[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                  FORECLOSURE PROBLEMS AND SOLUTIONS: 
                  FEDERAL, STATE, AND LOCAL EFFORTS TO 
                 ADDRESS THE FORECLOSURE CRISIS IN OHIO 

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

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 16, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-120

                               ----------
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44-185 PDF                       WASHINGTON : 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
BILL FOSTER, Illinois                THADDEUS G. McCOTTER, Michigan
ANDRE CARSON, Indiana                KEVIN McCARTHY, California
JACKIE SPEIER, California            DEAN HELLER, Nevada
DON CAZAYOUX, Louisiana
TRAVIS CHILDERS, Mississippi

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
           Subcommittee on Housing and Community Opportunity

                 MAXINE WATERS, California, Chairwoman

NYDIA M. VELAZQUEZ, New York         SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
EMANUEL CLEAVER, Missouri            STEVAN PEARCE, New Mexico
AL GREEN, Texas                      PETER T. KING, New York
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
GWEN MOORE, Wisconsin,               GARY G. MILLER, California
KEITH ELLISON, Minnesota             SCOTT GARRETT, New Jersey
CHRISTOPHER S. MURPHY, Connecticut   RANDY NEUGEBAUER, Texas
JOE DONNELLY, Indiana                GEOFF DAVIS, Kentucky
MICHAEL E. CAPUANO, Massachusetts    JOHN CAMPBELL, California
CHARLES A. WILSON, Ohio              THADDEUS G. McCOTTER, Michigan
DON CAZAYOUX, Louisiana              KEVIN McCARTHY, California





































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 16, 2008................................................     1
Appendix:
    June 16, 2008................................................    75

                               WITNESSES
                         Monday, June 16, 2008

Brancatelli, Antony, Councilman, City of Cleveland...............    20
Ford, Frank, Senior Vice President for Research and Development, 
  Neighborhood Progress, Inc.....................................    57
Gross, Michael, Managing Director, Loan Administration and Loss 
  Mitigation Division, Countrywide...............................    48
Guelker, Kimberley, President, Lorain County Association of 
  Realtors.......................................................    51
Howell, Andrew S., Executive Vice President and Chief Operations 
  Officer, Federal Home Loan Bank of Cincinnati..................    44
Kidd, Patricia, Executive Director, Lake County Fair Housing 
  Resource Center................................................    26
Kramer, Edward G., Director and Chief Counsel, The Housing 
  Advocates......................................................    55
Lloyd, Engram, Director, Philadelphia Homeownership Center, U.S. 
  Department of Housing and Urban Development....................    13
Stefanak, Matthew, Commissioner, Mahoning County Health 
  Department.....................................................    24
Tisler, Lou, Neighborhood Housing Services of Greater Cleveland..    53
Van Buskirk, Michael, President and CEO, Ohio Bankers League.....    45
Warren, Chris, Chief of Regional Development, Office of the Mayor 
  of Cleveland, Ohio.............................................    17
Wozniak, Tina Skeldon, President, Lucas County Commissioners.....    22
Zurz, Kim, Director, Department of Commerce, State of Ohio.......    15

                                APPENDIX

Prepared statements:
    Carson, Hon. Andre...........................................    76
    Kaptur, Hon. Marcy...........................................    77
    Kucinich, Hon. Dennis J......................................    83
    Waters, Hon. Maxine..........................................    93
    Brancatelli, Antony..........................................   101
    Ford, Frank..................................................   309
    Gross, Michael...............................................   320
    Guelker, Kimberley...........................................   326
    Howell, Andrew S.............................................   335
    Kidd, Patricia...............................................   342
    Kramer, Edward G.............................................   360
    Lloyd, Engram................................................   397
    Stefanak, Matthew............................................   400
    Tisler, Lou..................................................   403
    Warren, Chris................................................   439
    Wozniak, Tina Skeldon........................................   445
    Zurz, Kimberly A.............................................   450

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Foreclosure Prevention Resources.............................   467
    Freddie Mac Consumer Resources...............................   474
    HUD Maps.....................................................   479
    Article from The Morning Journal, dated June 6, 2008.........   484
    Tables from Policy Matters Ohio..............................   485
    Report from the Center on Urban Poverty and Community 
      Development................................................   491
    Report from The Slavic Village Vacant and Abandoned Property 
      Task Force.................................................   507


                  FORECLOSURE PROBLEMS AND SOLUTIONS: 
                  FEDERAL, STATE, AND LOCAL EFFORTS TO 
                 ADDRESS THE FORECLOSURE CRISIS IN OHIO 

                              ----------                              


                         Monday, June 16, 2008

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:30 a.m., at 
the Joseph E. Cole Center for Continuing Education, Cleveland 
State University, 3100 Chester Avenue, Cleveland, Ohio, Hon. 
Maxine Waters [chairwoman of the subcommittee] presiding.
    Members present: Representatives Waters and Kaptur.
    Also present: Representatives Wilson, Kucinich, Tubbs 
Jones, and Sutton.
    Mrs. Tubbs Jones. I am Stephanie Tubbs Jones. I am the 
Congresswoman for the 11th Congressional District of Ohio. I 
would like to welcome you to the 11th Congressional District 
and please join me in welcoming my colleague from California, 
our chairwoman, Maxine Waters, and my colleagues from across 
the State of Ohio for this significant hearing.
    We are being hosted today by another alma mater of mine, 
Cleveland State University. And I would like for you to join me 
in welcoming the president of Cleveland State University, 
President Michael Schwartz.
    Mr. Schwartz. Thank you, Congresswoman Tubbs Jones, and 
welcome, Chairwoman Waters. We're glad to have you and all 
members of this delegation here for a conversation about 
probably one of the two most pressing problems facing this 
entire Nation, and I hope that this turns into an important 
learning experience for all of you who have come here today.
    The Maxine Goodman Levin College of Urban Affairs is 
probably the premiere college of urban affairs that studies 
issues of housing and matters of predatory lending and so on. 
And so it's really quite fitting that this hearing be held on a 
campus so devoted the amelioration and solution of issues like 
this.
    Having said that as the University's president, I will try 
to do something reasonably intelligent and get out of the way 
of the real business that you're here for today. Thank you.
    Mrs. Tubbs Jones. Thank you. Madam Chairwoman.
    Chairwoman Waters. This hearing of the Subcommittee on 
Housing and Community Opportunity will come to order.
    Good morning, ladies and gentlemen. I would like to start 
by thanking Dr. Michael Schwartz, president of Cleveland State 
University for allowing us to use this space for today's 
hearing on ``Foreclosure Problems and Solutions: Federal, 
State, and Local Efforts to Address the Foreclosure Crisis in 
Ohio.'' The University has also kindly allowed us to use some 
additional rooms to conduct a foreclosure workshop where local 
housing counselors, Legal Aid groups, and mortgage servicers 
are available to work with borrowers trying to avoid 
foreclosure.
    I would especially like to thank our Ohio Representatives 
here today for requesting that I hold a field hearing focused 
on the foreclosure crisis and responses to it in the State of 
Ohio. Your Representatives have been a powerful, persuasive 
voice in Congress on behalf of Ohio's residents and 
neighborhoods, which have been devastated by subprime lending 
and the turmoil that has spread through the mortgage markets, 
and, eventually, the entire economy. In fact, I can attest that 
every Ohio Member sitting beside me today has played an 
extraordinarily active role in the Federal response to this 
crisis.
    Representative Kaptur has been a persistent voice in our 
Democratic caucus for taking bold action on the foreclosure 
crisis generally, and for holding this field hearing in 
particular. Representative Kucinich, in his role as chairman of 
the Domestic Policy Subcommittee of the Government Oversight 
and Reform Committee has painstakingly examined the causes and 
characteristics of this growing problem, including holding a 
joint hearing with my subcommittee less than a month ago which 
focused on how best to target Federal aid to neighborhoods and 
communities facing block after block of foreclosed and 
abandoned properties. The Ohio delegation's efforts to address 
the crisis have been bipartisan, with Representatives Kucinich, 
Wilson, Pryce, and LaTourette--who wanted very much to be here 
today. I hope that Representative Pryce will join us--some did 
advise us that they would have unavoidable conflicts. They have 
also worked to contribute key amendments to the bill I 
introduced, H.R. 5818, the Neighborhood Stabilization Act of 
2008. That bill, H.R. 5818, would provide $15 billion in grants 
and loans, with over $800 million of this amount to the State 
of Ohio, for the purchase, rehabilitation, and resale or rental 
of foreclosed and abandoned properties. My Judiciary Committee 
colleague Representative Sutton joined us in an effort to make 
sure that bill passed the House. And all of us here are working 
diligently to see that these critical resources are retained as 
our chamber negotiates with the Senate on the elements of the 
foreclosure rescue package that will eventually make it way to 
the President's desk, and hopefully that will be done by July 
4th.
    Last, but certainly not least, I want to thank 
Representative Stephanie Tubbs Jones, not only for the 
tremendous logistical support her office and her staff have 
provided to the subcommittee in putting this hearing together, 
but also for really opening my eyes to the scope of the 
foreclosure problem here in Ohio almost 2 years ago. I was here 
working on a campaign, and she asked if I was coming to a town 
hall meeting that residents had organized who were very angry 
about the fact that there were so many abandoned houses in 
their neighborhood. This is long before Members of Congress and 
others understood what was happening with the foreclosure 
problem.
    I saw residents who were upset that their neighborhoods had 
so many abandoned homes, the grass was overgrown, and the 
copper had been stripped out. They were asking for answers, and 
nobody had answers because no one really understood what this 
was all about. But it was because of her that I began to pay a 
lot more attention and I want to thank her for that today. 
Thank you very much.
    Because of the challenges it has faced economically over 
the past few years, with the loss of manufacturing jobs and 
population from certain parts of the State, Ohio was truly the 
``canary in the coal mine'' of the foreclosure crisis, 
vulnerable to subprime lending and its aftereffects much 
earlier than the rest of the Nation.
    Ohio has contended with rising foreclosures since 1995. 
According to Policy Matters, from whom we will hear today, the 
number of foreclosures in Ohio has quintupled since that year. 
Ohio has consistently ranked in the top five States monthly in 
foreclosure filings during the recent crisis. In May of this 
year, the State ranked 7th nationally, with 12,295 foreclosure 
filings, or 1 filing for every 410 households.
    As the senior member of the Financial Services Committee 
from California, which has been ranked first or second in 
foreclosures for most of the past year, I can certainly confirm 
that the rest of the Nation is confronting the problems that 
Ohio has grappled with for some time. Foreclosure filings in 
May are up 7 percent from April, and fully 48 percent from a 
year ago. Over 260,000 properties received foreclosure filings 
last month, or 1 in 483 U.S. households.
    Today, we are here to learn about where things stand in 
addressing these problems, specifically, the impact of existing 
and potential Federal, State, and local efforts to prevent 
further foreclosures and to help stabilize neighborhoods that 
have already seen too many of them. I am here primarily to 
learn, so I will turn things over shortly to my Ohio colleagues 
and the witnesses. I will close, however, by noting that I am 
particularly interested in two issues. First, I would like to 
know whether Ohio stakeholders believe that the recent actions 
taken by the House of Representatives, including passage of the 
Neighborhood Stabilization Act as well as a broad housing 
rescue package that proposes a greatly expanded role for the 
FHA and the GSEs in preventing further foreclosures, might be 
helpful to them if enacted into law.
    Second, I would like to hear specifics about the efforts of 
the major mortgage servicers in the State to engage in loss 
mitigation. Unfortunately, the data provided by the voluntary 
mortgage industry loss mitigation initiative, HOPE NOW, have 
been incomplete and opaque, and I'm not the only one say that. 
Treasury Secretary Paulson and, more recently, the Office of 
the Comptroller of the Currency, have expressed similar 
concerns. But the figures HOPE NOW does provide, coupled with 
feedback from constituents facing foreclosure and counselors or 
attorneys helping them, continue to trouble me. For example, of 
the 1.5 million loan workouts HOPE NOW members have executed 
since July 2007, fewer than one third have been loan 
modifications. The rest are repayment plans, which can often 
just postpone the day of reckoning on a subprime adjustable 
rate mortgage, or so-called ``ARM'' loan. Indeed, of the over 
600,000 subprime ARMs scheduled to reset in the first 4 months 
of 2008, less than 3 percent received loan modifications from 
HOPE NOW members of 5 years or longer, the loss mitigation 
approach recommended by many, including FDIC Chairwoman Sheila 
Bair, one of the few regulators to sound the alarm early in 
this crisis. And the stories I have heard from distressed 
borrowers and their representatives at previous field hearings 
and town halls in my own district suggest that engagement with 
members of the HOPE NOW Alliance is neither as smooth nor as 
productive as the Alliance's press releases and testimony 
before Congress suggest.
    For this reason, I introduced H.R. 5679, the Foreclosure 
Prevention and Sound Mortgage Servicing Act, which would 
require mortgage servicers to engage in reasonable loss 
mitigation. In particular, the bill would force them to focus 
on providing loss mitigation offers that are affordable to the 
borrower for the long term, something we don't know with 
respect to any HOPE NOW loan workout, be it a repayment plan or 
a loan modification, because the Alliance members don't report 
the affordability standards they use.
    I am looking forward to hearing from the witnesses about 
mortgage servicers' work here in Ohio, as well as in local and 
State government efforts to prevent foreclosures and address 
the foreclosed and abandoned properties problem.
    Representative Wilson and I are regular members of the 
subcommittee present today, but I would like to ask unanimous 
consent that each of the Members of Congress attending be 
considered part of the subcommittee for the purpose of today's 
hearing. Without objection, it is so ordered.
    I would like to recognize our subcommittee members for 
their opening statements. I will be alternating the parties and 
the subcommittee members. We do not have some of our members 
here today who serve on the committee, but we will start with 
Congressman Wilson, who is recognized for 3 minutes.
    Mr. Wilson. Thank you, Chairwoman Waters, for convening 
this field hearing today, especially here in the State of Ohio.
    I truly appreciate all that you have done to help put an 
end, or certainly the beginning of the end, to this foreclosure 
crisis. I'm happy that you chose to hold a hearing here in my 
State to get a better view of what is going on, on the ground.
    I also want to thank my Ohio colleagues, especially 
Congresswoman Pryce and Congressman LaTourette who are on the 
committee with me. I am proud to have worked with them on the 
housing legislation produced by our committee this year. 
Together, we were able to bring more money and more help home 
to Ohio.
    Today's hearing is particularly significant. As the 
Financial Services Committee continues to work on this crisis, 
it is important to look at our State. Ohio suddenly became one 
of the Nation's worst home-loan default zones last year with an 
88 percent spike in foreclosure proceeding.
    Ohio filings included about 90,000 properties, with some of 
the properties generating multiple court entries as they moved 
through the foreclosure process in 2007. That represents nearly 
2 percent of all Ohio properties. By almost every measure, the 
outlook for Ohio is bleak.
    But there is good news. I would like to take this 
opportunity to highlight some of the innovative steps that our 
State has taken to address this issue.
    In Governor Strickland's first few months in office, he 
formed a Foreclosure Prevention Task Force and charged this 
diverse group with developing recommendations to address 
various stages of the foreclosure process. Since the release of 
the recommendations in September, administrative officials and 
our State legislature have worked diligently to address many of 
these recommendations. Recently, Governor Strickland and Ohio's 
Director of Commerce, Kim Zurz, announced that nine mortgage 
loan servicers agreed to sign the ``Compact to Help Ohioans 
Preserve Homeownership.'' It is the first agreement of its kind 
in the Nation. The document is a pledge by servicers that they 
will work with the State in making every possible attempt to 
prevent default loans and foreclosures in Ohio.
    The principals agreed to include a willingness to engage in 
a substantial and large-scale loan modification effort for 
adjustable rate mortgage resets and subprime mortgages. That is 
something that Congress is working to provide Federal insurers 
if lenders are willing to take a haircut. The agreement also 
encourages good-faith attempts to contact at-risk or defaulting 
borrowers as soon as possible. It also creates an incentive for 
staff and foreclosure counsel to modify loans rather than 
foreclose.
    These steps taken by the State of Ohio are vitally 
important, but now they need a boost from Congress. We are 
working on that. The House has passed a two-part housing 
package that would first include loans and grants for States to 
help keep families in their homes in flexible ways that are 
best for that State also. The second part is a voluntary 
program that would permit FHA to provide up to $300 billion in 
new guarantees to help refinance 1.5 million at-risk borrowers. 
I am happy to have worked on these bills when they came through 
our committee.
    Congresswoman Pryce, Congressman LaTourette and I have 
worked together to modify the funding formula of the first part 
of the House package resulting in loans and grants worth 
millions more for Ohio.
    In addition, I was able to include demolition as one of the 
ways that our State could use these loans and grants. Now 
States will be able to clean up the blight, help families stay 
in their homes and rehabilitate long-vacant and decrepit 
housing. States will be able to stabilize entire neighborhoods 
that are hurting because of foreclosures.
    This was particularly important in Ohio because many 
foreclosed homes have been empty for a long period of time. 
Many of them have been stripped of their copper piping and 
other valuable parts. To rehabilitate such homes is often more 
expensive than demolishing them. And in fact, in many pockets 
of my State, we have homes that are no longer needed because of 
the population decline.
    I look forward to hearing from Matthew Stefanak today. He 
really helped me understand how blight can affect an entire 
neighborhood. He has been an real asset to us and I appreciate 
that.
    In closing, I would simply like to praise Governor 
Strickland and his team once again, and encourage Congress to 
act expediently, and to leave you with one final thought: I 
believe we need to get back to our roots and the fundamentals 
that have been so successful to the people of Ohio in the past.
    Many years ago, when I was on a bank board, you loaned to 
those who would be able to pay the loan back. You kept an eye 
on those in trouble and you reached out when it looked like 
they needed help. I believe that many in Ohio have kept to 
those standards. But I also believe that many need to get back 
to those standards.
    I look forward to hearing the testimony from our panelists 
today. Thank you.
    Chairwoman Waters. Thank you very much. Congresswoman 
Kaptur.
    Ms. Kaptur. Thank you very much, Chairwoman Waters. On 
behalf of our entire Ohio delegation, thank you for accepting 
our invitation to come to Ohio to conduct one of the most 
important hearings your committee has held outside of the 
Nation's capital. It's a joy to be with our colleagues as well 
and we selected Cleveland because we know it is it Ground Zero 
in mortgage foreclosure challenges facing our great Buckeye 
State.
    Our State provides a telling picture of what is a recurring 
problem in our Nation, the largest washout of private savings 
in the form of home equity in half a century. Pew Charitable 
Trusts estimate that just in the next 2 years, the loss in 
property values will total over $356 billion, and that the cost 
of this is really well over $1 trillion in the washout coast to 
coast. Nationally, 9 million homeowners now owe more on their 
mortgage than their home is worth, the largest share since the 
Great Depression. In fact, for the first time since World War 
II, net home equity is now negative, that is below 50 percent. 
That is to say that as a whole, Americans now owe more on their 
homes than they are worth. This is an enormous loss of real 
wealth that affects not just the homeowners, but our Nation as 
a whole. For the first time ever, the securitization of these 
mortgages into the international capital market both fueled and 
masked this risky process.
    The effect has been to make our Nation and its banks more 
dependent than ever on foreign borrowing and infusions of 
foreign capital. America is now is now a debtor Nation both 
publicly and privately.
    When a homeowner can't make ends meet they lose their 
homes. But when a giant firm like Bear Stearns can't make ends 
meet due to this crisis, the Chairman of the Federal Reserve 
and the Secretary of the U.S. Treasury get involved. Billions 
of dollars of capital from foreign places such as Abu Dhabi are 
found to fill the gap, mergers of banks expeditiously and the 
Fed opens its New York window with our taxpayers becoming the 
insurance company of last resort pledging the full fees and 
credit of the United States not just to the big banks, but for 
the first time, to brokerages as well.
    Will ordinary homeowners in our Nation ever be afforded 
equal attention by the Fed and the Treasury? It does not appear 
to be so with the rate of foreclosures and bankruptcies rising 
every month.
    I want to thank all of those who are working so hard to 
pick up the pieces, but we will note that large shares of the 
cost of this crisis are being shifted to the public sector, to 
the taxpayers. And I would like to enter this opinion for the 
record and provide additional material as attachments. Congress 
must get tougher in its own investigations of what brought 
America's financial system to this predicament. An equity 
washout of this magnitude does not happen by spontaneous 
combustion. It was willed to happen.
    Specific people in specific places set the pieces in place 
to allow this to proceed. Many of them have been handsomely 
rewarded. America needs to know who they were and are; I 
believe Congress should authorize a full independent 
investigation into the roots of this crisis and trace back the 
unstable period following the savings and loan crisis in the 
late 1980's. The development of the international mortgage 
securitization instrument itself deserves more attention. In 
effect, this became a clever and high-risk credit device with 
little transparency that acted like a bank. It created money or 
at least the illusion of it in a Ponzi-like scheme or manner 
and it did so without the normal regulatory restraint of full 
accounting and proper examination. How could the national 
regulators let that happen?
    Well, the first institution to embark on subprime lending 
was Superior Bank of Hinsdale, Illinois, ultimately bought by 
Charter Bank here in Ohio. Superior Bank was created out of the 
Resolution Trust Corporation. By the late 1990's, Superior's 
return on assets was 7.5 times the industry average. It held a 
very different portfolio. It had a CAMEL rating of 2, yet its 
executives were financially rewarded for presiding over ruin. 
No Federal regulator stepped in to properly examine the 
institution. Why? Where was the Office of Thrift Supervision? 
What happened to appraisal and underwriting standards? Assuming 
many of these loans were moved to market through Freddie Mac 
and Fannie Mae, why is it their standard and HUD's regulatory 
oversight fall short? How were their boards and executives 
compensated during those years when risky practices 
proliferated? Which board members and which financial 
institutions and brokerages, regulators, and secondary market 
bodies allowed these risky and predatory policies that 
escalated this equity draw down?
    Do we have any evidence that any of those board members 
personally benefitted from their board decisions? Through which 
domestic and international institutions were the original 
securitizations approved? Which persons did it? Which 
regulatory agencies sanctioned the process? What role did the 
U.S. Secretary of the Treasury, the Securities and Exchange 
Commission, and the Federal Reserve play in allowing these 
practices to flourish?
    I find it troubling, for instance, that even when it became 
known that firms like Countrywide had done great damage to the 
mortgage market, the Federal Reserve maintained them as one of 
a handful of primary Treasury security dealers. Who and which 
firms created the very first subprime loan and rolled it into 
an international mortgage securitization instrument? What set 
of individuals were involved in moving it and clearing it to 
market? Frankly, Congress doesn't know.
    Where are the audit trails for the thousands of those 
subprime loan transactions that international securitizations? 
Congress doesn't know.
    In 2001, the Federal Deposit Insurance Corporation placed 
the largest fine in American history, $450 million, on Superior 
Bank. Though we know--and I'll be ending here, Madam 
Chairwoman, with two sentences, though we know what Superior 
and what Merrill Lynch were involved in, in moving securities 
paper, we do not know which third parties were involved in 
packaging it, their fees, and how that paper was moved into the 
international market. For a crisis of this proportion, the 
American people have a right to know the whole story.
    I'm here to learn from the witnesses today what Congress 
can do to help remedy the current crisis, but also trace its 
roots to avoid a further raid on the private savings of 
America's homeowners.
    Chairwoman Waters. Representative Kucinich.
    Mr. Kucinich. I wanted to thank Congresswoman Kaptur for 
that very wise and perceptive commentary on this situation. And 
you, Madam Chairwoman, for your work which has been exemplary 
and enormously helpful on behalf of every American, your 
experience as a community organizer, as someone who has come 
through the political process. And I want to thank you for 
bringing us together here in Cleveland, Ohio.
    I have here, without objection, Madam Chairwoman, a 
statement for the record from Congressman LaTourette. 
Congressman LaTourette is scheduled for a tour of Ashtabula 
Harbor with the Commandant of the Coast Guard and he is with 
the Commandant right now and he asks that this statement be 
entered.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Kucinich. Thank you, Madam Chairwoman. Mr. Delfin, who 
is our staff attorney, is going to be assisting us as I go 
through these maps which will tell the story.
    Cleveland is at the epicenter of the national problem of 
foreclosure. Last year, the Center for Responsible Lending 
projected that one out of five subprime mortgages originated 
during the previous 2 years will end in foreclosure. These 
foreclosures will cost, at a nationwide estimate, homeowners as 
much as $164 billion. This is a massive transfer of wealth.
    Here in Cleveland, we can already see the damage. This 
series of maps illustrates the problem here in Cuyahoga County.
    Look at the first map. This is where depository banks made 
loans in 2005. You see the sideways ``V'' highlighted in light 
green. Let me tell you what that geographical area represents. 
It is the area in the City where the depository banks made very 
few prime loans.
    Now look at the next map of subprime loans made in 2005. It 
is highlighted in reds and oranges. These are subprime loans. 
Look at the ``V.'' This is where the highest number of subprime 
mortgage loans were made during the same year.
    Now look at the next map. Again, you see the same ``V'' 
pattern and the same place. Here, the red dots indicate the 
number of foreclosures in the first 10 months of 2006. These 
maps tell you that there is a clear and self-reinforcing 
correlation between the low number of prime loans, the high 
number of subprime loans, and the high number of foreclosures.
    Now look at this next map. Again, the familiar sideways-
lying ``V'' shape. But here the foreclosures, indicated by blue 
dots, are superimposed on the neighborhoods. Red indicates 
predominantly African-American neighborhoods. Again, we see a 
perfect match.
    The next map shows the relationship among high-cost 
mortgage loans made to investors in 2006, increases in vacant 
homes in 2007 and 2008, and high minority population based on 
the 2000 census. Again, we see the sideways ``V,'' but we also 
see increases in high-cost loans and vacant properties in the 
outer suburbs and outlying counties.
    The last map highlights only the census tracts with all 
three factors: the highest cost mortgages, the greatest 
increase in vacant properties, and the highest minority 
populations. We still see the sideways ``V,'' but where 
previously the phenomenon was mainly in African-American census 
tracts in eastern Cuyahoga County, we see the problem spreading 
west to census tracts with larger Hispanic and Arab 
populations. Now, it looks more like a diagonal ``T,'' 
spreading in every direction it can spread in Cleveland--east, 
south, and now west.
    Lack of access to prime loans, a high frequency of subprime 
loans, and a high rate of foreclosures are by no means specific 
to any racial group, but the pattern with respect to the 
African-American community certainly carries a whiff of 
America's bleak past.
    Now how did our City get to this point?
    The Domestic Policy Subcommittee, which I chair, has 
initiated a broad-reaching examination of the predatory 
mortgage and subprime lending industries, and the Federal 
regulators overseeing the Nation's banking industry. As part of 
that effort, the Domestic Policy Subcommittee intervened in a 
major bank merger in Ohio between Huntington Bank and Sky 
Financial. We asked the Federal Reserve Bank of Cleveland, 
which is the primary regulator, to expand the public comment 
period and to hold a public hearing. Instead of giving the 
merger greater scrutiny in light of the mortgage crisis and 
particularly this phenomenon in Cuyahoga County, the Federal 
Reserve and the Office of the Comptroller of the Currency 
rubber-stamped the merger based on the banks' self reporting of 
Community Reinvestment Act compliance.
    As a result of that merger, we see more depository bank 
closures in low- to moderate-income communities, including 
Euclid and Cleveland here in Cuyahoga County, as well as 
Canton, Grandview, Lima, New Philadelphia, and Revanna. And as 
we can see from the newest data, the problem is getting worse.
    Madam Chairwoman, because of the Waters Amendment which you 
drafted to the Banking and Branching Efficiency Act of 1994, 
the City of Lima, Ohio, held a meeting to determine what 
actions must be taken due to the Huntington bank branch closing 
there. Last week, a similar meeting was held in Cleveland due 
to the Huntington branch closings in Cleveland and Euclid. We 
don't know what, if any, result will come of these meetings 
with the Federal Reserve, the Office of the Comptroller of the 
Currency, and the Nation's and State's other bank regulators, 
banks, and community representatives. However, with your 
leadership and understanding of the problems facing our cities 
nationwide, and particularly here in Ohio, the Waters Amendment 
was able to be invoked so we can pay attention to its 
effectiveness where more depository bank branches have been 
closed in low- to moderate-income communities. It is now up to 
us to listen carefully to what the witnesses today say about 
the crisis in Ohio and to find ways to supplement the mandate 
of our Nation's regulatory agencies where necessary to get out 
of the current crisis and avoid similar ones in the future.
    Again, I want to thank you, Madam Chairwoman, and I do want 
to say that I know that your whole life is about fairness and 
equity. We have to find a way to bring about some kind of 
equity for good people who had everything they worked their 
lifetime for stolen from them by unscrupulous lending and sharp 
mortgage practices. I think if this committee can do anything, 
we need to delve very deeply into who precipitated, who made 
the money, and to see if there's any way that we can find 
remedies for people who have been cheated out of their dream of 
a lifetime.
    I thank the Chair again, and I look forward to hearing the 
testimony.
    Chairwoman Waters. Thank you very much.
    Congresswoman Tubbs Jones.
    Mrs. Tubbs Jones. Good morning, again, and thank you, Madam 
Chairwoman. When I first came to Congress, I served on the 
Financial Services Committee, and she was the ranking member on 
the Housing Subcommittee at the time. Now she chairs that 
subcommittee and we continue to move forward to try to 
accomplish things within our community.
    Before I go any further, I am joined by a number of my 
elected official colleagues from across my Congressional 
District. I am going to ask those who are here to kindly stand 
because their communities need to know the fact that you are 
here in support. Zach Reed from the City of Cleveland, I see 
Council Member Brian Cummins, West Side, City of Cleveland. I 
see the Mayor of the City of South Euclid, Georgine Welo. I see 
the President of the City Council of East Cleveland, Gary 
Norton. I see the Councilman from Ward 18, Jay Westbrook. Thank 
you all for joining us this morning. This is an issue that we 
have been paying attention to throughout Cuyahoga County.
    I know that there are other people who are represented here 
from the AGs Office, Ed Krause and Nancy Rogers on behalf of AG 
Nancy Rogers. And the list goes on. I thank you very much for 
being with us today.
    I want to say that in the City of Cleveland, we have been 
paying attention to predatory lending for a long time, but no 
one was hearing us. In 2001, I introduced a piece of 
legislation called the Predatory Lending Reduction Act of 2001, 
trying to focus in on brokers who were not telling people that 
they represented a company and got a commission, and brokering 
these foreclosures. I knew that if I shamed the financial 
district, then people would start paying attention to predatory 
lending.
    I also recall in yesterday's Plain Dealer an article about 
the impact and I want to celebrate my colleague, Jim Rokakis, 
the Treasurer of Cuyahoga County. We know that school systems 
are going to suffer as a result of reduction in dollars coming 
into, captured as a result of --
    We also know that next generations are going to suffer 
because working class families pass homes from one generation 
to the next to give their kids a start. These days there won't 
be homes to transfer from one generation to the next.
    I could go on, but I have a statement, Madam Chairwoman, 
that I seek unanimous consent to have placed in the record. I 
am just so thankful that you came up here.
    There are a lot of organizations that have been working 
consistently around this issue such as the Ohio Credit Union, 
and the Eastside Organizing Project Housing Advocates.
    Cleveland Housing, I just thank you for your diligence. The 
Legal Aid Society, all of you. We have to continue fighting on 
behalf of the people that we represent and get this fixed. I am 
pleased to say that a little piece of that 2001 predatory 
lending legislation I introduced got included in recent 
legislation that was introduced by my colleague, Maxine Waters, 
and the chairman of the Financial Services Committee, Barney 
Frank. We have to be consistent. We have to make our 
communities stay in place.
    Thank you, Madam Chairwoman. Thank you for bringing this 
home to us and focusing in on the State of Ohio and all my 
colleagues. It is nice to see all of these Members of Congress 
right here.
    Thank you.
    Chairwoman Waters. Congresswoman Betty Sutton.
    Ms. Sutton. Thank you very much. Thank you for inviting me 
to participate here today and I would like to recognize the 
strong leadership of Chairwoman Maxine Waters on this issue. 
Chairwoman Waters has been a tremendous advocate during her 
whole career for working families, and with the crisis that we 
face, this has been no exception. She has been stellar.
    I also want to thank my other colleague, Representative 
Tubbs Jones, for hosting this event and Cleveland State as 
well.
    The foreclosure crisis has been devastating for Americans 
all across the country, from all walks of life. Just recently, 
one of my staff members told me of an experience he had right 
in our office building. When he entered into an elevator, and 
as they rode on the elevator between the floors, there was a 
woman who got on and she started to sob and my staff member, 
being the great caseworker that he is, he reached out and asked 
her if he could be of assistance and asked her what was wrong. 
She conveyed to him that she was on her way to sell her wedding 
ring to try and make the house payment to save her house from 
foreclosure. And then not long after that, I received an e-mail 
from a person whom I had come to know who has been actively 
involved in the community, a woman who had a job, but lost her 
job, and is actively trying to find a job that will help her 
make ends meet. The e-mail said that she had done some art work 
in her spare time, paintings, and didn't really want to sell 
them, but she was going to try to find some people who might be 
interested in buying them. So people are trying and I am the 
proud owner of some of her artwork, by the way.
    Statistically speaking, in recent months, this crisis of 
historical portions, the Mortgage Bankers Association recently 
released numbers showing that more than a million homes are in 
foreclosure, which is the highest number reported since they 
began collecting those statistics in 1979.
    RealtyTrac on Friday released numbers showing that for 29 
straight months, foreclosure rates have seen a year-over-year 
increase nationwide. And yet economic experts predict sadly 
that we haven't seen the worst of it yet.
    Ohio has consistently been at the forefront of this crisis, 
as the chairwoman rightfully points out. We are the canary in 
the coal mines. We see a massive exodus of manufacturing jobs 
that have long been the backbone of this State's economy. Food 
prices and fuel prices keep going up and families who were 
already struggling to make ends meet are now at that breaking 
point. The credit crisis which has been discussed here has made 
it difficult for families to purchase new homes or to refinance 
old loans. And all of these factors can compound the problem 
and create a spiral effect that's difficult to break out of.
    Although the figures from RealtyTrac released last Friday 
show that the number of foreclosure filings in Ohio have 
declined by 7 percent, the State still has the dubious 
distinction of ranking 9th in the area nationally; 50 to 60 
percent of homeowners who received a foreclosure filing will 
eventually lose their home. That has to change. That translates 
into a staggering human and economic cost.
    In many respects we are still in unchartered territory and 
the types of actions necessary to mitigate the crisis will 
require solutions that move beyond what we have now come to 
know and embrace.
    Too often Federal, State, and local governments operate in 
their own spheres. What we are facing is unlike anything we 
have ever faced before and it will require innovative new ways 
to address the problems of those we represent. That is why I am 
so happy to see so many people from various levels of our 
government here today to help become part of the solution, a 
part of this charge that will overcome this challenge, 
including the housing advocates and the advocates who are out 
there being stricken so hard by the consequences of our plight.
    We're fortunate to come from a State where we have leaders 
who are willing to face this head on. The Ohio Foreclosure Task 
Force that the Governor set up generated a number of excellent 
recommendations, one of which was the basis for an amendment 
that I was able to include in H.R. 3915, which passed, as you 
have heard, last December.
    I am also proud that the Ohio legislature quickly acted to 
curb the predatory lending practices that played such a major 
role in precipitating this crisis. And as you have heard, we're 
also working on solutions at the Federal level and we have to 
do more. The need is great, the challenge is enormous. We have 
to do everything we can to overcome this crisis because the 
wellbeing of so many families in all of our communities, and 
frankly, the health of our Nation depends on it. In the House, 
we have passed a number of mortgage foreclosure related bills 
such as the Neighborhood Stabilization Act, FHA Stabilization, 
and the Homeownership Retention Act. And these bills provide 
funds to cities and States to purchase and rehabilitate vacant 
homes and provide new refinancing mechanisms through the 
Federal Housing Administration, both of which are critical in 
northeast Ohio.
    We still have significant challenges and I know I'm not 
telling you anything new for those of you who are in this room. 
These challenges lie ahead and that is why today's hearing is 
so important.
    Again, I thank the distinguished committee and I thank the 
distinguished witnesses for being here today and all of you 
gathered because I know you are here because we're looking for 
solutions.
    Thank you.
    Chairwoman Waters. Thank you. At this time, I would like to 
introduce our first panel: Mr. Engram Lloyd, Director, 
Philadelphia Homeownership Center, U.S. Department of Housing 
and Urban Development; Ms. Kim Zurz, director, Department of 
Commerce, State of Ohio; Mr. Chris Warren, chief of regional 
development, Office of the Mayor of Cleveland, Ohio; Mr. Antony 
Brancatelli, councilman, City of Cleveland; Ms. Tina Skeldon 
Wozniak, president, Lucas County Commissioners; Mr. Matthew 
Stefanak, commissioner, Mahoning County Health Department; and 
Ms. Patricia Kidd, executive director, Lake County Fair Housing 
Resource Center.
    I thank you all for appearing before the subcommittee today 
and without objection, your written statements will be made a 
part of the record. You will now be recognized for a 5-minute 
summary of your testimony, and we will start with Mr. Lloyd.

