules which we have put out as final 
rules in this administration and we continue to work on that 
problem.
    Chairman Ney. If I could, the time has expired and I have 
no problem coming back, but I think Mr. Renzi has a commitment, 
so if we can get him into the questioning, and then we will 
come back.
    Mr. Renzi?
    Mr. Renzi. Thank you, Mr. Chairman.
    I represent a district where actually I actually represent 
more Native Americans than anyone else in Congress that has one 
single district that is not a whole state. While I am not in 
favor of growing government, I would applaud Mr. Scott's 
comments. I do not care if you have to add 100 people in this 
new office, if it takes that to reach out to particularly 
Native Americans who are the lowest of all minorities in the 
country as far as homeownership goes.
    In the Indian housing block grant program you have the 
ability on an optional basis to spend money for counseling. Can 
you help me understand that optional basis, please?
    Mr. Weicher. I am not an expert on the Indian housing block 
grant. It is managed by my colleague, Assistant Secretary Mike 
Liu, the Office of Public and Indian Housing. I do know that 
counseling is an eligible activity in that program as it is in 
our other block grant programs. It is an eligible activity at 
the discretion of the grantee. I do not know to what extent the 
recipients of that block grant choose, the tribes choose to 
devote funds to counseling. We may be able to provide you with 
that information for the record, but I do not know that myself.
    Mr. Renzi. One of the things that I commend Mrs. Velazquez 
for teaching me when I first came on this committee was, many 
times first generation Americans trying to go to college and 
have their sons and daughters enter into the university system, 
the first impediment they meet is the application process. Of 
course, that is the same that we are seeing here as it relates 
to housing. For the first time, generations and generations of 
Native Americans who live on sovereign land do not even have 
the concept of a modular home. So they are having to break 
through cultural barriers in order to embrace the benefits that 
homeownership have that we have all seen.
    In the area of funding and the formula as it relates to 
Indian housing block grants, and again this is not so much 
counseling, but I have you in the door and since we opened it 
up, you know we are going through a tough time here as far as 
what kind of funding and everything, that housing will take in 
the block grant program. Many times, those monies are spent, 
are allocated to individuals in the census who check that they 
are Native American in their blood. They might live in Chicago, 
but because they checked the box that they are Native American, 
those monies that are specifically intended towards tribes or 
sovereign lands are then diverted into even inner-city areas.
    While I do not want to be a person who impedes their 
ability to get monies, there has got to be a focus as to how 
much money is being diverted away from the tribes, and the 
monies that are really needed on the reservation. The 
conditions on the Navajo Nation's 18 million acres are 
absolutely deplorable. You do not have to go to Africa. You do 
not have to go to the third world countries to see poverty like 
we have on the reservation.
    So I would just, since I had you in front of me today, I 
wanted to take the time to ask you to look at that. In my final 
couple of seconds here, could you just go ahead and expand upon 
any kind of HUD programs or any kind of counseling programs 
that you see that are going to really help Native Americans? 
Thank you.
    Mr. Weicher. Let me say, Mr. Renzi, that I am not an expert 
on Indian housing and I do not manage the Indian housing 
programs at all. I certainly do not manage the Indian housing 
block grant. I do know that my colleague, Assistant Secretary 
Liu, spends a great deal of time addressing the Indian housing 
issues, and indeed has been much involved personally in the 
development of the formula for allocating funds under the 
Indian housing block grant. I know he spent a lot of time on 
that earlier this calendar year.
    What I can certainly do is express your concerns to him and 
I will certainly do that. I cannot tell you how that block 
grant program works. I cannot tell you of my own knowledge. We 
can certainly provide information for you for the record from 
the department. I can do that.
    Chairman Ney. Thank you.
    The gentlelady from California, Ms. Lee?
    Ms. Lee. Thank you, Mr. Chairman.
    First, thank you, Mr. Secretary, for being here. Let me 
just ask you a couple of questions about the current housing 
program, given the fact that we have such a high rate of 
foreclosures and of course cases of predatory lending. How 
effective are these existing housing counseling programs?
    Mr. Weicher. We think they are effective. We track 
performance of clients in various kinds of programs in a number 
of ways. I can provide you with very detailed information for 
the record, but I can say, for instance, that the agencies 
which we have funded have provided help to clients who are 
trying to avoid a mortgage delinquency or resolve a delinquency 
without going to foreclosure. The HUD funds that we have 
provided have been successfully used to avoid foreclosure in 90 
percent of the cases, here I am using data based on fiscal year 
2002, in 90 percent of the cases where there has been a 
conclusion to the person's concern, foreclosure has been 
avoided.
    Here we are dealing with people who are at serious risk of 
foreclosure. To start, there are a lot of families for whom we 
do not know at the end of the year whether they have 
successfully avoided foreclosure. The jury is still out. We do 
not know the end of the situation.
    Ms. Lee. So you have not done any national studies?
    Mr. Weicher. Yes, we have tabulations of outcomes in a 
number of aspects, and this I think is a good indication of the 
effective use of our funds. It is also I think a good 
indication of the effectiveness of the housing counseling 
agencies who receive our funds and use our funds and other 
funds as well, to provide help. I think the funds are used 
effectively for the important purposes of keeping people in 
their homes and helping people buy homes.
    Ms. Lee. So you have the raw data, but you do not have the 
compilation of this data into any studies that would show us 
how effective these programs are?
    Mr. Weicher. I can provide you with the tabulations. There 
are a number of studies which have been done. Two economists at 
Freddie Mac did a study 3 years ago looking at Freddie Mac's 
data and measuring the effectiveness of counseling. There is a 
study done by The Ohio State University where I used to teach, 
not done by me, but done by The Ohio State University which 
shows the same pattern. I do not think there is any question 
about the effectiveness of housing counseling. We track it in 
our own program, in the FHA programs as well, and we know that 
counseling is effective in preventing foreclosure.
    It is on the basis of that research that the administration 
made the decision to ask Congress for additional funding for 
counseling. We started with a $20 million appropriation at the 
beginning of this administration. We have gone to $40 million 
with Congress acting favorably on our request, and we are now 
asking to go to $45 million.
    Ms. Lee. Okay. Given the number of assistance programs that 
you have, what do you think the impact would be if all of these 
counseling assistance programs were under one umbrella or were 
consolidated, streamlined, and that office, for example, takes 
responsible for really executing and maintaining these 
programs?
    Mr. Weicher. There is only one direct grant program that 
provides housing counseling and that is the program I 
administer. That provides over two-thirds of the funding that 
the department has for housing counseling. There are only two 
other direct grant programs in the department. They are both 
much smaller and they both have very specific purposes. One is 
the Fair Housing Initiative grants for fair housing counseling, 
and one is the Resident Opportunities Self-Sufficiency Program 
for residents of public and Indian housing. One is managed by 
the Office of Fair Housing, the other by Public and Indian 
Housing. They are both small and they both have very specific 
purposes.
    The list that I know CRS has provided is largely a list of 
programs in which funds may be used for counseling at the 
discretion of the grantee. Unless you change those programs, 
unless you change CDBG or the Native American housing block 
grants, the decision to spend money on counseling rests with 
the grantee.
    Ms. Lee. I see. May I just quickly have an additional 30 
seconds, Mr. Chairman?
    I just wanted to ask you about creating more affordable 
housing in terms of the housing production initiative, given 
the mission of HUD in terms of its goal to provide more 
affordable housing for everyone. How do you see the 
establishment of a national housing trust fund? We have had the 
bill here in committee. We have talked about it. We have 
support throughout the country, but somehow it just goes away. 
I am just wondering what your thoughts are on that.
    Mr. Weicher. I have seen a number of proposals to use the 
reserves, the net worth of the FHA mutual mortgage insurance 
fund for a national housing trust, and those funds are the 
reserves that we use to pay claims when we have foreclosures. 
We certainly do not believe that the funds that FHA has 
collected from moderate income home buyers as part of a mutual 
mortgage insurance fund should be used for other purposes.
    Ms. Lee. About how much is in the reserves now? Do you 
know?
    Mr. Weicher. The reserves are about $22 billion.
    Ms. Lee. $22 billion?
    Mr. Weicher. At this point, yes.
    Ms. Lee. So just taking maybe $2 billion a year to create 
more affordable housing would impact this fund?
    Mr. Weicher. Yes. Those reserves are to pay the costs of 
defaults, the cost of foreclosures. We have built them up 
through effective management of the program and we do our very 
best to minimize foreclosures and minimize losses on the 
foreclosures, but these are the reserves.
    Ms. Lee. No, I understand that, but I am just saying on the 
reserves, if we took $3 billion, $5 billion, left the reserve 
fund at $15 billion, that would create a major impact in the 
ability to use the reserves in the way----
    Mr. Weicher. It would put the fund at some risk that we do 
not believe that there is any purpose in putting the fund at 
that risk.
    Ms. Velazquez. Would the gentlelady yield for a second?
    Ms. Lee. May I yield, Mr. Chairman?
    Chairman Ney. Ms. Lee, the time has expired.
    Ms. Velazquez. Just a quick question. Sir, out of the $20 
billion reserve, what is the default rate?
    Mr. Weicher. The default rate is not measured against the 
reserve. For a given book of business, we expect to have about 
8 percent of the loans, the book of business being the loans 
underwritten in one year, we expect to have about an 8 percent 
claim rate over the life of that book of business, and we 
expect most of those claims to occur between about the third 
year and the fifth year after the loan is originated. After 
that, people have equity in the home and they are well 
established and they know how to do it.
    So we believe that the funds that we have are appropriately 
maintained for the MMI fund and we do not really see the public 
policy advantage of taxing moderate income first-time home 
buyers for the provision of housing for other people through 
charging premiums on the MMI fund.
    Chairman Ney. The time has expired.
    I want to note, the default rate is 12 percent?
    Mr. Weicher. I am referring to the FHA. Over the life of a 
book of business, the loans we underwrite in any year, over the 
life of that book of business those loans will default, about 8 
percent of those loans will default, and most of them will 
default in the first 5 years.
    Chairman Ney. There was an article in the New York Times 
and the Journal of 12 percent. So you are all saying 8 percent.
    Mr. Weicher. The New York Times was talking, what is 
commonly looked at is the default rate right now, and the 
default rate is higher during economic downturns, and the 
default rate tends to peak after the economy has turned up 
because people do their best to hang onto their homes when they 
become unemployed, so they avoid losing their home as long as 
possible. Typically, that means that some of the people who do 
not run out of resources after the economy as a whole has 
turned up, but their own position remains negative. We have 
seen this in every economic cycle back for 30 years.
    Chairman Ney. I think it is 12 percent, but I will move on 
to Mr. Clay.
    [Laughter.]
    Mr. Weicher. But not in our program.
    Mr. Clay. Thank you, Mr. Chairman, for allowing me to claim 
my time. I appreciate that.
    Chairman Ney. We appreciate your patience.
    Mr. Clay. Let me follow the same line of questioning of Ms. 
Velazquez and Ms. Lee. You know, Mr. Secretary, when people 
sign paperwork on predatory loans, they often do not understand 
what they are signing. Does your counseling program provide 
legal assistance to homeowners that enter into predatory loans? 
I would think that should be a point of any comprehensive 
counseling that your department provides.
    Mr. Weicher. Yes, we do. The counseling agency may provide 
legal assistance directly or may refer the borrower to legal 
aid or to an organization which specializes in legal 
assistance, but that is one thing that happens for those 
borrowers who appear to be victims of predatory lending. Yes, 
that happens.
    Mr. Clay. Okay, so if we change that setup and you go to a 
software program instead of a one-on-one session with a trained 
housing counselor who can really review the paperwork and 
figure out if there are alternatives available to those people 
seeking counseling, how does that help this situation?
    Mr. Weicher. That is not what we are doing. The software 
program that Ms. Velazquez asked about is a software program 
which enables us to track the performance of housing counseling 
agencies and the experience of their clients much more 
specifically, much more directly than we are able to do now. It 
relates to Ms. Lee's question about what kind of data we have 
and what the data shows. We are not proposing to replace any 
one-on-one counseling with a software program. The software 
program is an information tool for us and for the agencies that 
receive our funds. It is not a software counseling program.
    Mr. Clay. Does that mean that when someone calls, will they 
speak to a person or speak to a machine? That can be 
frustrating, I know.
    Mr. Weicher. Our 1-800 number is intended to direct you to 
a counseling agency. The counseling agency that provides you 
with help is providing you help through one-on-one counseling 
or perhaps through group counseling, but the counseling is 
being provided by human beings.
    Mr. Clay. Okay. Along the same lines that others have asked 
you today, help me and describe the effectiveness of the post-
homeownership counseling. Has your department been able to 
stave off foreclosures and keep families in homes? Along with 
that, should local communities that receive the grants and CDBG 
funds be required to provide counseling? You stated earlier 
that it was discretionary. Being from St. Louis, Missouri, I 
realize how local communities can abuse the CDBG funds. It 
happens every day in my community, where they go for unintended 
purposes. So should that be part of any law, that we require 
these local communities who receive these grants to provide the 
counseling necessary?
    Mr. Weicher. I think there are two questions there. Let me 
take them in the order in which you asked them.
    We know that of those counseling clients who come to our 
counseling agencies and are trying to avoid losing their home, 
we know that 90 percent of them are successful in keeping their 
home. I think that is a good performance. With respect to 
requiring counseling in the CDBG, the rationale behind the CDBG 
program for the 30 years since it was enacted has been that the 
decision on how to use the funds should be left to the local 
government, the county, the city, the rural community that 
receives funds through the state CDBG portion. It becomes up to 
them to decide which purpose of the purposes of the funds are 
the most important to them.
    If you have abuses of funds, that becomes an issue for the 
HUD office of inspector general and perhaps the Justice 
Department, but it has not been our view and I do not think it 
has been a very popular view that CDBGs should be earmarked for 
specific purposes, rather than being left at the discretion of 
the local government to decide what is the most important local 
purpose.
    Mr. Clay. You find local governments abusing funds every 
year.
    Mr. Weicher. I am sure that is true. I think the abuses 
should be considered separately from the question of how the 
program is organized. There are abuses in categorical grant 
programs as well. It is in all of our interests to combat those 
abuses.
    Mr. Clay. You have broad guidelines now in CDBG funding, so 
to make this a requirement you would see it to be problematic?
    Mr. Weicher. I think I would like to defer to Assistant 
Secretary Bernardi who runs the program, but certainly our view 
has been that the program, and the view of I think all previous 
