[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
EFFECTS OF THE SUBPRIME MORTGAGE
CRISIS IN NEW YORK CITY AND EFFORTS
TO HELP STRUGGLING HOMEOWNERS
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND CONSUMER CREDIT
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 11, 2008
__________
Printed for the use of the Committee on Financial Services
Serial No. 110-89
U.S. GOVERNMENT PRINTING OFFICE
41-180 PDF WASHINGTON DC: 2008
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California DEBORAH PRYCE, Ohio
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 RON PAUL, Texas
BRAD SHERMAN, California STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas WALTER B. JONES, Jr., North
MICHAEL E. CAPUANO, Massachusetts Carolina
RUBEN HINOJOSA, Texas JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York GARY G. MILLER, California
JOE BACA, California SHELLEY MOORE CAPITO, West
STEPHEN F. LYNCH, Massachusetts Virginia
BRAD MILLER, North Carolina TOM FEENEY, Florida
DAVID SCOTT, Georgia JEB HENSARLING, Texas
AL GREEN, Texas SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin, JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota TOM PRICE, Georgia
RON KLEIN, Florida GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio JOHN CAMPBELL, California
ED PERLMUTTER, Colorado ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida KENNY MARCHANT, Texas
JIM MARSHALL, Georgia THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma KEVIN McCARTHY, California
DEAN HELLER, Nevada
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Financial Institutions and Consumer Credit
CAROLYN B. MALONEY, New York, Chairwoman
MELVIN L. WATT, North Carolina JUDY BIGGERT, Illinois
GARY L. ACKERMAN, New York TOM PRICE, Georgia
BRAD SHERMAN, California DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois MICHAEL N. CASTLE, Delaware
DENNIS MOORE, Kansas PETER T. KING, New York
4PAUL E. KANJORSKI, Pennsylvania EDWARD R. ROYCE, California
MAXINE WATERS, California STEVEN C. LaTOURETTE, Ohio
RUBEN HINOJOSA, Texas WALTER B. JONES, Jr., North
CAROLYN McCARTHY, New York Carolina
JOE BACA, California SHELLEY MOORE CAPITO, West
AL GREEN, Texas Virginia
WM. LACY CLAY, Missouri TOM FEENEY, Florida
BRAD MILLER, North Carolina JEB HENSARLING, Texas
DAVID SCOTT, Georgia SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee JIM GERLACH, Pennsylvania
PAUL W. HODES, New Hampshire STEVAN PEARCE, New Mexico
KEITH ELLISON, Minnesota RANDY NEUGEBAUER, Texas
RON KLEIN, Florida GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio JOHN CAMPBELL, California
ED PERLMUTTER, Colorado KEVIN McCARTHY, California
DEAN HELLER, Nevada
C O N T E N T S
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Page
Hearing held on:
February 11, 2008............................................ 1
Appendix:
February 11, 2008............................................ 31
WITNESSES
Monday, February 11, 2008
Azia, Jane, Director, Non-Depository Institutions and Consumer
Protection, New York State Banking Department.................. 9
Dilan, Hon. Erik Martin, Chairman, Housing and Building
Committee, New York City Council............................... 7
Gerecke, Sarah, Chief Executive Officer, Neighborhood Housing
Services of New York City...................................... 13
Quinn, Kieran P., Chairman, Mortgage Bankers Association, on
behalf of the HOPE NOW Alliance................................ 11
Zinner, Josh, Co-Director, Neighborhood Economic Development
Advocacy Project............................................... 14
APPENDIX
Prepared statements:
Engel, Hon. Eliot L.......................................... 32
Azia, Jane................................................... 34
Dilan, Hon. Erik Martin...................................... 47
Gerecke, Sarah............................................... 55
Quinn, Kieran P.............................................. 70
Zinner, Josh................................................. 82
EFFECTS OF THE SUBPRIME MORTGAGE
CRISIS IN NEW YORK CITY AND EFFORTS
TO HELP STRUGGLING HOMEOWNERS
----------
Monday, February 11, 2008
U.S. House of Representatives,
Subcommittee on Financial Institutions
and Consumer Credit,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 11 a.m., in
the City Council Chamber, New York City Hall, New York, New
York, Hon. Carolyn B. Maloney [chairwoman of the subcommittee]
presiding.
Members present: Representative Maloney.
Also present: Representatives Velazquez and Meeks.
Chairwoman Maloney. I am Congresswoman Carolyn Maloney, and
I'd like to call this hearing to order, this Federal hearing,
and recognize the Speaker of the great City of New York,
Speaker Christine Quinn.
She has graciously allowed us to use this chamber today,
along with the entire Council, and they have been doing
tremendous work on this challenge. Thank you, Christine.
Speaker Quinn. Thank you. I'd like to say that we have the
nice chairs for you and Chairwoman Velazquez, but the truth is
that Scott Stringer is giving his State of the Borough speech
later. Seriously, though, I want to thank you both very much
for holding this hearing here and for having us be a part of
it.
I mentioned before we had a hearing not dissimilar from
this that Congresswoman Maloney requested on the issue of TRIA,
a very important insurance issue related to the City. And not
long after the hearing, the legislation was passed in exactly
the way the City of New York needed it to be passed. I raised
that example because I think it shows the difference that the
City and our congressional leaders can make, working together.
I just want to thank Chairwoman Maloney and Chairwoman
Velazquez again for being so receptive to the needs of this
City, and for demonstrating that by being with us in our
chambers and having our housing chair participate in today's
hearing.
So, I really just wanted to take a moment to thank you both
so much for your tremendous commitment to the City, and to
thank you for working on an issue that is critically important
to so many of the neighborhoods we all represent. You know,
it's terrible to have to talk to somebody who is at risk of
losing their home and not know what to say to them. We have
tried to bring resources to this issue on the Council level,
but ultimately we'll only be successful if the City, and the
State, and the Federal Government are working together. And I
know with your--both of your leadership, the response of the
Federal Government will be expanded tremendously, because you
both will really bring the urgency that this issue needs to
Washington.
So I want to thank you both so much. I am excited at the
idea of staying and grilling our housing chair, but I'm going
to leave that to our two Congress people. And thank you, both,
very, very much.
Thank you, Chairperson Dilan, as well.
Chairwoman Maloney. Thank you so much, Christine, for your
leadership, and for allowing us to be here today. Thank you. I
hope we have the same success that we had with the TRIA bill,
which was enacted and signed into law and is now helping
commerce go forward in New York City and around the country.
This hearing is entitled, ``The Effects of the Subprime
Mortgage Crisis in New York City and Efforts to Help Struggling
Homeowners.'' This is a hearing of the Subcommittee on
Financial Institutions and Consumer Credit, which I chair.
Without objection, I'd like to invite any Members of
Congress here today or those who were not able to come to put
their statements in the record. Hearing no objection, I welcome
their statements. And, without objection, I will now recognize
myself for 5 minutes.
We are at a critical juncture in the subprime mortgage
crisis. All of the data we have seen clearly demonstrates the
severity of the problem. We have seen the perfect storm of
stagnant wages, rising mortgage payments, and decreased home
values, which have all led to a tsunami of foreclosures here in
New York and across the country.
A look at the performance on subprime adjustable rate
mortgages in New York City reveals a really startling picture.
Of the almost 26,000 adjustable rate mortgages examined, the
Federal Reserve Bank of New York reported in November that only
57 percent were current, 12 percent were more than 60 days
delinquent, and 19 percent were in foreclosure. Couple this
with the reports from the Mortgage Bankers Association that
places foreclosures at an all time high nationwide, and
estimates from the Center for Responsible Lending, that say we
will see at least 2.2 million Americans with subprime loans
lose their homes, it is very easy to see that we have a crisis
on our hands. And this crisis is not just confined to the
holders of these mortgages, but affects the community as a
whole.
These foreclosures can have devastating effects on
families, communities, and financial institutions. Consumers
forced into foreclosure can lose many thousands of dollars in
equity on top of substantial fees imposed prior to and during
the foreclosure process. Communities are negatively affected as
foreclosures drive down home prices overall, diminishing
homeowners' equity in entire neighborhoods.
Costs also accrue to local governments in the form of lost
tax revenue and direct expenses for securing policing and
disposing of abandoned properties. And, financial institutions
and holders of mortgage securities suffer losses if loans do
not perform, particularly in the environment of flat or
declining housing prices.
I think that one report that came out last week, from
Freddie Mac, in one of their surveys it showed that over half
of those who were delinquent in their subprime loans--57
percent--did not even know that there was help there, or that
they could go for help. And that is one of the reasons that
we're holding this hearing here in New York City. We want to
hear from the City and the State as to what they are doing to
help translate the programs and policies that we have on the
Federal level. We just passed a funding, $180 million, for
counseling to go to neighborhood groups. And I know of at least
five neighborhood groups here in New York City that are
applying for that funding. But we need to really take the City
and State and have them take the initiative to work with the
individuals in their communities.
My colleague, Nydia Velazquez, has already sponsored forums
in her community. And the Governor and the Banking
Superintendent, along with the New York State Senate, have
started Operation Protect Your Home. They will be having day-
long seminars around the State and in New York City to
literally work with the lenders, the servicers--and my
colleague, welcome--here in New York City and to help them in
their home. The first will be in the Bronx, on Saturday,
February 23rd.
We are welcomed by my good friend and colleague,
Congressman Meeks.