STATEMENT OF ENGRAM LLOYD, DIRECTOR, PHILADELPHIA HOMEOWNERSHIP 
    CENTER, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Lloyd. Thank you, Chairwoman Waters. I appreciate the 
opportunity to speak to you today on behalf of Steven Preston, 
the Secretary of the U.S. Department of Housing and Urban 
Development. I am Engram Lloyd, Director of the Philadelphia 
Homeownership Center.
    The significant effects of foreclosure on our national 
economy and on world markets bring us here today. Congress and 
the Administration have for some time been looking at 
legislative and regulatory options for minimizing foreclosures. 
At HUD, I can report that we are working on both in our efforts 
to mitigate the adverse effects of this market correction on 
borrowers.
    One of the strongest tools we have to protect both 
borrowers and markets is the Federal Housing Administration. As 
you may know, FHA helps individuals secure credit by providing 
mortgage insurance through a private sector distribution 
network that makes owning a home more affordable and safe and, 
therefore, a reality for many borrowers that might otherwise go 
unserved.
    Several times in testimony before Congress last year, HUD 
witnesses stated that many of those who ultimately entered the 
subprime market would have been better off with an FHA-insured 
loan. Many may still be eligible to refinance today. Although 
we cannot go back in time to ensure that each borrower made the 
best decision when obtaining a mortgage, we can provide 
refinancing options when obtaining a mortgage for many subprime 
borrowers. And we can do more to help people make better 
decisions and we can provide new financing options to many 
subprime borrowers and we can do more to help people make 
better decisions going forward through both innovative products 
and counseling support.
    The Administration has taken decisive action to help 
responsible homeowners stay in their homes. Last fall, the 
Administration launched the FHASecure initiative and 
facilitated the creation of the HOPE NOW Alliance, which 
together has helped more than a million struggling homeowners.
    FHASecure is a refinance option designed specifically for 
conventional and subprime borrowers who default on their 
mortgages solely because they can no longer afford the payments 
on their adjustable rate mortgages after the interest resets to 
a higher rate.
    On April 9, 2008, the Department announced a dramatic 
expansion of the FHASecure program to help additional borrowers 
stuck in subprime mortgages, some of whom may owe more on their 
mortgage than their home is worth. Under the original FHASecure 
program, FHA modified its refinancing program to help credit 
worthy homeowners who missed payments after their teaser rate 
reset. Now, FHASecure has expanded its eligibility standards to 
cover borrowers with adjustable rate mortgages who were late on 
as many as 3 monthly mortgage payments over the previous 12 
months.
    FHA has already helped about 250,000 people refinance into 
safer mortgages and with these additional changes, FHA is 
expected to help approximately 500,000 homeowners refinance by 
the end of the year.
    One of the goals of the HOPE NOW Alliance was to develop 
and fund a nationwide advertising campaign to encourage 
delinquent borrowers to seek help through the 888-995-HOPE 
network of HUD-approved housing counselors. HOPE NOW is an 
alliance among counselors, servicers, investors, and other 
mortgage market participants. The Alliance maximizes the 
outreach efforts to homeowners in distress to help them stay in 
their homes. Its purpose is to reach and support as many 
homeowners as possible. The members of this Alliance recognize 
that by working together, they will be more effective than by 
working independently.
    In the fall of 2007, HUD released informational video 
footage containing foreclosure prevention tips and information 
for homeowners who are struggling to pay their mortgage. Among 
other things, the video includes a list of 10 tips on how to 
avoid foreclosure. I suggest anyone who owns a home or who is 
in the market to buy a home visit HUD's Web site at www.hud.gov 
for more information.
    Throughout this year, HUD staff and senior officials have 
sponsored or participated in more than 92 separate 
homeownership retention events in Ohio including clinics, 
fairs, targeted mailings, advertising, and joint task forces 
that reached a combined audience of over one million people. 
The Philadelphia Homeownership Center, in cooperation with the 
Ohio congressional delegation, the State of Ohio, and HUD's 
field offices have conducted housing preservation clinics and 
foreclosure summits to spread the word about foreclosure 
prevention alternatives. Participants besides HUD include 
Fannie Mae and Freddie Mac, various agencies within the State 
of Ohio, local governments, congressional representatives, 
housing counseling agencies, lenders, and Realtors. Of these, 
the most effective have been our Homeownership Preservation 
Clinics in Cleveland and Columbus, which enabled homeowners to 
meet face-to-face with participating lenders, including Wells 
Fargo, Countrywide, and National City, and were attended by 
over 1,000 participants. These clinics also enabled on-the-spot 
counseling sessions with an approved counseling agency.
    In addition to these Homeownership Preservation Clinics, 
staff from the Philadelphia HUD has attended several banking 
and Realtor conventions.
    As you can see, the Department has taken several steps to 
address foreclosures, but there is much more work to do. Thank 
you, and I look forward to your questions.
    [The prepared statement of Mr. Lloyd can be found on page 
397 of the appendix.]
    Chairwoman Waters. Thank you very much. We will now hear 
from Kimberly Zurz.