administrations has been that the program is intended to 
provide funding for local governments to make local decisions 
as to what they need. It came after a very unhappy experience 
with a number of categorical programs, most notably urban 
renewal.
    Mr. Clay. Okay. That is a subject for another hearing, but 
I thank you for your answers.
    Chairman Ney. Would you like some extra time, Mr. Clay?
    [Laughter.]
    I feel bad. That is why I am offering it. We will have some 
other rounds here. I have one quick one and I will yield to any 
question you have.
    The one I wanted to ask about is, you were talking about 
the success of the pre-purchase housing counseling. Do you 
collect data on that, the number of people who were counseled 
and it was a successful situation for them?
    Mr. Weicher. Yes, we do, Mr. Chairman. We can certainly 
provide that information to you for the record. As I said, I 
think to Ms. Lee, we have a very detailed tabulation. Of the 
families who received pre-purchase counseling last year, we 
count 150,000 families, of whom 30,000 bought a home; 70,000 
are continuing the process of counseling with the clear 
expectation that they will be buying a home this year; and 
10,000 decided not to buy a home, which is fine, too. It is one 
way of avoiding making a mistake. As a result of the 
counseling, they decided that they really were not ready to buy 
a home or this was not what they wanted to do.
    So a large number of families who received homeownership 
counseling either buy a home or are about to buy a home. The 
data stops at the end of that fiscal year. We think it is a 
successful program.
    Chairman Ney. What I will do, because we have two more 
panels, and Mr. Davis has yet to ask a question, I will just 
put some things in writing to you. I want to look at ways how 
we measure the effectiveness of the programs we have and the 
counseling.
    Mr. Weicher. I would be glad to respond.
    Chairman Ney. Thank you.
    Mr. Davis?
    Mr. Davis. Thank you, Mr. Chairman. I appreciate the Chair 
letting me sit here. I was not sure which would upset Ms. 
Waters more, seeing me on the Republican side or in her seat.
    [Laughter.]
    Chairman Ney. We could talk about sitting you over there if 
you would like to.
    [Laughter.]
    Mr. Davis. At least we would get a roll call tomorrow.
    Let me, Mr. Weicher, pick up the spirit of the last round 
of questions you have been asked about predatory lending. One 
of the things that is always very striking to me is that 
obviously we would expect to find a fairly active sub-prime 
market in low-income communities. I suppose that is the purpose 
of the sub-prime market. One of the things that is really 
striking to me, though, is that as I understand the statistics, 
the incidence of sub-prime lending is double in affluent black 
communities what it is in low-income white communities. That, I 
think, is a significant thing that we ought to very much try to 
get a handle on. I hope that your program is able to address 
some of those disparities.
    Let me ask you, what can your counseling program do to 
proactively seek out upper-income black homeowners who for 
whatever reasons are still being steered into the sub-prime 
market? Do you recognize that as a problem and what does your 
program do to specifically get at that concern?
    Mr. Weicher. Mr. Davis, I believe that next week I will be 
testifying in front of this subcommittee on two program 
initiatives that we and FHA have in this year's budget to 
create more opportunities, particularly for minority families, 
to buy homes with FHA-insured mortgages, and also for families 
which now own homes which have sub-prime loans, to refinance 
into FHA mortgages. We think both of those initiatives will go 
far toward addressing the concern that you raise. This is we 
think an important program initiative, and I very much hope you 
will be here next week, on either side of the aisle.
    Mr. Davis. I will be on this side of the aisle.
    Let me try to ask a slightly more pointed question than 
that. How do you structure a counseling program to not just 
reach people who are low income and who recognize that they 
have problems buying a home? That is an obvious target group 
for you to reach. I am sure there are fairly easy ways to reach 
them. How do you take it a step further, though, to proactively 
reach what may be affluent, but discriminated-against 
homeowners who may be African American or Latino, Puerto Rican? 
How do you go about telling them about the sub-prime market and 
the potential abuses in the sub-prime market? Is there anything 
in this counseling program that can really aggressively reach 
out to target not just your easy group of people to reach, the 
low income, but maybe some of your higher income individuals 
who still may be affected?
    Mr. Weicher. I am not quite sure I would agree that it is 
easier to reach low-income people than it is high-income 
people, but setting that aside, there are two things here. Our 
program is intended to serve anyone who wants to buy a home. 
Our counseling agencies are prepared to help anyone who wants 
help. When we get into concerns about discrimination, that is 
where the program that I mentioned, one of the other two grant 
programs in the department, the Fair Housing Initiatives 
counseling program, comes into play as well. If there is a case 
of discrimination, that is something that they are prepared to 
help with.
    I can provide you for the record with the income levels of 
the individuals who we have helped last year. I cannot tell you 
what that looks like right now.
    Mr. Davis. Let me ask you one final set of questions on a 
different topic. There has been some concern that has been 
raised around what happens in the context of apartment owners. 
Can you clarify for me exactly how this program is going to be 
administered for people who are living in apartments?
    Mr. Weicher. About 20 percent of the funds that we have for 
counseling are in fact used to provide rental counseling; 
provide counseling to individuals who either have problems 
where they are renting or are looking for help and advise in 
how to rent and what to look for.
    Mr. Davis. Who does the counseling?
    Mr. Weicher. It is the same agencies. It is the same set of 
agencies. Some agencies will specialize more in homeownership 
counseling; some will specialize more in rental counseling; 
some will do both. But we make grants to agencies which are 
providing counseling assistance, housing counseling assistance, 
which may be homeownership counseling, buying a home, maybe 
keeping a home; maybe renting a home. We provide funding and 
our agencies provide assistance to people with any of those 
problems, and indeed there is homeless counseling in there as 
well.
    Mr. Davis. Okay. Mr. Chairman, I think my time has expired.
    Chairman Ney. Thank you.
    Ms. Velazquez and then Mr. Scott.
    Ms. Velazquez. Mr. Weicher, according to the U.S. Census 
Bureau statistical abstract the number of homes in foreclosure 
in the year 1980 was 114,000, while the number of homes in 
foreclosure in the year 2001 was 555,000. This is an increase 
of over 250 percent. Yet even this statistic masks the more 
dramatic increases in foreclosures in some neighborhoods; 
cities such as Philadelphia and Chicago, where the foreclosures 
have tripled in recent years, and in New York it is twice the 
national average. Are those numbers alarming to you? What do 
you have to say to those 555,000 people who lost their homes?
    Mr. Weicher. I think with respect to the comparison over 
time, in 1980 we had experienced a long period of inflation 
which had resulted in substantial increases in house prices and 
made it for those people who owned homes much easier to avoid 
foreclosure. We have a significantly higher homeownership rate 
now than we had in 1980, and that means that we can expect 
there will be some more foreclosures for that reason as well. 
In 2001, we were in the recession that started at the end of 
1980, and we will have higher foreclosure rates in a recession 
than we have in a period of good economic experience.
    That being said, we certainly are not happy when people 
lose their homes. We have a very active loss mitigation program 
in FHA where we require lenders to offer loss mitigation to 
families who are at risk of losing their homes. In the last 2 
years, we have had as many families in loss mitigation as we 
have had foreclosures. Of those families who have loss 
mitigation, more than half of them have brought themselves 
current on their loan and avoided foreclosure within a year. 
That is an extremely important activity and it is something we 
are continuing. We monitor that. We monitor the performance of 
our lenders both in offering loss mitigation and in avoiding 
foreclosure.
    Ms. Velazquez. Given the high percentage of foreclosure, 
are you contemplating putting more funding into the prevention 
of foreclosure?
    Mr. Weicher. This is something that is addressed in the 
notice of funds availability. We want a balance between 
promoting homeownership, preventing foreclosure, providing 
rental counseling, and to some extent that is at the discretion 
of the counseling agencies, which know what their clients, what 
their communities need. To some extent, it is based on guidance 
that we will provide as well.
    Certainly we believe in promoting homeownership, and we 
also know that it does not do anybody any good to put them in a 
home which they are going to lose in a couple of years through 
no fault of their own.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Ney. Any other questions?
    Mr. Scott. Two very quick ones here. The first question, I 
do not want you to leave without answering this. What is your 
opinion of this legislation before us?
    Mr. Weicher. As I believe I said earlier, we certainly 
applaud the purpose of the legislation. We have asked Congress, 
asked the Appropriations Committee to create a separate account 
for housing counseling and take it out of the home block grant. 
We do believe that the program that we have operates well. The 
program that I operate constitutes the large majority of the 
housing counseling grants that HUD makes. We do not really see 
a particular advantage to consolidating the three grant 
programs that we have into a single agency, since they serve 
different purposes and have different clienteles. I do know 
from my own experience that a reorganization within the 
department takes time and resources, and can be a complication 
while it is going on. I would be glad to try to explain it more 
thoroughly if you would like.
    Mr. Scott. Well, you are aware of a serious problem that 
requires our attention, that is going to require us to do more 
draconian measures to try to get at, to stop much of the abuses 
that are happening there. It is clear that there needs to be 
improvement in specific areas. Of course, the reason I asked 
you that question was, when I asked you the previous question 
about just one simple application of this new bill that we are 
pushing, which was the application of the toll-free number, 
clearly mandates that a toll-free number be established and 
that it be operated and that it be language-friendly, and that 
we have these other programs implemented so that it reaches 
these targeted groups of low-income senior citizens and so 
forth.
    In other words, this bill goes to the heart of the matter 
of getting at it. We must have a corresponding attitude within 
this administration than when help is coming, it needs to have 
a receptive nature, or else we will be forced to have to deal 
with more draconian measures of which mortgage bankers, 
mortgage banks, legitimate operators who are not in these 
activities, get caught up in this net.
    So it is my hope that as a result of this hearing, that HUD 
will go back and understand that this bill is vitally needed; 
that we need to get programs and outreach out there that target 
this; and currently what is being done is not getting the job 
done.
    Mr. Weicher. Mr. Scott, we are the administration which has 
requested a doubling of housing counseling funds in the first 3 
years and a further increase this year. We know housing 
counseling is important. We have made a point of requesting 
Congress and Congress has granted additional funds to support 
housing counseling. We have asked for a separate account in the 
budget for housing counseling which we believe would be 
valuable as well.
    Whatever abuses you are aware of or problems you are aware 
of in the performance of specific agencies, please let us know. 
We believe that the agencies are doing a good job. We believe 
that the funds that are being spent are helping people who need 
help now. They are helping them to buy homes. They are helping 
them to avoid foreclosure. They are helping to find and 
maintain and continue to live in decent rental housing. We 
think the program works well. It can always be improved, but we 
believe the program works well. I really would like specific 
examples of the problems that you allude to and I will address 
them if it is at all within my authority.
    Mr. Scott. Well, they are all over the place. They are in 
the news daily. We hope that as a result of this hearing that 
we have taken this opportunity to share with you the need for 
this, and this is the whole genesis of this counseling bill 
that we are putting forward. We look forward to working with 
you on it and receiving it, and making this an integral part of 
not taking what you are doing, but adding to it and making it a 
collaborative effort. But clearly and surely, we must get 
programs directly to these targeted groups, or else failing 
this, will come more draconian measures that many of the 
industries will not like.
    So it is my hope that you will be, and HUD will be very 
receptive to this bill and work with us to get it through, and 
that you will implement it and follow through with the 
directives in the legislation.
    Chairman Ney. Additional questions?
    I want to thank you, Mr. Weicher for your time today.
    Mr. Weicher. Thank you, Mr. Chairman.
    Chairman Ney. We will move on to panel two if we could. 
Could I remind you as you speak to please turn the mikes on. We 
will start with panel two, Mr. Kenneth Wade, executive 
director, Neighborhood Reinvestment Corporation. We want to 
welcome you here today. You are the new executive director of 
the Neighborhood Reinvestment Corporation. The corporation is a 
national nonprofit organization created by Congress 25 years 
ago to develop effective systems of public and private sector 
support for community revitalization efforts. The corporation 
supports a network of more than 220 locally based affordable 
housing and community development organizations.
    The next witness will be introduced by Congresswoman 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    I would like to take this opportunity to personally welcome 
and introduce Lisa-Nicolle Grist, the executive director of 
Neighbors Helping Neighbors, a community-based housing 
counseling agency in my district. Neighbors Helping Neighbors 
serves tenants, homebuyers and owners of small properties and 
small businesses. The agency, which was founded by community 
residents in 1990, helps tenants retain and improve their 
homes, succeed in purchasing affordable first homes, and repair 
their homes and resolve mortgage delinquencies.
    The critical housing counseling Neighbors Helping Neighbors 
provides, and their leadership, has a huge impact on the 
families they serve. I appreciate your coming here to share the 
experiences you and your staff have had working with families 
in Sunset Park and Park Slope, Brooklyn.
    Thank you and welcome.
    Chairman Ney. We also want to welcome Lautaro Diaz, the 
deputy vice president for community development of the National 
Council of La Raza, a national Hispanic advocacy and research 
organization. La Raza seeks to improve opportunities for 
Hispanic Americans by supporting and strengthening local 
Hispanic groups. We want to welcome you.
    The next witness is Mr. Rodney Jordan, vice chairman of the 
Norfolk Redevelopment and Housing Authority in Norfolk, 
Virginia. We want to welcome you also.
    The next witness is Gary Obloy. He is from the great State 
of Ohio and the greater county of Belmont and the even greater 
city of St. Clairsville, which happens to be my hometown. So I 
have known Gary Obloy for a long time. He is executive director 
of Community Action Commission of Belmont County in St. 
Clairsville, Ohio. I personally know about the contributions 
that he has made and the commission and the people that they 
have helped in our county and its low-income residents, and the 
more than 25 federal, State and locally funded programs that it 
manages. So it is a pleasure to have you here today, Gary.
    The last witness will be introduced by Mr. Scott.
    Mr. Scott. Thank you very much, Mr. Chairman. We are 
delighted to have Mr. Chapman Walsh from the Green Forest 
Community Development Corporation in the great State of Georgia 
in my district. Mr. Walsh was appointed director of the 
homeownership program, the Green Forest Community Development 
Corporation in 1999. Prior to that, he served as the 
coordinator from 1997 to 1998.
    Just very briefly, Green Forest Community Development 
Corporation is a private nonprofit faith-based community 
economic development corporation created by the Green Forest 
Community Baptist Church of Georgia.
    Good to have you with us. Thank you.
    Chairman Ney. Thank you very much. We will begin with Mr. 
Wade.