We are focusing today on what we can do to help people stay
in their homes, but I do want to mention what we have done on
the Federal level. Last year, working together with Congressman
Meeks, Congresswoman Velazquez, and Chairman Barney Frank, we
passed H.R. 3915, the Mortgage Reform and Anti-Predatory
Lending Act. This has passed the House, but regrettably, it has
not passed the Senate. This comprehensive legislation will
create a licensing system for residential mortgage loan
originators and establish a minimum standard for underwriting,
so that loans are not given to people who cannot afford to pay
for them, a very fundamental change. It will also have limited
liability to the secondary market securitizers, to build more
discipline into that market.
We also passed legislation to reform and modernize the
Federal Housing Authority and government-sponsored
enterprises--Freddie Mac and Fannie Mae. This legislation will
enhance the safety and soundness of these institutions, and
with the FHA, provide a safe haven for subprime borrowers in
desperate need of refinancing. It will give them extra tools to
help people stay in their homes.
And we have pushed and succeeded in getting a change in the
FASB rules--the Financial Accounting Standards Board--to
clarify that its Standard Rule 140 allows for the modification
of a loan when there is a reasonable idea that there will be a
default. Otherwise, before we got it changed, they could only
become involved after the default.
So, we are taking steps to help people stay in their homes.
We have eliminated the tax on debt forgiveness, sparing
families the double whammy of paying taxes on the lost value of
their homes. And we are working now to eliminate the cruel
anomaly under Chapter 13 of the Bankruptcy Code which allows
judges to modify mortgages on a borrower's vacation home or
investment property, but not the home they actually live in.
This change, again, will give us more tools to help people stay
in their homes.
Beyond the work of Congress, industry and advocacy groups
have formed important partnerships, such as the HOPE NOW
Alliance, and they are working, and we'll be hearing more about
that. And, just last week, we passed an economic stimulus plan
that included raising the cap on the loan limit amounts of
Fannie Mae and Freddie Mac. This will help high cost housing
areas such as New York City.
And, the State of New York has formed a $100 million
mortgage rescue fund in addition to their Operation Protect
Your Home. They are coming forward with comprehensive
legislation also to help people stay in their homes.
That is why we are here and we will keep on working. I have
a lot more to say, but I'm going to put it into the record,
because I'd like to hear from my good friend and colleague,
Nydia Velazquez, chairwoman of the Committee on Small Business,
who has led many efforts here in the City to help people stay
in their homes.
Ms. Velazquez. I am the only Member from the New York
delegation who sits on the Housing Subcommittee.
Good morning, Chairwoman Maloney, and thank you for holding
this hearing today on such an important issue for New Yorkers.
Right now, New York City is at a crossroads with the
current housing crisis threatening the pursuit of the American
dream. Homeownership in New York City, in spite of slight
growth recently, still lags behind the national average and
that of other major cities. Also disappointing is that while
Blacks and Hispanics make up a large portion of the population
and contribute significantly to our local economy, they
experience lower tenure rates than other groups. There is no
question that it is paramount to identify the driving causes of
these disparities in order to find constructive solutions to
our crisis today.
I held a roundtable on mortgage foreclosure in my district
3 weeks ago, and some of the financial services institutions
were saying, ``Well, we are not at fault. It is not our fault.
It is those mortgage brokers.'' Financial institutions have to
ask themselves why it is that there is a perception in minority
communities that they cannot walk into any bank to get a loan
to purchase a home, and therefore, they are driven to go to
unscrupulous lenders?
So, when we look at HMDA reports on data as to fair lending
practices and we see that there is a disparity in terms of the
mortgage loans that people get across the board in New York
City compared to the lack of such loans in minority
communities, we need to ask what is wrong and if there is any
legislative fix that needs to take place in order to make sure
that fair lending practices are the norm and not the exception
when it comes to minority communities. Hispanic and Black New
Yorkers are 3 to 4 times more likely to have a loan issued by a
subprime lender than non-minorities. At 19.8 percent, New York
has one of the highest subprime lending rates in the country.
In 2007, the average subprime outstanding loan balance in New
York City was nearly twice the national average.
Not only is this an issue in minority populations, but
compounding the negative effects of subprime lending is the
concentration of outstanding loans in particular neighborhoods.
Last year, in at least 10 communities across the City, more
than 34 percent of all loans were subprime. These places
include Jamaica, Brownsville, Ocean Hill, Queens Village, my
district--Bushwick, and East New York, Sunset Park, and Red
Hook. It should come as no surprise to find that those areas
are experiencing high rates of default and foreclosure.
Clearly, certain populations and areas within our State are
targets of faulty lending practices.
Although most of us know that this is not a simple problem
that a quick fix will solve, foreclosures crush a family's
dream for economic stability and success. If large numbers of
families are only achieving homeownership for a short period of
time, our policies are misguided. All those who want to enter
the ranks of homeowners should not only have a fair opportunity
to do so, but also the ability to remain there.
And so I take this opportunity once again to thank
Chairwoman Carolyn Maloney for being here to listen to the
recommendations not only that the State and the City Government
can provide to us, but those who are on the ground, facing the
pain and the struggle that so many hard-working families are
suffering, today, in New York City, in our Nation, the most
powerful, richest country in the world, robbing these families
of their dreams. That's shameful, and we need to act. Thank
you.
Chairwoman Maloney. Thank you, so much, Nydia, for speaking
so eloquently on the American dream and the assault that it is
under.
We are very fortunate to be joined by my good friend and
colleague on the Financial Services Committee, Gregory Meeks,
from the great Borough of Queens.
Mr. Meeks. Thank you, Madam Chairwoman, and I want to thank
you for holding this timely hearing on this issue, which is
particularly alarming to my constituents and deeply concerning
for millions of Americans across this Nation.
I mean, it is very timely, and I just want to compliment
you on all of the work that you do on this committee. I am
having the opportunity to watch you operate, and I just wish
that everyone in New York would tune in sometimes when you're
doing your hearings, on C-SPAN, and see what a great job that
you are doing and how focused you are, particularly on this
issue.
And likewise, I want to thank my colleague, Nydia
Velazquez, who makes us all proud. I mean, I couldn't agree
more with her statements. She is chairing the Small Business
Committee, as well as, you know, working on the Housing
Subcommittee of this great committee. And, I always just want
to take the time to take my hats off to both of you strong,
strong, strong advocates here in New York.
The 6th Congressional District has been one of the hardest
hit communities in New York with the crisis in subprime
mortgage lending. In the next 2 years, it is estimated that
91,000 families across the State will be at risk of
foreclosures. In the New York Metropolitan Area alone, an
estimated 53,000 families will see their mortgages reset to
onerous rates.
The foreclosure rate in my district is up 90 percent over
last year. This is predicted to continue as subprime adjustable
rate mortgages from 1 to 3 years continue to reset to their
higher level. These are, indeed, astronomical figures.
But, when I see the faces of constituents who are
confronting financial ruin because they can no longer sustain
the payments on their homes, I see something much more jarring
than numbers. I see the American dream that Nydia Velazquez was
talking about slipping away from them, and the pain that comes
with that loss.
It isn't just an individual pain. The entire community
becomes at risk in the form of lost tax revenue, at the cost of
securing abandoned properties, and preventing blight. Everyone
suffers.
My constituents, and indeed all New Yorkers, will
experience some relief with the mortgage provisions of the
economic stimulus package. But long term, much more is needed.
Raising the maximum size of mortgages that Fannie Mae and
Freddie Mac can purchase in markets as a security from $417,000
to as high as $729,000 is critical to the expensive States like
New York.
However, our challenge today is to determine what else can
we do to stop this hemorrhaging before our communities fall too
deep into an economic downturn, the likes of which our Nation
has not seen since the Great Depression.
The subprime loan numbers in southeastern Queens are
staggering. As of October, in the Jamaica and Hollis section of
Queens, part of my district, there are over 609 foreclosure
filings for two- to four-family properties in 2007. That's up
from 223 in all of 2004.
And a New York University study from 2005 reveals that for
the Jamaica/Hollis community, the proportion of subprime loans
for homes purchased has surged to 51.8 percent, ranked number
two in New York City, almost 6 times the rate it was in 2003,
when it was only 9.3 percent.
Sadly, African Americans and Hispanics are
disproportionately represented in the subprime market. The
racial disparity between whites and minorities actually
increases as incomes rise. So, this is not just on a poor
level. But, as incomes rise we see the greater disparity.
In trying to attain the American dream of becoming a
homeowner, many minorities have fallen prey to high interest
rates, balloon payments, and excessive fees and other predatory
lending practices. What is most disturbing about this reality
is the fact that a majority of subprime borrowers would have
qualified for conventional prime rate loans.
According to a Wall Street Journal study, 55 percent of
subprime borrowers had credit scores that made them eligible
for a conventional prime loan in 2005. By the end of last year,
that percentage was up to 61 percent.
Now, those who could have had prime loans are struggling to
stay afloat and, because of predatory practices, they have lost
the financial upper hand. Today, I'm especially focused on
exploring what we can do to better serve this group of
individuals.
I commend my colleagues on this committee, who are working
very hard with Chairman Barney Frank and Subcommittee
Chairwoman Carolyn Maloney, for passing the Mortgage Reform and
Anti-Predatory Lending Act of 2007. The bill includes language
that prevents a lender from underwriting a loan if the
borrower's income does not support the monthly payment at every
interest rate during the life of the loan. The legislation also
sets forth minimum repayment standards for residential mortgage
loans and requires creditors to determine, based on verified
and documented information, that a consumer has a reasonable
ability to repay the loan according to its terms and all
applicable taxes, insurance, and assessments.