    STATEMENT OF KIMBERLY A. ZURZ, DIRECTOR, DEPARTMENT OF 
                    COMMERCE, STATE OF OHIO

    Ms. Zurz. Thank you, Chairwoman Waters. I appreciate the 
opportunity to be here on behalf of Governor Strickland and the 
Ohio delegation to be able to speak to you today about the 
impact of foreclosures on our State.
    The mortgage foreclosure crisis has touched all corners of 
Ohio. Virtually every county has recorded an increase in 
foreclosure filings from 2005 to 2008, and has reached the 
highest level statewide in over 13 years.
    We are making concerted efforts here in Ohio to help our 
citizens, and I would like to tell you a little bit about that 
today.
    We have collaborative efforts crossing all of our branches 
of government and expanding into the private sector as well. 
Today, as I explain Ohio's crisis and our innovative efforts to 
combat foreclosures, I hope you share my perspective, and also 
that of Ohio's community.
    The Supreme Court reported, as you know, 83,230 new 
foreclosure court filings in Ohio in 2007. That's a high record 
of over 5 percent over 2006. While we consider the numbers rise 
and the trends are equally alarming across-the-board according 
to the reports of the Association of Realtors. We also 
recognize that we are taking every effort we can to help our 
citizens stay in their homes.
    When we listen to the statistics, we realize the sobering 
reality of them, but they aren't speaking to the human stories 
behind each of those mortgage foreclosures and they don't speak 
to the uniqueness that Ohio has on this issue.
    I have attached to our report some of the statistics since 
1994 for your review to show that Ohio has been facing this 
issue for many, many years.
    In the last couple of years, some States have just begun 
their fight. Obviously, Ohio has had its share of economic 
problems which has contributed to the trend. However, we have 
also been accounted for in the unscrupulous lending until the 
passage of Senate Bill 185, the Homeowner Protection Act.
    I hope you don't lose sight of the fact that Ohio has been 
facing this issue for a number of years as Congress continues 
to work toward legislation to address these issues.
    In Ohio, the impact of vacant and abandoned properties 
varies from one locality to another, from neighborhood to 
neighborhood, but the impact is just as devastating no matter 
where it might be. The scale and impact of the problem is some 
things considered on the level of a natural disaster where 
emergency assistance from the State and Federal Government that 
some have compared to that of Katrina. As you visit our 
neighborhoods, you can see the devastation that we're talking 
about.
    Our cities are trying to do the best that they can to 
combat the problem. More needs to be done to assist them. Ohio 
desperately needs the Federal and State actions to help to 
reduce the impact of the vacant and abandoned properties.
    Ohio's response has been vast. On March 7, 2007, shortly 
after becoming Governor, Governor Strickland established the 
Foreclosure Prevention Task Force of which I was appointed 
chairwoman. This is a group that was brought together to 
provide a unified coordinated statewide effort that would 
respond to our citizens with the goal of keeping as many people 
in their homes as possible. We brought together local, State, 
and Federal government, and housing agency organizations and 
associations, many of which are here today. We asked them to 
put their personal agendas on the table and to put their 
feelings aside and try to work for an overall solution that 
everyone could live with. This is a group that had to come up 
with solutions.
    We held 11 meetings. We had 22 subcommittee meetings and we 
had about 6 months to complete our report. We worked on a very 
short timeline with a great deal of information.
    After we had those meetings, and listened to a lot of the 
testimony, we reported to the Governor on September 10, 2007, 
with report recommendations of the best ideas and the best 
approaches we felt Ohio could use to move forward to address 
the foreclosure problem. We had 27 recommendations and we moved 
forward on each of those recommendations and took action on 
each one of those recommendations to date.
    The most important piece that the country is talking about 
and has been recommended and talked about a little bit today 
was the Compact. The Compact that would help Ohioans preserve 
their homeownership was signed earlier this year, and we are 
hoping that the Compact will be something that we will be able 
to continue to use to help our families be able to work with 
their mortgage servicers and come to some type of workout of 
loan assistance as they move forward.
    Under the Compact, servicers were asked to take all kinds 
of measures. They were asked to increase the loan workouts, 
including adjusting their staff and resources to include major 
improvement, preventive efforts, and loss of litigation. We 
have asked that they report to the Department of Commerce on a 
regular basis. We have asked that they do loan modifications 
and that they work very diligently to actually contact the 
borrower. We recognize that the contact piece is the most 
difficult piece, and many of them tried, but we want to make 
sure that they understand that it is imperative that they make 
that extra effort.
    In December of this year, I met with servicers and their 
trade associations to discuss this proposed Compact. We finally 
agreed on six principles on which we based the final product. 
It substantially matched the spirit of our original 
conversations with the servicers and will help us move forward 
to come to fruition of the Compact that was actually signed 
April 7, 2008, by Governor Strickland, myself, and nine of the 
loan servicers. We will continue to look forward to try to get 
more folks to join us in that Compact in Ohio. We are seeing 
that it is having an impact on our citizens and we hope that it 
is something we will be able to use as an example for others to 
follow.
    We encourage the servicers to join with us to try to help 
those that are not part of the Compact at this time to join 
along with us. The more folks we have following our effort, the 
more helpful it is to our citizens and the more that we can do 
as we reach out across the State.
    We also kicked off what is called Save the Dream. Save the 
Dream is our new effort for the State that tells you how to 
contact the State and the State will then help you to get an 
attorney or a housing counselor and put you in direct contact 
with your servicer. All the efforts we are making on the 
State's end are what we can do, but we also need your help.
    We need Congress' help on many of the things that you have 
before you today. Many of the pieces that you talked about are 
the challenges that we face and if you will be able to move 
forward with some of those pieces regarding housing counseling, 
it would greatly impact what we can do here. Our citizens have 
watched Wall Street be bailed out. They most desperately need 
to be bailed out. There needs to be help for the citizens of 
Main Street, not just those on Wall Street.
    I thank you for coming here and taking the time to learn 
about Ohio. Thank you.
    [The prepared statement of Ms. Zurz can be found on page 
450 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Next, we have Chris Warren, chief of regional development, 
Office of the Mayor of Cleveland.

   STATEMENT OF CHRIS WARREN, CHIEF OF REGIONAL DEVELOPMENT, 
             OFFICE OF THE MAYOR OF CLEVELAND, OHIO

    Mr. Warren. Good morning. Thank you, Chairwoman Waters, for 
bringing this hearing to Cleveland. You're not only welcomed, 
you are desperately needed because Cuyahoga County, and the 
State of Ohio is trying to recover from the devastation caused 
by unchecked predatory lending practices. This has been a 
murderous unnatural disaster, one that has wiped out decades of 
patient community development work, threatened our futures, and 
left thousands of homeowners and renters in the lurch. Call it 
Hurricane Greed.
    Consider the wreckage: 15,000 foreclosures in Cleveland 
filed in 2006 and 2007 and it will hit 8,000 this year; 80 
percent of those are tied to subprime loans. Wreckage: 3,500 
certified tax delinquencies as of March of 2008, a 5-fold 
increase since 2005--5-fold--9,500 vacant residential 
structures and growing as of December in our City, 3 times the 
number in 2005.
    Last year, our City spent out of our general funds, not our 
block grant funds, but out of our general funds, $12.5 million 
on public nuisance abatement, tearing down vacant structures 
that cannot be lived in again, cutting the grass of vacant 
properties. As reported in the Plain Dealer yesterday, sending 
our fire trucks out to arsons at abandoned properties.
    Cleveland Tenants Organization, a very good group in 
Cleveland, reports a sharp increase in evictions. We're talking 
about foreclosures. Why evictions? Because their landlords, 
many of whom are as unscrupulous as the lenders, use predatory 
loans to buy hundreds of properties, turn them into rental 
properties, and once the interest kicked in, they're gone. And 
even though these tenants have paid their rent, they're out. 
They're evicted. Wreckage.
    Our cities are bracing from declines in property tax 
valuations and the consequent loss of sorely needed funds for 
public schools, city services, our inside millage for borrowing 
for public properties and infrastructure is in shambles.
    As Congressman Kucinich indicated, the devastation does not 
stop at our City boundaries. Double the foreclosure, 
abandonment, and public service cost I cited for Cleveland, and 
you have a fair idea of the impacts on Cuyahoga County.
    Who are the plunderers? It's a long list, but the main 
culprits we know, subprime lenders and brokers who 
substantiated loan after loan, underwater loans with bogus 
appraisals while maximizing their fee income through 
questionable assembly line underwriting practices. The real 
estate scam artists whom I mentioned who purchased hundreds of 
properties, low-valued properties in poor neighborhoods with 
subprime loans often in cahoots with the lenders and converted 
them to high-cost rentals, no money put into repairs, and once 
the resets came, they were gone.
    Wall Street. We now know that tens of thousands of 
mortgages originated in Cleveland since 2003 were snapped up by 
some very large financial institutions, all of whom trafficked 
in high risk mortgage-backed securities. And in fact, for firms 
like Deutsche Bank, Merrill Lynch, Wells Fargo, Goldman Sachs, 
and others, it appears the only home mortgage business they did 
in Cleveland during that timeframe involved the acquisition of 
subprime loans, the assignment of this paper.
    The default rate on these loans backed by the titans of 
finance? Better than 60 percent.
    What can we do? Drawing on the work of Cleveland's Vacant 
and Abandoned Property Action Council, here's a summary.
    For people: place a moratorium on the foreclosure of 
occupied properties that would give defendants the chance to 
utilize court-supervised mediation in an effort to restructure 
their loans.
    For people: building on the work already going on that has 
Federal, State, and local governments using every available 
means to compel, not just encourage, lender workouts and loan 
restructuring commitments coordinated with local financial 
counseling efforts.
    For people: as is called for in a number of bills before 
Congress now, increase the amount of FHA mortgage insurance 
available for refinancing restructured subprime loans.
    For people: institute a strict policy by regulatory 
agencies of policing mortgage brokers, appraisers, and the 
secondary market. And as Representative Kaptur said, 
aggressively investigate and prosecute fraud through actions by 
the Justice Department, our regulatory agencies, and anybody 
else we can find to do the job, including Congress.
    Maintain high levels of funding. We need it for the long 
haul for financing literacy and counseling programs.
    Now for communities: hold Wall Street accountable. In 
January, the City of Cleveland, through the leadership of Mayor 
Jackson, filed a lawsuit against 21 Wall Street firms. The 
complaint, based on Ohio's public nuisance statute, asserts the 
defendants could have and should have foreseen massive numbers 
of foreclosures when they purchased thousands of unsafe and 
unsound subprime loans from 2003 through 2007. These 21 
defendants have filed more than 16,000 foreclosure actions in 
Cleveland and Cuyahoga County since 2003. We are spending 
through the nose through public service expenses that are the 
result, money that should go to police, fire, basic city 
services, our suit seeks to recover in this damage.
    So, in addition, we need emergency relief. This is a 
hurricane, Federal relief. Congresswoman Waters, whose 
leadership in introducing the security package in the House of 
H.R. 5818 is a huge step in the right direction. And we have a 
game plan here in Cleveland. Cooperation with community-based 
development corporations, national and local foundations we 
have launched in the State of Ohio, we have launched a 
``Reclaiming Foreclosed Properties'' program led by 
Neighborhood Progress, Inc., Cleveland Housing Network, some 
very experienced community development corporations. This 
initiative will target six city neighborhoods for intensive 
pre-foreclosure workouts, systematic ``property banking'' of 
tax-foreclosed and bank-foreclosed properties, clearance of all 
vacant properties that are unsafe and beyond repair, and the 
redevelopment of homes on terms affordable for low- and 
moderate-income buyers. We have a plan, our county treasurer is 
leading, Jim Rokakis is leading really an incredible effort to 
establish a countywide land reutilization authority or land 
bank that would make it possible to establish and finance a 
countywide entity capable of holding, maintaining, and 
redeveloping abandoned and foreclosed properties.
    These programs constitute a solid framework for converting 
and recovering from Hurricane Greed, the successful and 
meaningful saleable level, meaning resources, and we need it 
fast. We need resources that the Federal Government can 
provide.
    Last March, the City of Cleveland hosted a half-day forum 
on the foreclosure crisis problem. One of the participants 
summed up the situation well. She said, ``With the help of the 
Federal Government, including the regulatory agencies, we might 
recover in 5 to 10 years. Without their help, it will take a 
century.''
    Thank you.
    [The prepared statement of Mr. Warren can be found on page 
439 of the appendix.]
    Chairwoman Waters. Thank you.
    Councilman Brancatelli.

 STATEMENT OF ANTONY BRANCATELLI, COUNCILMAN, CITY OF CLEVELAND

    Mr. Brancatelli. Thank you, Madam Chairwoman, and members 
of the subcommittee for this hearing today. Certainly, having 
been a young, freshman Councilman, I get to sit in the middle 
of these two tables and also have a bottle of water. The 
distinguished chief is here and I'll kind of follow his lead.
    My name is Antony Brancatelli, and I have had the pleasure 
of representing our ward for the past 3 years. Prior to 
becoming a Councilman, I served 17 years as the executive 
director of Slavic Village Development Corporation, one of the 
most successful community-based nonprofits in our city and now 
led by an outstanding executive director, Marie Kittredge.
    Madam Chairwoman mentioned earlier that we want to know how 
it's working. I think I included in your packets at your desk 
you'll see a piece, Fight Foreclosures and Abandoned forum, 
breaking the cycle of abandonment. It was a forum that was 
initiated by Martin Sweeney who supported Jay Westbrook. And 
it's really a highlight of all the organizations and officials 
that are working hard at stopping this abandonment.
    I think if you look at this piece you'll see some of the 
things that we're talking about and breaking the cycle of 
abandonment. Those are detection, prevention, maintenance, and 
redevelopment. You'll see ways that we are trying to change the 
face of our neighborhoods and trying to recover from this 
crisis.
    While tracking this crisis across our City, I have seen a 
record number of negative reassessments and as the chief 
pointed out, the impact has been devastating for our 
neighborhoods and our residents and our county treasurer 
estimates that if our property values drop 10 percent, 
Cleveland stands to lose $10 million. The Cleveland Municipal 
School District will lose $3 million if it drops 10 percent.
    I'm also providing you with a report entitled, 
``Foreclosure and Beyond'' which is a detailed report on 
ownership following the sheriff's sale to Cleveland. This 
report was commissioned by Case University and researched by 
Michael Schramm, Kristen Mikelbank, Claudia Coulton and 
contains a detailed study of the impact of foreclosures. This 
``Foreclosure and Beyond'' really identifies the corporate base 
in our community and the changes that will be impacted by the 
sheriff's sales and it will give you an identifying number that 
you can see what will happen when this occurs.
    Across the City, we have points of blight. You see over 
10,000 vacant and abandoned homes in our community and as the 
chief pointed out, we're spending millions and millions of 
dollars maintaining these homes. Council members have spent 
hundreds of thousands of dollars of their own precious EBG 
dollars and many of you know how previous those dollars are. 
Just to cut lots and maintain some of the vacant homes and keep 
them secured, keep our residents from having to deal with this 
crisis. And we found our weapons of mass destruction in the 
form of Deutsche Bank, and JP Morgan just to name a few, but 
used the Wall Street gold to destroy our community. Wells Fargo 
officials openly admit their dependence on Federal dollars to 
bail them out. Many panelists will talk about how to recover 
from this, but first I want to talk about the impact of the 
crisis in our local community.
    Our community has been the victim of a perfect storm. This 
is not a community with adequate banking presence. We have some 
of the highest quality banks in the region. We have great 
shopping, retail dining, and recreation opportunities in our 
communities. We also have a wonderful employment base with 
quality manufacturers, industry, and service providers.
    What we don't have is an adequate protection from predatory 
mortgage companies, corrupt mortgage brokers, and title 
companies who openly participate in the destruction of our 
company.
    There were a questionable number of mortgages given by a 
handful of mortgage brokers and appraisals which resulted in 
millions of dollars of foreclosures, yet these brokers and 
appraisers are still licensed today. As you go through that 
document, you can see those firsthand. We have residents like 
Barbara Anderson in our community who are working hard to 
identify this fraud and that report clearly puts it in 
perspective. This is not a neighborhood that was not hit with 
hard economic times and market conditions that people would 
believe it was hit hard with predatory lending. This 
neighborhood averages two foreclosures a day. In the last 3 
years, we lost 10 percent of our population and currently have 
1,000 vacant homes.
    Hundreds of homes are condemned and waiting for the 
wrecking ball. Houses are being stripped at an incredible rate, 
and scrap prices are at an all-time high. This was not 
unforeseen.
    We need to develop a Federal housing policy and legislation 
that provides for the continuation of existing leases a minimum 
of 90 days as a determination of the tenancy of the tenants in 
the event of a foreclosure. We all seen the effects of vacant 
homes and keeping families in their homes until suitable and 
appropriate housing makes sense.
    I have seen proposals by the Federal Government; we talked 
about those today. Supporting H.R. 5818 and supporting H.R. 
5870 brings millions of dollars and billions of dollars to help 
save our neighborhoods is critical. Demolition is a critical 
tool for our recovery. We have over 10,000 structures in our 
neighborhood and many of those homes were factory-built and by 
today's standards are functionally obsolete. This proposal not 
only financially condemns these homes, they're now physically 
condemned and should be demolished.
    There are a number of plans in place for reuse of this 
vacant land but what we need is help from the Federal 
Government. We need the Federal Government to place all the 
mortgage companies under stricter government lending laws. We 
need stricter licensing and mortgage brokers and licensing of 
appraisers. We need the Federal Government to make it a 
priority to prosecute mortgage fraud at a high level. We need 
the Federal Government to not bail out banks but to hold them 
accountable for their actions. The city is doing their part and 
will now enforce the registration laws and code enforcement 
laws in at a very aggressive level. The community is doing its 
part to help cut back some of the problems in our neighborhood. 
The nonprofits are doing their part.
    It's my hope that the next President will learn from our 
experience and hit the ground running to change the policies 
and help save our neighborhoods and this year we will see 
meaningful mortgage packages that we can use now coming from 
Congress. Thank you very much.
    [The prepared statement of Mr. Brancatelli can be found on 
page 101 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Next, we will hear from Tina Skeldon Wozniak, president, 
Board of Lucas County Commissioners

  STATEMENT OF TINA SKELDON WOZNIAK, PRESIDENT, LUCAS COUNTY 
                         COMMISSIONERS

    Ms. Wozniak. Good morning, and thank you so much, 
Chairwoman Waters, for this opportunity and to the members of 
the Housing and Community Opportunity Subcommittee for coming 
to Ohio for this very critical and important hearing. I would 
also like to thank my own Representative, Congresswoman Marcy 
Kaptur, for this opportunity. We've been working hard on this 
issue at home.
    I represent 450,000 residents of my county which is located 
about 100 miles from here, as you know. I also come to you as a 
trained and professional social worker, here to share stories 
of the deep worry in the faces of many of our residents.
    I'd like to be able to tell you that our problems are 
unique, but the truth is that Lucas County and Northwest Ohio 
are just like every other community in America that is dealing 
with this foreclosure crisis as you have heard from this great 
panel here today.
    You've heard countless times the story of a family member 
who lost their job and a family that subsequently lost their 
home. You know too well the pain that unscrupulous lenders have 
caused not just for homeowners, but in fact in whole 
neighborhoods in our area. You've seen the struggle on the 
faces of the people who have come before this subcommittee, 
whether it's in our Nation's capital or the main streets of 
America.
    This problem is more than just the statistics, more than a 
report, and data that is gathered in the field. But to fully 
grasp the extent of this problem, the data is where we have to 
begin.
    Since 2002, foreclosure filings in Lucas County have 
increased by over 50 percent, and in the last 5 years, we have 
calculated over 18,000 homes have been part of foreclosure 
filings. That is nearly 10 percent of the total housing stock 
in Lucas County and that's a dramatic figure for any community 
to deal with.
    Single-family homeowners are not the only victims. 
According to RealtyTrac and information from our county 
auditor, almost 5 percent of all rental units in Lucas County 
have been involved in a foreclosure action. This proves that 
you don't have to own your own home to be hurt by this crisis.
    A recent study by the policy group ReBuild Ohio determined 
that vacant and abandoned properties in Toledo, Lucas County's 
largest city, cost taxpayers at least $3.8 million in 2006 
alone. But it's not just our cities like Toledo; the 
foreclosure crisis in Lucas County has hurt almost every 
community in our area, especially in the area of declining home 
values and this decreases basically the revenue available to 
provide necessary services.
    Yes, the data is dramatic, but we know that the real story 
of this crisis is in the faces of those who have been disrupted 
and who have lost their chance at the American Dream. It is 
both a story of the individual and their family.
    But as tragic as those stories are, what's left after a 
family loses their home is not just a personal crisis, it's a 
community crisis too.
    Those homeowners who didn't take any risks, who didn't fall 
victim to the slickest sales pitches or unbelievable claims, 
and who behaved appropriately, are now too watching their homes 
fall in value in the foreclosure crisis. They are looking 
across the street to the yard which hasn't been mowed all 
summer. They are worried about what pests might be attracted by 
the vacant buildings. They are wondering why their city is no 
longer able to provide the same tree-trimming, street-cleaning, 
and trash collections that they have experienced in the past.
    When a foreclosure happens in Lucas County, instead of just 
a family in crisis, a household is in crisis, a bank is in 
crisis, and that foreclosure leads to a block, a neighborhood, 
a city, a State, and a Nation in crisis.
    Crime rates that had been dropping start to go back up. 
Middle-class families move out of their former neighborhoods, 
contributing to greater and greater urban sprawl. The falling 
value of our homes keeps families from making needed 
investments and contributing to starved local economies.
    In Lucas County, trust me, we've seen it all. Before the 
foreclosure crisis became a daily news item for the media, we 
started working. In 2006, in partnership with city, county, and 
State leaders, as well as nonprofits like United Way, the 
Toledo Fair Housing Center, and Advocates for Basic Legal 
Equality, we formed the Lucas County Save Our Homes Task Force.
    This innovative group developed an important mailing that 
is sent to families at the start of their foreclosure crisis, 
so they can connect immediately with the many resources 
available in the community. About 5,000 have already been sent 
out and that's a good thing.
    Working with our Department of Job and Family Services, we 
were the first county in Ohio to devote over $400,000 in 
Federal TANF dollars toward low-income foreclosure assistance.
    The judges of our Common Pleas Court have also responded, 
setting aside resources to create a foreclosure magistrate and 
develop an expedited mediation process for homeowners and 
lenders.
    Elected officials and nonprofit leaders from across the 
county, including myself, went door-to-door in the hardest-hit 
neighborhoods and talked to residents about upcoming sessions 
where homeowners could try to work out a mediation with their 
lenders.
    With the limited resources that our county government 
provides, we've done a great job reaching out, but we know it's 
not enough. We've been smart about our outreach, we've tried to 
target our resources responsibly, but we've just nibbled around 
the edges. At the end of the day, families keep losing their 
homes and we haven't solved the problem.
    I wish that I were here today with a new idea or a new 
solution that could make a real difference. I am happy that 
this subcommittee does have the right ideas and does know the 
best solutions. Ultimately, Lucas County families need the 
power to bring the lenders to the table to renegotiate these 
loans. Our homeowners need the opportunity for a fresh start 
with mortgage terms that they can afford.
    This is not a bailout. It's an investment in our future, 
and it's clear that only the Federal Government has the 
authority, the clout, and the resources to make it happen.
    There are two pieces of legislation currently being 
considered by the Congress that I believe will bring a 
tremendous amount of relief. Having listened closely to the 
conversation regarding H.R. 5830, the FHA Housing and Homeowner 
Retention Act of 2008, it's clear that these key provisions 
will give at-risk homeowners the tools needed to get out from 
under a bad mortgage.
    As a local government official, I am pleased by the 
initiations by the subcommittee. These two bills address the 
twin grievances that communities like Lucas County are facing 
in the foreclosure crisis. Our people are not afraid of hard 
work and are not afraid to do their part to get out of a bad 
situation. We do not need any special treatment. What we need, 
both at the homeowner level and the level of the local 
government, is a readiness by our leaders in Congress to take 
action and make a difference.
    Whether you're in Toledo, Houston, or Los Angeles, we know 
that you are listening to our issues. Thank you very, very 
much.
    [The prepared statement of Ms. Skeldon Wozniak can be found 
on page 445 of the appendix.]
    Chairwoman Waters. Thank you very much.
    We will now hear from Matthew Stefanak, commissioner, 
Mahoning County Health Department.