  STATEMENT OF KENNETH WADE, EXECUTIVE DIRECTOR, NEIGHBORHOOD 
                    REINVESTMENT CORPORATION

    Mr. Wade. Good morning, Chairman Ney and Representatives 
Velazquez and Scott. I am pleased to be here today. As was 
commented earlier, I am the executive director of Neighborhood 
Reinvestment. I am here today to share our achievements in the 
housing counseling area.
    While I am new to the executive director role here at 
Neighborhood Reinvestment, I have been with the corporation for 
13 years, serving in a variety of capacities. Prior to becoming 
executive director, I was our director of National Programs. In 
that role, I oversaw our homebuyer education counseling 
efforts. So I am particularly proud to be here to share with 
you the accomplishments that we have achieved.
    We are authorized by the House Committee on Financial 
Services. We thank you for your continued support. 
NeighborWorks is over 220 community development organizations 
nationwide providing housing counseling and promoting 
neighborhood revitalization in 2,500 urban, suburban and rural 
communities, such as an organization you will hear from a 
little later today, Neighbors Helping Neighbors. We also work 
very extensively with HUD as they serve on our board, and we 
are one of the intermediaries that HUD funds in the housing 
counseling arena, and we do work with a number of the other 
panelists that you will hear from today in a number of 
capacities. Over the last 10 years, the NeighborWorks Campaign 
for Homeownership has set national standards for pre-purchase 
homeownership counseling. NeighborWorks has established a 5-day 
training and certification course for housing counselors. With 
the committee's support, NeighborWorks has certified more than 
3,000 counselors nationwide. And the NeighborWorks network has 
provided housing counseling to nearly 500,000 families.
    NeighborWorks does this by creating a system that 
effectively educates low-income customers about the home buying 
process. This system, known as Full Cycle Lending, includes 
pre-purchase counseling, flexible loan products, and post-
purchase counseling. Essentially, here is how it works. All the 
potential homebuyers receive a minimum of 8 hours of group 
counseling with follow-up individual counseling. In addition, 
NeighborWorks housing counselors are certified by completing a 
5-day home buyer education methods class at our national 
training institute, where they are also required to pass an 
exam. In addition, NeighborWorks uses the widely endorsed 
Realizing the American Dream curriculum, which I would like to 
submit for the record today.
    Because of these high standards, families across the 
country from Ohio to Queens, New York to all the communities 
you represent have received over 4 million hours of counseling 
in the last 10 years. The demand for housing counseling 
continues to rise and we plan to significantly increase the 
number of housing counselors we train and certify. This will 
reach more underserved communities and ensure effective 
education and counseling to a vast number of additional 
families and individuals.
    NeighborWorks housing counseling achievements are even more 
impressive when you consider that the home buyers directly 
assisted by the NeighborWorks system are traditionally 
underserved populations: 51 percent of those home buyers were 
non-white; 67 percent earned less than their area's median 
income; and 44 percent were female-headed households. 
NeighborWorks adheres to strict housing counseling standards 
that have proven to lower delinquency and default rates. 
Mortgage delinquency among NeighborWorks customers is lower 
than for all mortgage loans in the United States. This is 
amazing when you consider that these borrowers are often viewed 
by the conventional market as too risky.
    Moreover, only 0.25 percent of NeighborWorks borrowers were 
foreclosed upon. This is less than the foreclosure rate for 
conventional borrowers. NeighborWorks borrowers are thoroughly 
educated about the responsibilities of owning a home and 
therefore have a stabilizing impact on their communities. This 
is why NeighborWorks insists on Full Cycle Lending.
    I thank the subcommittee for the opportunity to speak about 
the housing counseling successes of NeighborWorks. Your support 
and guidance have been crucial to our effectiveness. We look 
forward to greater success in the future and we look forward to 
working with you in any way we can.
    Thank you. I am prepared to answer any questions you might 
have.
    [The prepared statement of Kenneth D. Wade can be found on 
page 29 in the appendix.]
    Chairman Ney. Thank you. We will get to the testimony and 
then we will come to questioning.
    Mr. Diaz?

STATEMENT OF LAUTARO DIAZ, DEPUTY VICE PRESIDENT FOR COMMUNITY 
            DEVELOPMENT, NATIONAL COUNCIL OF LA RAZA

    Mr. Diaz. Thank you, Chairman Ney, Ranking Member Waters 
and Congresswoman Velazquez and the rest of the members of the 
subcommittee. My name is Lautaro Diaz. I am NCLR's deputy vice 
president for community development. I have spent the last 16 
years developing and operating community development programs, 
including small business lending, single-family and multi-
family housing development and homeownership programs.
    As the nation's largest national Hispanic constituency-
based organization, NCLR serves all Hispanic national groups in 
all the regions of the country through a network of more than 
300 affiliated community-based organizations. We have a long 
history in the housing industry. We have been producing 
research, policy analysis and advocacy on affordable housing 
issues for more than two decades. We partnered with Fannie Mae 
and First Interstate Bank in the early 1990s to pilot one of 
the first counseling programs called Home To Own. NCLR has 
since become a national intermediary designated by HUD to 
distribute funds to community-based organizations providing 
housing counseling services.
    NCLR has concluded that housing counseling is a powerful 
tool that effectively moves low-income families into 
homeownership. Homeownership is critical to building wealth in 
the Latino community. However, Latinos are still significantly 
less likely than other Americans to be homeowners. Hispanic 
families have unique financial service needs that are not being 
met by the marketplace. In fact, we estimate that more than one 
million Hispanic families are mortgage-ready, yet do not own 
their own homes. There are four key barriers to this, to 
increasing Latino homeownership: lack of information regarding 
the process; lack of affordability in many of the mortgage 
markets around the country; systemic barriers to obtaining a 
mortgage; and other market failures.
    This brings me to NCLR's homeownership network, or NHN. The 
mission and purpose of NHN is to increase Latino homeownership 
in a manner that does not endanger the family financially. The 
NHN consists of 35 NCLR affiliates in 15 States that provide 
bilingual pre-purchase homeownership counseling to low-income 
families. NCLR counsels over 20,000 families per year and 
closes approximately 3,000 mortgages with those families. 
Today, more than 13,500 families have achieved homeownership 
through NHN agencies.
    The success of the network is based in large part on the 
NCLR model which focuses on a single goal: increasing the 
number of Latino homeowners. NHN counselors may spend 6 months 
to 3 years helping a family prepare for this goal. Once the 
family is ready to purchase their home, counselors help 
families evaluate products, navigate the closing process, and 
help the family package a loan and send it on to the lenders 
for verification and processing.
    As we all know, the home buying industry is expanding. In 
the midst of these changes, community-based housing counseling 
agencies are becoming more critical to the home buying process. 
They are often the first point of contact for Latino and 
immigrant families looking for trustworthy information. The 
counseling agencies play a critical role in filling the market 
gap that exists for low-income Hispanic families.
    It is imperative that all levels of government recognize 
the important role the organizations play. It is important that 
the mortgage industry reward families that receive counseling 
and recognize the value-added provided by counselors. It is 
equally important that the regulatory environment does not 
discourage this role.
    NCLR has forged many sophisticated national partnerships 
with financial institutions. These partnerships have allowed us 
to expand our capacity by, first, increasing funding to 
counseling agencies by leveraging NCLR's HUD grant funds with 
private mortgage company contributions to NCLR's network. We 
have been able to develop innovative database technology 
designed for counseling agencies to increase staff efficiency. 
They have helped create fee-for-service relationships that will 
allow agencies to become more self-sufficient.
    Now let me turn to our recommendations. NCLR applauds H.R. 
3938 for promoting the visibility and work of housing 
counselors. However, NCLR would like to make the following 
recommendations to improve the bill and advance the counseling 
field. First, we suggest increased funding. The program has 
proven its capacity and effectiveness. In order to reproduce 
this success on a larger scale, increased support is necessary. 
Second, develop a pilot program with FHA clients. FHA and VA 
loans have the highest delinquency and foreclosure rates. 
Proven counseling methods can be used to mitigate the risk for 
both the homeowner and the taxpayer. Finally, support fee 
income. Agencies must develop ways to generate fee income to 
become self-sustainable. This committee should encourage HUD to 
affirm counseling agencies' ability to earn fees.
    Thank you and I would be happy to answer any questions 
afterwards.
    [The prepared statement of Lautaro Diaz can be found on 
page 31 in the appendix.]
    Chairman Ney. Thank you very much.
    Ms. Grist?

  STATEMENT OF LISA-NICOLLE GRIST, CHIEF EXECUTIVE DIRECTOR, 
               NEIGHBORS HELPING NEIGHBORS, INC.