While passing this bill is and was an important first step,
it is simply not enough. We have to continue to educate
individuals about how to avoid foreclosures and provide
financial counseling services for those who are in danger of
losing their homes. The housing crisis and the economic descent
that comes with it demands that all stakeholders come together
to help struggling homeowners. The business community needs to
work with clergy and neighborhood organizations to highlight
the crisis and offer assistance to people who need help.
We also must make sure that we begin to give financial
education to individuals in our schools so that our young
people and our seniors and our families will know and
understand and become financially literate. It is something
that we must do.
Again, I want to thank our chairwoman for holding this
hearing, and I look forward to hearing from the panelists, to
find out how we can work together to ensure that this crisis is
remedied. I know that the State and the City look forward to
working with you and the private industry, because if we're
going to solve this issue, all of us have to come to the table;
because the truth of the matter is all of us have something to
lose.
Thank you, Madam Chairwoman.
Chairwoman Maloney. Thank you so much, Congressman Meeks,
for your work on this issue and so many others.
The City Council has many committees that are challenged
with subprime lending and have jurisdiction over it. Speaking
for the City Council today will be Erik Dilan, chairman of the
Housing and Building Committee. I had the honor of serving with
his father on the City Council.
I must point out that we have a 5-minute rule in Congress,
and we will be enforcing it. Everyone's testimony can be put in
the record, but we would like to give you 5 minutes to
summarize your testimony, and at the end of everyone's
presentation, there will be questions.
Thank you.
STATEMENT OF THE HONORABLE ERIK MARTIN DILAN, CHAIRMAN, HOUSING
AND BUILDING COMMITTEE, NEW YORK CITY COUNCIL
Mr. Dilan. Thank you, Madam Chairwoman. And I certainly
understand, as the chair of the committee that probably holds
the record for the longest hearings, so I hope to be shorter
than the 5-minute rule.
Good morning. My name is Erik Martin Dilan, and I am the
chairman of the City Council's Committee on Housing and
Buildings, and I would like at this time to thank the
committee, Congresswoman Maloney, Congresswoman Velazquez, and
Congressman Meeks, as well as the full committee chairman,
Chairman Barney Frank, for convening this hearing and allowing
me to testify today.
In November, the Committee on Housing and Buildings held a
joint hearing with the Council's Consumer Affairs Committee,
chaired by Council Member Leroy Comrie, entitled, ``The City,
State, and Federal Response to Subprime Lending and the
Mortgage Foreclosure Crisis.'' Now briefly, some of the
recommendations made at the hearing from community members on
the Federal level were very simple: To enact laws that will
further regulate the banking industry, in order to prevent
predatory loans and deceptive practices.
Someone very simply stated during that testimony that had
their mortgage broker been their stock broker, they would have
gone to jail for a very, very long time. So we know this is
something that the Federal Government can regulate, because
they are financial markets, even though we're talking about
homes.
We would also like the Federal Government to support
restructuring of loans to clearly reflect what homeowners can
afford. We'd also like to see the prohibiting of lending
without the borrower's ability to repay--common sense; to
restrict loan flipping; to mandate homeowner education and
counseling for anyone entering into legitimate subprime loans,
specifically seniors, because we have seen many seniors
refinance their homes, many of them having full equity, and
they have lost that upon refinancing; conduct anonymous testing
of practices of brokers, realtors, attorneys, and lenders that
are originating the lion's share of bad loans. And, this
includes to fine, prosecute, and shut down the one-stop shops
engaging in unscrupulous and illegal practices, perpetuating
foreclosure rescue scams.
We'd like to see a strengthened regulation against
investors profiting from the bundling and purchase of predatory
loans that are stripping owners of their wealth. These are some
of the things that you mentioned in your opening.
And then, in addition, we would like to see Federal
legislation empower States' attorneys general. We see that many
of the banks are hiding behind Federal laws, not giving the
States' attorneys general the ability to prosecute fraud.
And then, in the event that foreclosure can't be prevented
by any Federal, State, or City regulation, we'd like to see the
ability for banks--and I know my Congresswoman is very familiar
with this, because she started a similar program in my
district--we'd like to see the banks be able to receive CRA tax
credit to banks that do give foreclosed homes, to have to re-
sell the foreclosed homes to returning veterans. How that gets
structured, I don't know, but I know it is a program that has
worked well in my district because of Congresswoman Velazquez's
leadership.
You mentioned in your opening, Madam Chairwoman, but the
City Council agrees that there should be an increase in the cap
on FHA loans. The current caps do very little to capture the
high cost loans that have been originated here in New York
City.
And finally, the legislation, again, should better protect
seniors who have already seen a substantial loss of equity in
their homes.
Now, just to add, and it's not part of my testimony, but I
believe it's important enough to add in, I had a meeting with
my local assembly member this past Friday, Assemblyman Darryl
Towns, who chairs the Banking Committee on the State level. And
part of his legislative package will include a code of conduct
for appraisers. I think many appraisers have not been discussed
on any level, and some appraisers wrongfully over-appraise the
values of some of the homes that are not really real. So we'd
like to, at least on the State level, we know they're going to
strive to do that. We'd like to see that on the Federal level,
as well.
Just recently here in the City, a colleague of mine,
Council Member Lew Fidler, had come up with the initiative--oh,
I broke my promise.
Chairwoman Maloney. Let's hear that initiative, and then we
have to call time.
Mr. Dilan. Okay, and I'll call time.
The initiative was called the ``Center for New York City,''
that has been now a Council and administration initiative. This
will provide major funding for the not-for-profits that will
help the general public get out of bad loans.
So, with that, I have a lot of statistical data that is in
my testimony. I'm sure that the information you have is
probably much better, but I'd like to submit that for the
record, and I thank you for your time.
[The prepared statement of Mr. Dilan can be found on page
47 of the appendix.]
Chairwoman Maloney. I want to thank you for your testimony,
for being here today, and for your hard work.
We will now hear from Jane Azia, director of non-depository
institutions and consumer protection for the New York State
Banking Department. Thank you, Jane, and thank you,
superintendent, for all of the work and really creative
initiatives that you have taken. And your new initiative, I
think, is just absolutely terrific, Operation Protect Your
Home, to have hands-on help. Thank you for being here.
STATEMENT OF JANE AZIA, DIRECTOR, NON-DEPOSITORY INSTITUTIONS
AND CONSUMER PROTECTION, NEW YORK STATE BANKING DEPARTMENT
Ms. Azia. Thank you, Madam Chairwoman, and the committee
for the opportunity testify today.
New York State is hit hard by the mortgage crisis. New York
City is especially hard hit, with 52 percent of foreclosure
filings in New York City, and 40 percent of those in Brooklyn
and Queens. And, as Congressman Meeks pointed out, there is a
disproportionate impact on those minority communities. For
every one borrower in a non-minority community who has a
subprime loan, there are two in minority communities. So, this
is a severe problem.
I would like to focus on some of the State initiatives that
we have been undertaking. This is a priority for the Governor
and for the Banking Department. Soon after taking office,
Governor Spitzer created the HALT Task Force, to halt abusive
lending transactions. We have had several summits through the
State to bring together community groups, borrowers, government
officials, and industry to discuss issues affecting different
geographic areas and solutions.
One of the areas that we have focused most on are loan
modifications. It's important to put borrowers in places with
affordable loans that they can sustain over the long term. And
we have been very active on two fronts:
First, we have been working with a group of State attorneys
general and banking departments, particularly the North
Carolina Banking Department and the Conference of State Bank
Supervisors. We have met with loan servicers, over 90 percent
of the industry, and got commitments from them that they were
committed to long-term modifications where borrowers have the
ability and desire to pay.
Yet, we requested the data to support these claims. And
just last week, we issued a report of our findings, looking at
the month of October. And, this report had some very
interesting results. The key findings were:
The good news. Servicers are increasing their level of loan
modification and home retention efforts, but these efforts fall
far short of the need. At the end of October, 45 percent of
loss mitigation efforts in process were directed to loan
modifications. This is in contrast to mortgages closed in
October, where only 9 percent were loan modifications.
The bad news is that payment resets on hybrid adjustable
rate mortgages are not a driving force in foreclosures. A
significant percentage of subprime adjustable rate loans are
delinquent before they ever experience payment shock. This
reflects weak underwriting or origination fraud. Thirty-two
percent of subprime ARMs and Alt-A loans scheduled to reset in
2008 and 2009 are already delinquent by more than 30 days; 20
percent of loans that are scheduled to reset in the third
quarter of 2009 are already delinquent.
Another key finding is that 7 out of 10 seriously
delinquent borrowers are not currently on track for any loss
mitigation option.
And finally, the refinance option, which had saved
borrowers in the past, has nearly evaporated.
The State Working Group intends to put out monthly reports
showing how we perceive going forward. But one unfortunate fact
is that of the major loan servicers, only 13 contributed data
to the report. The remaining national banks did not do so. And,
we wrote to the Comptroller of the Currency, and his response
was that to do so would provide inconsistent data. Well, we
don't believe that is the case, and we urge action to encourage
cooperation by the national banks and the Federal regulators.