 STATEMENT OF MATTHEW STEFANAK, COMMISSIONER, MAHONING COUNTY 
                       HEALTH DEPARTMENT

    Mr. Stefanak. Thank you, Chairwoman Waters, and I would 
also like to thank my Congressman, Representative Charlie 
Wilson, for listening so intensively to our concerns about the 
growing blight problem in this district.
    When I started my public health career nearly 20 years ago, 
I never thought of myself as an anti-blight worker, but over 
the last couple of years, I have come to realize that the 
blight problem caused by this housing crisis is a public health 
problem.
    Blighted dwellings attract nuisances, and they attract 
disease vectors, like raccoons, rats, and mosquitoes. This is 
the public health concern that we face.
    Also, unmaintained properties, especially those that were 
built many years ago when the use of lead paint was 
commonplace, release lead and threaten to poison children when 
they reoccupy those properties. In the Youngstown area, where 
90 percent of our housing stock was built before 1950, lead-
based paint was in common use.
    This housing crisis came home to roost for me over the last 
few years, when I saw our numbers of housing complaints triple. 
Last year my sanitarians struggled to respond to over 240 of 
these.
    I serve a health district that comprises 14 townships and 9 
municipalities in Mahoning County. They range from old steel 
towns like Campbell, Ohio, all the way to Smith Township, which 
is a rural Appalachian township. And in each and every one of 
those communities, there is a blighted property.
    I have made a poster here showing you some of them. If you 
can't see it, I am sorry. It illustrates the kinds of 
properties that we are dealing with now in public health.
    To give you a sense of what this means for people trying to 
keep up their homes in some of these blighted neighborhoods, 
last year I was listening to the news. One TV reporter 
interviewed Ms. Lori Mayberry, who lives on Jefferson Street in 
Campbell, Ohio. She tried to keep up her home as a resident, 
put paint on her front porch, and flowers in her front lawn. 
But she has 10 blighted properties like these up and down her 
street.
    She told the TV reporter, ``This neighborhood was full, 
used to be full of nice, quiet families. One by one they either 
moved or passed away. Now it is just a bunch of abandoned homes 
that are just deteriorating. I feel like I am being 
discriminated against. I feel like they have put me in a 
category like if you live down here, you deserve what you 
get.''
    Now, units of local government, like mine and others, 
especially the mayor of Campbell and our township trustees 
across the county, want to do something to help people like Ms. 
Mayberry, but they either don't have the money or they don't 
have the tools or know how to use the tools to take down these 
blighted vacant structures.
    We are losing the war on blight, it seems, in Campbell, 
because, first and foremost, as Congressman Wilson pointed out, 
we have a lot of surplus housing. Our population has dwindled 
by up to 50 percent in some communities, like Youngstown, over 
the last 30 years. In Youngstown, in 1970, there were 160,000 
people. Today there are barely 80,000. Campbell has probably 
lost half of its population as well.
    We have too much housing. You can buy a house in Campbell 
for $2,000. If you bought it for $2,000 several years ago, it 
is probably worth $500 now. You know, it costs $2,500 to $3,000 
to knock down that home today. It is worth less than it takes 
to knock it down.
    That is why when Congressman Wilson and his colleague 
Congressman Tim Ryan, our other representative from Mahoning 
Valley, introduced the Emergency Neighborhood Reclamation Act 
of 2008, we were very excited because we think that kind of 
short-term Federal help can help us tip the balance in our war 
on blight in the Mahoning Valley. We need to right size our 
housing stock in order to deal with the blight problem at the 
same time.
    Some communities, like Campbell, really need that financial 
assistance because those precious Community Development Block 
Grant dollars for Campbell would need to be fully allocated 
over the next 3 or 4 years to take care of the blight problem 
at the exclusion of taking care of other needed city services, 
like sidewalks and sewers and whatnot. There just isn't enough 
money for cities like Campbell to get a handle on their blight 
problem.
    In not every community is just more money the answer. In 
Smith Township, for example, the township could probably scrape 
together the $2,500 to $3,000 it needs to knock down its 
blighted structures, but it doesn't know how to do it.
    The township has tools to deal with blight, but in many 
cases they have never done it before. They have never had to do 
it before. And that is why that we have been trying in my 
district to educate our fire chiefs, our zoning inspectors, our 
mayors, and our trustees about their authority under Ohio law 
to deal with blight.
    We brought in speakers from the State Health Department, 
and State EPA earlier in the spring for a workshop. I have to 
tell you, unfortunately, many of our fire chiefs and mayors 
came away scratching their heads not knowing how to negotiate 
the regulatory process to tear down or burn down blighted 
structures. One of the participants wrote in his comments on 
the workshop, ``This was depressing. I feel like we are 
regulating ourselves into a Third World country.''
    So one point I would make, in addition to supporting short-
term financial assistance to help communities like ours, is 
that perhaps Federal agencies, like HUD and EPA, could get 
together and offer some clear guidance to their State partners 
and municipalities on how to safely negotiate asbestos 
regulations and other air quality regulations in those 
communities that want to deal with blight but can't or don't 
have the money to do so.
    Finally, my final point is that I wasn't around for 
smallpox eradication in my public health career. It was before 
I started, but I would like to be around for the elimination of 
another major disease for many children in this country, and 
that is childhood lead poisoning.
    We have made a lot of progress in my community and 
nationwide in a push to our goal of eliminating this disease 
from this country by 2010, but I think that progress is in 
jeopardy now because of the deteriorated quality of our housing 
stock. That is why we would ask the Congress to please protect 
and perhaps expand the opportunities to homeowners and 
landlords to make their properties lead-safe through the HUD 
Office of Lead Hazard Control and Healthy Homes.
    Thank you. I hope I have made the case that this is also a 
public health concern as well as an economic crisis.
    [The prepared statement of Mr. Stefanak can be found on 
page 400 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Patricia Kidd, executive director of the Lake County 
Fair Housing Resource Center.