    Ms. Grist. Thank you very much. I am Lisa-Nicolle Grist. I 
am the executive director of Neighbors Helping Neighbors in 
Brooklyn, New York.
    It is a great honor for me to be invited to join this panel 
of leaders whose work I have long admired, and to be asked to 
share a Brooklyn street-level perspective on both the 
importance and the mechanics of housing counseling.
    The home is the base from which families climb the 
socioeconomic ladder. It is a key to health, educational 
attainment, business opportunities and intergenerational 
wealth. Thus, housing counseling helps residents not only to 
stabilize their housing situations, but also to advance the 
quality of their lives. As housing counselors, we envision a 
society where all people are secure in their ability to find, 
afford and keep good homes.
    Housing is typically a person's largest expense and 
investment. The price and quality of housing is affected by a 
complex set of institutions. Therefore, housing counseling 
helps educate consumers and level the playing field between 
individuals and institutions that naturally have very different 
amounts of information and power. For example, housing 
counseling creates confidence for first-time home buyers facing 
mortgage banks, tenants facing housing court, and homeowners 
facing foreclosure attorneys.
    Neighbors Helping Neighbors, which is also called NHN or 
sometimes VAV, is a community-based organization that advocates 
and serves tenants, homebuyers and owners of small properties 
and small businesses. Our mission is to enable low-and 
moderate-income people to build assets for their families and 
Brooklyn communities by securing, improving and owning their 
homes and businesses. NHN's most quantifiable results come from 
helping low-income people get money to buy, keep or improve 
their homes.
    In the course of our history, we have facilitated 148 home 
repair loans worth almost $2.5 million; 463 mortgages worth 
over $64 million; and in the past 2 years, NHN has saved over 
50 families from becoming homeless by securing rent subsidies 
worth nearly $485,000. Since housing and money are inseparable, 
we also measure the difference that we make in people's lives 
by giving them the information and tools to take charge of 
their personal finances. NHN is a HUD-certified local housing 
counseling agency. We have received housing counseling grants 
each year since 1999 and our experience in applying for and 
administering the HUD grants has generally been excellent, even 
though the processes can be somewhat complicated.
    The HUD housing counseling grant program offers ample 
flexibility for us to adjust to changing community needs. NHN's 
housing counseling work is also funded by New York City and New 
York State, the Neighborhood Reinvestment Corporation, the New 
York Mortgage Coalition and its member banks. Our partnerships 
with banks are very important to NHN's home buyer and homeowner 
counseling programs. These partnerships give us legitimacy in 
the eyes of the public and enable us to offer real products, 
not just words, to people who might otherwise succumb to the 
aggressive marketing by predatory lenders.
    NHN's one-on-one home buyer counseling ensures that people 
have sufficient income, savings and credit to qualify for a 
mortgage, and that they shop for homes they can afford. Once a 
customer has identified an affordable property, NHN calls 
several banks, helps them complete the application, and helps 
them through closing. NHN also counsels homeowners on how to 
seek loan forbearance or pursue other loss mitigation 
strategies.
    Homeowners who miss FHA mortgage payments are advised by 
their lenders to contact HUD's housing counseling 
clearinghouse, that 800 number, which refers them to local 
agencies through zip codes. Sometimes this is less than ideal 
because homeowners often delay in seeking help because the 
mortgage delinquency is just one of many disheartening factors 
that create more stress and chaos in their lives. 
Unfortunately, the delay means precious time is lost. 
Counseling is most effective in the first 3 months of a 
mortgage delinquency, but is very difficult after a lender 
starts legal proceedings.
    Some large counseling agencies have built relationships 
with loan servicers so that the agency gets notification of 
missed mortgage payments and can reach out to homeowners 
proactively. Although our organization does not participate in 
that system, I imagine that it is very successful. It requires 
substantial staff capacity.
    Our homeownership counselors must continuously become more 
efficient, knowledgeable and professionally skilled in order to 
meet our banking partners' increasing expectations. To help us 
meet those expectations, NHN receives superb technical 
assistance from Neighborhood Reinvestment in the person of 
management consultant Jose Perez.
    In addition to homeownership counseling, the need for 
rental counseling is overwhelming. A person earning the minimum 
wage would have to work 154 hours a week to afford the average 
one-bedroom apartment in New York City, or would have to earn a 
wage of almost $20 an hour to afford a typical two-bedroom 
apartment. At NHN, we focus on preventing homelessness by 
helping people to afford and improve their current rental 
situations. The median annual household income of NHN's tenant 
customers is less than $7,000; 44 percent of the tenants who 
seek our help are having problems making rent payments. Due to 
the high cost of housing and the excess of demand over supply 
in rental housing in New York, displacement counseling is one 
of our most important types of work.
    I hope this helps address the committee's interests and my 
written testimony offers more detailed descriptions of our work 
and the ways that we measure our success, as well as some case 
studies about people that we have helped.
    Thank you for giving me this opportunity to participate in 
the process.
    [The prepared statement of Lisa-Nicolle Grist can be found 
on page 32 in the appendix.]
    Chairman Ney. Thank you.
    Mr. Jordan?

      STATEMENT OF RODNEY JORDAN, VICE CHAIRMAN, NORFOLK 
        REDEVELOPMENT AND HOUSING AUTHORITY, NORFOLK, VA

    Mr. Jordan. Good afternoon, Chairman Ney and honorable 
committee members. I am Rodney Jordan, vice-chair of the board 
of commissioners of Norfolk Redevelopment and Housing Authority 
in Norfolk, Virginia. With me today are Lori Burden and LaShawn 
Fortes of the NHRA Homeownership Center, and in the audience is 
Robert Jenkins, our deputy executive director.
    As one of the oldest redevelopment housing authorities in 
the country, we at NRHA are well aware of the benefits of 
raising the rate of homeownership. Not only does it strengthen 
Norfolk's neighborhoods and help maintain a healthy economy, it 
also contributes to wealth creation and has positive effects on 
our city's social and educational cultures. That is why we 
created the NHRA Homeownership Center. It is just one of the 
many innovations we have brought to our industry in recent 
years.
    Another example of how NHRA innovates is that we were the 
only housing agency in the nation to be awarded an allocation 
of new market tax credits by the U.S. treasury in the program's 
first round. These tax credits are enabling us to bring 
amenities such as fitness centers and grocery stores into the 
neighborhoods we build, and those amenities in turn attract the 
homebuyers that we counsel to those neighborhoods.
    Today, through our one-stop homeownership center, we 
demonstrate our commitment to bringing the great American dream 
of homeownership to more people every year, especially 
minorities. We do this by providing comprehensive and 
customized homeownership counseling to any prospective Norfolk 
homebuyer. Our center is designed to reach families from all 
economic backgrounds to the variety of housing choices 
available in Norfolk, including the homes that we build.
    The counseling we offer provides potential homebuyers with 
the tools and resources they need to become homeowners. We have 
programs that cover everything involved in the process of 
purchasing a home, from restoring credit and finding the right 
mortgage, to builder selection, home inspections and 
foreclosure prevention. To bring a complete range of home 
buying services to our clients, we form partnerships with 
banks, developers, mortgage companies, attorneys, real estate 
firms and other government agencies.
    Another important benefit is that through our Homeownership 
Center, we are able to match buyers with homes in the 
neighborhoods that we build as a redevelopment authority. 
Another plus is that our center also creates demand for other 
NHRA services such as rehabilitating homes and selling real 
estate. Our housing counseling ultimately increases 
homeownership in Norfolk, especially among minorities, by 
educating potential home buyers about the issues involved in 
buying and owning a home. Our goal is to remove the barriers to 
homeownership by preparing clients to become mortgage ready, 
enable them to pre-qualify for loans, and informing them of the 
range of special financing and mortgage programs available.
    The post-homeownership counseling we offer enables clients 
to handle issues that may come up after loan closing. For some 
of our clients, this counseling is the first time they have 
learned anything about homeownership because they come from 
families caught in the cycle of poverty that has prevented 
previous generations from becoming homeowners.
    Our housing counselors are certified through the 
Neighborhood Reinvestment Corporation's NeighborWorks Institute 
and by the Commonwealth of Virginia. We offer a 22-month 
counseling program through our five home buyer clubs, 6 hours 
of group counseling through the VHDA home buyers program, and 
individual counseling customized to each client's needs. We now 
provide counseling to more than 350 families and individuals 
annually. Of those, more than 50 are considered mortgage-ready, 
and at least half of those end up buying new homes that we 
build in mixed-income neighborhoods. For example, as a result 
of our homeownership counseling in our new neighborhood of 
Westchurch, we have former public housing families living next 
door to homeowners who earn six-figure salaries.
    Although we are not a HUD-approved agency, our mission is 
comparable. As with those agencies, we give advice on buying a 
home, renting, defaults, foreclosures and credit histories. Our 
counseling programs are very similar to those offered by HUD-
funded agencies and cover virtually all of the same issues. 
Preventing foreclosure is addressed through the home buying 
classes we offer in conjunction with VHDA. For more intensive 
foreclosure counseling, we refer clients to one of our 
homeownership center partners, Catholic Charities of Hampton 
Roads.
    We offer a 22-month counseling program through our five 
homebuyers clubs, as I mentioned before, and additional 
training as well. One important way that we measure our success 
is through the number of clients who graduate from our 
counseling programs. We also track our clients' successes 
through their improved credit scores, increased savings and 
reduced debt, loan pre-qualification, and ultimate goal of 
achieving homeownership.
    The classes we offer with VHDA educate our clients about 
the issues of questionable and predatory lending, as well as 
foreclosure prevention. Even if the financial institutions we 
partner with did not require that these issues be addressed, we 
believe that it is our responsibility to educate and inform our 
clients about these unfair lending tactics.
    I would like to thank you for inviting me here today and I 
would be free to answer questions at the appropriate time.
    [The prepared statement of Rodney Jordan can be found on 
page 34 in the appendix.]
    Chairman Ney. Thank you, Mr. Jordan.
    Mr. Obloy?

 STATEMENT OF GARY OBLOY, EXECUTIVE DIRECTOR, COMMUNITY ACTION 
      COMMISSION OF BELMONT COUNTY, INC., CLAIRSVILLE, OH

    Mr. Obloy. Good afternoon. My name is Gary Obloy and I am 
the executive director of the Community Action Commission of 
Belmont County. We are located in Appalachian Ohio. I wish to 
thank Chairman Ney and members of the subcommittee for giving 
me the opportunity to address you today.
    I would like to begin by describing for you the mission of 
the Community Action Commission and by explaining what we do in 
an attempt to improve the lives of the people we serve. The 
Community Action Commission of Belmont County is a private 
nonprofit organization governed by an 18-member board. The 
agency's mission is to combat poverty, its causes and 
consequences. The Community Action Commission administers over 
20 federal, state and privately funded programs targeted to 
low-and moderate-income residents of Belmont County. Specific 
programs include the LIHEAP Program, the Home Weatherization 
Assistance Program and the Homebuyers Counseling Program.
    In January 1997, the Community Action Commission received a 
certification from the Department of Housing and Urban 
Development in first-time homebuyer education and for home 
equity conversion mortgages. In May 2000, the Community Action 
Commission received certification from HUD as a local 
comprehensive housing counseling agency. The Community Action 
Commission's program provides services in four areas: homebuyer 
education; budget counseling; foreclosure prevention; and home 
equity conversion mortgages. Resource materials used include 
the HUD publication, the Home Buyer Education and Learning 
Program Guide, also known as HELP, various handouts which have 
been compiled into booklet form, and a locally designed 
PowerPoint presentation. Homebuyer education includes general 
sessions on budgeting, home selection, financing, the closing 
process, knowing and understanding credit, post-closing, and 
foreclosure prevention.
    General sessions are offered eight times per year with an 
average class size of 10. In 2003, 25 customers who attended 
homeownership sessions purchased their first home. From 1996 to 
2003, persons attending the sessions have purchased 215 homes. 
While the purchase of a home is a significant measure of 
success, it is not the sole indicator of the benefits of a 
homeownership counseling program. Currently, 27 families are in 
pre-purchase status, meaning they lack a sufficient down 
payment or have not been able to identify a home which is 
financially affordable. This status ranges up to 18 months. 
Thirty-one families have been working on credit issues for the 
last 6 to 12 months. Eleven families have contacted the 
Community Action Commission after becoming delinquent. 
Seventeen families who purchased a home have contacted the 
agency requesting additional information on such topics as home 
repair and insurance.
    For the grant year ending September 30, 2002, 96 households 
completed the home buyer education workshops; 28 purchased 
housing; 9 decided not to purchase; 2 obtained a home equity 
conversion mortgage; 3 initiated forbearance agreements or 
repayment plans; and 1 mortgage was foreclosed upon.
    Participants are also schooled in renting versus ownership. 
A participant's involvement includes an analysis of the 
household income and expenses, a credit report and discussions 
on the impact of an immediate purchase as opposed to remaining 
a renter. If the participant chooses to continue renting, he or 
she is provided with information aimed at increasing his or her 
knowledge of their rights and obligations in a landlord-tenant 
relationship. If safe and affordable rental housing becomes the 
goal of the participant, a referral is made to the Belmont 
Metropolitan Housing Authority.
    The Community Action Commission views success with its 
housing counseling efforts not only in terms of homes 
purchased, but also in delivering services which are needed by 
the customer. Part of the value of homebuyer education 
workshops is that participants are given the opportunity to 
objectively judge whether or not purchasing a home is in their 
best interest. Statistics show that if they choose to do so, 
their success in maintaining homeownership is strengthened. 
Other successes can be seen in the customer who is motivated to 
purchase, but does not have the down payment or is experiencing 
credit problems. He or she is provided with the mechanism to 
address issues that may lead to future ownership. Those who 
find themselves in a financial dilemma have somewhere to turn 
and someone to intervene on their behalf.
    Key partners in offering a successful program are banking 
institutions. The relationships are mutually beneficial in that 
the counseling programs offered by the agency enhances the 
ability of banks to make good loans. Program participants are 
educated about banks and lending practices, and are made aware 
of what banks require from potential loan customers. The 
partnership also serves to educate participants who might 
otherwise look to predatory or sub-prime lenders for loans.
    In summation, the Community Action Commission has been 
involved in homebuyer education and homeownership counseling 
for nearly 8 years. Through the concerted efforts of many 
partners, we as the community of Belmont County, Ohio have 
witnessed many families become homeowners. We applaud those 
families and individuals for their true grit, hard work and 
dedication in claiming a piece of the American dream. We look 
forward to a continuing relationship with funding agencies such 
as the Department of Housing and Urban Development and urge you 
to consider enhancing the federal government's efforts in the 
arena of homebuyer education and counseling.
    Once again, thank you for the opportunity you afforded me 
today, and I would be happy to answer any of your questions.
    [The prepared statement of Gary F. Obloy can be found on 
page 36 in the appendix.]
    Chairman Ney. Thank you for your testimony.
    Mr. Walsh?