The forms that we used were developed in collaboration with
Federal regulators, lenders, and servicers. These forms are
short, they're not burdensome, and we believe that it is
important to get full information out to the public.
Our other initiative with respect to loan modifications is
at the grassroots local level. We have teamed up with State
officials and State legislators, housing counselors, and
community groups and lenders to schedule forums here in New
York City that will take place February 23rd and 24th and the
following weekend, March 1st and 2nd, to bring borrowers
together with loan servicers to hopefully work out
modifications where possible.
The State is also looking at legislative proposals, many of
which contain ideas similar to what was in the Assembly's bill,
and that would require protections for both all borrowers, as
well as those who are in high cost loans.
I also think there's a greater role that the Federal
Government could play in this area. As I mentioned, we were
disappointed with the OCC's response to our request for data,
and we feel that this should not be a turf issue. There are
also legislative reforms that are needed, both with respect to
Bankruptcy Code, tax relief, and affordable housing.
Chairwoman Maloney. Your time is up. Can you summarize
briefly? Are you finished?
Ms. Azia. I am finished.
Chairwoman Maloney. Okay, great. Thank you so much.
Ms. Azia. Thank you.
[The prepared statement of Ms. Azia can be found on page 34
of the appendix.]
Chairwoman Maloney. We now have Mr. Kieran P. Quinn,
chairman of the Mortgage Bankers Association, and he is
speaking on behalf of the HOPE NOW Alliance.
Thank you for being here.
STATEMENT OF KIERAN P. QUINN, CHAIRMAN, MORTGAGE BANKERS
ASSOCIATION, ON BEHALF OF THE HOPE NOW ALLIANCE
Mr. Quinn. Thank you. Thank you for the opportunity to
appear before you on behalf of the Mortgage Bankers Association
and the HOPE NOW Alliance to discuss both the mortgage market
and how we are helping homeowners.
HOPE NOW is a broad-based collaboration between counselors,
lenders, investors, and trade associations, and is achieving
real results in helping people avoid foreclosure. Our task is
two-fold:
We want to increase the number of delinquent borrowers who
respond to our efforts to contact them and create a streamlined
system to help borrowers in differing circumstances. The most
significant barrier we face in helping consumers in an historic
and persistent reluctance of struggling borrowers to reply to
or contact their servicer for help. With every passing week
without contact from a delinquent borrower, fewer options are
available to a homeowner.
We understand it is human nature to want to avoid the
conversation with a lender, especially if you are behind on
your payments. That is why we are working on innovative ways of
reaching out to people, three of which I'd like to talk about
this morning.
First, servicers began a monthly direct mail outreach
campaign to at-risk borrowers. This direct mail effort on the
HOPE NOW letterhead--not on ours--is in addition to the
thousands of letters and telephone contacts made by individual
servicers to their own customers. Over the last 3 months alone
we sent out over half-a-million letters to at-risk homeowners
who had not contacted their servicers. This third party contact
has already increased borrower response rates.
The second tool we are using is the Homeowner's HOPE
Hotline--888-995-HOPE. This hotline directly connects
homeowners with trained counselors. This counseling is free and
it is offered in English and in Spanish.
Counselors have direct access to servicers through single
points of entry specially designed for this effort, and to help
advise the consumer and act as his advocate as he goes through
this process.
Third, we have undertaken a media campaign to promote the
hotline. For example, HOPE NOW has created a series of Public
Service Announcements with very effective and moving messages
illustrating the real world impact a foreclosure can have on a
family, and urging borrowers to call 888-995-HOPE, especially
if they find themselves in trouble.
Public officials can help us spread the word. Thirty-eight
mayors recently worked with the MBA to produce Public Service
Announcements promoting the hotline. Hearings such as this are
perfect to help us increase the awareness of the hotline and
encourage more people to call.
All of these methods are having results. The hotline
received over a quarter of a million calls in 2007, and this
volume is increasing. In December alone, there were over 90,000
calls, producing over 15,000 counseling sessions. In New York,
almost 4,000 New York homeowners were counseled through the
hotline last year. My written testimony goes into much greater
detail, detailing these results.
The second challenge we have is to ensure that we have the
tools available to help borrowers in the most effective way
possible. We have worked with the American Securitization Forum
to create a framework that allows servicers to modify the
securitized loans you were talking about this morning. The
focus of the effort has been to identify different categories
of subprime hybrid ARM borrowers who can benefit from work out
solutions catered to their situation. The key is to find
solutions which help borrowers but do not violate existing
agreements with investors who now own the securities containing
these loans.
The ASF framework covers securitized subprime adjustable
rate mortgages--the 2/28s and the 3/27s. The framework provides
solutions for homeowners who qualify for one of three different
types of help: Refinancing, modification, or other loss
mitigation efforts.
Now, I'm a native New Yorker who grew up up in Stuyvesant
Town, so I have some more things to say about New York, where
loan modifications and repayments plans are continuing to
increase. Generally speaking, we are experiencing fewer loan
problems and delinquencies than the national average.
Nevertheless, there are a significant number of homeowners who
need assistance.
For example, in November, we counseled 495 New Yorkers. It
grew in December to 654. And last month, we helped 785 New
Yorkers with counseling.
Loan modifications in New York by HOPE NOW servicers
increased 138 percent between the first and fourth quarters of
2007, and repayment plans increased 27 percent during that
timeframe. We believe the upward trend in counseling, the key
aspect, loan modifications, and repayment plans will continue,
and homeowners will receive the help they need.
It is my number one priority, and the number one priority
of the member companies of the Mortgage Bankers Association to
help people stay out of foreclosure and stay in their home.
Thank you.
[The prepared statement of Mr. Quinn can be found on page
70 of the appendix.]
Chairwoman Maloney. Thank you. We will now hear from Sarah
Gerecke, the chief executive officer of the Neighborhood
Housing Services of New York City. She is on the front line
working with the pain and suffering of homeowners who are
losing their homes. She has been hard working at the
neighborhood level, and we want to hear what is happening.
Thank you for being here.
STATEMENT OF SARAH GERECKE, CHIEF EXECUTIVE OFFICER,
NEIGHBORHOOD HOUSING SERVICES OF NEW YORK CITY
Ms. Gerecke. Thank you for having me. And, I want to thank
all of the representatives here for their hard work and
successful efforts in bringing attention and, I know, solutions
to this problem.
My name is Sarah Gerecke, and I am the CEO of Neighborhood
Housing Services of New York City. Last year, we had 2,000
families come to us for help in paying their mortgage and
preventing foreclosure.
The mortgage crisis is causing great damage to families and
to neighborhoods in New York City. The damage to families I
don't think is fully understood.
The families who walk in have begun abusing their charge
cards, often as Congressman Meeks said, when their credit was
good to begin with, but they find they can't keep up with the
loan. They have taken on two and three jobs. A lot of times
they're leaving their children unsupervised.
And, if they do lose the home, there is nowhere for them to
go in New York City, where our rental vacancy rate is still
around 3 percent and where landlords, frankly, look for
satisfactory credit and don't want to see a bankruptcy or
foreclosure in order to rent an alternative apartment.
But, the collateral damage to neighborhoods is awful, too.
Most homes here, as you know, are two- to four-family homes,
and the rental families are evicted if the mortgage is
foreclosed.
Rescue scams are rampant. There are blocks in Bedford
Stuyvesant, in South Ozone Park, and in Williamsbridge, where
more than half of the homes on a single block have
unsustainable loans.
You see signs of deferred maintenance on blocks that used
to be spotless, blocks where NHS has worked for decades to
bring them back from the horrors of the 1970's. We're seeing
graffiti now, abandonment, foreclosures.
If you are the neighbor with a prime loan, not only is your
home devalued, but you wonder why you remain. You wonder if
your children are safe going past the vacant house down the
street.
Investors are buying properties and speculators are very
active, filling single-family homes illegally with 10 or more
single adults who rent rooms or beds. This happened down the
street from me. Infill construction sites are abandoned.
Commercial businesses are closing shop.
The convergence of these New York City conditions has a
major dampening effect on the entire economy. I know
Congresswoman Velazquez mentioned the Joint Economic
Committee's data.
I think the report released by the New York Conference of
Mayors is even worse, estimating that the New York City
Metropolitan area faces $10 billion in 2008 in losses relating
to the mortgage crisis. That's the worst of any city it
studied.
Your hearing today will bring recognition and resources, I
hope, to stabilize neighborhoods. Federal tools are invaluable.
And, first and foremost, I want to thank each of you for your
support for the Neighborhood Reinvestment Corporation
appropriation, doing business as NeighborWorks America. NHS
received support for counseling, and we've just applied for
additional counseling resources that you appropriated and were
passed in December for $180 million total.
Chairwoman Maloney. Well, we hope you will be successful in
that, and we'll certainly support it.
But right now, your time is up. Could you summarize,
please?
Ms. Gerecke. Sure. I'm sorry.
We urge additional support for capacity building for
counselors, greater consumer protection, and flexible Federal
funding for innovative programs that can help us.
Thank you.
[The prepared statement of Ms. Gerecke can be found on page
55 of the appendix.]
Chairwoman Maloney. Thank you, so much.
And now, we will hear from Josh Zinner, who is the co-
director of the Neighborhood Economic Development Advocacy
Project, also working at the neighborhood level, helping people
stay in their homes. Thank you for your hard work and for being
here today.