  STATEMENT OF PATRICIA KIDD, EXECUTIVE DIRECTOR, LAKE COUNTY 
                  FAIR HOUSING RESOURCE CENTER

    Ms. Kidd. Thank you, Chairwoman Waters, and I would like to 
thank you for asking me to come. My name is Patricia Kidd, and 
I am the executive director of the Fair Housing Resource 
Center. We are a nonprofit fair housing advocacy agency that 
operates in Lake County, Ohio.
    Our county and people in the resident counties who spoke, 
we have the same type of issues. But I want to try to take a 
different approach, rather than give you statistics of all the 
problems. I think we are all aware that we have a real issue 
here.
    Our agency has been a certified HUD housing counseling 
agency since 2002. But, unfortunately, we have been at the 
front lines of this foreclosure crisis since its beginning. 
Back in the mid 1990's and late 1990's, I was helping on 
predatory lending. Here, 10 years fast forward, we are dealing 
with the results of what predatory lending brought to us.
    Our agency had always done loss mitigation counseling for 
homeowners. This is nothing new. It is not a new concept. We 
have been doing this type of counseling since 2002. The 
difference between then and today is that our numbers have 
increased over 300 percent.
    The numbers of homeowners that are coming to our offices 
seeking services from our counselors are keeping us so 
incredibly busy. It is time-consuming to assist a homeowner to 
work out a mortgage loan. It is very time-consuming to try to 
get a servicer on the phone. It takes anywhere between 6 to 10 
phone calls just to find a phone number where we can fax a 
release form to so that we can get permission to speak to a 
borrower.
    In my testimony, I have outlined 6 pages worth of 
chronological order of one loss mitigation that we received 
recently, 6 pages, 4 months, 43 phone calls and e-mails, 43 of 
them.
    Our qualified borrower was told that she didn't make enough 
money to get a loan modification at $800 a month but, instead, 
was offered a $1,200 repayment plan. I don't understand the 
logic.
    We are dealing with single families, elderly couples. And 
it is difficult to see an elderly couple sitting before me who 
have planned for their retirement 20 years ago as long as they 
made a substantial amount of money and realizes today that they 
can't afford to make ends meet. And the house they raised their 
children in, like somebody on the panel has already said, isn't 
past the loan. The house is going into foreclosure.
    Everybody looks at the foreclosure statistics. But you want 
to triple that or multiply it by five. That is how many people 
are in default. We are dealing with people in default for 30 
days, 60 days, 90 days, and running around scurrying, trying to 
do everything that we can to try to prevent the foreclosure 
from happening.
    But the other thing that I think Congress needs to take a 
look at is it doesn't just end after foreclosure. What happens 
next? What about the people then? The house gets foreclosed on. 
It is not like they fall off the face of the planet. They still 
have to go somewhere. They have to relocate.
    Nine times out of ten, the mortgages that the individuals 
have that they are having trouble paying, then forcing them 
into foreclosure is probably $300 less a month than the average 
rental prices, they've learned when they leave that house. And 
they have to rent somewhere else.
    Most of the reputable landlords require a credit report on 
initiating a lease. Now we have homeowners--they couldn't even 
rent a decent place because their credit score doesn't pass 
muster or their foreclosure is a bad stain on their financial 
circumstances.
    Representative Sutton said--and I had it written down--that 
we have done a lot and there has been a lot initiated in order 
to try to help this crisis moving down, but we need to do more.
    H.R. 5679 is definitely a step in the right direction. 
Let's get the mortgagors required to speak to us. As a HUD-
certified housing counselor, it would be nice to have a direct 
line to a modification specialist and a direct individual whose 
job it is to speak directly with our agency.
    It shouldn't take 4 months to work out a loss--do a loss 
mitigation or a repayment plan or a modification for a 
particular homeowner. It should only take a matter of a couple 
of weeks. The individuals that our agency is seeing, this 
increase of 300 percent, is only 10 percent of the total 
population.
    Too many individuals are suffering this crisis, packing up 
their belongings, and just leaving without picking up the 
phone. And then when they come to us, we have to go to drag 
through weeks and weeks and weeks of promises and we're trying, 
we want phone calls. I think there needs to be more 
accountability. We need to have more direct contact with the 
servicers.
    Mandatory mediation for any foreclosure filing after 30 
days of the complaint, not tail end of the litigation process, 
at the beginning. Let's bring the borrowers and the lenders to 
the table, bring somebody who can mediate and negotiate on 
behalf and try and see what we can do to try to keep people in 
their homes.
    We are seeing too many. And theres are too few of us in our 
office to try to handle this. We can get more money for 
increased hiring, our staff needs, but it takes us a while to 
get somebody trained and up and running in order to effectively 
counsel individuals. Taking a look at the--just something 
simple as the Ohio domestic relations laws to try to prevent 
losing a primary home residence in the issue of a divorce, 
tough regulation on every recovery scam program.
    We have enough bad things that are happening out there. Now 
we have these individuals who are duping homeowners into quit 
claiming their properties over to them, thinking that they are 
recovering their home when, in fact, all they did is just went 
from being a homeowner to being a tenant. If they are 2 days 
late on their rent, they are evicted, and they don't even 
realize that they ever transferred their property.
    Increased offer instance to try and get homeowners to get 
to counseling, to contact housing counseling agencies, such as 
myself and the rest of my colleagues. And it is--then it is 
through State governments, through renter regulations dealing 
with renters' rights to prevent price gouging in rent or unfair 
and unconscionable lease option purchase agreements, which is 
going to be the next issue that we are going to see in the 
future.
    Thank you.
    [The prepared statement of Ms. Kidd can be found on page 
342 of the appendix.]
    Chairwoman Waters. Thank you very much.
    I would like to thank all of you for your testimony. And 
let me just share with you that I think this is the first time 
that I have conducted a hearing where witnesses were willing to 
call names, to identify problems in such a pointed way.
    I have a great appreciation for the recommendations that 
you have made. I have sat here listening today, and I am going 
to ask a few of you to help us improve on some of the 
legislation that we are working on and to help us formulate 
even additional legislation because I have heard some things 
here today that I think really need to be addressed.
    I will start my questions by simply asking whether or not 
you know of any of our lenders or our service providers who 
have done an excellent job in helping to do workouts and 
modifications and whether or not they have had an impact in any 
of your communities or areas because they have been so great 
that they have done outreach, they have found people who need 
help, they have stopped foreclosures, they have been easily 
accessible. Anybody know any of the lenders or servicers with 
that kind of description?
    Ms. Kidd? Thank you very much. That was a loud ``no'' that 
you don't know anybody?
    Ms. Kidd. No.
    Ms. Wozniak. Madam Chairwoman?
    Chairwoman Waters. Yes, Ms. Wozniak?
    Ms. Wozniak. I was just going to say the service providers, 
locally it is the Fair Housing Center and GABEL, which is, you 
know, the attorneys who assist communities, are the greatest 
resource, but, as Ms. Kidd said, if there is anything that 
Congress could do to assist with legislation to allow proper 
staffing levels with agencies like that because the numbers are 
so great.
    So, chairwoman, thank you for that question. I think they 
are the most unbelievable agencies with the ability that they 
had to actually reach lenders, unlike anyone else.
    Chairwoman Waters. I thank you. And I certainly was not 
referring to Ms. Kidd's organization. You know to whom I was 
referring.
    Ms. Wozniak. Right, all of them.
    Chairwoman Waters. Basically those who have been, some of 
whom have been, identified are here today that have a 
responsibility for a lot of the subprime lending that we are 
not getting a connection to.
    Let me just ask Mr. Lloyd, could you provide us with some 
detail of the number of Ohio homeowners assisted by FHASecure 
to date, the impact of the recent changes to that issue, and 
the proportion of homeowners in the State relative to the total 
need for assistance preventing foreclosures you expect 
FHASecure ultimately to have? Let us know what is going on. 
What is happening with that issue?
    Mr. Lloyd. Well, to date, we have endorsed over 12,000 
FHASecure mortgages in the State of Ohio.
    Chairwoman Waters. You have done much of this?
    Mr. Lloyd. Well over 12,000, 12,244.
    Chairwoman Waters. What did you do?
    Mr. Lloyd. Well, for those particular loans, they were 
either delinquent or they were conventional ARMs that were 
converted to FHASecure mortgages. They could have been 
conventional mortgage products, subprime mortgage products, 
that were converted into FHASecure and refinanced in a sense.
    We have FHA, just standard FHA, loans across the State of 
Ohio. We have roughly 10 percent of the market share, which the 
point is still valid, 161,000 FHA-insured mortgages statewide.
    As far as subprime, and when you look at FHASecure, that is 
primarily for mortgages that have either reset or are about to 
reset.
    Chairwoman Waters. So describe to me the ARMs. Give me the 
numbers of the ARMs that have been--that you have dealt with 
when the--prior to reset so that people were able to either get 
refinanced, to be able to continue with the mortgages that--in 
the way that they were contracted with in the beginning of 
the--when the mortgage began, and did not have to go into the 
reset or the increased rate. How many of them?
    Mr. Lloyd. I would have to go back and provide that 
information to you. I don't have it broken out for my records 
here.
    Chairwoman Waters. Because 12,000 is a lot. I mean, you are 
giving us a figure of 12,000 that you dealt with, but we don't 
feel it here, do we?
    Mr. Lloyd. I guess the other thing that I was going to say 
is that when you look across--this information is based on the 
mortgage bankers delinquency survey that came out, I think, at 
the end of March. When we look at the situation across the 
State of Ohio, there are 9,000 subprime ARMs out there that--
whereby 28 percent of those are now delinquent and facing 
foreclosure. So, you know, when you look at it in those terms, 
there are a vast number of mortgages that are still out there.
    What we have been trying to do in doing our outreach, we 
have been trying to encourage people not to wait until they are 
reset but to come in and explore the possibility of 
refinancing.
    Chairwoman Waters. How do you do that? How do you encourage 
it?
    Mr. Lloyd. Well, we have done that through outreach events 
that we have held here in Ohio and--
    Chairwoman Waters. I am sorry? Outreach?
    Mr. Lloyd. Outreach events.
    Chairwoman Waters. What does that mean?
    Mr. Lloyd. That means foreclosure summits, foreclosure 
prevention summits.
    Chairwoman Waters. In direct mail?
    Mr. Lloyd. In direct mail to people who are anticipating 
resets within the next 6 months.
    Chairwoman Waters. What kind of response have you gotten 
from your direct mail?
    Mr. Lloyd. Usually we get a response. It is very low in a 
sense but roughly maybe 2\1/2\ to 3 percent.
    Chairwoman Waters. What would you advise us to do to help 
FHASecure really identify outreach, too, and get people in to 
get those mortgages before the resets kick in?
    Mr. Lloyd. If we could do more advertising, prime time 
advertising, I think that would help tremendously. We have just 
gone on a rally type of training campaign where we provided 
training to lenders. We brought in practitioners, counseling 
agencies, and State finance agencies to just talk about 
barriers that may be out there that preclude people from being 
able to refinance.
    One of the strong suggestions that was made--and we were 
encouraged to take this back to Brian Montgomery, our Housing 
Commissioner--is to expand it to include not only just ARMs but 
all subprime, you know, subprime fixed mortgages, fixed-rate 
mortgages, and the like.
    Chairwoman Waters. Okay. Thank you very much. I am going to 
move on.
    Councilman, you talked about statutes or efforts to 
prosecute fraud. Do you think we should do more of that?
    Mr. Brancatelli. Thank you, Madam Chairwoman.
    Absolutely I think it would be more aggressive marshaling 
all of our Federal resources to prosecute. And then the 
flipping report that you have shows where people were blatantly 
using the system, blatantly using the no document loans, loans 
that were put out there by mortgage companies.
    And until we start going after measures of brokers and 
companies who are participating in this, we are not going to be 
able to make as much headway as I think we should.
    Chairwoman Waters. I have been wanting to advocate to 
eliminate the illegal no doc loans altogether. Do you support 
that?
    Mr. Brancatelli. I would welcome that with open arms.
    Chairwoman Waters. Thank you.
    Mr. Mayor, I am going to ask Congresswoman Stephanie Tubbs 
Jones to bring us the information on the lawsuit that has been 
filed by the City, against the Wall Street creditors, so that 
we can take a look at that and perhaps somehow introduce that 
into the record in a general way. Perhaps we can take some time 
on the Floor and talk about that.
    So I would like to thank you.
    Ms. Zurz. Absolutely.
    Chairwoman Waters. All right. Congressman Wilson, do you 
have any questions?
    Mr. Wilson. Thank you, chairwoman.
    I have a couple of questions. Number one, I would like to 
make a statement before I ask a question. The statement is that 
we understand on a Federal level and in Congress what is going 
on, and we don't fault you at all for being angry. This new 
direction Congress is trying to address the issues that need to 
be addressed.
    I, for one, feel like I have been among a lot that has gone 
on here, that I was in the Ohio Senate when we did Ohio Senate 
bill 185. I was very proud to be a part of that and feel that 
we were able to curb some of the things that had been going on 
in the State of Ohio. Red flags had been going up for several 
years. So it is nice that we could finally get something done.
    I wanted to mention as far as in Congress what has happened 
since 2007, which I think it is never enough and it is never 
quick enough. But I would like to touch on H.R. 5818 and H.R. 
5830, both of which have been discussed here this morning. They 
have passed the House and are moving forward.
    Also H.R. 3915, the Mortgage Reform and Anti-Predatory 
Lending Act of 2007 has passed the House in December of this 
past year. Now, H.R. 1427, the Federal Housing Finance Reform 
Act of 2007, Chairman Barney Frank's bill, has passed the House 
and is now moving forward. It passed May 24th.
    So action is happening. We would have liked to have seen 
this 4 or 5 years ago, instead of now. And then certainly what 
is going on with Chairwoman Waters' bill, that is, the 
Expanding American Homeownership Act of 2007, has passed the 
House also, on September 19th of this past year.
    So things are moving. How we get them past the House and 
then through the Senate is another situation. But we are 
definitely going to continue working and continue pushing.
    My first question is for Matthew Stefanak, from our area. 
Matthew, thanks, first of all, for your help that you have 
given in the good things that you have written and said for Jim 
Ryan and I as far as with the new legislation moving forward.
    We need to do as much as we can. The Neighborhood 
Stabilization Act, which Chairwoman Waters helped us with very 
much, I have never really had an opportunity to personally 
thank you and thank you for--
    They have had us on a comparative basis with California, 
our housing values with the chairwoman's State. There is a 
difference, and we were able to get her to hear that and be 
able to get into that, I think.
    You know, really, she didn't have to, being a senior member 
and the chairwoman of our committee, but she was willing to do 
that for the State of Ohio.
    I just wanted to make that point because many times those 
things go unheard. And thank you so much, Congresswoman. It is 
that kind of thing that is showing this new direction Congress 
working together to be able to accomplish things. And we have a 
bipartisan effort on this. So I am proud of that.
    Back to Mr. Stefanak. My understanding is that a lot of 
what is going on in Youngstown right now is you had been doing 
some demolition and gearing down to be more addressing your 
population, I think you were saying it has gone from 160 to 
about 80. And so you are gearing down.
    We are hoping that this is going to be helpful to you. Do 
you see being able to have money for demolition for moving 
forward to remove the blight from some of the neighborhoods? Do 
you think this is going to be a significant positive action?
    Mr. Stefanak. Congressman, absolutely. I see it as kind of 
a short-term investment that is really helping cities like 
Youngstown and Campbell and other former steel centers tip that 
balance in favor of moving towards a housing stock that is 
appropriate in size for the population of that community.
    Youngstown has a very ambitious plan for creative 
shrinkage--shrink the City with a plan that would tackle the 
houses, for 80,000 or so residents, and create opportunities 
for new green space and redevelopment.
    And, as I said, outside of those areas where there are many 
epicenters of the blight problem, like Youngstown and 
Cleveland, there is probably less of a need for management 
assistance than there is for some guidance to these communities 
on how to deal with their blight problem before it becomes of 
the proportion of enormity that it is in some of our cities, 
like Campbell and Youngstown.
    Mr. Wilson. Good. Okay. Well, thank you. And hopefully you 
will be able to use those funds for other things as the Federal 
money begins coming in and to continue to brighten the 
neighborhood and lessen the blight.
    Mr. Stefanak. I would add that there is the ability for 
municipalities and townships in districts in the State to 
recover some of those costs when those properties are 
demolished and made available for redevelopment to recoup those 
costs as property tax liens. So a short-term infusion of some 
Federal assistance could benefit those communities on down the 
line to help them deal with additional blighted properties that 
come up in the future.
    Mr. Wilson. Thank you.
    Chairwoman Waters. Thank you very much.
    And let me just say that, Congressman Wilson, I was focused 
on demolition. I was a little bit concerned that we need rehab; 
we don't need demolition. But hearing you describe what is 
happening with Campbell really helps me to understand a lot 
better why demolition resources are so important. So thank you 
very much.
    Congresswoman Kaptur?
    Ms. Kaptur. Thank you. Thank you, Madam Chairwoman. Again, 
thank you so much for coming to Ohio, which is off your regular 
beat as you fly across the entire country from Los Angeles to 
Washington on a regular basis. Can you imagine that kind of 
schedule? Ohio truly thanks you for being here today and for 
bringing the power of this committee to Ohio. Thank you so very 
much for your leadership on so many issues of importance to the 
vast majority of the American people.
    Mr. Lloyd, I wanted to ask you a question, if I could, 
regarding whether you know when HUD lifted its normal appraisal 
and underwriting standards in the early 1990's, certain 
mortgage letters that were issued by the Department that 
overturned prior practice within the Department, I believe it 
was in 1993. I am wondering if you are aware of that at all.
    And in addition, in terms of both underwriting and 
appraisal standards, a major change that occurred, I believe it 
was in 1994, was that Fannie Mae and Freddie Mac came under the 
regulatory jurisdiction of HUD. Am I correct in that 
understanding?
    Mr. Lloyd. That was before my tenure with the organization. 
I have been on board since late 1999.
    Ms. Kaptur. All right.
    Mr. Lloyd. What I will do, I can take that information 
back, and provide a written document to the committee.
    Ms. Kaptur. All right. I thank you.
    You know, during this period of time of the 1990's, we saw 
the time-tested principles of making loans, home loans in 
particular, which used to be measured by character, collateral, 
and collectibility. I think Congressman Wilson knows that well. 
Is anybody in the audience old enough to remember when you 
actually knew the person who made the loan to you? And we move 
from that into this world of high finance.
    I can remember after we came out of the savings and loan 
crisis in the 1980's; I served on the committee at that point. 
And I can remember when they said, ``Well, you know, 
Congressman, you don't ever have to worry because we are going 
to securitize mortgages. And this magic will be breaking up 
into pieces and giving to the market. This is going to prevent 
any down turn. We will never have another savings and loan 
crisis.''
    But then as we move into the 1990's, I think around 1997-
1998, Congress is a part of the problem looking back, because 
the Glass-Steagall Act, which had separated banking from 
commerce, was abolished.
    And so now we see the Federal Reserve bailing out Bear 
Stearns. Think about that. Think about this change that 
occurred during that decade before these fine numbers, many of 
them, arrived in Congress, which set in place the opportunity 
for the high-risk strategy. So the law also affects what is 
going on is my point.
    I wanted to ask--I also wanted to thank the chairwoman for 
bringing us together today. You are part of the conversation 
that happened in Ohio that has not happened before. This is 
very useful, including the people who are in the audience 
listening and thinking with us and the think tanks that are out 
here, the analysts.
    If we were to look at Ohio and to put your cumulative 
knowledge together, if we wanted to go back and unwind what has 
happened here, what would be the first bank or the first 
brokerage or the first servicer that would have put their 
footprint on these subprime loans in Ohio?
    All right. Cleveland was a big player here. I mean, things 
happened in Cleveland. But what do we know of Lucas County that 
we could lend to what you are involved with here? Is there a 
way for you to look at the footprints? Go back. What was the 
first set of institutions you stumbled across or who is at the 
top of your list?
    You mentioned a couple of them here in your testimony, but 
it is not a complete list. If you were to try to unwind what 
happened here in Ohio to fully understand what we are all 
facing, do you want to make any comment for the record? Could 
you provide for the record additional material on your 
reflection on what is captured and how Ohio was dipped into?
    Who was the first dipper? How did they get here? Then they 
left, right? The paper got taken. Who took it? How can you help 
us understand?
    I know you are dealing with casualties, and you don't have 
time to think about this, but this is a very important question 
because this leads us, then, at the national level to 
understand the architecture, the broad architecture, of what 
happened.
    What we are doing now, Countrywide has plenty to apologize 
to the American people for, but they are a downstream 
participant. They were allowed to--they got into this market, 
but they are not at the top. They are just involved in it. They 
and their folks became beneficiaries.
    Can you comment on this? As you look back at Ohio, look 
back in Lucas County and Cuyahoga County. When--who were the 
door openers? How did this happen here? What is the first--that 
is the question across the country. What was the first 
institution or set of institutions to invent the subprime 
instrument? It may have been Superior Bank in Hinsdale, 
Illinois, but I can't prove that yet. But I want to prove it.
    And then what company, what third party took those subprime 
loans and gave them to Merrill Lynch? And then what happened to 
the paper? We don't know, but we need to know. What about here 
in Ohio? What happened?
    Mr. Warren. To the Chair and to the Congresswoman, I will 
start on that. I will be brief. It is the right question. 
Frankly, I can't answer that with precision.
    Ms. Kaptur. We need to.
    Mr. Warren. Yes. And I recognize the need. Part of our goal 
of our lawsuit is that we'll get to a point where we are able 
to pursue those questions in the courts. We will get to that. 
There are 21 defendants, Wall Street-based defendants. And we 
will provide those to whoever asks, the details of that 
lawsuit.
    But the answer is it seems to me--and I mean, I just have 
sort of some feelings about this. I mean, you know, the 
empirical data, you know, provide lots of information on the 
casualties.
    Ms. Kaptur. Right.
    Mr. Warren. Where were the motives?
    Ms. Kaptur. And in through the media is all focusing--
    Mr. Warren. Yes. And we are going to--
    Ms. Kaptur. --on people trying to care for those who get 
hurt. What about the ones that did the hurting? We don't have 
as much focus there.
    Mr. Warren. And where did that start? And, you know, they 
are people with names and corporations and signed letters and 
supporters.
    Ms. Kaptur. Was Banc One a part of this at all? Do you 
know?
    Mr. Warren. Banc One has not been a major player, no. They 
have been involved. They have not been a major player.
    Ms. Kaptur. Who would it be here in the Cuyahoga County 
area? Who is number one on the list?
    Mr. Warren. We have Argent. We have Countrywide. We have 
Litton. We have a whole range of the subprime lenders that are 
national in scope. They descended on Cuyahoga.
    Ms. Kaptur. Did you know that they were--Countrywide, for 
example, did you know that they were a primary dealer from the 
Federal Reserve?
    Mr. Warren. I heard that this morning.
    Ms. Kaptur. So is HSBC. So is Citigroup.
    Anybody else want to comment on footprints? Mr. 
Brancatelli?
    Mr. Brancatelli. Thank you, Congresswoman.
    I think if you go through some of the reports that we gave 
regarding mortgages in Slavic Village, it clearly indicates 
those who were really on the front end of the part of the 
mortgage problems, as the chief outlined, Argent Mortgage, 
Ameriquest, New Century, Peoples Choice,--
    Ms. Kaptur. I am sorry. You are going to have to speak up 
louder.
    Mr. Brancatelli. Okay. Argent Mortgage, Ameriquest, New 
Century, Peoples Choice, Countrywide, Long Beach, Aegis, Wells 
Fargo. You can go down the list and see.
    Actually, if you go to the Web site, it is kind of a 
mortgage flow meter. You can see all the companies that are 
going out of business are those who had their first 
fingerprints on this. I wouldn't use footprints unless I would 
use my point elsewhere. Really, it is fingerprints on a crime. 
And so you can see those who have participated by just looking 
at the component numbers in our community.
    And I think, as Congressman Kucinich--as a matter of fact, 
as a resident in the Slavic Village neighborhood, you know, the 
difference between the old Federal days and key bank days when 
you walked in the bank and knew them, when these folks came in 
to do their crime center neighborhood, you can see the 
devastation that they have left behind.
    It is pretty clear you can see the fingerprints on a number 
of these, Beneficial and others, who came in and did their 
criminal acts.
    Ms. Kaptur. And what percent of those, sir, would it take 
to get that paper and move it to Freddie Mac or Fannie Mae to 
service? What would you guess?
    Mr. Brancatelli. Well, what was interesting, when the first 
pieces of that started happening, they didn't need--many of 
them weren't insured you know, they hadn't worked through 
Fannie Mae or HUD. As the crimes continue now, you start seeing 
a lot of those that became insured through Fannie Mae and HUD, 
they used those underwriting standards. And so it changed then 
and kind of really kind of morphed into something different 
each year as the crime changed each year.
    And I think that when you talk about your demolition budget 
and things that can be done, there are some things that can be 
done without adding new House bills, that can be done just by 
policy, by responding.
    When you look at the number of distressed properties that 
HUD now owns, many of those should be demolished in our 
neighborhood. The HUD Dollar program right now, we have gotten 
just in our neighborhood 23 houses this year we are trying to 
get through the HUD Dollar program. We have a 10-day window to 
respond to get that household dollar. It has been now 6 months. 
We still don't have a deed to it.
    Two-thirds of those in our neighborhood are slated for 
demolition on a chiefs bill, and the city is having to pay for 
that. For a policy change, all you have to say is the M&M 
Brokers have the right to demolish properties and they can use 
the budgets that you have all generously given to these M&M 
Brokers, to demolish those properties today without having to 
earmark any new funds.
    Chairwoman Waters. All right. Thank you very much. We can 
move on to Congressman Kucinich. Thank you for that 
information.
    Mr. Kucinich. Thank you very much, Congresswoman Waters, 
again for holding this hearing.
    I want to go right back to Mr. Warren. The City of 
Cleveland has brought a lawsuit now against some of these 
companies. In the course of developing the lawsuit, are you 
looking at the question as to whether or not this entire 
subprime fiasco was engineered? It did not just happen by 
accident, but all across this country, people saw that low- and 
moderate-income people were a target for these subprime 
products.
    They knew that the people were credit risks to begin with. 
They knew that there was a reduced level of financial literacy 
in some of these communities. They knew that there were loans 
that were being inflated. They knew that Wall Street was 
building enormous portfolios of these subprime loans that were 
helping to fuel the growth of hedge funds. They knew exactly 
what was going on, as opposed to it being an accident.
    Which do you think it was?
    Mr. Warren. I--to the Chair, to the Congressman, I think 
you are right. It is part of our lawsuit. Let me illustrate the 
point this way. Slavic Village, the community that you 
represent, representative council and Councilman Brancatelli 
represents now, between 2004 and 2006, we saw a study that 
showed, then, the property values of that neighborhood measured 
by reported purchase prices in the county. From 2004 to 2006, 
actually, led Cuyahoga County in great appreciation.
    We saw that. We said, go back and do the study. There was 
something wrong with it. And so you dig into that. And what you 
find out is that properties worth $20,000, $25,000, and $35,000 
were selling, being financed in subprime loans by the fiscal 
$75,000, $80,000, and $90,000, 10 properties reported on the 
same day, almost as if, you know, with the same number.
    And, as you know, Congressman, in Slavic Village on the 
southeast side of Cleveland, there are a lot of doubles, so 
prevalent we call them the Cleveland doubles, two-bedroom 
apartment down, two-bedroom up. These are classic where the 
properties were reverted to rentals. And then they were picked 
up at these $85,000 and $90,000 rates where really the true 
market value is $40,000.
    Now, to your point, how does that fit into some sense of 
conspiracy? Well, the point being is that these are properties 
that are then bundled or mortgages paper bundled and sold to 
the secondary market. And then values seemingly to the rest of 
the world are so low, they don't--it is not a blip in the 
screen. They just bundle them as part of thousands of 
properties on a portfolio.
    And so you might say--and, you know, we haven't proved it, 
but we are pursuing this--that part of the strategy, perhaps 
from afar, is to look at markets where the values, property 
values, are so low that a doubling of the value from the true 
value to the market or to what the sale was doesn't get 
noticed. It is easily scurried and moved along.
    Mr. Kucinich. Well, here is the point. Speaking out, we 
should be honest here. These banks, these lending institutions, 
they knew exactly what they were doing. They knew they were 
going into the poor neighborhoods. They knew they could jack up 
the value of the properties through inflated appraisals. They 
knew if they loaned and then fronted them later on and then 
they turned out to be securitized, that this would be part of a 
go-go-go approach on Wall Street, a hedge fund.
    And so what you have is some people made a lot of money on 
these scams, but here is Wall Street supposed to be the really 
smart people are going to avoid any risks. They are taking the 
riskiest instruments--the four pronged instruments particularly 
clean piece of property while the rest of the neighborhood 
around them is falling away. Their property value goes down. I 
mean, this is a crime. There is no other way to do it.
    And I would urge the City of Cleveland to look at not only 
pursuing the fraud statutes against these people but also a 
fast action suit on behalf of African Americans who, no 
question about it--there are civil rights implications.
    And the fact that money wasn't loaned to people in the 
first place according to the Community Reinvestment Act, 
subprime loans were ignored, and then--the prime loans were 
ignored, then they come up with these subprime products that 
have fraud written all over them. And, you know, this is an 
issue that goes to the core of our financial situation and goes 
to the core of whether people can trust these lending 
institutions. And the City of Cleveland because it is at the 
epicenter of this crisis can also be at the epicenter of the 
solution.
    I want to thank all of the representatives from our 
community who are here, the members of the council, who have 
had to deal with this on a daily basis. You know, Mayor Terrell 
will tell you this still concerns the city council.
    When I was at council years ago, if you had a single home 
in your community that was boarded-up, it was a problem. You 
hear about the neighborhood groups organized around this. Okay?
    How many, Mr. Brancatelli, are there out there in Slavic 
Village now?
    Mr. Brancatelli. Mr. Congressman, we have over 1,000 vacant 
properties identified.
    Mr. Kucinich. We cannot let these lending institutions get 
away with this and just say, ``Well, it is the people's fault. 
They should have known better.'' They knew exactly, these 
lending institutions knew exactly, what they were doing. Wall 
Street knew exactly what was going on. And there has to be--
somebody is going to have to pay for this.
    Our community has already paid. Now we have to follow 
through on this. As Congresswoman Kaptur says, we have to 
follow this money all the way to where it leads.
    Madam Chairwoman, I hope this committee gets subpoena power 
so that you can start to go into this. And I will certainly 
support every effort that you make.
    Thank you very much.
    Chairwoman Waters. Thank you very much. Thank you.
    Congresswoman Stephanie Tubbs Jones?
    Mrs. Tubbs Jones. Thank you, Madam Chairwoman.
    First of all, I would like to recognize another elected 
official from my congressional district who has joined us. His 
name is Peter Lawson Jones. He is my cousin. And he is a 
Cuyahoga County commissioner.
    Also, because we were limited in the number of witnesses 
that we could bring before the committee, I do want you to also 
know that Mayor Georgine Welo represents the First Ring 
Suburbs. She is the president of the First Ring Suburbs. And I 
am talking with her about these issues.
    In her City, there was a street on which one woman owned 11 
houses. How does one woman own 11 houses and have no real 
reportable income? Georgine, the City of South Euclid came to 
the attention of this as a result of receiving more than 1,000 
calls and complaints on this street for the police department.
    What they ultimately did was they purchased these houses. 
The City bought every one of the houses and then redid the 
financing because there was no other way that they could 
immediately get some resolve in there.
    And I just want to congratulate Georgine Welo and that City 
for the work that they did.
    There are other cases where cities may have the opportunity 
to fix some of the problems. We hope that they don't have to do 
that, which Georgine Welo was saying that they spent tons of 
money cutting the grass, all of the things that we have been 
talking about in the process.
    I would also hope that when we get to our second panel, you 
are going to hear some of the litigation that has been 
implemented by the housing advocates and other organizations to 
address many of the issues that my colleagues have talked about 
previously.
    I am just so thrilled that here we are in 2008, paying 
attention to what has been going on in our community for years. 
And I am just so thankful that all of you each took time to 
come in.
    I would want to pontificate a little bit and ask a few more 
questions, but I am just going to associate myself with the 
comments of my colleagues.
    I do want to see, Chris, if there is anything else you want 
to add or, Mr. Brancatelli, anything else you would want to add 
very briefly. And I am going to yield back my time. Chris?
    Mr. Warren. To the Congresswoman and the Chair, again I 
want to thank you for this effort today, your work on a variety 
of fronts on our behalf.
    It is a long way back. I think speed is of the essence. The 
House is clearly taking a strong position. There are issues in 
terms of looking at culpability and motives that can't be 
ignored as we look at remedies. I would agree with that. 
Hopefully our lawsuit would be helpful in that way. But, again, 
thank you for your leadership, in particular.
    Chairwoman Waters. Mr. Brancatelli?
    Mr. Brancatelli. Thank you, Congresswoman. I think, as I 
mentioned earlier, looking at policies for HUD, Fannie Mae, and 
disposition of those real estate and how we can rescue 
neighborhoods is critically important.
    The other piece I want to note, which I don't think any of 
the panelists really hit on hard, was the next wave of the 
tsunami. And this is these houses that are being dumped on the 
market for pennies, for pennies. You are seeing thousands of 
houses sold on eBay every day for $1,000 or less.
    In our neighborhood, we had hundreds and hundreds of homes 
that are being bought by out-of-town brokers, from California 
and on--I am not saying there is anything wrong with 
California. It is kind of hard to manage scattered site-
condemned homes from California.
    Chairwoman Waters. It is okay.
    Mr. Brancatelli. And so we really need to look hard at how 
we can try and get in front of that next wave so that more 
families aren't impacted.
    The other thing, members of the panel today talked about 
these new lease-purchase programs, not lease-purchase but 
companies that are turning the favor and knocking down the real 
estate. And we need to stay in front of that because that is 
what our service providers are going to be dealing with next.
    And we are looking at cutting ways of dealing with some of 
the issues we are facing. We talk about demolition as a tool. 
We are also looking at deconstruction. And as we pick up our 
houses, when you talk about an energy crisis now, being able to 
use deconstruction as a tool for recycling materials and saving 
some of our neighborhoods and saving some of our resources is 
just as important.
    So I appreciate your being with us.
    Mrs. Tubbs Jones. Lastly, I want to say in conjunction with 
the comments of my colleague Mr. Kucinich, that as we have been 
looking and focusing on the fact that predatory lending 
predominates in African-American communities, the Congressional 
Black Caucus has been up front on this issue since way back, 
almost back when you got here, Congresswoman Waters. And we 
have done a lot of things.
    But, lastly, I would say to everybody listening: you must, 
you must understand what you are signing and you must 
understand who you are going to be operating with. It is so 
very important.
    I don't care what kind of legislation we implement. I don't 
care what kind of things we do. If you don't pay attention to 
what you are doing and get the financial literacy information 
and understand the process, we can't stop what is going on.
    Whomever is listening, you must pay attention. You must 
take a look at your grandparents and your mothers and your 
aunts and your uncles, the seniors in our community, whom they 
prey upon, not only in the course of building or buying a home 
but in the housing reconstruction and remodeling. That is the 
other way they attack senior citizens in our communities.
    So again, Congresswoman Waters, thank you for your 
leadership. Thank you for holding this hearing. And I yield 
back my time.
    Chairwoman Waters. Thank you.
    Congresswoman Sutton?
    Ms. Sutton. Thank you very much.
    Your testimony was extraordinarily insightful, and I 
appreciate the passion. I just want to be brief. This is 
obviously a multifaceted challenge that we face. And a lot of 
the angles have been discussed. I appreciate the questions of 
my colleagues, which get at the heart of many, many key parts 
of this issue.
    I would like to begin, though, by speaking to Ms. Kidd. If 
my colleagues haven't had the chance yet to look at the 
transcript or the record of you trying to seek assistance to 
help somebody who was trying to take action early on when she 
identified that she was going to have problems and fulfilling 
the commitment that she is in, it is an amazing account.
    And I don't know if there are more of these that you can 
make available to folks like myself and other members of this 
committee as well as Congress, but this is really helpful 
because we see as we look through this that all of the nonsense 
that occurs along the way, the nonsensical direction that 
people are given--on one occasion if you were to read through 
this--I will just share--when you are seeking help for getting 
lower payments, when they do the rework, it is actually a 
higher payment. And that happens I think several times 
throughout the course of this. You are actually told to wait to 
seek help until you are further behind because then help might 
be available.
    So all of this information is really important. One of the 
reasons why I ran for Congress is because policies don't always 
make sense when they are being applied. And we also need to see 
what actors are doing what in the process. So that is why this 
hearing has been so good.
    And, Ms. Kidd, if you could provide us with more 
information like this? I know a lot of people don't want to 
tell their stories, but it is important that we know really how 
this works at the ground level when you are trying to deal with 
a foreclosure.
    Ms. Kidd. Yes, definitely.
    Ms. Sutton. Thank you.
    Also, one of the things that has been troubling to me and 
we haven't talked a lot about it here yet today, although the 
chairwoman did attempt, Mr. Lloyd, to ask you some questions--
and I am going to follow up on those--you know, we have heard a 
lot about H.R. 5818 was passed. And it is a great, great bill 
that the chairwoman has shepherded through the House.
    And if that bill is signed into law, which I think it 
deserves, your testimony says that will bring over $830 million 
in grants and loans to Ohio to help us rebuild our communities 
that have been devastated by the effects of this crisis if that 
bill is signed.
    Now, sadly, that bill isn't signed. And it doesn't look 
like under this Administration, that we are likely to get that 
bill signed. And that is a problem. Okay?
    I am troubled about the Administration's, what appears to 
be overly simplistic responses to some of the thoughtful plans 
that have come out of the Congress and especially the 
subcommittee that we are in today.
    Oftentimes you hear this issue framed as an issue of 
irresponsible borrowers. And I concur with my colleague 
Representative Tubbs Jones that we have to be careful, we have 
to be educated, and we have to do our best to know what it is 
we are getting into. But it is framed as an issue of 
irresponsible borrowers and lenders that don't deserve 
government bailout.
    But then the rhetoric ignores what I said was this 
multifaceted crisis. First, this is a systemic problem that 
involves the failure of multiple regulation and accountability 
mechanisms. We have heard that discussed here today.
    And, second, our fates are tied together. We have also 
heard how that is discussed today. A house goes into 
foreclosure. Regardless of the fault, it doesn't just affect 
the family who lives there. It reduces the local tax base. It 
has health consequences, safety consequences. And so the 
effects of foreclosure are felt all around.
    And the HOPE NOW program, the initiative that you 
addressed, you addressed, Mr. Lloyd, I just don't think that it 
was structured to address the enormity of the problem at hand. 
And so I think that there is much lacking.
    There have been some issues with the numbers being reported 
by the HOPE NOW initiative, as the Comptroller of the Currency 
has brought up in recent days. He suggested that perhaps only a 
small fraction of the number reportedly helped by HOPE NOW have 
received assistance.
    And, in addition, there appeared to be significant 
discrepancies between reported percentage of repayment plan 
versus the actual loan modifications. And it is not a rounding 
error. These are major, major differences in the numbers. They 
are different sets of numbers.
    So, Mr. Lloyd, do you have any numbers on--I know we tried 
to get this a little bit earlier--on how many individuals from 
Ohio have been helped through this initiative, how many have 
been saved, literally saved, from foreclosure, how many have 
received loan restructuring versus loan modifications? I know 
that it is a bit early in the program, but what is the success 
rate? Basically what is the success rate of keeping families 
helped by HOPE NOW in their homes?
    Mr. Lloyd. Unfortunately, I don't have the numbers for HOPE 
NOW. I have primarily concentrated on the FHASecure numbers. 
And I am versed in our numbers for the FHA portfolio. But I 
will go back and retrieve those numbers for you and try to find 
out exactly why there has been such discrepancies noted.
    Ms. Sutton. Okay. I would appreciate that. I realize that 
you don't run this program, and so this is not an attack on 
you. But the problem reported about the HOPE NOW alliance, we 
are wondering what we can do to improve it. And that coupled by 
some of the other experiences in the information that has been 
brought to light today, we would find that very useful.
    With that, I yield back my time.
    Chairwoman Waters. Thank you very much.
    Mrs. Tubbs Jones. Madam Chairwoman?
    Chairwoman Waters. Yes?
    Mrs. Tubbs Jones. For the record, I have in my hand and I 
would seek unanimous consent to add to the record an emergency 
resolution passed by the Cleveland City Council asking the 
Cuyahoga Board of Common Pleas to institute an emergency 
foreclosure moratorium, to stay all active and newly filed 
foreclosure cases involving occupied residences and continue to 
work with council and community organizations to implement a 
comprehensive program that strengthens distressed 
neighborhoods. And this is from all six council members.
    Chairwoman Waters. Without objection, that will be 
submitted as part of the record for today. Thank you very much.
    Ms. Kaptur. Madam Chairwoman?
    Chairwoman Waters. Yes?
    Ms. Kaptur. I know that you are about to conclude, but I 
did want to just ask or suggest to the representatives from the 
Cleveland area since we have representatives from Lucas County 
and Youngstown, the Mahoning Valley area, perhaps the attorneys 
that exist in those counties could join your suit or augment 
your suit. People might want to think about this as you proceed 
forward. I think that we probably haven't done that in our 
region of the State. It is a very interesting path to pursue.
    So I just wanted to put that out there. And I thank you, 
Madam Chairwoman, for yielding the time.
    Chairwoman Waters. You are certainly welcome. And I would 
just like to send a message to the Governor that we commend him 
on his leadership, including to the Compact. That has not been 
done in other areas for the most part. They have not tackled 
the foreclosure problem in quite that way. We will be 
interested in your submitting more information to us about what 
the impact has been to date.
    And we want to know when you have servicers make their 
first report on their efforts and subsequent successes. And if 
there are servicers who have declined to participate, we would 
like to know that, too. I think that information will be very 
helpful as we go forward.
    Ms. Zurz. Thank you, Madam Chairwoman. I will tell you that 
we very much appreciate your recognition of that. We do have a 
lot of work to do here as well.
    But to the point of--and you asked the question earlier of 
any servicers going above and beyond, we are saying ``no.'' And 
I would be remiss to say that those that signed the compact 
from our perspective are at least trying to make the efforts. 
And I don't want that to go unnoticed because they are 
responding to us and they are working with folks.
    Do I think it is enough? No, I don't, and nor does the 
Governor. But it is a start. We will be happy to get you 
details, which the first reporting period is up in about by the 
end of the week.
    Chairwoman Waters. Well, I appreciate that. We don't have 
time to go into the legislation that I am working on now, but 
it is directed at servicers. And we are going to need some help 
because one of the things we have discovered is that we have no 
regulation over servicers. We have to create a body of law to 
deal with them because they are the key now, based on the fact 
that our citizens cannot get back to the institutions that 
originated the loans, from the broker etc., those security 
kinds of loans--that was packaged, they're all in service now, 
and these servicers have a lot of power. But they said to us 
that they were afraid to use the power because they could be 
sued by the investors.
    We have tried to help with that in this legislation by 
eliminating liability and all of that but still they are not 
coming forward, because they have no laws to make them. We have 
to help them come forward. And we need a lot of pressure from 
all of our community groups and organizations to do this.
    Ms. Kidd, your testimony was right on point about 
servicers. No telephone numbers, no way to get in contact with 
them. Some of the loss mitigation is done offshore, where 
people use a piece of paper with 10 questions. And after the 10 
questions are answered, the telephone is hung up, and that is 
it.
    So we know that we have a lot of work to do in this area. I 
want to thank all of you. And I would like to note that some of 
our members may have additional questions for this pane], 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 these witnesses and to place their 
responses in the record.
    This panel is now dismissed. And I thank you so much. I 
would now like to welcome the second panel.
    Chairwoman Waters. Our next panel consists of: Mr. Andrew 
S. Howell, executive vice president and chief operating 
officer, Federal Home Loan Bank of Cincinnati; Mr. Michael Van 
Buskirk, president and CEO, Ohio Bankers League; Mr. Michael 
Gross, managing director, Loan Administration and Loss 
Mitigation Division, Countrywide; Ms. Kimberley Guelker, 
president, Lorain County Association of Realtors; Mr. Lou 
Tisler, Neighborhood Housing Services of Greater Cleveland; Mr. 
Edward G. Kramer, director and chief counsel, The Housing 
Advocates; and Mr. Frank Ford, senior vice president for 
research and development, Neighborhood Progress, Incorporated.
    We are going to start our testimony with Mr. Andrew S. 
Howell.