  STATEMENT OF CHAPMAN WALSH, HOUSING DIRECTOR, GREEN FOREST 
         COMMUNITY DEVELOPMENT CORPORATION, DECATUR, GA

    Mr. Walsh. Thank you, Chairman Ney and to all you other 
members of the subcommittee, especially Congressman Scott from 
our great state.
    My name is Chapman Walsh and I am the housing director at 
the Green Forest Community Development Corporation, a faith-
based community development corporation located in Decatur, 
Georgia, right outside of metro Atlanta. Green Forest Community 
Development Corporation was really created and born out of the 
need that the Green Forest Community Baptist Church felt. The 
cries coming from the community led that organization to fund 
and go forward with a move to get granted a 501(c)(3) in 1996. 
Green Forest Community Development Corporation is a nonprofit 
and it really focuses on economic development and housing.
    The mission of the Green Forest Community Development 
Corporation is to create empowerment and networking for people 
through economic development, housing, youth, senior, and 
health initiatives, social ministries, education, and 
comprehensive preventive programs for persons of all ages. You 
can see that is a pretty lengthy list. I am really here today 
to talk about the housing division. That was the first division 
started in the Community Development Corporation at Green 
Forest. Basically, we started because everyone realizes the 
great need to create safe matriculation from renting to housing 
in society and communities.
    We started really with the Expanding the Dream initiative, 
which is a homebuyer education program, what many people look 
at as a first-time homebuyer program, but in fact many times 
people who have purchased homes before need housing counseling 
and need homebuyer education.
    During the first year of the program, we were able to help 
over 300 families move to homeownership either directly or 
indirectly. At this point, we are well over 700 families who 
have directly gained benefit from working with Green Forest and 
from having us help them to understand the process of 
homeownership and key role players what they should be doing 
for you and exactly how to acquire a team that works for you.
    Green Forest uses a HUD-certified, Freddie Mac-certified 
and Fannie Mae-certified lecture series. We call that our 
education piece. Those classes teach potential homebuyers about 
the key roles of the realtors, what sort of realtor you should 
have if you are purchasing, the mortgage process, and the 
appraisals. It talks about renting versus buying. I think 
everyone wants to know how much it costs. We go on to talk 
about repairing your credit. I think that what we find is that 
that is the area that people have most difficulty with.
    Clearly, every successful entity in America works on a 
budget, but very few of our community members are taught 
formally anywhere how to budget. Consequently, financial 
illiteracy is a real issue with many people who come into and 
want to purchase a home. It goes across the board. No matter 
what their educational background, there are problems with 
budgeting.
    Credit is another issue. What we feel is that anyone who we 
interface with should be able to come in, learn the process of 
home purchase, understand who the sharks are, who to stay away 
from, who to get close to. We feel that the strength of housing 
counseling is really one-on-one meetings with the clients after 
this education period. Anyone can help someone move to 
property, but in fact I think the one-on-one counseling is what 
helps build a roadmap for an individual that allows that person 
to find success. As I said, financial illiteracy is a real 
issue. We use the CreditSmart curriculum. It is a Freddie Mac 
program to help people to understand the purpose of credit and 
to help them strengthen their credit profiles.
    Our housing counseling program was asked to go and get 
certified to provide loss mitigation counseling some years ago 
because of the great foreclosure rate in DeKalb County. That is 
where most of our work is done right now. Loss mitigation 
allows people to work out something with the servicers and stay 
in their homes. I think that the bottom line is that people who 
are facing foreclosure are really at a loss for which way to 
turn. Many times, they are taken advantage of. So again, one-
on-one counseling is what works with that situation.
    To sum it up, the bottom line is one-on-one counseling is 
what works. Group counseling does not. One-on-one counseling is 
very, very expensive. We need help.
    Thank you.
    [The prepared statement of Chapman Walsh can be found on 
page 38 in the appendix.]
    Chairman Ney. I want to thank the panel for some very good 
testimony.
    I want to ask Mr. Obloy, according to the testimony, you 
take individuals from West Virginia that come over to Ohio for 
counseling, too?
    Mr. Obloy. Correct.
    Chairman Ney. I know Canton, you mentioned in your 
testimony. Where is the closest in West Virginia to us?
    Mr. Obloy. I believe that the family services in Wheeling 
was recently awarded or recently certified as a HUD-certified 
counseling agency. I did a check of the HUD Web site before I 
came to Washington and their name appeared there.
    Chairman Ney. Okay.
    Mr. Obloy. Other than that, the nearest HUD-certified 
agency would be in the Pittsburgh area.
    Chairman Ney. Is every single group here certified by HUD 
to do counseling officially?
    Mr. Jordan. No.
    Chairman Ney. You are not? Okay. Did you want to be? I was 
just curious. Did I ask a bad question?
    [Laughter.]
    Maybe we better get Mr. Weicher back here.
    Mr. Jordan. As I mentioned, Mr. Chairman, we are a 
redevelopment housing authority and we created this 
homeownership center under those auspices. While we do meet the 
criteria, we are pleased with our current standing.
    Chairman Ney. Okay. Of the groups that have the HUD-
certified counseling, the question I wanted to ask, if anybody 
can answer, does HUD tell every single group the same thing, 
that this is how you counsel; this is what you say? Is there a 
laid-out criterion that is given to you all? Gary, do you want 
to start? I am sorry. Mr. Walsh?
    Mr. Walsh. Mr. Chairman, in the loss mitigation area, there 
are parameters set by HUD to the servicers, but the people who 
call are all in different situations. So I think that we have 
to deal with them on a one-on-one basis. The counseling is 
different for each client.
    Chairman Ney. Do you ever get stumped? Is there somebody 
you have to call? Or have you dealt with the issues so long you 
are able to do it?
    Mr. Walsh. I think you have to work your way through. There 
is usually an answer and working with the HUD guidelines and 
the servicers as best we can. We usually can come up with a 
solution for the community member.
    Chairman Ney. But it is standard. HUD gives all of you the 
same guidelines; nothing changes.
    Mr. Wade. I would just like to clarify that a little bit. 
HUD provides broad guidelines for each of the eligible program 
activities. One of the things that we do is train the 
counselors who are actually doing the training in the 
neighborhoods. We have a defined curriculum that we use at our 
national training institutes. It is broadly available. We do 
five of those throughout the year, all over the country. The 
most recent was in Atlanta the last week of February. 
Essentially, this is the curriculum that we provide to all of 
the folks who we train and certify as homebuyer education 
counselors.
    Mr. Diaz. I would just like to add, what HUD said, as 
Kenneth mentioned, broad standards. When we apply for HUD 
funds, we have to present the program curriculum, how it is 
delivered, when it is delivered, processing in between. The HUD 
staff approves that as meeting their standard.
    Chairman Ney. Okay. And do you think counseling is defined 
as much as it can be? Or does it need more definition? The 
reason I say that, in Cleveland, Ohio there was an article and 
the Cleveland Council decided they were going to have 
counseling. This gentleman thought his mortgage was going to be 
$447. It was actually $600 and some. He was in terrible 
jeopardy and there was a newspaper article on it. The counselor 
said, well, I don't know; I was hired by the Council. The 
Cleveland Council put this together; I was hired; I was paid 
$79; I thought I was telling the right thing.
    I do not think they made a clear point of definition, and 
this was not HUD. This was the Cleveland City Council. I do not 
think they made clear definition, but do you think counseling 
has been defined, or in HUD's eyes has been defined enough?
    Mr. Diaz. I would imagine so. I guess when you were saying 
the question, the services that are provided in counseling, 
they tend to slide from one to another; for a homebuyer 
education to pre-purchase; to default counseling. There are a 
variety of services. So we took some pains to separate those, 
which HUD has accepted as definition for discrete counseling 
services.
    Chairman Ney. I have one brief last question because I know 
other members want to ask question, and we do have a third 
panel, and we appreciate your testimony.
    Ms. Grist, I wanted to ask you, you mentioned displacement 
counseling. What is that? Is that different than regular 
counseling?
    Ms. Grist. Displacement counseling is a category that was 
in this most recent year's HUD notice of funding availability 
as one of its eight eligible activities. In New York and in 
many cities, and I only know the urban areas, as the local 
economies have improved, as the real estate markets have heated 
up, low-income, often long-term residents can no longer afford 
market rents. One of the side effects of neighborhood 
improvement which we have all participated in is that a lot of 
people are now being displaced as their neighborhoods have 
become more attractive.
    So helping people to preserve their rights to the extent 
that they have them, to stay in their homes, to ensure that 
abuses are not taking place as people may be forced out of 
their homes by landlords who are eager to collect market rents, 
that is part of what we would call displacement counseling. It 
might even include getting people rent subsidies or even 
helping people figure out how to relocate.
    Chairman Ney. That has happened here in the District of 
Columbia. I have watched it in the 10 years I have been 
commuting. We probably ought to talk at some point in time. 
This bill has not addressed displacement counseling. It is not 
something we particularly thought of. That is why I wanted to 
see how much of it you were doing and maybe we will address it 
in this bill.
    Ms. Grist. It is one of the eligible activities under the 
current housing counseling program. That is one of the nice 
things about the program, is that is has offered a great deal 
of flexibility, both for us to define what the needs are in our 
local community and pick among a menu, and to sort out where to 
place our emphasis.
    Chairman Ney. Thank you.
    The gentlelady from New York?
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Grist, in your testimony you mentioned how homeowners 
who miss payments on their mortgages are currently advised by 
their lenders to contact HUD's housing counseling 
clearinghouse, which refers them to local agencies. You said 
that this process is not necessarily ideal. Can you explain a 
little bit further?
    Ms. Grist. Sure. It is wonderful that people are given 
access to this 800 number, but it comes in an envelope from 
their lender which they might not want to open. One 
characteristic of people who are falling behind on their 
mortgage is they stop opening their mail, especially their 
bills. It requires that the homeowner make at least two phone 
calls, one to the clearinghouse and one to the counseling 
agency.
    So it is a good idea. It is a wonderful idea, but it has 
its sort of natural pitfalls for homeowners who are avoiding 
taking care of their situation as quickly as they might. The 
delay is really what causes problems.
    Ms. Velazquez. You also stated that some large counseling 
agencies have developed relationships with loan servicers in 
which they contact the counseling agency when one of their 
clients becomes delinquent. The housing counselor then contacts 
the delinquent borrower to provide assistance. You stated that 
you felt this system is more successful than waiting for the 
borrowers to contact HUD. Can you talk more about these 
agreements and explain their effectiveness?
    Ms. Grist. A little bit. Our organization is too small to 
engage in that kind of operation because it requires 
considerable staff capacity, but I know that one of our 
colleagues in New York, Neighborhood Housing Services, which is 
also part of the NeighborWorks network, has had that kind of 
relationship. The advantage of it is that, particularly with 
conventional lenders, it gives an additional support to the 
homeowner. It takes some of the obligation off of the homeowner 
to reach out and make that first call. It can avoid that delay 
period. The key in default counseling is to get the homeowner, 
counselor and lender talking in a three-way conversation within 
the first 3 months of delinquency. So a process that allows a 
counselor to know who is falling behind early is in general a 
process that I think can work better. Maybe Neighborhood 
Reinvestment might know how that works other places.
    Ms. Velazquez. Would you?
    Mr. Wade. Sure. Yes, we have a number of groups who have 
that kind of relationship with servicers. Typically, you do 
need the customer's consent in order for them to allow the home 
buyer education counselor to contact the customer. Oftentimes, 
we have encouraged our groups to use a simple release form. We 
have samples that we have provided to our groups that they can 
use with their customers, allowing them to be designated as the 
homebuyer educator.
    Ms. Velazquez. And that will happen at the time of the 
closing?
    Mr. Wade. It is best done at time of closing. Then 
obviously if you are doing follow-up work for customers, you 
can also have it done at that time.
    Ms. Velazquez. Mr. Diaz, a key issue for housing counselors 
is their ability to expand their work and build capacity to 
meet the needs of growing demands from individuals hoping to 
purchase a home for their families. Counseling agencies also 
need technical assistance to build their infrastructure and 
efficiently serve and attract more families. Can you comment on 
how support from HUD for capacity building and technical 
assistance will help housing counselors serve more families?
    Mr. Diaz. Yes, our relationship with HUD and with the 
counseling agencies that are part of our network, HUD has been, 
rightfully so, taking on a role of making sure that all the 
dollars that we have invested are getting to the family, which 
is really critical. We have taken on the role primarily for 
technical assistance to make sure the efficiency quality of 
service things have occurred.
    How HUD could be supportive, and they have been supportive 
with us before, is as mentioned earlier, promote technology 
usage. We think it is a critical part. It is not replacing the 
one-on-one contact, but encouraging efficiency within the 
agencies because database technology can be a really useful 
tool once it is learned and used well. I think they can also 
support that activity. One of the key aspects with that is to 
get people using the database technology requires training. 
That sometimes is forgotten when they have this great 
technological thing.
    And then finally, HUD does have a lot of technical 
expertise, particularly on foreclosure counseling; some other 
technical areas that could be utilized by counselors in terms 
of training programs, but it has to be offered in a way that is 
useful to the agency. By that I mean it follows a work-flow. 
Sometimes that connection is a little harder to make than just 
offering the training once a month or whatever.
    Ms. Velazquez. So you feel that resources that are 
available to agencies that offer housing counseling services 
are not enough in the area of capacity building and technical 
assistance?
    Mr. Diaz. Yes, that is definitely true.
    Ms. Velazquez. And that will go to the heart of the 
question that was asked by the Chairman regarding the 
information that was provided by the counselor to the Virginia 
person. I do not know, the question that he asked to Mr. Obloy. 
So Mr. Chairman, I think that this is an area that I think that 
we need to really look at. If we want to have counselors that 
are not only providing the information, but on top of what is 
happening, so that they could provide the effective services.
    Mr. Obloy. May I say something?
    Ms. Velazquez. Yes.
    Mr. Obloy. I appreciate your comment. To take that perhaps 
a step further as laws change, rules change, regulations 
change.
    Ms. Velazquez. Sure.
    Mr. Obloy. In order to deliver a quality product, you need 
that technical assistance to keep the housing counselors up to 
date on what is happening with credit reporting; what may be 
happening with insurance underwriting; what may be happening 
with all changes in rules and regulations.
    Ms. Velazquez. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Ney. Mr. Scott?
    Mr. Scott. Thank you very much, Mr. Chairman.
    Mr. Walsh, thank you again for coming up and being a part 
of this for all members of the panel. One of the reasons why we 
are so delighted to have you, Mr. Walsh, is because the area 
that you are concentrating your counseling services is the 
highest in the nation in three very critical areas: 
delinquency, predatory lending, and foreclosure.
    It would be very revealing if you could share with us why 
this is so in South DeKalb, Atlanta, and especially given the 
fact that this area in the nation is not low income. It is more 
moderate and middle, and in some degrees higher income. In so 
doing, could you share with us in responding to those three 
areas of difficulty, how you feel this legislation, this 
housing counseling bill can be helpful?
    Mr. Walsh. Thank you, Congressman. I do feel that it is 
critical that the emphasis be placed on more counseling. You 
are right. In the zip code where my organization is located, 
30034, it is a notorious area for predatory-type activities. 
Many of the homes are owned by elderly people who have really 
paid most of the mortgage down. They are great targets for 
people who can come in with some kind of scam, whether it be 
home improvement or some other type of scam; you know, flip the 
house and before you know it, they take all that is contained 
in the house. There is nothing left. There is no equity. These 
people many times are senior citizens and really do not have 
the ability to pay a second mortgage or a mortgage at the rate 
that these predatory-type lenders are offering.
    What we see in our area is that our phones are ringing off 
the hook with people who have reached a 90-day delinquency mark 
and have received this pamphlet from HUD, or from their 
servicer. Many times it is ambiguous because the servicers take 
this pamphlet and they kind of adjust it. It is very hard for 
some of the people to peruse through this minutiae and get to 
the HUD hotline and get to a certified counseling agency.
    Consequently, many of them get to us when they are 5 or 6 
months behind. It is very hard. I just know that our phone is 
ringing off the hook. We are following the HUD guidelines. We 
are using the remedies that are available to us, but I think 
more education and more information for our community is 
certainly necessary.
    Mr. Scott. How many families have you helped, certainly if 
it is measurable on an annual basis?
    Mr. Walsh. I think that we average probably over 200 
counseling hours a month. That is split between housing 
counseling and loss mitigation counseling. But I think one of 
the things that we see is most of the people who are facing 
foreclosure or 60-or 90-day delinquencies have not gone to 
housing counseling. They have been targeted by someone that 
they trusted who put them many times in a sub-prime loan or 
charged high fees. That is a big part of the problem.
    Obviously, we are in very tough economic times and we are 
seeing a host of people who have lost their jobs, who have lost 
income. That is a factor also, but I think many of the times it 
is a matter of mis-education and no education.
    Mr. Scott. Thank you very much.
    Mr. Wade, in your testimony you mention a terminology, 
``full cycle lending.''
    Mr. Wade. Yes.
    Mr. Scott. I think you mentioned it also in connection with 
delinquency and foreclosure. Could you elaborate on what that 
means in relationship to foreclosure?
    Mr. Wade. Sure. What we have done in the development of our 
homebuying education efforts is develop what we call the full 
cycle lending approach. Essentially, it includes an 
organization that has a partnership with local lenders, local 
government in their local community. They have a pre-purchase 
homebuyer education program, and their staff received 
certification and training at our training institutes.
    We also typically have flexible loan products. Oftentimes 
it includes the provision of down payment and closing cost 
assistance to assist the homeowner. It would typically provide 
property services where the organization would provide home 
inspections and construction management if the home needs 
repair. And then it requires a post-purchase counseling 
component as well, so that the customer to a certain extent is 
helped all the way through the process on the front end, and 
then has some assistance on the back end as well.
    Mr. Scott. Thank you.
    Those are my questions for now, Mr. Chairman.
    Chairman Ney. I want to thank the panel. I appreciate your 
testimony and appreciate your coming to the Capitol. Thank you.
    We will move on to the third panel now. We have Doug Bibby, 
who is the president of the National Multi Housing Council. The 
Council is the national association representing the interests 
of the nation's apartment firms. Previous to joining the 
National Multi Housing Council, he spent approximately 16 years 
with Fannie Mae, including having served as the organization's 
chief administrative officer. Welcome.
    We welcome Anne Canfield who is executive vice president of 
the Consumer Mortgage Coalition, a trade association of 
national resident mortgage lenders and service providers. 
Welcome.
    Robert Couch is the 2004 chairman, kind of brand new, of 
the Mortgage Bankers Association, an association of 2,700 
members representing mortgage companies and brokers, commercial 
banks and thrifts, and life insurance companies. Mr. Couch is 
the president and CEO of New South Federal Savings Bank in 
Birmingham, Alabama. New South is the largest thrift in Alabama 
with $1.4 billion in assets.
    William Smith is president and CEO of the Mutual Community 
Savings Bank in Raleigh, North Carolina. He is testifying today 
on behalf of America's Community Bankers, a trade association 
representing the nation's community banks of all charter types 
and sizes.
    William Spriggs is executive director of the National Urban 
League Institute for Opportunity and Equality.
    Odette Williamson is a staff attorney with the National 
Consumer Law Center. The center seeks to help consumers utilize 
the nation's consumer laws on behalf of low-income Americans. 
One of the Center's top priorities is providing support on 
issues involving consumer fraud, predatory lending and 
sustainable homeownership.
    We want to welcome the entire panel. Thank you for your 
patience. Does anybody have a flight, I should ask? Someone 
wrote me a note. I know you do. Anybody else? We will start out 
of order. Mr. Couch, and then we will go down the line, if that 
is okay.