STATEMENT OF JOSH ZINNER, CO-DIRECTOR, NEIGHBORHOOD ECONOMIC
DEVELOPMENT ADVOCACY PROJECT
Mr. Zinner. Thank you, Madam Chairwoman. And thank you,
Congresswoman Velazquez and Congressman Meeks, for--
particularly for your testimony. I had come here to testify in
part about the situation on the ground in New York City, and I
think you have all done such an eloquent job of describing the
scope of the problem that, given the time, I'll jump right into
some of the possible solutions.
I do want to mention a couple of points. One is that I
can't overstate enough the responsibility that the secondary
market, and particularly Wall Street investment banks, have for
this fiasco. The securitization of subprime mortgages has
provided easy liquidity to the subprime market and for abusive
lenders who are doing loans that were unaffordable, that didn't
have benefit to borrowers. It was so profitable to make
unsustainable loans that the investment banks were actually
marketing products such as ``no doc'' loans and piggyback
loans, payment option, adjustable rate mortgages that were not
sustainable and not advantageous to borrowers that mortgage
lenders were actively and aggressively pushing on borrowers at
the neighborhood level, which created huge profits on Wall
Street.
There was no incentive at any level to make sustainable,
responsible loans. Mortgage brokers were getting big fees for
inducing borrowers into loans based on misrepresentation. And
lenders were selling their loans into the secondary market
regardless of their viability, and everybody was making a
killing. So, it is time now to create some accountability in
the secondary market and to change the incentives.
The Federal regulators and especially the Federal Reserve
was asleep at the wheel, I think with a blind faith in the
markets as a corrective. But of course, because the incentives
were perverse, the market did not correct itself, creating this
crisis.
As far as the mortgage servicers go, I think that loan
modifications are obviously a key to helping borrowers out of
foreclosure. And, there has been plenty of testimony about the
scope of the foreclosure problem. Millions are facing
foreclosure. But, there have been no signs that voluntary
actions alone by servicers are going to solve the problem.
So, while I laud any initiatives by the industry to modify
loans, and I hope that helps to solve the problem, I want to
stress that it cannot alone solve the problem. And, I want to
state that the Bush-Paulson plan, which really at most is only
going to help 3 percent of borrowers at risk of foreclosure, is
not nearly the answer.
So, I call on Congress to really push the industry to find
a way to change the incentives so that servicers are offering
loan modifications that are not only better for homeowners but
better for investors.
I'm going to run through, because I know I'm running out of
time, some of the policy recommendations that we have. And
again, if there are questions more about neighborhood impacts
or the civil rights implications here, I'm happy to answer
them.
We strongly support House Bill 3609 to change the
Bankruptcy Code. It goes without saying this is a sensible,
simple, straightforward emergency fix that would save more than
600,000 homes. So, I think I speak for the advocacy community
as a whole in New York State, or for many people, that this is
sort of a no-brainer fix that will save homes.
We also favor a very strong preventative bill and we do
laud House Bill 3915, but we call on the Congress to pass a
bill that is more in line with the bill that Senator Dodd has
introduced in the Senate, which does have stronger protections
in several areas, including stronger prohibitions to prevent
steering of borrowers into higher cost loans on the basis of
race, has a wider scope of protection of ability to pay
provisions, and in particular, widens assignee liability, which
is critical--absolutely critical--for holding Wall Street
accountable for the loans that they buy and for changing the
incentives in this system.
Finally, I want to emphasize, as my time is running out,
that remediation--you know, the bankruptcy fix is critical, but
remediation efforts are needed on the Federal level and on the
State level to fill gaps. I mean, this is absolutely critical
to halt the bleeding from the foreclosure crisis.
There is a big problem, in that there is not a secondary
market for loans that come out of rescue programs, for
borrowers who are more than 60 days delinquent. New York and
Massachusetts have started loan funds that are promising, but
that are hamstrung because the requirements are less than 60
days delinquent in order for the loans to be made--I'll close.
Chairwoman Maloney. You'll have to sum it up.
Mr. Zinner. I'll sum it up.
And this needs to be fixed. You know, the bottom line is
that borrowers come in later in the process, and so these
programs have been able to close on very few refinance loans.
So, we welcome the FHA reform, but I do call on Congress to
expand FHA reform to look for ways to create some flexibility
in the secondary market so that FHA temporarily can guarantee
loans that come out of special programs that are refinance
loans that are for borrowers who are more than 60 days
delinquent, and this is critical.
And finally, we call on Congress to expand funding--we laud
Congress for expanding funding for loan counseling, but also
funding needs to be expanded for legal services programs around
the country that represent borrowers who are in foreclosure.
This is critical, again.
Chairwoman Maloney. Those are all good points.
Mr. Zinner. Thank you very much.
[The prepared statement of Mr. Zinner can be found on page
82 of the appendix.]
Chairwoman Maloney. We can recognize you later, but we have
to stick to the 5-minute rule.
I'm going to ask one brief question, and then recognize my
colleagues.
In response to the testimony from the Superintendent of
Banks' office, Ms. Azia, you said that the data collected by
the States show that the reset is not the only gateway to
subprime loan foreclosure, and many subprime borrowers, the
States found, are delinquent before the reset. We were under
the impression that when you hit the reset, that's when the
foreclosure happens. So, this is extremely interesting.
And, what are your conclusions from this data? Are we in
for an increased rate of foreclosure? Because a lot of the
estimates were based on the resets that are coming up this year
and next year. But, you're saying it was before they even get
to the reset they're foreclosing--
Ms. Azia. Yes.
Chairwoman Maloney. --so it looks far worse than the
predictions that we have heard.
So, if you could, just elaborate, please.
Ms. Azia. Well, what we're saying is that resets are only
part of the problem and are only part of the solution, and that
long-term modifications based on resets are missing huge chunks
of the population, that over 30 percent of loans that are not
even reset are already delinquent, and that these people need
to be addressed. Otherwise, we will continue to have real
problems.
Chairwoman Maloney. Thank you. Congresswoman Velazquez is
now recognized for 5 minutes.
Ms. Velazquez. Thank you, Chairwoman Maloney.
I would like to address my first question to Ms. Azia and
Mr. Quinn, and also Sarah, if you could come respond.
What can we do to incentivize services to engage in mass
modification of loans that could save thousands of New Yorkers
from losing their homes?
Ms. Azia. Well, I mean, services already have at the top
levels the commitments to modify loans. I think, you know, they
have expressed that quite clearly. But, it's not clear that
they have the staff and the capacity themselves to engage in
the full modifications.
And while at some levels we hear that their agreements with
the investor community have been relaxed, other occasions we
hear that those are still impediments. So, those issues need to
be addressed.
Ms. Velazquez. Mr. Quinn.
Mr. Quinn. May I give the phone number one more time? It is
888-995-HOPE.
We cover, in the HOPE NOW Alliance, 90 percent of the
servicers who service the subprime adjustable loans. They are
there, at the ready. We have increased the number of people
just answering the calls from roughly 64 to almost 400, over
the course of 2007.
The NeighborWorks organization has 240 locations around the
country. The increased funds for counseling that Congress
recently passed are enabling us to expand that network.
And the beauty of a counselor is that he then becomes not
just a counselor for the homeowner, but he is also the
homeowners' advocate before the servicer. He has the hotline.
He has the way to go.
Ms. Velazquez. Okay. But so, in that statement that you're
providing us, are you saying that modification of at-risk loans
is taking place among the Mortgage Bankers Association.
Mr. Quinn. As a trade association, we represent many
members.
Ms. Velazquez. Sure.
Mr. Quinn. Our evidence, covering over 33 million loans
that our servicers take care of, modified 230,000 loans in the
third quarter alone. And, this was 2 months before the Paulson-
Bush plan was announced.
And, with that publicity and all, we made every major
newspaper in this country. The word has gotten out that
homeowners should call their servicer.
Ms. Velazquez. Okay. Let me take this opportunity and ask
you how expensive it has been for your members to provide the
counseling, to do the outreach, and to have the staff to deal
with borrowers who are at risk of losing their homes.
Mr. Quinn. It's expensive for our organizations, but it's
free for the homeowners and--
Ms. Velazquez. I understand.
Mr. Quinn. --and each servicer is being asked to write a
check as they go along.
Ms. Velazquez. So, do you think that housing counseling
should be a part of any legislation, in terms of being
mandatory? Or for--or to have opt-out provisions.
Mr. Quinn. Illinois passed the mandatory counseling, and I
think the State revolted against it. We have tried, and we
spent a lot of money last year, to improve our home loan
learning center. In the late fall, we had a million hits a
month for people trying to get more education before they went
for a home.
The literacy programs that Congressman Meeks talked about,
we desperately need to upgrade that, all across the country. I
don't like mandatory counseling, personally.
Ms. Velazquez. I know that. I know. I am the one who has an
amendment advocating for it, but you also mention the fact that
borrowers are not, for whatever reason, reaching out to housing
counseling providers or to those banks where they are--that are
the originators, because they are embarrassed, because they are
postponing it, for whatever reason.
So, if a borrower is delinquent the first month or second
month, why is it so bad for the industry to have a mandatory
provision that will get the lender to notify a housing
counseling provider to contact that borrower?