  STATEMENT OF ANDREW S. HOWELL, EXECUTIVE VICE PRESIDENT AND 
 CHIEF OPERATIONS OFFICER, FEDERAL HOME LOAN BANK OF CINCINNATI

    Mr. Howell. Good afternoon. Madam Chairwoman and members of 
the subcommittee, I appreciate the opportunity to speak to you 
today on behalf of the Federal Home Loan Bank of Cincinnati 
about the role our bank has played to help restore balance to 
the housing finance market and, specifically, to help at-risk 
homeowners. My name is Andy Howell, and I am executive vice 
president and chief operating officer of the Federal Home Loan 
Bank of Cincinnati.
    The Cincinnati Bank is one of 12 regional Federal Home Loan 
Banks established by Congress in 1932 to provide liquidity to 
community lenders engaged in residential mortgage lending and 
economic development. For over 75 years, we have fulfilled the 
housing finance mission with a successful cooperative structure 
comprised of local lenders and regional management.
    Our primary business is the provision of low-cost credit in 
the form of secured loans or advances to our members. We do not 
securitize loans. Our members, in turn, use these advances to 
fund their daily credit needs, such as originating mortgage 
loans, affordable housing activities, investing in community 
projects, or managing their own balance sheets.
    The Cincinnati Bank's role increased dramatically in 2007 
due to the unprecedented disruptions in credit and mortgage 
markets that have continued into 2008. Industry access to 
liquidity was substantially restricted, and members 
increasingly turned to us to support their daily funding needs. 
Demand for our core products--advances--has reached historic 
levels.
    Since 2000, the State of Ohio has been severely impacted by 
the substantial rise in residential foreclosure activity. 
Although questionable lending practices of some have 
contributed to the rise in home foreclosures, our general 
experience is that many distressed homeowners did not originate 
mortgages with a lot of these financial institutions. 
Nonetheless, the impacts of foreclosures are substantial to 
both homeowners and their communities.
    In addition to meeting our congressionally-mandated 
liquidity mission, we believe that the combined efforts of our 
members, housing partners, Advisory Council, and our Board of 
Directors, has led to the development of meaningful foreclosure 
assistance programs. The result has been the offering of three 
foreclosure mitigation programs that address the problem from 
different perspectives, and a fourth program is under 
development.
    The first program is called HomeProtect, wherein we have 
made available to our members $250 million in advances at our 
cost of funds, targeting these funds to help our members 
refinance homeowners at risk of delinquency or foreclosure. We 
instituted this program in June of 2007, and have approved 
commitments of more than $128 million to date.
    Second, we have taken actions to direct more of our 
Affordable Housing Program funds to assist with foreclosures. 
Later this year, we will award roughly $13 million through this 
program, and we have modified the scoring of these applications 
to favor high-foreclosure areas and projects that will return 
abandoned foreclosed homes to occupancy. With these new scoring 
criteria, we expect to see funds directed to those areas of 
Ohio that have been hardest hit by the foreclosure crisis.
    Third, in February 2008, our Board instituted a voluntary 
program called Preserving the American Dream, which will 
provide $2.5 million for foreclosure counseling and mitigation. 
Under this program, we will provide up to $3,500 per household, 
through our members and qualified nonprofit counseling 
agencies.
    There is also a fourth effort underway. Regulations 
currently prohibit the bank from using Affordable Housing 
Program funds to help our members refinance mortgages for at-
risk homeowners. We have petitioned our regulator--the Federal 
Housing Finance Board--for a regulatory waiver of this 
restriction.
    To date, we have experienced modest success with 
HomeProtect. The interest level for the American Dream 
assistance is high, and we are optimistic that the Affordable 
Housing Program scoring adjustments and regulatory changes will 
be well received.
    In closing, we support a collaborative effort with multiple 
initiatives to provide both preventative and effective 
solutions to the foreclosure issue. The Federal Home Loan Bank, 
its 726 members, and hundreds of housing partners, are working 
diligently to provide long-term solutions to create and 
maintain healthy communities and cities.
    Madam Chairwoman, thank you for the opportunity to address 
the subcommittee on this important matter. I would be happy to 
answer questions at the appropriate time.
    [The prepared statement of Mr. Howell can be found on page 
335 of the appendix.]
    Chairwoman Waters. Thank you very much.
    We will now hear from Mr. Van Buskirk.

   STATEMENT OF MICHAEL VAN BUSKIRK, PRESIDENT AND CEO, OHIO 
                         BANKERS LEAGUE

    Mr. Van Buskirk. Chairwoman Waters, members of the 
subcommittee, and other Members of Congress from Ohio, thank 
you for the opportunity to appear before you today.
    The Ohio Bankers League is a nonprofit association 
representing Ohio's commercial banks, savings banks, and 
savings and loan associations. My name is Michael Van Buskirk, 
and I am the Association's president.
    Chairwoman Waters, as you know from your Ohio colleagues, 
and as we all heard from the witnesses on the first panel, our 
State, particularly its northern part, is suffering 
economically. Mortgage loan delinquencies and foreclosures have 
been one painful result.
    Although foreclosures are a national problem, foreclosures 
in Ohio have remained stubbornly higher than the national 
average for at least the last 3 years. Other parts of the 
country, including your home in Los Angeles, face troubling 
foreclosure problems. However, the nature of foreclosure 
problems differ regionally. Therefore, we are particularly 
grateful you have come to Ohio to gain insight into the 
circumstances here, as the subcommittee works to find ways to 
help the national recovery.
    Ohio's economy has struggled for at least the last 12 
years. In northern Ohio, like Michigan, a decline in 
manufacturing employment continues to be a contributing factor. 
In eastern Ohio, a part of the country that is in Mr. Wilson's 
district, a similar story is told through the decline in the 
mining industry.
    While Ohio's problems are not new, they have grown much 
more severe. In 1995, we suffered 15,000 foreclosures. Last 
year, we had 83,000. Not surprisingly, foreclosures have been 
the highest in the northeastern part of the State, where job 
losses in the auto, steel, glass, and rubber industries have 
been the highest.
    Before I offer the Association's perspective on what is 
being done and what can be done to mitigate foreclosure short 
term, I would like to offer a few observations on the causes of 
our current problem along lines that you asked the first panel, 
which I hope will help you as you chart this country's course 
to avoid a recurrence.
    Historically, most consumer mortgages in this country were 
funded from insured deposits. Lenders were banks, thrifts, or 
credit unions that kept the mortgages in their own portfolios. 
For that reason, the lender had a shared interest in the 
ability of the borrower to repay the loan. It suffered the loss 
if the consumer could not repay the loan.
    In addition, these institutions were regularly visited by 
trained governmental examiners who analyzed both the safety of 
the lending practices as well as their fairness. That fairness 
measurement was given increased definition by Congress over 
time through laws like the Truth in Lending Act, the Home 
Mortgage Disclosure Act, the Equal Credit Opportunity Act, the 
Real Estate Settlement Procedures Act, the Fair Housing Act, 
and the Home Ownership and Equity Protection Act, among others.
    By the 21st Century, lending in Ohio had become globally 
funded. Investors ranging from foreign governments to Ohio 
public pension funds bought securitized mortgages, rated as 
very safe by international rating agencies. The securitized 
loans were usually originated through a new retail outlet 
called a mortgage broker. The ultimate owner of the mortgage 
did not know the borrower. In fact, they often knew very little 
about them.
    This new system did bring benefits to the consumer. The 
huge inflow of mortgage funds helped lower interest rates, and 
market entrants, at least when they were ethical, gave 
consumers more choice. Technology allowed mortgage and rate 
shopping through the Internet. However, the new system also 
triggered significant problems. Non-bank brokers had no 
financial stake in the borrower's ability to repay. Both the 
Ohio broker and the Wall Street securitizer were compensated by 
sale. Neither suffered loss if the ultimate product didn't 
work.
    Historically, mortgage brokers in Ohio were not licensed. 
In 2006, when Congressman Wilson was in the General Assembly, 
our legislature required mortgage brokers to be licensed and, 
for the first time, required a criminal background check. While 
Federal lending laws theoretically applied to them, there was 
no enforcement. Most Ohio mortgage brokers were ethical and did 
comply with the lending laws. However, as history repeatedly 
has proven, scoundrels will flow into an enforcement vacuum.
    Ohio's Department of Commerce discovered many hundreds of 
applicants were convicted criminals when it began a licensing 
process.
    Uneven governmental protection had unintended competitive 
consequences, too. Since non-bank brokers do not face the same 
high level of regulation and oversight as banks, they 
benefitted from significantly lower operating costs. 
Competitively, FDIC-insured lenders in Ohio suffered 
significant loss of mortgage share.
    Today, Ohio is fighting unethical lending practices. 
Commerce Director Kim Zurz, whom you heard from earlier, has 
greatly stepped up enforcement efforts under the Strickland 
administration during her relatively short time in office. 
Every Ohio mortgage brokerage today now gets some sort of 
review every 18 months. That compares to no review at all in 
past years. While we believe more needs to be done, efforts 
continue to achieve adequate rigor of examination.
    Unfortunately, as the subcommittee and the full committee 
learned, many States still do little or no enforcement. 
Therefore, we commend the House's work to require all mortgage 
brokers to be licensed, to set minimum Federal standards, and 
to establish a Federal alternative if a State fails to act.
    We would suggest you consider one change to the House-
approved bill, though. The House designated HUD to act if the 
State fails to do so. While HUD certainly has a great deal of 
expertise in housing, we believe that the Office of Thrift 
Supervision, which has trained mortgage examiners in most major 
cities across the country, including here in Cleveland, in 
Columbus, and in Cincinnati, is positioned to be immediately 
effective.
    We also want to take this opportunity to publicly support 
other of your initiatives, including expanding the powers of 
FHA to guarantee a reworked mortgage, where the investor or 
lender agrees to reduce the principal to less than the current 
appraised value, and to provide grants to purchase abandoned 
properties in distressed neighborhoods and restore it to 
productive use.
    I want to commend Congressman Wilson's amendment to the 
bill to increase the allocation formula benefitting highly 
important cities like Cleveland. Funds to remove the blight of 
unsaleable homes in blighted neighborhoods are sorely needed 
here.
    We commend the provisions in the bill which would 
dramatically increase funds available to fight foreclosure--a 
subject I want to return to a little bit later in my testimony. 
Perhaps most importantly, we support the creation of a credible 
regulator to ensure the safety and soundness of the housing-
related, government-sponsored enterprises.
    Ohio is not a homogeneous State. To be successful, Ohio 
banks and thrifts must tailor their operations to meet the 
needs of communities each serves. Most Ohio banks maintained 
prudent underwriting discipline in the face of mushrooming 
competition from mortgage brokers and other non-traditional 
lenders. Very few are engaged in subprime lending. As a 
consequence, these banks and thrift institutions lost market 
share as some customers were attracted to loans with teaser 
rates, little or no requirement for documentation, or features 
like non-amortizing payments.
    Remediation processes tend to be tailored to individual 
markets, too. But in surveying practices, the successful ones 
at least, we found common elements. Banks want to keep 
borrowers in their homes. They will work with borrowers on a 
case-by-case basis, foreclosing only when all else fails. This 
is not altruism. It represents enlightened self-interest. A 
loan reworked to the borrower most times will cost the investor 
or the lender less than foreclosing on a property and selling 
it under the circumstances we heard the first panel talk about.
    If you look across the foreclosure filings in counties 
across Ohio, you see that the overwhelming majority of 
foreclosure filings are not by Ohio-based banks or thrifts. In 
surveying our members, we have found that as long as there is 
good communication and good faith from the borrowers, ethical 
lenders routinely waive late fees, permit partial payments, 
extend terms, and in some cases, forgive past due amounts, 
lower interest rates, or reduce principal.
    We do need to focus on one recurrent problem--communication 
with the borrower. One of the greatest challenges ethical 
lenders face is getting delinquent borrowers to talk with them. 
Mailings and telephone calls often go unanswered. I think we 
can understand that financial problems are embarrassing. 
Financial literacy is poor. Too few borrowers understand that 
an ethical lender is strongly motivated to work with them. Too 
few borrowers understand that there are competent, neutral 
counseling services that can help.
    Increasingly, these competent counseling services--
    Chairwoman Waters. I'm sorry. Your time was up a long time 
ago.
    Mr. Van Buskirk. I am sorry. Thank you for your indulgence.
    Chairwoman Waters. Thank you.
    I am going to move on to Mr. Michael Gross, managing 
director, loan administration and loss mitigation, at 
Countrywide.

      STATEMENT OF MICHAEL GROSS, MANAGING DIRECTOR, LOAN 
    ADMINISTRATION AND LOSS MITIGATION DIVISION, COUNTRYWIDE

    Mr. Gross. Good afternoon, Madam Chairwoman, and members of 
the Ohio delegation. Thank you for the opportunity to appear 
here today to discuss Countrywide's efforts to help families 
prevent avoidable foreclosures. We have testified on three 
previous occasions to this subcommittee about these efforts, 
and today I will update our progress, also providing additional 
information on our activities in Ohio.
    While our progress has been significant, we clearly 
recognize that more must be done. A key component of the 
successful loss mitigation initiatives undertaken by national 
servicers includes partnerships with financial counseling 
advocates and community-based organizations.
    At Countrywide, we continue to expand our outreach to 
ensure that every customer who needs help is reached. In 
addition to our NACA partnership, which we discussed with this 
committee last fall, we have strengthened our national 
relationships with NeighborWorks, the Homeownership 
Preservation Foundation, the National Foundation for Credit 
Counseling, and ACORN.
    Nowhere are partnerships with effective counseling and 
advocacy organizations more important than in difficult markets 
like Ohio's. Here in Cleveland, we have long had a strong 
relationship with the Neighborhood Housing Services of Greater 
Cleveland. We also have forged a strong working relationship 
and signed a home retention agreement with ESOP, Empowering and 
Strengthening Ohio's People, which also provides valuable 
assistance to residents in Cleveland's hardest hit 
neighborhoods.
    Since December of 2007, ESOP and Countrywide have assisted 
135 borrowers. With over half of those borrowers, we have been 
successful in preserving homeownership into the future--a 
success rate that both Countrywide and ESOP take pride in but 
want to improve. We also are working with the State program--
Ohio Save the Dream--and 26 of our borrowers have sought help 
through that program. Likewise, in Cincinnati, we have begun 
working with our borrowers to seek counseling and assistance 
from the nonprofit, Working in Neighborhoods.
    We are actively engaged in foreclosure prevention outreach 
programs with both governmental and community organizations 
around the country. So far in 2008, we have participated in 
nearly 170 home retention events around the Nation, including 
foreclosure prevention fairs and train-the-trainer events.
    In Ohio, we have participated in outreach events around the 
State sponsored by the State of Ohio, HOPE NOW, and ACORN. We 
as well have staff here on campus today helping our customers. 
Countrywide remains committed to helping our customers avoid 
foreclosure whenever they have a reasonable source of income 
and a desire to remain in the property.
    In addition to our work to provide home retention solutions 
to customers, we are working with nonprofits from ESOP to 
Enterprise Community Partners, NeighborWorks, and others, to 
identify how Countrywide can be a partner to communities with 
greater numbers of vacant and boarded-up properties. We are 
providing them with information on Countrywide-serviced 
properties in communities where they and a host of other 
nonprofit partners are working. ESOP has connected Countrywide 
with local nonprofits that have expertise in property 
acquisition and disposition.
    While that work is just beginning, we have already conveyed 
property to the Slavic Village Development Corporation, and we 
are discussing other properties that may be acquired by 
nonprofits like Detroit Shoreway. With national intermediaries 
like Enterprise, we have been working to build a program that 
would result in the purchase of real properties in certain 
distressed areas in markets like Cleveland. While this program 
is not complete, Countrywide recently committed $1.5 million in 
charitable funding to Enterprise to assist them in further 
defining and implementing the program.
    As we reported in the last hearing, in the 6 months ending 
March 31st, we saved an average of more than 15,000 homes 
nationally each month from foreclosure, more than double the 
pace from the first 3 quarters of 2007. The pace continues to 
improve.
    In April and May of 2008--our most recent data--we 
completed nearly 48,000 home retention workouts in these 2 
months alone. I would emphasize that these are workouts in 
which the borrower obtains a plan to keep their home. It does 
not include deeds in lieu of foreclosure or short sales, which 
accounted for less than 7 percent of our workouts.
    Comparing May of 2008 versus 2007, home retention workouts 
are up over 540 percent. The primary cause of that increase was 
a 718 percent jump in loan modification plans, from about 2,000 
modifications in May of last year to more than 14,200 in 2008. 
A new program which has also greatly contributed to these May 
results was the new Fannie Mae HomeSaver Advance Program, which 
provided 12,200 homeowners with a fresh start. Clearly, the 
efforts of our national and community-based partners, and our 
own home retention teams, are paying off.
    Since we announced a series of retention initiatives last 
fall, loan modifications have become the predominant form of 
workout assistance at Countrywide. Year-to-date, loan 
modifications have accounted for more than 68 percent of all 
home retention plans, while repayment plans accounted for less 
than 16 percent.
    While interest rate relief modifications were extremely 
rare until late last year, that is not the case today. In May 
2008, interest rate modifications accounted for more than 70 
percent of all loan modifications Countrywide completed. 
Importantly, the vast majority of these rate relief 
modifications had a duration of at least 5 years, in a 
sustainable area.
    The trends are much the same in Ohio. In May 2008, we 
serviced over 256,000 loans with an unpaid balance of $26.2 
billion in Ohio. More than 92 percent of these loans are prime 
or FHA/VA, with only 7.4 percent being subprime. As with 
national data, our home retention workouts in Ohio are up 
substantially. In May 2008, we completed 952 home retention 
workouts that keep borrowers in their homes, which is a 120 
percent increase over November of last year.
    Before I conclude, I would like to briefly address our 
pending acquisition and merger with Bank of America. The 
acquisition is awaiting final approval by our shareholders next 
week, and will close in the third quarter of 2008. Until it 
does, I am limited as to what I can discuss. However, I can 
assure you that Bank of America is committed to our efforts and 
to continuous improvement in the foreclosure prevention area.
    Chairwoman Waters. Thank you, Mr. Gross. Your time is up.
    [The prepared statement of Mr. Gross can be found on page 
320 of the appendix.]
    Mrs. Tubbs Jones. Madam Chairwoman, for the record, if 
there is anyone in the audience who is here to do a workout, 
workouts are going on in the room right next door. If you go 
out the door to the left, they are working at one of the 
tables. The sign-in table is--behind that sign-in table is 
where workouts are going on right now. So please feel free to 
go over there and see if they can be of assistance.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. You are welcome.
    Ms. Kimberley Guelker.