STATEMENT OF ROBERT COUCH, PRESIDENT AND CEO, NEW SOUTH FEDERAL 
  SAVINGS BANK, ON BEHALF OF THE MORTGAGE BANKERS' ASSOCIATION

    Mr. Couch. Thank you, Congressman. Good morning, Chairman 
Ney, Congressman Scott. My name is Rob Couch. I am president 
and chief executive officer of New South Federal Savings Bank 
in Birmingham, Alabama. I am here today as chairman of the 
Mortgage Bankers Association. Thank you for inviting MBA to 
testify today on H.R. 3938, the Expanding Housing Opportunities 
Through Education and Counseling Act. That is a mouthful, I 
know.
    MBA strongly supports H.R. 3938, as it elevates and expands 
upon the Department of Housing and Urban Development's current 
housing counseling activities. We applaud your efforts and 
those of Representatives Velazquez and Scott for introducing 
this bill and highlighting the important role that homebuyer 
education can play in combating predatory lending and assisting 
American families in making wise housing choices. While there 
has been a great focus on laws, regulations and stepped-up 
enforcement, the absolute best defense against predatory 
lenders is a knowledgeable and empowered borrower in a 
competitive marketplace.
    MBA is also pleased that H.R. 3938 recognizes the 
importance of housing counseling for those families who live in 
rental housing. Renters often have significant housing needs 
and the ability to discuss housing options with a competent 
housing counselor can stabilize families and help them avoid 
homelessness. Purchasing a home is often the biggest investment 
that the typical American family makes. It can bring great 
financial and social rewards, helping families to build wealth 
while they put a roof over their heads.
    However, buying a home is often also one of the most 
complicated transactions they ever undertake. H.R. 3938's 
provision for a toll-free number and Web site will ensure 
convenient access to information that will assist them with the 
benefits and responsibilities of homeownership. Through the 
funding of HUD-approved counseling agencies and the 
certification of counselors, families across the country who 
require more personal counseling will have access to it.
    We support H.R. 3938 and again applaud your timely effort. 
In that spirit, I would like to share two important suggestions 
that MBA believes are essential to the effective implementation 
of the bill. First, the bill calls for updating and simplifying 
the mortgage information booklet. This booklet is provided to 
all borrowers at time of application. While HUD would be 
responsible for updating and expanding the booklet into several 
languages and cultural styles, the bill States that lenders 
would be required to provide the booklet in a format that is 
language-appropriate and culturally appropriate for the 
borrower. This requirement may give borrowers the impression 
that because they were offered a booklet explaining aspects of 
home financing in a language other than English, they could 
expect further documents, communications or assistance in a 
language other than English. This is just not practicable.
    Additionally, the term ``culturally appropriate'' is far 
too vague to be used as a reliable compliance standard. MBA 
believes a mandate requiring lenders to deliver the most 
language-appropriate or culturally appropriate booklet could 
become a litigation risk. MBA would like to work with the 
subcommittee on language that would achieve the intent of H.R. 
3938, without the above-cited problems.
    There is a second issue I would like to raise. MBA believes 
that while software programs can be a great tool for consumers 
to use during the mortgage process, they can fall short in 
assisting a specific consumer with a specific transaction. A 
software program will not be able to accurately measure 
subjective issues. MBA suggests report language be included 
stating software programs certified by the office of housing 
counseling should not replace the sound advice of a financial 
or mortgage services professional.
    H.R. 3938 is a bill that takes HUD and housing counseling 
in the right direction. MBA applauds the efforts that HUD has 
made to date in prioritizing housing counseling and believes 
that it can have an even greater impact under the proposed 
office of housing counseling.
    Thank you again for the opportunity to present MBA's views. 
We look forward to working with you and the subcommittee as it 
considers this bill.
    [The prepared statement of Robert M. Couch can be found on 
page 46 in the appendix.]
    Chairman Ney. I want to thank you. One quick question, in 
case you have to take off. I have raised this already. Would 
you all accept the fact that if you had a Web site you could go 
to and you print it and it prints in Creole or Farsi or 
Spanish. Would that work in the technological end of it?
    Mr. Couch. It certainly has some possibilities as an 
intriguing notion, provided that HUD is responsible for the 
translation and the compilation of all the different languages 
that would need to be posted there.
    Chairman Ney. I understand about you putting the book 
together versus somebody else putting the book together because 
you could make a horrific mistake and it would not be good. 
What is your current liability? Do you have current liability 
on a certain amount of the information you distribute?
    Mr. Couch. Unfortunately, just like Secretary Weicher, I 
cannot tell you the exact liability, but we are required to 
provide a notice to borrowers within 45 days of going into 
foreclosure. So there are requirements on us to provide HUD-
mandated information to all borrowers, whether they are HUD 
borrowers or not.
    Chairman Ney. Thank you.
    Mr. Bibby?