Mr. Quinn. Well, we have sent the notices out to the
borrowers. They need to take some initiative to call the
counselor to prepare their financial information. It is the
most critical tool we--
Ms. Velazquez. I know that I'm not going--
Mr. Quinn. --need to help them--
Ms. Velazquez. --to convince you. Let's go with--
Chairwoman Maloney. We have one more minute.
Ms. Velazquez. --with Mr. Zinner.
Chairwoman Maloney. One more minute.
Ms. Velazquez. Yes, okay.
Mr. Zinner. If I could just speak for a minute on your
question of how to change the incentives with servicers to
promote more loan modifications? I have a lot to say on this
topic, but let me be brief and say one thing. I think one of
the problems even taking the servicers at face value that they
do want to do more loan modifications, and I think that there
is a need to change the culture of the mortgage servicers in
that area.
But, you know, because of the way these loans have been
securitized and, you know, they've been sold off in slices to
different grades of investors, you know, there are ``A''
investors who get paid first out of the trust, and then there
are slices at the bottom that only get paid when the investors
above get paid first.
So, you know, the investor--the servicers say that they
fear legal liability from investors if they engage in too many
loan modifications. You know, part of the problem is that
modifications might be good for investors with the lower
slices, but whereas foreclosure is better for the investors
with the top slicers. The legal obligation of the servicer is
to act in the best interests of the investors, as a whole.
So, I think it would be very helpful if there was guidance
received from the top, possibly from the SEC. But, if there
were Federal guidance that sort of could assure mortgage
servicers that if they're engaging in modifications that are in
the best interests of the--to maximize the return to the trust
as a whole that they don't have to fear liability from certain
slices of investors. I think this is critical.
Ms. Velazquez. Thank you.
Chairwoman Maloney. Thank you. I'll make one comment and I
have a brief question, and then recognize my colleague Gregory
Meeks.
I want to respond to one of the comments of Mr. Zinner,
where he said that we need to negotiate and help people stay in
their homes, but what do we do for the people who have already
lost their homes? They need help right now, and what are we
doing now?
One suggestion that I have heard recently is a revival of
the Homeowners Loan Corporation. This agency was created during
the Depression to manage defaulting mortgages in that crisis.
I'd like to hear what your thoughts are about this.
By the way, at the Joint Economic Committee, we have heard
some testimony from some economists who believe that the amount
of people who will lose their homes during this crisis will be
even greater than those who lost their homes during the Great
Depression. And, the Homeowners Loan Corporation bought
defaulting mortgages during the Depression for the Government,
with backed bonds at lower rates.
And does the fact that the subprime mortgages are
securitized now make the efforts of the Homeowners Loan
Corporation more difficult than it was in the 1930's, to help
in this situation?
Any ideas of any of the panelists on this?
Ms. Gerecke. I'll make one comment. I'm certainly not an
expert on that proposal. But, I do want to say that the problem
of families who have faced foreclosure already, and one of the
limitations of the voluntary act, is that there is no ability
to be geographically targeted with the solution. So, if you
have a particular block where you have homeowners facing
different levels of problem, it's very difficult to sit back
and wait to receive the call and see which ones fit into which
buckets.
So, to that extent, a centralized coordinated solution, I
think, would stop the secondary and tertiary economic
spillovers that are happening right now, and harm that's being
done to the broader community.
Mr. Quinn. Our fear is that in just the time it will take
to put all this in place, we can be modifying 230,000 loans a
quarter or more.
We lose $30,000 to $50,000 at a minimum every time we
foreclose on a home. We have every incentive to modify the
loan. We just want the people to get in touch with us.
Mr. Zinner. Yes, I would say again--excuse me. Again, we
strongly support any efforts by the industry to improve the
rate of modifications, but it can't be a replacement for
effective Federal action.
And we do strongly support the initiatives to create a
Federal fund. I think Representative Baca and Senator Dodd are
both talking about such an initiative. As Ms. Gerecke said,
there is a potential problem in that it doesn't give you
necessarily the ability to respond on the local level. It would
be sort of a top-down approach, because only borrowers whose
mortgages were sold into this fund would get assistance.
So, while we strongly support this as a very appropriate,
effective, and strong Federal response, there is also a need at
local levels to have complementary programs. And, this is where
it's critical, as I stated in my testimony, to have more
flexibility possibly in FHA to enable those local programs,
those State programs, to be effective.
Chairwoman Maloney. We have passed an FHA reform bill that
is flexible, if we could get it through the Senate. So, that's
one of our goals.
And, I'd like now to recognize my colleague and good friend
Gregory Meeks for 5 minutes.
Mr. Meeks. Thank you, Madam Chairwoman. And, in my 5
minutes, just first I should have said when I opened up, is a
strong thank you to Erik Dilan for the work that he's doing.
We're in your house. It's good being in your house at the City
Council and working with my friend and colleague that you
mentioned in your statement, Leroy Comrie, doing a job focused
on this.
I also, Mr. Zinner, want to say thank you to your
organization. Sarah Ludwig, who works very closely with my
office, helping my constituents who fall into problems, and
referring her to people, your agency is doing a great job, and
I want to make sure you say hello to Sarah for me, and we thank
you for what you do.
I also want the record to be clear that we still believe
that owning a home is the greatest thing that one can do. And
we understand that the subprime market is a--you know, we don't
want to throw the whole market out. We want to get rid of those
predatory lenders, those that take advantage of individuals.
Because some people, without subprime, would not be able to be
in a house, period.
However, we want to make sure that steering is over, and
all of these illegal and predatory practices don't begin--you
know, don't continue.
And so the first thing that, in listening here, I was
wondering if, in fact, Mr. Zinner, and you and Mr. Quinn, or
your respective organizations, is there any direct
communication? When someone comes to you, do you have any
experience with that, referring to HOPE and back and forth, to
try to see if there's some synergy there in this market or
other markets?
Mr. Zinner. Let me just say that NEDAP does not take direct
referrals from borrowers. However, I can speak of prior to
working at NEDAP, I ran the foreclosure prevention project at
South Brooklyn Legal Services, and we had thousands of calls
coming in from borrowers who were targeted for subprime abuses.
And, you know, I want to say historically, and I think I
can speak for many, many advocates, that historically it has
been very, very difficult for borrowers and advocates to work
with servicers. That's not to say that we are not very hopeful
that those bridges can be opened up, and HOPE NOW is a positive
development.
We do have a concern, you know, since we are speaking of
HOPE NOW, we do think that there's a need to train the
counselors in the HOPE NOW Alliance, the counselors who are
working with the Alliance to screen loans for illegalities,
because borrowers go straight into loss mitigation without a
look at whether their loans have illegalities that might create
defenses to foreclosure. And, when they do sign those
modification agreements, they waive those defenses.
So, with that caveat and saying that there is a need to be
more careful in the screening of these loans, we welcome
opening up any bridges. Historically, advocates and homeowners
have had a lot of difficulty dealing with mortgage servicers,
and it has been a negative experience, but we welcome a change
in that.
Mr. Quinn. The HOPE NOW Alliance is an alliance of trade
associations and neighborhood associations, so we welcome all
the help we can get in this important endeavor.
Mr. Meeks. But, I should hope--
Ms. Gerecke. I just want to add, because we do refer to and
from the hotline a lot, and we've had experience with it, both
in improving the levels of service on both sides. On the plus
side, we find the hotline counselors very helpful in conducting
triage and providing basic advice. They do refer back to us if
people need more assistance.
The work with the servicers, I will say, is uneven. Some,
we've seen incredible changes over the recent periods of time.
Often though, within the same organization, you can get very
different responses from person to person.
On Friday I was told by my director that he had personally
placed a call to the nonprofit contact for the servicer about a
customer, and had left five messages over the course of a week
that had never been returned. So, I think that they are also
facing capacity and volume issues that we all have to work
through.
But very often, the answer, especially for the early
payment delinquent that Jane was talking about, the answer is
we cannot help you with that now. Many of the modifications are
just forbearances on the interest that may be collected later,
rather than a full loss mitigation.
Mr. Meeks. Let me just throw two questions out there real
quick, before that buzzer goes off.
One is I am concerned when you have someone who has been
wronged, and clearly, we can identify a group of individuals
who have been wronged, as I stated in my testimony. Those
individuals who were steered into a subprime, when they could
have had a prime rate, those individuals who had great credit,
who were paying their mortgage until the rates went up. They
clearly were wronged.
I was wondering if there's any focus that the industry, or
whether we in Government, that we can do at the City and the
State level, or counseling can do, that can focus on making
sure that those individuals, that they're restored their credit
ratings or something of that nature.
Because the statement is actually correct. Once their
credit is gone, they probably can't buy another home again in
their lifetime, which is affecting a generation of people. And,
it is difficult for them even to rent a decent place when they
were wronged.
So, is there any focus on helping those who clearly were
wronged in this matter?
And secondly, I think Mr. Quinn indicated that individuals,
you know, it's hard to get people to come. And, that's correct.
And, we've appropriated millions of dollars for foreclosure
prevention counselors.
And, I was wondering if, in fact--in fact, there was a
study by Fannie Mae that showed the reason why some people go
to subprime lenders in the first place is because they are
afraid to be told ``no'' by others. So, surely, when they're
foreclosed.
What other efforts--what else can we do--
Chairwoman Maloney. The gentleman's time is up, and we
welcome any responses to his questions.