   STATEMENT OF KIMBERLEY GUELKER, PRESIDENT, LORAIN COUNTY 
                    ASSOCIATION OF REALTORS

    Ms. Guelker. Good afternoon. My name is Kimberley Guelker. 
I am a Realtor with Howard Hanna Real Estate Estates, and I am 
also the volunteer president of the Lorain County Association 
of Realtors, located in Amherst, Ohio. With me today is our 
Association's executive vice president, Tom Kowal. I would like 
to express our thanks to you for convening these discussions to 
provide an effective solution to the growing problem of 
foreclosures.
    The Lorain County Association of Realtors is a trade 
association under the Realtor family of the National 
Association of Realtors and Ohio Association of Realtors. Our 
Association represents 500 Realtors and 40 brokerage offices in 
Lorain County. In 2007, our members sold over 2,700 residential 
units with an average market value of $143,000. The total 
transaction value exceeds $375 million.
    During the nationwide real estate market boom years, Lorain 
County experienced a very favorable housing market for buyers. 
Prices escalated about 3 percent, well below the national 
average, during the same time period. Housing choices were 
good. Local mortgage rates continue to be at record lows. As a 
result, homeownership rates are at record levels.
    Unfortunately, the current economy of Lorain County is 
stagnant. Lorain County has experienced numerous heavy industry 
plant closings, company relocations, and an aging population. 
The unemployment rate of 6.2 percent in April 2008 was 
significantly higher than the national rate of 4.4 percent and 
the State of Ohio's rate of of 5.4 percent. As a result, 
foreclosures are at an all-time high according to the Lorain 
County Clerk of Courts.
    I would like to share with the group an article that was 
recently published in The Morning Journal. In Lorain County, 1 
in 54 homes is foreclosed on, compared to 1 in 201 homes 
nationally. We are 4 times as bad as the national average, 
according to our clerk of courts.
    Foreclosures filed through May were up 8 percent, as 
compared to the same time last year. In one community--
Sheffield Lake--1 in every 28 homes is foreclosed on. The major 
cities of Lorain and Elyria are about 1 in 40.
    In addition, the current inventory of homes on the market 
for sale is over 3,300. That is a 14-month supply. Many of 
these homes are on the market because owners cannot afford the 
mortgage payment, the homeowner's insurance, or the real estate 
taxes. Studies on Lorain County foreclosures have shown that 
the Lorain County foreclosure problem is not a direct result of 
predatory lending practices.
    While the Lorain County real estate market provides many 
opportunities for affordable housing, greater amenities, and 
reasonable cost of living, we are beginning to see negative 
appreciation in housing values. The estimated impact on housing 
values is $1,700 if your property is next to or near a 
foreclosed or abandoned home. The cumulative impact would be 
$56 million on our existing inventory of homes for sale.
    According to many of our local lenders, they are seeing 
foreclosures increasing because of rising health care costs and 
the uninsured paying for medical care, job losses, and social 
situations. I would also like to add that going forward, the 
high cost of gas and food items will add to the foreclosure 
rates as homeowners make a choice between these items or paying 
their monthly mortgage.
    Many of our local lenders are trying to intervene with 
their mortgagees by participating in consumer outreach programs 
sponsored by the Lorain County Save Our Homes Task Force and 
other community organizations. Many of these foreclosed 
properties were purchased by investors who find very high 
vacancy rates because of the malaise in the Lorain County 
economy. They are also reporting extensive property damage 
which is forcing investors into the foreclosure alternative 
rather than additional investment in their homes.
    Our Association believes that educating the consumer and 
our Realtor members plays a very important role in foreclosure 
intervention. In 2005, our Association, with the support of 
several Lorain County foundations and lenders, provided a 2-day 
foreclosure intervention program for attorneys, government 
officials, and Realtors.
    The program, which covers the legal, ethical, and 
intervention process with short sale sellers as an alternative 
to foreclosure was again offered in 2007 under the leadership 
of the Lorain County Save Our Homes Task Force, and supported 
by a grant from the National Association of Realtors. These two 
programs had over 300 participants.
    Also in response to the need to educate the real estate 
professionals, an extensive 30-hour foreclosure intervention 
program, licensed by the Lorain County Association of Realtors, 
has trained over 500 Realtors and attorneys throughout Ohio in 
foreclosure intervention techniques.
    Realtors are encouraged by recent legislation at the 
national level that supported modernization of the FHA, as well 
as financial support of community-based outreach programs for 
helping consumers. Likewise, recent Ohio legislation on 
predatory lending practices, mortgage rehabilitation programs, 
and mortgage term reporting are helping homeowners.
    We strongly recommend several additional efforts. Local 
city, township, and county government agencies need to be more 
concerned with the foreclosure rates in our communities, 
because of the effect on government costs, tax revenue losses, 
and reduced valuation of properties. Federal and State funding 
for community outreach and education programs need to be 
funneled down to local agencies.
    County governments need to expend public funds for consumer 
awareness programs. Financial literacy programs for young 
adults need to be funded and become a criterion of classwork in 
our educational system so they can develop a strong sense of 
ownership in the next generation of home buyers.
    Again, thank you for this opportunity to discuss the local 
housing conditions and the real estate market in Lorain County. 
Your attention to this unfortunate situation is commendable. 
The Lorain County Association of Realtors' leadership and 
members look forward to working with you to provide solutions.
    [The prepared statement of Ms. Guelker can be found on page 
326 of the appendix.]
    Chairwoman Waters. Thank you.
    Next is Lou Tisler.

   STATEMENT OF LOU TISLER, NEIGHBORHOOD HOUSING SERVICES OF 
                       GREATER CLEVELAND

    Mr. Tisler. Good morning, Chairwoman Waters, and members of 
the subcommittee. My name is Lou Tisler, and I am the executive 
director of Neighborhood Housing Services of Greater Cleveland.
    I am honored to be speaking to our congressional friends 
and allies who are battling this crisis. No Federal agency has 
taken the time to absorb the testimony of this panel.
    Neighborhood Housing Services of Greater Cleveland is a 
not-for-profit community development corporation incorporated 
in 1975 with a mission to provide programs and services for 
achieving, preserving, and sustaining the American dream of 
homeownership. Our footprint is Cuyahoga and Lorain Counties 
for all our housing programs, and includes Erie and Heron 
Counties for our foreclosure prevention programs.
    As one of the charter organizations in NeighborWorks 
America, a network of excellence consisting of 236 
organizations working in 4,400 urban, suburban, and rural 
communities, in economic and community development across the 
Nation. We are also a national board member of the National 
NeighborWorks Association, and I would like to thank the 
chairwoman for her leadership and commitment to neighborhood 
stabilization.
    Impact--the preceding panel spoke eloquently and succinctly 
to the issue, but I would just bring one more study to bear. 
According to Rebuild Ohio's February 2008 report, $60 million 
and counting is the cost of vacant and abandoned properties in 
the State. There are over 25,000 vacant and abandoned 
properties in eight cities, Lima, Columbus, Springfield, 
Toledo, and Zanesville--$15 million in additional houses and 
additional city services and $49 million in cumulative loss and 
property tax revenues for local governments and schools and 
counties.
    Adding to this impact, the continued stream of requests to 
the County Treasurer's Office for property reassessment, which 
will continue to impact exponentially the lost property tax 
revenues that provide funding for city services to help 
educational systems.
    As a State with one of the highest rates of mortgage 
defaults in the Nation, Ohio is facing a grim future for the 
vitality of its communities. My written testimony provides 
numerous statistics from many sources, including the Mortgage 
Bankers Association, on the causes and effects of this crisis 
on Ohio versus the rest of the Nation.
    To be brief on the positives, which are fairly familiar to 
all, lack of financial education exasperated with predatory 
lending, loss of unemployment and underemployment uninsured 
medical costs, and loss of spouse.
    What are the programs that are being undertaken by NHS of 
Greater Cleveland? Local efforts: From a local perspective, 
NHSGC is involved in the Cuyahoga County foreclosure prevention 
program started by Cuyahoga County Treasurer Jim Rokakis and 
Director Paul Oyaski through our Cuyahoga County Department of 
Development.
    This program institutes United Way's two-for-one call for 
help line that acts as a feeder system to the organization for 
public prevention counseling services and programs. The measure 
of effectiveness of this outreach is that NHSGC is the top 
performer of all agencies participating in this foreclosure 
program in mortgage foreclosure assistance, predatory lending 
assistance, mortgage payment assistance, and total agency 
referrals. Statistics on these measures are included in my 
written testimony.
    NHSGC has one of the most informative and useful Web sites 
at www.nhscleveland.org with regards to foreclosure information 
and prevention. NHSGC receives over 800 new visitors per week--
the majority of those new visits to the foreclosure prevention 
area of our Web site.
    NHSGC utilizes relationships with over 20 community 
development corporations in the City of Cleveland to provide 
common ground, grass-roots outreach to residents of the City of 
Cleveland. NHSGC also works with the Cleveland City Council to 
disseminate information to provide yet another outlet for NHSGC 
programs and services.
    NHSGC continues to play a leadership role in the Ohio Home 
Rescue Fund, NeighborWorks Ohio Coalition, including 12 
organizations across the State of Ohio. NHSGC is the 
administrator of the $4.6 million of mortgage assistance funds 
or rescue funds, implementing, assisting, and providing 
direction to agencies across the State. These funds were 
provided by the Ohio Department of Development and the Ohio 
Housing Finance Agency.
    Strategically placed, Ohio's nonprofit organizations have 
been collaborating independently with public and private 
funders, lenders, and nonprofit practitioners, to develop and 
implement both the strategies to reduce the incidence of 
foreclosures for the past 10 years.
    The Ohio Foreclosure Action Initiative Organization began 
marketing this program through public service announcements, 
billboard advertising, public postering, large distributions of 
literature drops, community and grassroots meetings, special 
events, etc. We are also involved in a National Ad Council 
campaign promoting homeownership preservation foundations, 
credit counseling resource center, or CCRC, or hotline 888-995-
HOPE.
    As a member of Governor Strickland's Foreclosure Task 
Force, many of our recommendations have been instituted as 
others have previously testified. Also, the State of Ohio 
recently initiated the Save the Dream hotline, 888-404-4674. 
This number, instituted across the State of Ohio, is a major 
means for connecting homeowners to over 41 agencies' 
foreclosure prevention programs and services.
    The success of a statewide program is measured in many 
different ways. The total number of clients counseled in Ohio 
through the CCRC hotline, the Ohio Foreclosure Prevention 
Initiative 2006, was 3,972 residents of Ohio. This program is 
represented by many organizations counseling over 1,022 
residents.
    For the calendar year of 2007, there were 28,000 calls made 
to the hotline from Ohio, making Ohio the 3rd greatest user of 
the hotline in the United States, behind California and 
Florida. A breakdown of the call volume for the period of the 
delinquencies is contained in the written testimony.
    Nationwide efforts: From a national perspective, NHSGC is 
part of NeighborWorks America, and a grantee of the 
NeighborWorks Center for Foreclosure Solutions, a participant 
in the branding organization of the National Ad Council 
campaign, as well as having a position on the National 
NeighborWorks Association Board.
    To assist homeowners in distress throughout the county, 
NeighborWorks, in cooperation with the Ad Council, has embarked 
on a public awareness campaign for a toll-free hotline. In 
additional to the national campaign, NeighborWorks is 
supporting the local implementation of foreclosure prevention 
strategies to turn greater attention to focus on hot spots.
    There was also--has made a Fiscal Year 2008 Consolidated 
Appropriations Act to administer the National Foreclosure 
Mitigation Counseling Program. These funds are targeted to 
provide foreclosure mitigation and counseling help to eliminate 
foreclosures and help those across the country.
    If I could, I would like to move quickly to what Federal 
legislative and regulatory reforms are needed. One --
    Chairwoman Waters. I am sorry. I can't let you get into it 
at this moment.
    Mr. Tisler. Okay. Thank you very much.
    [The prepared statement of Mr. Tisler can be found on page 
403 of the appendix.]
    Chairwoman Waters. Thank you. And you can submit your total 
testimony for the record.
    Mrs. Tubbs Jones. Madam Chairwoman, for the record, 
Councilman Roosevelt from Ward 10 is here.
    Chairwoman Waters. Welcome. Thank you.
    Mr. Kramer, director and chief counsel, The Housing 
Advocates.

STATEMENT OF EDWARD G. KRAMER, DIRECTOR AND CHIEF COUNSEL, THE 
                       HOUSING ADVOCATES

    Mr. Kramer. I want to thank you, Chairwoman Maxine Waters, 
and the members of the subcommittee, especially my 
Congresswoman, Stephanie Tubbs Jones, and her staff for their 
untiring efforts to promote affordable housing and assist our 
clients to fight housing injustice caused by predatory lending.
    Housing Advocates was organized in June of 1975 to offer 
minorities and the poor an opportunity for housing justice. And 
for over 33 years now our organizations have provided a 
lifeline to thousands of people who have no other place to turn 
without the assistance of our staff.
    More than a decade ago, Councilman Frank Jackson issued 
warnings of the dangers posed by subprime mortgage schemes that 
were beginning to prey upon Cleveland neighborhoods. If his 
warnings had been heeded, much of the damage that we have heard 
today would not have occurred.
    Let me talk to you about the five questions that you 
invited us to discuss. The first, the Congressional Joint 
Economic Committee estimates that Ohio can expect another 
82,000 home foreclosures between now and the end of 2009, with 
more than $3.7 billion in losses.
    And let me put a face on this large number. You in 
Washington listen to billions of dollars. It is hard for me to 
imagine. Let me tell you about one client who is actually 
Councilman Holt's constituent, a 70-year old woman who lives in 
Cleveland's east side at East 147th Street, and has lived in 
that house for 38 years. In 2005, she took out a new 
refinancing of her home. The value of that home was $89,000 in 
2005; 7 weeks ago, the bank and Housing Advocates agreed to a 
new appraisal. The appraisal came back at $31,000. That means 
that in 3 years, that house is now worth only 35 percent.
    We talk about the losses of wealth. This is the human 
tragedy. The billions of dollars we cannot understand, but this 
woman whom--the house is well-maintained. Her street has so 
many foreclosures the appraiser said he could find no 
comparable houses except sheriff sales. That is why it is 
$31,000. That is the face that we, on the trenches, live with. 
Frank and the other people who are testifying see every day, 
that we need immediate action, not only from Congress but also 
from the Administration, which hopefully will hear of this 
hearing and the tragedy.
    Housing Advocates has provided, in the last 5 years, 163 
educational outreach programs, most from the Homeowner's 
Assistance Program, which the City of Cleveland has funded 
thanks to Frank Jackson and Jay Westbrook, and the other 
council members.
    Currently we receive phone calls from the Homeowner's 
Assistance Program, and we have been assisting 242 victims of 
predatory lending through this program alone. In addition, we 
do a predatory lending counseling program through Cuyahoga 
County, and through Homeowner's Assistance, we resolved 19 
cases through litigation in the last 5 years. And we have saved 
consumers $668,133.37 through this litigation program.
    Three years ago, the Fannie Mae program had a pilot program 
here, which Congresswoman Stephanie Tubbs Jones was at the 
press conference. The Housing Advocates helped eliminate loans 
that are predatory, where Fannie Mae agreed to lower--have no 
credit scores and lower other criteria if Housing Advocates' 
staff would assist in counseling these individuals.
    We had four lending partners that assisted us, who became 
our own loan committee, where we would present this information 
to refinance predatory loans. Huntington Bank, Amtrust Bank, 
Dollar Bank, and Fifth Third Bank have been our lending 
partners. We have been able to refinance 17 loans and save $1.2 
million to consumers through this refinancing program.
    Putting several of them that were in bankruptcies, many of 
them were in foreclosures, they are now saved and these homes 
are saved. We have an Emergency Mortgage Assistance Program 
which provides for up to $2,500 of emergency mortgage 
assistance to help prevent people from becoming homeless. We 
also have, under this program, rental and utility assistance 
where we can provide up to $1,000 to individuals who have their 
utilities being threatened to be cut off.
    Let me tell you my experience with predatory lending. 
Predatory lending has contributed greatly to this problem that 
we are hearing about today. Yes, economic problems certainly 
played its part. But what we are seeing here is in many cases 
predatory lending, as Congressman Kucinich says, is just a 
cleverly fashioned form of housing discrimination.
    Let me ask you to consider urging Fannie Mae to expand this 
pilot program that we have told you about. We have been 
successful here in Cleveland, thanks to the efforts of our 
staff and also Mayor Jackson. This would be something that 
could be done immediately. They have the authority.
    I would urge you to take a look at the information I have 
given in my full text. This program can be expanded nationwide.
    I thank you very much for the opportunity to present this 
testimony.
    [The prepared statement of Mr. Kramer can be found on page 
360 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Ford.

STATEMENT OF FRANK FORD, SENIOR VICE PRESIDENT FOR RESEARCH AND 
            DEVELOPMENT, NEIGHBORHOOD PROGRESS, INC.