 STATEMENT OF DOUGLAS BIBBY, PRESIDENT, NATIONAL MULTI HOUSING 
                            COUNCIL

    Mr. Bibby. Thank you.
    Chairman Ney and distinguished members of the subcommittee, 
I am Doug Bibby. I am president of the National Multi Housing 
Council, a national association representing the nation's most 
prominent apartment firms.
    NMHC operates a joint legislative program with the National 
Apartment Association which represents over 30,000 apartment 
executives and professionals who own and manage close to five 
million apartment homes. It is my pleasure to testify on behalf 
of both organizations today.
    We commend you for your leadership and we thank the members 
of the subcommittee for your valuable work addressing the 
important issue of housing in America, and particularly the 
topic of today's hearings, successful homeownership and renting 
through housing counseling.
    I know some of you may be thinking, why is the head of an 
apartment trade group here discussing housing counseling? Well, 
as a matter of fact many of our members across the country 
partner with housing counseling agencies to do just that. They 
counsel people on a variety of issues important to the entire 
housing sector. Renters are the homebuyers of tomorrow and vice 
versa. Many homeowners become renters. Rental housing is a 
great benefit to many people in America, and our housing policy 
should not be so lopsided with tax incentives that it distorts 
what should be our over-arching goal in America: good quality 
housing for everyone, both owned housing and rental housing.
    Let me highlight today the Columbus Housing Partnership, a 
nonprofit housing provider. They offer various types of housing 
to meet the needs of individuals and families throughout 
central Ohio. CHP provides counseling to renters on a variety 
of topics: how to rent and maintain their apartment home; 
financial counseling; and homeownership counseling. CHP also 
provides residents with programs that bring computer labs, 
resident councils and meals to apartment communities. CHP, a 
member of the Columbus Apartment Association, partners with 
Wallick Properties Midwest, a private property management 
organization and a member of NMHC to manage most of its rental 
portfolio. Such partnerships not only provide housing-related 
counseling services, but also other valuable community 
services. CHP's program is a commitment to provide a start-to-
finish approach to housing services.
    We feel that appropriate counseling is especially necessary 
in light of the recent spike in the foreclosure rate, 
particularly among individuals who participate in homeownership 
programs with low down payment requirements. We support 
Congress in your quest to address this issue. NMHC and NAA feel 
that the time has come to ask whether homeownership above all 
else and at any cost is wise public policy and sound financial 
policy.
    It is essential that proposed homeownership initiatives 
include strong and substantial counseling and education 
provisions to educate consumers about the considerable 
responsibilities that accompany successful homeownership. No 
one is born a successful homeowner. To be a successful first-
time homeowner, an individual should understand all of the 
factors that go into purchasing and owning a home, especially 
the financial considerations.
    If I were counseling someone or a family that is now 
renting an apartment on whether or not they should buy a house 
with zero down, I would say, if you have a marginal income, few 
cash reserves, and impaired credit history, I would be very 
comfortable in advising you to be cautious and be very sure you 
want to take on the huge emotional and financial challenge of 
owning a home.
    NHMC and NAA urge Congress to include programs that will 
benefit both renters and potential homebuyers in the proposed 
office of housing counseling, such as those I have outlined 
today.
    Thank you for the opportunity to testify.
    [The prepared statement of Douglas M. Bibby can be found on 
page 48 in the appendix.]
    Chairman Ney. Thank you very much.
    Ms. Canfield?

   STATEMENT OF ANNE CANFIELD, EXECUTIVE DIRECTOR, CONSUMER 
                       MORTGAGE COALITION

    Ms. Canfield. Chairman Ney, thank you very much for the 
opportunity to testify today. I would like to request that our 
full written statement be made a part of the record. Thank you.
    We applaud your efforts, Mr. Chairman, and the efforts of 
Congresswoman Velazquez, as well as Congressman Scott in 
introducing this legislation. The CMC has believed since its 
inception in the mid-1990s that housing counseling and 
education, if done correctly, is a key component to helping 
individuals first become and then remain successful homeowners.
    When the CMC first became actively engaged in this issue 
some years ago, we found that there was an enormous amount of 
counseling services that were available to consumers, but, 
consumers often did not know where to go for the counseling; 
and very importantly, the quality of counseling services varied 
dramatically.
    Our solutions to these two issues were several-fold. First, 
in order to address the problem of letting consumers know where 
to find qualified counselors, we suggested that the government 
publish an online list of qualified counselors or counseling 
services and their location. In addition, we suggested the 
government set up 1-800 numbers that consumers could call and 
find out where to access these services. Furthermore, we 
suggested the government engage in a public advertising public 
relations campaign to let consumers know where these services 
are; that these services are available and within their reach 
by simply calling the 1-800 number that would be advertised, or 
by visiting the HUD Web site.
    Second, in an effort to improve the quality of counseling 
services being provided, we initially suggested having the 
government develop and make publicly available smart computer 
systems to be used as a tool to help counselors provide quality 
counseling services. In addition, we also proposed that these 
systems be available online so that consumers who had access to 
computers could use the systems themselves.
    Since the concept of utilizing a smart computer system to 
help improve the quality of counseling services was thought of 
some years ago, the industry has actually developed a number of 
similar programs that are available for consumers online. 
However, these systems are not necessarily being widely used by 
the housing counselors themselves to counsel consumers. Rather, 
the consumers who are computer literate are using them online 
themselves.
    Our third proposal was to have HUD create a counseling 
certification process to at least ensure that HUD-funded 
counselors would meet uniform high standards. That HUD 
certification process could eventually lead to a system whereby 
counselors would actually seek to be certified by HUD to prove 
to their customers or consumers that either they or their 
organization were providing quality services by utilizing the 
latest technology tools.
    Fourth, we suggested that HUD's special information booklet 
that is required to be given to consumers under RESPA should be 
available online and that the booklet should include examples 
illustrating various loan products and how consumers might 
evaluate which products best fit their needs. While not the 
only solution, helping consumers understand a loan product and 
its terms and the responsibilities of homeownership will help 
to prevent consumers from falling prey to abusive lending 
practices.
    Finally, we suggested that the lender provide information 
to its mortgage applicants on how they could reach a qualified 
counselor. This legislation that you have introduced, which is 
very important, incorporates many of these proposals and we 
believe it is a very good start to making timely high-quality 
counseling services available to consumers across the nation.
    In addition, we are particularly pleased that the 
legislation places a high degree of importance on the public 
awareness campaigns that you have referenced in your bills. 
Part of the problem right now is that most consumers do not 
know that a 1-800 number exists at HUD. We also believe it is 
critical that consumers understand what options are available 
to them after closing, an item that has been discussed 
considerably today, particularly when they miss a payment. One 
of the biggest difficulties that mortgage servicers have is 
getting delinquent customers to communicate with them about 
their situation right away and work out a resolution or plan to 
bring the loan current. If a consumer is reluctant to call and 
becomes many months delinquent, it is much harder to craft a 
solution that works for both the consumer and the note-holder. 
The availability of timely counseling can be of immense help to 
consumers in this situation. Thus, we are very supportive of 
the legislation's recognition of the importance of default 
counseling.
    Mr. Chairman, I would like to close with an example of how 
a housing counseling program can work effectively to help 
consumers make the right decisions. Some years ago, I used to 
work for GE Capital and one of the GE Capital companies was GE 
Mortgage Insurance Company. The late Gale Cincotta came to us a 
few years ago. She wanted private sector capital and resources 
in her neighborhood. She helped us understand the people in her 
neighborhoods and the neighborhoods and the communities 
themselves. We helped her understand what a financial 
institution needed in order to make things work on our end.
    Together, we created a series of affordable housing 
products. In fact, I think those were the core of the GSE's 
affordable housing products some years ago. The first product 
was a community homebuyers product. It was an expanded-risk 
product where GE Mortgage Insurance agreed to insure loans with 
higher debt-to-income ratios for first-time Low-to-moderate-
income homebuyers. However, in order for consumers to qualify 
for that product, they had to go through a counseling program. 
We test-marketed the product in five major Midwest cities. The 
product was distributed through various participating banks and 
thrifts. GE contributed counseling materials and the 
participating lenders put up the people, time and space to 
counsel.
    In the first year, we had 1-800 numbers running off the 
hook. People came into the lender's offices, went through the 
counseling programs. At the end of the year, only 250 loans had 
been made. So we were wondering what went wrong. It turned out 
that everything was right. Many of the consumers, they actually 
went through the counseling, determined that they were not 
ready for homeownership yet. So the smart lending institutions 
actually helped those consumers straighten out their credit 
records, set up a savings accounts, and many of those consumers 
actually became successful homebuyers a year later. So we look 
at that and say that was not only a successful counseling 
program, but it was a successful homeownership program.
    With that, Mr. Chairman and Congressman Scott, thank you 
again for the opportunity to testify. We want to work with you 
to get this legislation enacted this year.
    [The prepared statement of Anne C. Canfield can be found on 
page 49 in the appendix.]
    Chairman Ney. Thank you.
    Mr. Smith?

STATEMENT OF WILLIAM SMITH, PRESIDENT AND CEO, MUTUAL COMMUNITY 
     SAVINGS BANK, ON BEHALF OF AMERICA'S COMMUNITY BANKERS

    Mr. Smith. Good afternoon, Mr. Chairman and other members 
of the committee. My name is William Smith and I am the 
president and CEO of Mutual Community Savings Bank in Durham, 
North Carolina. I am representing America's Community Bankers 
and its MBank Council.
    ACB represents the nation's community banks of all charter 
types and sizes. ACB created the MBank Council in December, 
2001 as a standing committee within ACB to represent ACB's 
minority-owned institutions. Mutual Community Savings Bank has 
$94 million in assets. We are 82 years old and are one of only 
three African American financial institutions in the state of 
North Carolina. We are a premier housing lender to underserved 
and emerging communities.
    As part of Mutual's vision to educate customers before they 
are ready to buy a home, Mutual implemented the FDIC's 
MoneySmart program in October of 2002. It went right to the 
heart of the community to educate consumers on the importance 
of financial literacy as a crucial first step towards 
homeownership.
    To further our financial education and homeownership 
campaign, Mutual's branch managers must conduct a financial 
education session in their branches. Branch managers actively 
engage customers unfamiliar with the importance of financial 
education. I want all my customers to understand the importance 
of sound financial management and promote those values to their 
families.
    Mutual also has a trainer to assist our employees in using 
the FDIC MoneySmart module. This was the first step in 
assisting my customers on buying a home. One of our first 
financial education and housing counseling sessions was held at 
Maple Temple Church in Raleigh, North Carolina. There were 20 
parishioners here, including parents and students. They were 
very engaged in understanding the two most important steps 
needed before one actually is granted a mortgage: the 
importance of understanding your credit and the value of good 
credit when one qualifies for an interest rate.
    This housing counseling education is especially important 
due to the increase in foreclosures. As you know, the highest 
foreclosure rates are for so-called sub-prime loans, which are 
disproportionately made in low-income and African American 
neighborhoods. In 2003, the foreclosure rate for conventional 
prime loans was 0.53 percent, but for conventional sub-prime 
loans, it was 6.6 percent.
    In ACB's 2004 real estate lending survey, ACB asked its 
members if their banks required homeowner education or housing 
counseling for any of their current home mortgages or consumer 
lending products. Of the 401 responses nationwide, 52 percent 
required counseling for at least some loan products. Of those 
that did not require counseling, about half strongly 
recommended counseling. Those banks that do not require or 
strongly recommend homeowner education often cite the following 
reasons: it is not available in the area; it is not convenient; 
or it is too costly.
    I believe that housing counseling and education is a 
necessity. First, counseling should be made more universally 
available and encouraged by efforts to streamline the process 
and lower the cost. Therefore, I am a strong supporter of H.R. 
3938. Specifically, I agree with the language in the bill on 
the scope of homeownership counseling the Department of Housing 
and Urban Development will undertake. I also support the 
language to establish a toll-free telephone number and a Web 
site which anyone can access for homeownership information. In 
addition, the language in the bill that addresses outreach to 
vulnerable populations is essential.
    In closing, owning a home is the greatest accomplishments a 
person can achieve. Educating customers and consumers is one of 
the greatest responsibilities we in the private sector can 
undertake to decrease foreclosure rates and boost homeownership 
throughout our nation.
    Thanks for allowing me to testify.
    [The prepared statement of William Smith can be found on 
page 109 in the appendix.]
    Chairman Ney. Thank you.
    Mr. Spriggs?