Mr. Quinn. It absolutely starts with education. We have to
get people better prepared when they go for a loan. I was
blessed when my father worked in a bank, and I knew there was
only one route for me to go. But, with the change in our
population coming forward over the next 10 to 15 years, we have
to have all our programs in multiple languages, and we have to
get it down into the cities. The awareness that hearings like
this help to create helps us immensely to get people more
concerned.
But I want to get back to your point about the modification
process or workout process. These processes will leave people
with the best credit record coming out of this situation. If
people go into bankruptcy, it is a 7-year blight on their
record. And, we encourage people to exhaust every remedy
available to them through the counselors, through the HOPE NOW
Alliance, before you enter into any kind of bankruptcy action.
It's going to make the cost of financing for all homeowners go
up, and we're not sure it's really going to help people that
they couldn't already be helped through the HOPE NOW Alliance.
Chairwoman Maloney. Any responses?
Mr. Dilan. Yes, if I may, I would just like to re-emphasize
some of the points that I made during my testimony. I think
it's critical that practices such as one-stop shopping be
eliminated, where you get your broker, your attorney, and
everyone that's basically providing the bank with the client. I
think it should be prohibited that they're all in league with
each other. I think that the end user should be required to
have their own attorney and a broker that's separate and apart
from the bank.
And I think that practices such as yield spread premiums
and other fees that serve no benefit to the homeowner should be
eliminated. It's essentially a kickback for the mortgage broker
for steering that loan to said bank.
And again, I would say that this committee, in an unrelated
matter, should also study the impact on veterans who have their
loans reset while they are overseas fighting wars, because they
could be doing a service for this country and lose their home
when they come back.
Chairwoman Maloney. I'd like to ask Council Member Dilan
how is the Council working with the State on Operation Protect
Your Home or other initiatives? Obviously, one of the problems
we're hearing is that people don't know where to go to get
help, and certainly the City Council is the organization, the
elected body closest to the people.
How are you working with the State Senators and the Banking
Department to let people know about Operation Protect Your
Home?
Mr. Dilan. We're just beginning. I met last Friday with, as
I mentioned, Assembly Member Towns, who is the chair of the
Banking Committee, to come forward with a strategy. I know that
Senator Malcolm Smith has made this an issue for all of his
members in the Senate. I've worked with Senator Jeff Klein in
terms of getting some of the banks to come into communities and
restructure loans, as well as conversations with the HUD
Regional Director, Sean Moss, in terms of coming out to the
community and letting neighborhoods know what the Federal
packages are and what the Federal advantages are.
You know, clearly there's still more work for us to do. I
will be submitting legislation to the Council that, as I said
in the press conference earlier, that will potentially restrict
the City from publishing online people's deeds, via the
Registrar's Office. Right now, that's available to anyone in
the world with no proof that you are the actual homeowner.
Those are some of the things that we could do at least to
prevent fraud.
And then, as a budget item, I'd like to at least ask my
colleagues to consider funding specific units for property
frauds in the five DA's offices.
Chairwoman Maloney. Well, I want to thank you for your
initiatives. And, I'd like to ask Mr. Quinn, we hear a great
deal about the public/private efforts, and workouts, and
certainly applaud your efforts. But the numbers that we're
hearing from the State Superintendent's Office and others is
that they're not happening, that all of these initiatives are
taking place, yet the connection and the workouts are not
happening.
And what more are you doing with HOPE NOW to offer more
borrowers help? And, do you think it would be helpful if we
kept statistics on actual success? If servicers are being told
to reach out, just numbers reported back on how many have
reached out, how many have negotiated a workout?
Because, the numbers we're seeing are really horrific.
Everybody says they're helping, yet when we survey the
homeowners, the individuals who are losing their homes, they
say that they weren't aware, that no one is helping them, and
there is not the reach out.
And, I'd like to add to it, and have the other panelists
add to the really startling report that came out from Freddie
Mac last week, that 57 percent of the borrowers who are paying
late still don't know that their lenders might offer
alternatives--57 percent. And, I'm wondering if that is the
same situation in New York City. Do you think that half of New
York City residents facing foreclosures still have absolutely
no idea that there are workout options?
And again, the idea of having some oversight on what is
happening. Not only are you reaching out, how many people have
you reached out to? How many workouts are in the process now to
help people stay in their homes? Because we are seeing a
disconnect between what everyone says they're doing and what is
actually happening to people in helping them stay in their
homes.
Mr. Quinn?
Mr. Quinn. Part of the responsibility of the HOPE NOW
Alliance is to report actual phone calls received on a monthly
basis.
Chairwoman Maloney. On a monthly basis. That's great. So,
that's part of the plan.
Mr. Quinn. And, that all took off late November/early
December. So, you're going to see December--
Chairwoman Maloney. Great. So then, there's oversight on
it.
And my question, do you believe that half of New Yorkers
are not aware that there are workout options? To our
panelists--Jane and others?
Ms. Gerecke. Yes, I absolutely do believe it. I--we see all
the time that there is a lack of awareness of what the benefits
of calling a servicer can be, and we view our job to help
connect the borrower to the servicers.
Again, going back to the issue of early payment defaults,
though, when a borrower was told that the loan would be
affordable and then found out that the one percent teaser rate
was only good for the first month, and the bill comes in at
$500 or $700 higher the following month, asking for help from
the servicer can be a very difficult experience. And, in many
cases where they have been in contact from the servicer's
collection department, there is a reluctance to believe that
now, with a counselor, we can get you into a loss mitigation
department, we can try to do other things.
But there isn't a lot of help for people. And I think the
ones that are in the deepest, or the ones who faced predatory
or improper practices to begin with are really very reluctant
or have the negative experience, unfortunately.
Chairwoman Maloney. What else can Congress do to help with
the awareness program? We have allocated $180 million. They are
going to start processing that next week. They are taking
applications. We certainly urge the neighborhood groups to
apply, and we certainly want to help you.
But, what else can Congress do to help with the awareness
program? I'll ask Jane Azia.
Ms. Azia. I think individual congressional offices can get
information out to their constituents about programs. And in
particular, in New York City, the foreclosure forums that are
taking place at the end of February and the beginning of March.
So, I think that's one very important thing.
But, there's lots of material out there. It's just getting
it to the borrowers.
Chairwoman Maloney. Thank you. My time is up. Chairwoman
Velazquez.
Ms. Velazquez. Thank you. Mr. Quinn, you say that education
is paramount, and I agree with you 100 percent. There is no
doubt that an educated borrower will make a wiser financial
decision.
With the sharp increase in financial sophistication, what
is the industry doing to enhance transparency for borrowers?
Mr. Quinn. We supported the licensing provision in the
recent House bill that required education, both up-front and on
an ongoing basis for everyone who is involved in the loan
origination business. We have to get our originators and our
servicers on the same page about how these loans work.
We focus too much, I think, on getting people into a home.
This is the American dream that everyone is chasing, and we
have to focus on keeping people in their home. So, explaining
the loan programs. We actually would welcome RESPA reform. We
think the stack of documents that a homeowner faces should go
from this to about this. And, that would eliminate a lot of the
confusion and potential hiding of documents.
Ms. Velazquez. So, you're telling me that when HUD comes
out with the next RESPA regs, that you are doing to design a
grassroots mobilization from mortgage brokers to get members to
oppose it.
Mr. Quinn. We will support simplification of the mortgage
process in as many ways as we possibly can, Congresswoman.
Ms. Velazquez. Okay. Again, what can we do to restore
confidence and bring transparency to the secondary market?
In the roundtable that I held 3 weeks ago, specifically the
president of the Federal Home Loan Bank of New York said that
some institutions had withdrawn from the secondary market
unless they were purchasing securities issued by Freddie Mac
and Fannie Mae.
Mr. Quinn. You've done the first two things that were
excellent--the modernization of the FHA. If you go back to
2000, roughly, FHA had 13 percent of the market, and subprime
was about 2 percent. If you go to 2006, those numbers were
exactly the opposite.
The first-time home buyer, the person who needed the 93,
the 95, the 97 percent loan, lost his access to FHA. The
modernization of FHA, which you passed, was the critical first
step.
Empowering Fannie Mae and Freddie Mac through higher loan
limits helps California, New York, Massachusetts, Chicago, and
so many more places in this country. That was the critical
second step. And the money you spent for homeownership
counseling was also critical.
Ms. Velazquez. Yes, and the issue of transparency.
Mr. Zinner. Yes, I mean, well, just going back into your
question about restoring stability, confidence towards the
secondary market. I think the number one thing that's going to
do that is strong preventative legislation, you know, such as
the Frank bill in the House. And, you know--and, as I stated, I
think there are some improvements in--
Ms. Velazquez. Senator Dodd.
Mr. Zinner. --in the Dodd bill. But, what this is going to
do, you know, I think this is the single most important thing,
because the secondary market will then know that loans that are
sold are viable loans. And, this will restore stability and
integrity to the process, and there will be a secondary market
that is confident that what they're buying is legitimate, and
investors will respond accordingly. I think this is critical.
Ms. Velazquez. Okay. Thank you, very much.
Ms. Azia. And, if I could just add that New York is
considering various reforms, needed reforms with respect to
lending, and it has already implemented some things, like the
required registration of mortgage loan originators, not just
the firms, but the actual employees who will be required to be
registered, and the background check, and comply with ongoing
education requirements. Because, it's not just the borrower who
needs to be educated, it's the people in the industry who are
making these loans.
But, there needs to be comparable Federal legislation at a
national level, setting national minimum standards, so that New
York is not just in the forefront, so that there is a level
playing field for the whole country of these kind of
preventative measures.
Chairwoman Maloney. Thank you. Congressman Meeks.
Mr. Meeks. Thank you, Madam Chairwoman, and I will be
quick.
I think that Mr. Zinner and Mr. Quinn hit on part of what I
wanted my last questions to be. And that is, you know, what--it
only takes a few bad apples to taint the whole bunch. And,
until we get rid of those bad apples, then this whole thing is
going to be a problem.
And, the ways that those--the banks and the larger
mortgagors are at fault, in my estimation, is that you buy the
whole package without knowing that they're good loans, you
know, and that there was more attention paid to the quality of
the loan than looking at the buyers--the mortgagees. Then, you
would know that this is a bad loan and that would, to some
degree, I believe, begin to stop some of what's the practice
that's going on.
And, I couldn't agree with you more, with the work that
Nydia has done in strengthening the FHA is absolutely critical,
because my parents wouldn't have had a home if it wasn't for
FHA and Veterans--VA loans. That's tremendously important.
But, the real question I have is just Mr. Zinner's
recommendation. He made two recommendations, and I ask Mr.
Quinn what do you think about it? Changing the Bankruptcy Law?
He said that was number one, changing the Bankruptcy Law.
I think we all agree about that we need remediation with
reference to--it's critical, remediation is critical. But, what
about that? What's your opinion on changing the Bankruptcy Law?
Mr. Quinn. I'm not in favor of changing the Bankruptcy Law,
for a couple of reasons. I believe--and I said a minute ago--if
you exhaust all the remedies available through HOPE NOW
Alliance, I believe you will be able to effect the modification
work out repayment plan on your loan, not by going through
bankruptcy. The bankruptcy will not only cause a blight on your
credit record for years to come, while a modification won't, it
will also raise the rate for all borrowers. I don't know the
exact percentage that are in bankruptcy, whether it is 1, 2, or
3 percent. You're going to be raising the rate for the other 97
percent.
It is something that is critical to our business. The
reason that mortgages trade at the tightest spreads of any
financial instrument is because you do have the sanctity of the
mortgage document. It is a secured document. You control the
duration risk.
If you all of a sudden make it an unsecured loan, available
for a cram down, you are going to raise the borrowing cost for
all Americans. I believe that the modifications, through the
HOPE NOW Alliance, will continue to solve this problem.
Mr. Zinner. I just want to state in response to that, you
know, again, I think we would certainly support the notion that
if a borrower can get an affordable modification from his or
her servicer, that that's the number one option, that makes
sense.
But I think we've seen, again and again, and the statistics
bear it out, that we can't rely on voluntary loan modifications
from servicers as a solution. So, what's critical about the
bankruptcy fix, you know, this is an emergency fix, and it
would be available to borrowers to have exhausted all of their
remedies.
And, the critical thing to state is that, in the House
compromise bill, it's only from already existing mortgages.
It's not going to affect the mortgage markets, because it's not
going to affect mortgages that are being originated and then
sold. It's an emergency fix that's narrowly tailored to
mortgages that are already out there and that already exist.
And it's a critical backstop if voluntary modification efforts
fail.
Mr. Quinn. To go back to the point you raised a minute ago,
the number of people who stop making payments long before the
reset date? Our evidence, and this is over a 38-year study that
we track on delinquencies, is that in roughly 70 percent of the
cases, the reason someone loses their home is because they lost
their job, had a major illness, or they went through a change
in their marital situation.
There will be a number of these defaults that are beyond
the remedies available to a homeowner. And we think that the
HOPE NOW Alliance will solve those people that are in their
homes, with an income, that can stay in their home.
Mr. Zinner. But--
Mr. Quinn. It will--it will distract--
Mr. Zinner. But you--
Mr. Quinn. --and it will add to the cost of other
mortgages. You've changed the nature of the instrument forever.
Ms. Velazquez. Will you yield?
Chairwoman Maloney. Yes, absolutely.
Ms. Velazquez. Thank you. But we are not assessing here 30
years of numbers. We are assessing here what is happening to
New York and families across the country in the last 2 to 3
years.
Mr. Quinn. But, you will affect the next 30 years for
future homeowners.
Ms. Velazquez. I guess you need a strong message to know
that we are serious, and that we're going to hold people
accountable.
Chairwoman Maloney. Well, as my colleagues know,
legislation that Mr. Zinner commented about has passed out of
the Judiciary Committee and is scheduled to go to the Floor of
Congress for a vote. I predict that it will pass, because of
the basic fairness argument of the need to keep people in their
homes. But, why in the world would you allow them to
renegotiate on their secondary home, their 5th home, their 10th
home, but not their primary home that can keep many families in
their homes.
I would--Speaker Quinn has indicated she needs her room
back, and we're so pleased to have had time. But, I would like
to end with one question.
And that is, what are other creative ways we can keep
people in their homes? Any new initiatives that we have not
already talked about?
I would like to mention one that came into my office.
Although it would not affect a large group of people, it would
affect some, and that is the idea that employers should be
given incentives--whether it's a tax break or any other type of
incentive--to keep their employees in their homes. They have
flexibilities in their budgets to allow for this crisis
situation, to help them stay in their homes. That is one idea
that a constituent wrote in to me, that I think is a good one,
and deserves to be explored.
And so, I ask our panelists to respond to that particular
idea, and any other idea that you can think of that would help
us keep people in their homes. Obviously, we have ideas going
forward to reform the system. But right now, we have a crisis
in New York and across the country.
And oftentimes legislators ask me, what is happening in New
York? What is New York doing to help people stay in their
homes?
I congratulate the initiative from the Banking Department,
but what other ideas do we have, that we can take back to
Congress?
Thank you all for your excellent work throughout your
lives, and for being here today. Thank you.
Yes?
Ms. Azia. One idea that we are--that is being proposed at
the State level are sort of modifications of the foreclosure
procedures. Last year, we enacted a law that required a
separate notice to go out at the time of foreclosure, on a
separate colored piece of paper, that advised the borrower of
the importance of the situation and to contact a housing
counselor.
We have gotten so many responses to that, but it's kind of
late in the process, because the foreclosure action has already
commenced. So, being considered at the State level are
modifications where a lender would be required to send a notice
prior to foreclosure commencing, advising the borrower of the
situation, that it's a good idea to see a housing counselor,
and staying the foreclosure for a set period of time--say 30
days--in which the borrower and the lender or servicer can
discuss possible solutions to the situation.
So, that's one idea at the State level.
Mr. Quinn. We've encouraged the Congress to allow more
States to expand their tax exempt bond financing. There are
several States that have much higher incidents of delinquencies
and foreclosures--Ohio, Michigan, the places where we've had
job losses. You're going to see more of it in California. That
would be a very effective localized tool to expand relief.
Ms. Gerecke. I want to mention, too, one is the Center for
New York City Neighborhoods here, that Council Member Dilan and
Speaker Quinn have launched. I think it's going to show
tremendous innovation. I think it's very exciting and a
different way of creating a network.
The second is we're trying to work through how to intervene
in the pre-foreclosure stage, trying to avoid some of these--
the investors coming in and buying these homes. And so, we're
looking at ideas like a nonprofit real estate brokerage and
other innovations that we think could really matter in the
process. We're talking to some servicers about that.
But it's very hard with how we're stretched right now to
develop the capacity to actually plan for a program innovation
at this time, to be honest with you.
Mr. Zinner. I think it's critical to be available to offer
support to creative State initiatives. And again, I mentioned
this in my testimony, but I want to reiterate.
You know, there are many States that are trying to set up
refinance programs for people at risk of foreclosure. And, if
successful, these programs could help an enormous number of
borrowers and prevent them from losing their homes--borrowers
who are in unaffordable mortgages but would have the ability to
pay if they were in a fairly priced loan.
And, for the Federal Government to step up and help to
create a secondary market for these loans, so that these loan
programs can flourish, I think, would be a huge contribution
and would help State initiatives that look to keep borrowers in
their homes.
Chairwoman Maloney. Well, thank you so much. Mr. Dilan,
Council Member, you have the last word. And, thank you for
having us here in your City Council.
Mr. Dilan. Oh, thank you, and welcome back to the place
where you launched your career.
I would just say that, right now, I don't have anything.
But, I guess I would--I guess, in my future work, reserve the
right to share our findings with your committee and my local
Representative, Congresswoman Velazquez.
We intend to do more work on this issue, as well as you,
and I think the best thing for us is just further communication
on the topic. But, we're also mindful, as a City Council, that
we can move slightly quicker than Washington but with not the
same amount of effectiveness.
But, just keeping that in mind, we recognize that we want
fairness for all New Yorkers who get a mortgage, but we also
understand that we're the banking capital of the world, and we
wouldn't want to do anything that would cause more layoffs in
the banking industry, because that would certainly diminish our
tax base here in the City, being as most of these jobs are from
here.
So we have to move quickly and strongly, but also carefully
and collaboratively.
Chairwoman Maloney. Okay. Thank you, so much. I thank all
of the panelists.
I'd like to note that some members were not able to be
here. They are in Washington, so the record will remain open
for 30 days for members to submit additional questions to the
witnesses and to place their responses in the record.
I thank everyone. The hearing is adjourned.
[Whereupon, at 12:55 p.m., the hearing was adjourned.]
A P P E N D I X
February 11, 2008
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