  STATEMENT OF WILLIAM SPRIGGS, EXECUTIVE DIRECTOR, NATIONAL 
      URBAN LEAGUE INSTITUTE FOR OPPORTUNITY AND EQUALITY

    Mr. Spriggs. Thank you, Chairman Ney and thank you to 
Congresswoman Velazquez and to Congressman Scott, for this 
opportunity. The National Urban League runs a housing 
department. I do not run it. So I want to say thank you to my 
colleagues Marvin Owens, who is our vice president for economic 
development and housing and Cy Richardson who directs the 
housing program under him.
    The League, first off, is a housing counselor funded by 
HUD. We were an initial partner in the design of the housing 
counseling program in 1968 with HUD. As such, we are designated 
as a national intermediary. Our affiliates are certified to do 
this work through us, and our experiences with the program have 
been good with regard to implementation. We have generally 
found that education and counseling services are of broad value 
for homeowners and can improve the market by facilitating 
effective consumer use and demand for a very wide range of 
housing and mortgage products.
    One of the key areas our affiliates concentrate on is 
mortgage delinquency and foreclosure counseling. Others have 
already talked about this rising problem in the country. We 
primarily offer delinquency counseling which specifically 
targets homeowners who are delinquent in repayment of their 
mortgage and who may or may not have been served a notice of 
foreclosure. Delinquency counseling usually occurs in one-on-
one settings. The National Urban League seeks to assist 
delinquent borrowers as opposed to efforts from loan officers 
to structure a repayment plan.
    Our program also includes components that assist families 
looking to rent affordable housing. The affiliates serve as an 
information clearinghouse for affordable rental opportunities, 
and after determining that near-term homeownership is not 
desired or appropriate for a family, we make a referral on 
behalf of the family for the rental, while keeping the family 
in a database and contacting the family at a later date to 
encourage homeownership if requested. Housing counseling 
greatly benefits the rental market by moving renters to 
homeownership and thereby freeing up affordable units for other 
families to move up the housing ladder.
    The National Urban League does offer a narrow set of 
housing counseling services in partnership with Fannie Mae, 
Freddie Mac, the Bank of America and Chase Bank. With those 
partners separate from our HUD-funded housing counseling 
programs, we offer a program to help potential home buyers 
qualify for mortgages, and National Urban League affiliates 
separate from our HUD counseling program operate first-time 
homeownership programs in ways that complement the HUD program. 
We encourage our affiliates to develop robust and comprehensive 
housing programs ranging from financial literacy, to first-time 
homebuyer classes, to housing counseling, to broader asset 
development strategies such as real estate investment and 
capital home improvements.
    We measure the success of our programs by a number of 
qualitative and quantitative indicators. First, we gauge the 
efficacy of the program against the National Urban League's 
housing policy goals, which include, one, preserving and 
expanding the supply of good, quality housing units; two, 
making housing more affordable and more readily available; 
three, promoting racial and economic diversity in residential 
neighborhoods; and four, linking housing with the central 
support of services.
    Some of the short-term and long-term quantitative measures 
include the number of loans and people served, the number of 
new homeowners, the number of households relocating with 
housing search assistance, the number of very low-and moderate-
income households paying more than 50 percent for housing. 
These are some of the measures that we use.
    In total from our HUD counseling activities, our affiliates 
throughout the National Urban League movement service well over 
19,000 clients in a year. The nonprofit program is indeed 
comprehensive in nature and application.
    Chairman Ney. Not to interrupt, but I would note that a 
vote has been called. We have a few minutes, but we want to get 
your testimony finished, and then also your testimony, and see 
if there are questions, so we don't hold you.
    Mr. Spriggs. Okay. Let me sum up, then.
    Because of our relationship in terms of doing HUD 
counseling, we are very appreciative that you have this 
legislation to call attention to the need for home counseling. 
We would like to just make a few suggestions. One is in the 
area of certification, because we do it as an organization and 
it is very costly and capacity-building at the local level is 
very hard, if certification could be done at an agency level, 
so that we could then certify others, would be far more cost-
effective. CBOs need to be included in all advisory capacities 
within the process in order to reach the neighborhoods and the 
people who most need it. It is really necessary to work through 
community-based organizations. Finally, we would hope that 
these wonderful ideas of using technology to reach those who 
may not have a counseling agency nearby, not be a diversion of 
funds away from the existing program. We really need funds on 
top of the existing program. The greatest problem that we are 
faced with is that while we are a successful provider of 
counseling services, this program has never been funded to the 
level that we could do the services at the level we know we 
have the demand for.
    [The prepared statement of William E. Spriggs can be found 
on page 113 in the appendix.]
    Chairman Ney. Thank you.
    We will move on as quickly as we can, because I want to see 
if there are questions by Mr. Scott.

   STATEMENT OF ODETTE WILLIAMSON, STAFF ATTORNEY, NATIONAL 
                      CONSUMER LAW CENTER

    Ms. Williamson. Sure.
    Good afternoon, Subcommittee Chairman Ney and members of 
the subcommittee, my name is Odette Williamson. I am an 
attorney with the National Consumer Law Center. At NCLC, I 
focus on issues relating to sustaining homeownership for low-
income consumers, consumer credit and foreclosure prevention 
issues. I testify here today on behalf of low-income consumers.
    We support the committee's effort to improve the level of 
housing counseling assistance offered to low-income consumers. 
The achievements of the housing counseling industry are 
numerous and best exemplified by the sizeable increase in the 
number of low-income and minority home buyers over the last 
decade. Now more than ever, a strong housing counseling 
industry is needed to sustain the gains made in homeownership 
among low-income consumers from the threat of predatory lending 
and from the steady rise in the foreclosure rates.
    One of the benefits that education and counseling can 
provide is to make homeowners less vulnerable to predatory 
lending. A knowledgeable counselor can steer homeowners away 
from predatory lenders to affordable alternative loan products. 
However, counseling is not a substitute for strong legislation 
to protect homeowners from predatory lenders. Only by changing 
the laws governing mortgage lending can we fully address the 
problem of predatory lending. Clear prohibitions to stop the 
worst practices, coupled with assignee liability, are what is 
needed to tackle this problem.
    Federal law must also provide additional protections to 
borrowers losing their homes to foreclosure. The law should 
mandate that foreclosures cannot go forward without lenders and 
servicers being first required to offer counseling and to 
evaluate the use of loss mitigation options. Similar 
requirements are already in place for FHA-insured loans. These 
requirements should be made applicable to all loans.
    To assist consumers in danger of foreclosure, the capacity 
of nonprofit agencies to provide default and delinquency 
counseling and/or predatory lending assistance must be 
expanded. Currently, only a portion of the housing counseling 
agencies offer these programs. Providing these services in an 
effective manner is expensive. Well-trained counselors must 
meet one-on-one with consumers to assess their needs and 
provide direct assistance. An effective housing counselor can 
prevent foreclosure by acting as a mediator between the 
homeowner and the servicer. However, nongovernment support for 
this type of service is currently very limited. More funding 
and other resources should be specifically allocated to default 
counseling and for assistance to victims of predatory lenders. 
Federal policy should also encourage the private mortgage 
industry to provide more financial support for these types of 
services.
    More funding is necessary to support the housing counseling 
industry in general. The $45 million to be appropriated for 
fiscal years 2004 to 2007 under H.R. 3938 should be increased. 
This does not represent a significant increase from the current 
funding levels of $37.5 million. More nonprofit and for-profit 
organizations are providing housing counseling services. With 
more providers, the small pool of funding dedicated to housing 
counseling is being spread thin.
    In addition, the $45 million called for by H.R. 3938 will 
fund a new agency and many new initiatives. Without a 
significant increase in funding, the net result may be a 
reduction in the amount of funds directed towards HUD-approved 
agencies. Funding should be doubled to support this new agency 
and to provide adequate funding for the nonprofit housing 
counseling agencies that provide direct assistance to 
consumers.
    More funding should also be allocated to research.
    Chairman Ney. I will note, and I hate to do this. I feel so 
bad, but there are 8 minutes and 29 seconds left. So if you 
want to ask a question, we are running real short on time.
    Ms. Williamson. Okay. I will just sum up. In sum, the 
housing counseling and education industry provides invaluable 
assistance to low-income and minority consumers. A strong 
industry can be a benefit to consumers.
    I thank the subcommittee for the opportunity to speak today 
on behalf of low-income consumers.
    [The prepared statement of Odette Williamson can be found 
on page 158 in the appendix.]
    Chairman Ney. Thank you so much.
    Mr. Scott?
    Mr. Scott. Thank you very much. I apologize for this time 
frame. What a fascinating panel. There is so much I really 
wanted to get into.
    Ms. Williams, you are absolutely right in your testimony. 
That is why it is so important that if we move ahead with this 
bill, and we are fortunate we are. We are going to do it. Some 
of your comments are very pointed. We do have serious questions 
out there. The assignee liability is an issue that is a 
probability down the road. But in this legislation, we have 
some things before us. It is very concerning to me that we move 
forward with this, making sure that we have the resources to do 
the counseling; that we indeed have a toll-free number that is 
friendly, that is language-significant, that is going to do the 
job.
    One of the problems we need to clear up in this toll-free 
number, for example, in your testimony, Mr. Couch, you referred 
to the fact that through the current toll-free number and 
proposed Web site, this bill directly establishes this new 
department, to establish a new toll-free number; a toll-free 
number that is different from what is going on. As came from 
Ms. Canfield's testimony, she didn't even know a toll-free 
number existed. We need a toll-free number that is friendly; 
has a human being at it; that is language-specific to the 
diversity that reflects; and is targeted through marketing 
programs to get the number out there so we can get some help to 
the people beforehand.
    So it is a fight here just to get these things forward. I 
know I have to run, but Mr. William Smith, I would be very 
interested to know right quickly if we could, North Carolina 
has one of the toughest predatory lending laws on the books. In 
light of our counseling and in light of your work, very 
briefly, what is the result of that? What is the implication? 
Is that working? In terms of the counseling that is needed, 
does not it even bring forth a greater need for more resources 
to counseling?
    Mr. Smith. You are right. I believe it is working in North 
Carolina. Our predatory lending laws are making the leaders in 
the financial institutions in North Carolina more responsive to 
making sure we are providing homeownership training, counseling 
and training. It is about leadership for the banks in North 
Carolina, particularly in my bank. I provide leadership in my 
bank by going out and doing homeowners counseling and making 
sure we give back to the communities, and are doing things in 
those communities to make homeownership available to the 
citizens of Durham, North Carolina and Greensboro, and we are.
    Mr. Scott. Thank you.
    Mr. Couch, on that point, I just wanted to make sure that 
we were clear that we are talking about a new toll-free number. 
I think you may have put that in your statement. I do not know.
    Mr. Couch. If I said that, it was inadvertent. We are in 
support of a new toll-free number. There is an existing toll-
free number that is mentioned in the notice that must go out 
when someone becomes delinquent, within 45 days of delinquency.
    Mr. Scott. One other thing, too, while we are at it, and we 
will just get out of here so we can go vote, you mentioned your 
support in the Mortgage Bankers Association, for this effort in 
education, financial literacy and so forth. We have $45 million 
there. As Ms. Williams mentioned, we know that that is a 
pittance compared to what we are going to need if we are going 
to make a difference and to do this. Because once you get this 
out there, we do not know what that final cost would be.
    There is certainly some discussion within the private 
sector of ways and means in which they can augment and assist 
us with financial support for the financial literacy programs. 
I certainly wanted to put that on the table as something that 
you all might take back to your industry as well to see what 
you could do.
    Mr. Couch. Congressman Scott, I know you have to run, but 
it is worth noting that many of our members, just as my 
colleague Mr. Smith said, we do provide counseling services 
outside of those that are required of us.
    Mr. Scott. Thank you. Again, we apologize.
    Chairman Ney. Thank you.
    I want to apologize. I have a few technical things. First 
of all, Congressman Velazquez wanted me to personally relay 
that she does have questions, as I do too, but we will get them 
to you in writing. Also, I have for the record statements to be 
submitted without objection by Randall Pence, American Society 
of Home Inspectors, the AARP, Financial Services Roundtable, 
ACORN, Housing Partnership Network and American Financial 
Services Association.
    I also note that some members may have additional questions 
for this panel which they may wish to submit in writing. 
Without objection, the hearing record will remain open for 30 
days for members to submit written questions to you, the 
witnesses, and to place the responses in the record.
    I want to apologize for these votes. You are a great panel. 
I am glad you were here to get on the record. Thank you very 
much.
    [Whereupon, at 1:26 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             March 18, 2004
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