    Mr. Ford. Yes. Madam Chairwoman, and members of the 
subcommittee, thank you for the opportunity to come forward and 
testify today. I am going to focus my remarks on two topics: 
the impact of this problem; and the recommendations for 
Federal, regulatory, or legislative action.
    I dread the thought of the chairwoman's gavel coming down. 
At the risk of that, I am going to depart just briefly from my 
remarks to take issue with one of my fellow panelists at the 
far right, my right, probably on the left from you, but--and 
that is Mr. Van Buskirk, whose opening remarks stated that the 
foreclosures derived from Ohio's economy.
    There is no question that is a factor, but let me just 
point out a statistic. In Cuyahoga County, in 1993, the 
unemployment rate peaked at 7 percent. It went down by 1995 and 
hovered at 4 percent in 1995 to 2000. Yet, as that chart shows 
right over there on the right, foreclosures doubled in that 
same period. There is no way that you can explain this by 
saying that the economy caused this problem. It is a 
contributing factor, but the underlying problem is 
irresponsible underwriting and investing by lenders.
    I would like to talk about impact. The analogy of Hurricane 
Katrina, others have talked about the tsunami wave, I 
personally like the tsunami wave, because tsunami wave has the 
wave--the initial wave, then it recedes and comes back.
    And I actually think that there are three to five waves, 
and three of them I anticipate--I suggest that we haven't quite 
seen them yet. The first one is the individual impact on 
borrowers losing their homes. The second is the impact on the 
neighbors, which has been talked about quite eloquently by 
other people, loss of property value, the costs to the city to 
board-up properties.
    There are three waves that I think are just emerging now, 
and Tony Brancatelli did reference this. The third one would be 
this emerging culture of flippers and speculators, which many 
of them are just forming their business enterprises just in the 
last few months.
    And this sign over here, I am going to put that up.
    Mr. Kramer. I did.
    Mr. Ford. Oh, thank you. That is a great prop. I get to 
point to it.
    But what we are foreseeing is an emergence of something 
that we haven't seen for 20 or 30 years, and that is land 
contrasts, which are definitely not good for low- and moderate-
income people. And I can talk more about that later. So that is 
the third wave.
    The fourth one would be something that was referenced also 
and I want to reinforce it--that property taxes are assessed on 
a 3-year basis. We have not yet seen the property tax 
assessments that are going to hit Tioga County. There is going 
to be a devastating loss to school revenue, police and fire, 
municipalities. That is another wave that is going to hit us 
that really hasn't hit us yet.
    The final one is one which I hope doesn't hit us, but there 
is a lot of talk about tightening up credit standards, and 
there should be a tightening up of credit standards, but not an 
overtightening to where people who do deserve credit can't get 
it. I am a little concerned about an overtightening where we go 
back to a form of redlining.
    Now, in terms of recommendations, I have three categories: 
Federal action for preventing; Federal action for reclaiming 
and restoring property; and this one I just mentioned, what do 
we do about the credit markets going forward to make sure that 
people have access to credit.
    In terms of prevention, I am going to put forward two 
things which I know are controversial, and it may not even be 
within your power to do them, but I think it is important to 
put them on the table. The first one is a moratorium on 
foreclosures. Now, that would appear to be extreme and maybe 
even unconstitutional, but in 1934, the U.S. Supreme Court 
upheld the State of Minnesota's foreclosure moratorium. And I 
can get you the cite for that case if you need it.
    The second would be a freeze on the resetting of adjustable 
rate mortgages. There is probably no other single effect, no 
other single cause that is greater to trigger a foreclosure 
than an adjustable rate kicking in and a payment going from 
$800 a month to $1,200 a month.
    The third category of action that could be taken--and I 
think this is reasonably within the realm of the Federal 
Government to do--we have four regulatory agencies that 
regulate lenders: the Federal Reserve; the Comptroller of the 
Currency; the FDIC; and the Office of Thrift Supervision. These 
lenders could be using their authority to compel. And I like 
the fact that--I think it was Chris Warren who used the word 
``compel.'' Not just encourage loan modifications, but to use 
their position to try to compel lenders to consider loan 
modifications.
    And I want to--this may surprise some people, but I want to 
commend Countrywide for entering into the agreement they did 
with ESOP. I think that exactly what Mr. Gross talked about is 
what we need, and I like the fact that he said, ``We don't do--
when we count a loan modification, it is not a deed in lieu. 
The family stays in the home.'' That is what we should be 
aiming for, and trying to get other lenders to do that.
    The question was asked by the chairwoman, I think, earlier, 
or maybe it was Representative Kaptur, are the servicers doing 
enough? I would say no, not nearly enough. There are some high 
points. I would, again, say that Countrywide has responded. But 
I think we need more leaning by our regulators on lenders and 
whatever we can do to lean on services to do more workouts.
    In terms of reclamation, the cleanup is going to be 
extraordinary. There is demolition. The City of Cleveland 
estimates that the 10,000--
    Mr. Kramer. So that is the gap?
    Mr. Ford. I was going to say, it sounded a little different 
than I was expecting.
    [Laughter]
    [The prepared statement of Mr. Ford can be found on page 
309 of the appendix.]
    Mrs. Tubbs Jones. [presiding] We will try and give you a 
little more time as we go through the process.
    Madam Chairwoman has stepped out for a moment, so I am 
stepping in as the Chair, and I am going to go to the first 
question by my colleague. But before I do that, I would ask 
unanimous consent to have a statement by the Court of Common 
Pleas for submission to the record on the foreclosure problems 
and solutions. They are going to open their mediation program 
beginning June 24th. Where are the folks from the court 
mediation program? Stand up if you have any questions.
    And then, for the record, this is a copy of a lawsuit 
against various lenders that was filed. Let me give it back to 
you.
    At this point, I would call upon Congressman Wilson to do 
his questioning.
    Mr. Wilson. Thank you. The first question is to you, Mr. 
Tisler. I wanted to hear the rest of what you had to say. I 
know you can't do it in this timeframe, but let me ask you 
this: Is Senate bill 185 working in Ohio? Is it helping?
    Mr. Tisler. I think, Congressman, that we are glad that it 
was passed and that it is better than nothing. But I think that 
there are a lot of things that we are taking out of that--that 
good compromise that should have been. So I think that it is 
the right way to go. It is starting to get everybody to 
recognize what a predatory loan is, or at least what 185 says 
it is, and to really bring some lenders back to earth. But I 
think that it didn't go as far as it should have.
    Mr. Wilson. Thank you. Can I ask another question?
    Mrs. Tubbs Jones. Sure.
    Mr. Wilson. Mr. Van Buskirk, are we better off today in the 
way we are doing prime lending, or are we better off to go back 
to the days where the banker, who is the customer, he insists 
on a percentage down, versus the way we have gone--what has 
brought us to this home foreclosure situation that we are in?
    Mr. Tisler. Representative Wilson, that is a complex 
question. The good part of what happened in the U.S. housing 
market over the last 10 years was that we recognized the 
relatively simple lesson for investment in money from around 
the world flowing into it. It did make it possible for many 
more Americans than had historically been the case, to afford 
homes; most of them are still in those homes.
    One of the issues we are dealing with now in credit crunch, 
credit scams. Most of those sources of mortgages to the United 
States no longer exist. We talk about when we get back to 
normal. Part of the question is: what will be normal? I think 
part of the issue is Congress is coming up with a set of new 
guidelines that fit assures the investors into these loans that 
they are buying at very low rates into.
    We tend to damn investors. Many of them were people of 
mutual funds during the Foreclosure Prevention Task Force. The 
public numbers have stayed--the employees realized that they 
were investors, because most of the public pension funds, in 
fact, are impacted by these subprime mortgages. Why? Because 
rating agencies said they were very safe, and they couldn't see 
through the numbers.
    So I think that one of the keys is getting back to a point 
where appropriately underwritten mortgages, loaned under fair 
and equitable lending standards, can be funded, both nationally 
and again internationally.
    When we saw the explosion and the change talked about 
earlier among the FDIC-insured institutions, well, the good 
news for the consumer is that there are tens of thousands of 
choices, good choices and some of them are bad choices. We 
talked about financial literacy and people being able to 
choose. We don't want to go back to the old days, because 
that--there was too little money available for mortgages and it 
cost too much. But we have to find a new world where the 
lending is prudent. It is fair, it is available to anybody who 
has a reasonable probability of being able to pay it back.
    Chairwoman Waters. Thank you.
    Mr. Gross, one question for you, if I may. In your 
testimony, Mr. Gross, you said 718 percent jump in loan 
modification plans. Can you explain to me more in detail what 
that means?
    Mr. Gross. It means that in prior periods, back in the last 
2 or 3 years, the general type of loan modification was one 
where the borrower was already in his home, the reason for 
default had now been cured, and if unemployed now they are 
employed again, making a fresh start. The modification would 
mean that any arrears would have been capitalized at a 
principal balance and reamortized over the remaining term of 
the loan, which would have resulted in a very small increase in 
their monthly payment.
    In the past year, with credit and all the initiatives, and 
ASF guidance that we have gotten from the American 
Securitization Forum, where we have now gotten into a more 
proactive modifications where we have extended someone's start 
rates, for hybrid numerical growth, those a year ago did not 
exist. So now we are able to do those types of modifications, 
and as Countrywide is making clear, we are doing tens of 
thousands of loans on a monthly basis.
    Mr. Wilson. Thank you.
    Madam Chairwoman, I yield back the balance of my time.
    Chairwoman Waters. Thank you very much.
    Marcy Kaptur.
    Ms. Kaptur. Thank you, Madam Chairwoman. I would like to 
ask unanimous consent to place in the record three excellent 
articles--one from The New York Times and two from The 
Washington Post--dealing with this mortgage crisis.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Kaptur. I thank the Chair very much.
    Number two, I would like to just inform those who are on 
the panel and in the audience that the poster to your right 
tracks the rise in foreclosures in Ohio from 1994 to 2007, 
reflecting the roughly 80,000 foreclosures last year. And the 
poster to the immediate right, the number of foreclosures we 
had in the State last year, each red dot representing 10 
foreclosures.
    I wanted to also thank Countrywide's representative, Mr. 
Gross, for having people over in the adjoining room today, and 
the other modes of instrumentality that have shown a presence 
here today. We all live in this country, I think, and most of 
us live in this State. And we have to work through this 
together and it's not easy.
    I am also fairly convinced that many people who got caught 
up in this weren't the ones who came up with it; they came 
along for the ride. That doesn't mean they are totally 
guiltless, but I think they have responsibility. So we thank 
you for being here today.
    Mr. Van Buskirk, I am just going to focus this question to 
you. I think Ohio has a really important role to play in 
getting our Nation back on the right track. And I think in my 
very long career in the Congress, when I first arrived we had 
agricultural bankruptcies all over the country. Ohio had very 
few of those, because our farmers didn't overextend themselves. 
They were responsible, they were conservative, they didn't 
over-borrow. It was an anomaly in the Nation.
    When we had all the problems with thrifts back in the 
1980's, if you look at California, Arizona, Florida, or Texas, 
Ohio really--you know, we had some in there that weren't so 
good, but nothing like the washout that happened in the rest of 
the country. I see John Floyd sitting out there in the audience 
from the Ohio Credit Union League. But for the State charters, 
we have not had a bad record here with federally-regulated 
credit unions from this State.
    So I guess my message to you is that somehow America needs 
fiscal discipline again, and it needs to exert fiscal 
responsibility. We are $9.3 trillion in debt, headed to $10 
trillion in the public sector, and it in the private sector, 
according to your own testimony, we are just bringing the money 
from everywhere else because we are not self-sufficient here at 
home.
    I think people like yourself, and your colleagues from 
Ohio, need to have louder voices at the Federal level for how 
this country can get back on track again, because we are merely 
emptying ourselves. And you say in your testimony how our 
public pension funds are now invaded by foreign money.
    My friends, America has never really been here before. And 
part of this problem, a large part of this problem is that 
because we were broke, we should have been broke back in the 
1990's when we were growing a little bit and government was 
balancing the budget, we should have been more responsible 
fiscally in our private sector dealings. This is a private 
sector problem with a lack of public regulation.
    I just hope that--you say in your testimony here, non-bank 
brokers no longer have a real interest in the borrower's 
ability to repay. I think Ohio--the people of Ohio have had a 
history of paying their own way and wanting America to be 
financially independent. And we have lost our way. And maybe 
with, present company excepted, the City of Los Angeles--maybe 
Ohio voices need to be a little bit stronger at the national 
level and not be afraid to have our country take the actions we 
need.
    I think Ohio's experience has something to offer. The 
people in the financial centers in New York often look at us as 
flyover country, but our record is pretty good compared to 
other places in the country. So I think your testimony reveals 
the level of knowledge here that I think gives you special 
responsibility.
    And I guess my questioning really is only to say, ask 
yourself, what do you do with that knowledge now? Maybe you 
should play a little larger role before the committee. Maybe 
Ohio's experience has something to teach the Nation in 
unwinding things so we can become fiscally solvent in the 
public and private sectors and stand on our own two feet again 
as a country.
    So I am impressed with your testimony, but don't be afraid 
to draw from Ohio's experience and take it to the country. We 
are hurting now, because we haven't looked into all these deals 
from the coasts and internationally. Ohio should have been a 
larger voice in opposing all of that. So maybe now is the time 
to speak out. That is my comment, and I thank you for your 
efforts.
    Mr. Van Buskirk. Congresswoman Kaptur, thank you. I agree 
with you. You mentioned very few insured depository failures in 
Ohio's history compared to most other States, and that is true. 
But you remember in your early days of Congress, the home State 
failures.
    And I think there is something instructive from Ohio 
history to our current situation, because there was a group of 
savings and loans that were privately insured. Most had chosen 
private insurance to avoid the Federal regulator or the 
prudential regulator protecting the public's interest. Then, 
when one of them made poor investments in the private insurance 
fund, it immediately became bankrupt and created a domino chain 
into some other States, other failures.
    Another thing, in terms of Chairman Frank just announced a 
series of hearings of oversight in terms of the regulatory 
structure. Regulatory structure on paper doesn't look very 
pretty. The Comptroller of the Currency has created--the 
Federal Reserve created in 1913 was never really meant to work 
with one another very well. We have a series of housing laws 
designed to protect consumers, but they have never really been 
looked at as a whole to make them work efficiently and 
effectively.
    The Federal Reserve just announced some new rules dealing 
with--under the Home Equity Protection Act for high-cost loans. 
But it only has the authority, as I understand it, to deal with 
those high-cost loans. In principle, they are very simple. 
Focus on the disclosures to determine whether consumers learn 
from them what it is they need to know and make a prudent 
decision.
    So I think some streamlining of the process is an 
understanding to empower the consumer to make better decisions 
on these things is a lesson we need to learn here in Ohio.
    Ms. Kaptur. I would say that, in terms of the home State 
situation relative to California or Texas and some of these 
other washouts we had, Ohio didn't compare in terms of volume 
or impact downstream. We had some mergers, and so forth, but in 
terms of arguing that Ohio was equal to their situation, you 
would have--
    Mr. Van Buskirk. No. In terms of assets or number of 
institutions, Ohio didn't compare. But unlike some of those 
other areas, the problem here was a lack of financial 
regulation that allowed folks to abuse circumstances and do 
things that would--other kinds of financial institutions 
couldn't really manage an appropriately regulated market.
    Ms. Kaptur. I know that my time has expired, but I would 
just like to say in your testimony you also talk about the 
Office of Thrift Supervision. I have--I am withholding judgment 
on the Office of Thrift Supervision, because I am asking myself 
the question: what happened in Chicago, and what happened in 
Washington, that Superior Bank in the State of Illinois was not 
supervised? What went wrong? Why should I trust OTS again, if 
ever? What needs to be done to clean that up?
    Thank you.
    Chairwoman Waters. Thank you very much.
    Congresswoman Tubbs Jones.
    Mrs. Tubbs Jones. Thank you, Madam Chairwoman. One of the 
things that we didn't talk about earlier that we all need to 
factor into our discussion is the fact that it is important 
that predatory lending practices--a number of persons who 
qualify for prime loans were ushered into subprime loans 
because it was more financially viable--a financial gain for 
the lending institution. And we need to take a look at that 
also, because as a result of that a lot of people ended up in 
subprime that should never have been in subprime lending.
    I want to give--just for the record, say with regard to Ed 
Kramer --Ed Kramer and I went to law school together, and we 
started out first landlord-tenant cases way back in the day. 
And I have to say that is truly where I began the process of 
being concerned about housing, and that was way back in the 
day.
    And I want to use my time to talk about these things, but 
also for a moment talk about the kind of litigation that you 
have been involved in and the problem with litigation in this 
particular predatory lending area.
    Mr. Kramer. Well, the problem is there are very few 
attorneys who are capable and have the financial resources to 
go against major financial institutions in Wall Street. So the 
fact that the City of Cleveland, through Mayor Jackson, filed 
that lawsuit against the Wall Street firms and the investment 
banks is very important, and we are supportive of the City.
    That is something that we hope other cities will do. And, 
in fact, the City of Baltimore has brought litigation. The Fair 
Housing Law gives standing to cities because, if the city has 
been injured--if you look at the--just the devaluation of 
property, and, therefore, property taxes, every city that has 
experienced devaluation has a fair housing claim for the next 2 
years at least against these banks, but the clock is ticking.
    And we really have not seen what I thought--Baltimore and 
the City of Cleveland leading the way--other cities would join 
on. And so I was very happy to hear Representative Kaptur talk 
about encouraging other cities to look at this issue right now.
    Mrs. Tubbs Jones. Would the gentleman yield for just a 
second? I don't know if it is possible before we leave town for 
that case to be xeroxed and distributed to the members. I would 
like to take that back to my community. Thank you.
    Chairwoman Waters. We have--I will ask Congresswoman 
Stephanie Jones to lead us in the Congress--
    Mrs. Tubbs Jones. Will you get one of my staffers and tell 
them to come--one of my staffers and have him come in here, 
please?
    Chairwoman Waters. Let me just say to Congresswoman Kaptur, 
what I would like us to do is to take our matter forward and 
give some national presence to this lawsuit. Then, in addition 
to that, I would like us to be in touch with the Conference of 
Mayors in the country, and disseminate the lawsuit to them so 
that we can create some momentum with other cities following 
this lawsuit. It sounds as though it is kind of could help us 
to move the courts in our direction.
    Thank you.
    Mr. Kramer. I would also point to Exhibit 2 of my written 
testimony, which is an article that Marilyn Tobocman and I have 
written on fair housing laws as a weapon against predatory 
lending. It cites the principles about using the standing of 
cities to be able to sue predatory lenders, and that is with 
the materials that you would have, in my case.
    I do want to talk about this sign, which--you are seeing 
many of these signs popping up. It says, ``Sale, $500 down, 
$350 a month.'' What is happening here is this is like the 
third wave of the tsunami. The final devastation is just 
occurring, and we are the canaries. You know, we have already 
suffered through this predatory lending.
    The banks that have now gotten our property--10,000 vacant 
properties in the City of Cleveland alone--are not maintaining 
those properties. And now the City of Cleveland, through Judge 
Pianka, the City of Cleveland's housing court judge, is trying 
to take them to task because as property owners they should be 
maintaining the property. They should be cutting the grass. 
They should be, maybe, boarding-up to make sure that house 
stays viable. They are not.
    So suddenly what is happening is we are handing these out-
of-State companies--this one, for example, is assigned from 
Destiny Ventures. And Destiny Ventures are being given these 
homes, sometimes for $500 or $2,000, and they are selling them 
immediately back--selling--they are renting illegally, 21-year 
leases, which are never reported, so it is illegal under Ohio 
law, by giving it to families. It is like poisoning them with 
candy. It is like Halloween.
    And these families are trying to desperately take often 
condemned property and bring them up, spending the last 
resources they have because this is their chance, they think, 
to own a home. But the lease itself is so adhesionary, it says 
that if you default at all, once, if you don't make a payment, 
if you don't bring this up to code within 3 months, they can 
take the property back and they can evict you. Now--
    Chairwoman Waters. Would the gentleman yield for a moment? 
Would you repeat? Destiny Ventures?
    Mr. Kramer. Destiny Ventures is in--
    Chairwoman Waters. Where are they--
    Mr. Kramer. Oklahoma, Texas also. This is--and they are 
totally undercapitalized. But what is happening now, banks that 
have financial resources that own these properties are now 
trying desperately to get rid of them because they know they 
could be held responsible by the city of Cleveland.
    Chairwoman Waters. If the gentlemen would yield for a 
moment, I am basically very, very cautious about eminent 
domain. But the land use authority vested in the city council, 
I believe that a criteria could be developed so that you could 
use the eminent domain in some of these cases, or in many of 
these cases.
    Someone said here today that the banks or the lenders or 
the investors are anxious to do workouts because in the final 
analysis they could lose everything or they could save some of 
their investment with these modifications. But if you are 
telling me that you have, as he says, which we have heard over 
and over again, that are bringing down the value of other homes 
in the neighborhood, that are not kept up, that are being 
stripped, that are being used for criminal activity, it seems 
to me that is a good case for eminent domain.
    And if the cities get involved with establishing criteria 
for eminent domain, that if in fact the value of these 
properties has decreased significantly, then perhaps the city 
can end up, as I am trying to do with my--one of the pieces of 
legislation that I have for the cities to buy up these 
properties so that they can be rehabbed and placed on the 
market for low and moderate income people. Through eminent 
domain, you can get them all very, very cheap because the value 
of them has gone down.
    Perhaps the city ought to be a little bit more aggressive 
in exercising its authority to do some of this. So we would 
like to talk with you further because we are hearing something 
today that I always knew was going to happen if this situation 
persisted, but I didn't know it was actually happening the way 
that you described.
    All right. We are going to move on so that we can get--were 
you finished?
    Mrs. Tubbs Jones. Yes, ma'am.
    Chairwoman Waters. All right. Okay. We will move to Ms. 
Sutton.
    Ms. Sutton. Thank you, Madam Chairwoman.
    Ms. Guelker, thank you for coming in to testify about the 
good work that you are doing in Lorain County. You mentioned in 
your testimony short sales and they have been getting increased 
attention lately as an alternative to foreclosure. Can you just 
go into a little more detail about what short sales involve? 
And can you also explain how they might be beneficial to 
someone as an alternative to foreclosure?
    Ms. Guelker. The lady who was at the end of the first 
panel, I think she explained it exactly. I can fax or scan or 
e-mail something eight or nine times. They don't have it. They 
make a deal with an asset manager; a month later that deal is 
off the table. The homeowner--I can see why the homeowner gives 
up, walks away. It is very--they are made promises. They are 
trying and then somebody pulls the rug out.
    I mean, as a Realtor, I sit there and do it. I make the 
call. You follow up. One mortgage company wanted a $25,000 no 
interest for 5 years to a guy getting out of jail. The guy 
didn't have a job. Six months after trying to do a short sale, 
it went to sheriff's sale in January. He's still in the home 
because the bank still hasn't paid the country. Kind of 
disturbing. And he was a good one. He kept the property cut, he 
made showings available, he was a good homeowner who was 
actually trying to work with them.
    Ms. Sutton. Thank you. I am going to follow up with you a 
little bit after this and get some more information.
    Mr. Gross, you received some positive support here for 
Countrywide's president, but, you know, earlier in the first 
panel, there was discussion about Countrywide. And maybe you 
can just tell me, how many loans does Countrywide have in the 
State of Ohio?
    Mr. Gross. 256,000.
    Ms. Sutton. Okay. Do you know how many of those 256,000 are 
subprime loans?
    Mr. Gross. 7.4 percent.
    Ms. Sutton. 7.4 percent. Do you know how many homes 
Countrywide foreclosed on in Ohio last month?
    Mr. Gross. No, I am sorry. I do not have that information.
    Ms. Sutton. How about the last year, 2007?
    Mr. Gross. I don't have in terms of--at the present time, 
approximately 2.04 percent of the loans in Ohio are in a 
foreclosure status, which means foreclosure is pending. Of 
those, we estimate normally that 50 to 60 percent of those 
properties will not complete the foreclosure process, and 40-
plus percent will complete it.
    Chairwoman Waters. Move the microphone up as close as you 
can.
    Mr. Gross. Sorry.
    Ms. Sutton. Okay. In your written testimony you say that 
you have assisted 26 borrowers who have sought help.
    Mr. Gross. Through that one program.
    Ms. Sutton. Right. Through Ohio Save the Dream Program, 
right?
    Mr. Gross. That is correct.
    Ms. Sutton. And what percentage of the--well, we can 
calculate that. That is a relatively small number.
    Mr. Gross. Again, that is just those borrowers who have 
approached us through that one program.
    Ms. Kaptur. Will the gentlelady yield?
    Ms. Sutton. Certainly.
    Ms. Kaptur. Two percent of 276,000 is 5,520.
    Ms. Sutton. Thank you.
    Mr. Gross. In the foreclosure process, yes.
    Ms. Sutton. Thank you, Representative Kaptur.
    Although you are here today, and I appreciate that, and the 
people are in the other room trying to work out loans, we have 
heard some of the testimony about how difficult this all seems 
to be when it is put into practice for people. I looked at the 
litany of interactions between, you know, our earlier witness 
when she was trying to help people, and it reminded me of 
looking at the process that vulnerable people who are trying to 
get their health care coverage go through, even when they have 
insurance, it's just call after call after call, and when 
people are vulnerable, there are always those out there to take 
advantage.
    But I just have a question: Even though you are here, I 
didn't see Countrywide on the list of loan servicers who signed 
a Compact to help Ohioans preserve homeownership. Why is that?
    Mr. Gross. We have participated in the discussions 
regarding the Compact. Many times the overall principles that 
were in the Compact were ones that we subscribe to and had 
practiced for many years. Unfortunately for us, it was sort of 
the devil was in the details, which was for each one of those 
major points there were sub-bullets in there that we, quite 
frankly said, if it were just the six principles stated alone, 
we are fine. We could subscribe to that, as we have done in 
other States.
    But once you got into the details of exactly what was 
required, one of the challenges that we have is we service 9 
million loans across the Nation. We absolutely cannot get into 
a circumstance where we have materially different requirements 
and standards that a location makes so that all loans in Ohio 
have to be serviced in a certain manner, which is different 
from Minnesota or Michigan.
    So for national servicers, which is why I think there were 
very few national servicers that subscribe to the Compact, this 
was a major problem.
    Ms. Sutton. So it would be some things that are initiated 
on the Federal level so that you have--
    Mr. Gross. Which we were one of the first subscribers to 
the Dodd principles.
    Ms. Sutton. What exactly, just for clarification, what are 
the--what were the devilish details that kept you out?
    Mr. Gross. I don't recall what they were. I'll have to 
follow up with you later. Blame it on age; I don't remember.
    Ms. Sutton. Thank you. I yield back.
    Chairwoman Waters. Mr. Gross, are you a lawyer?
    Mr. Gross. No, I am not.
    Chairwoman Waters. Okay. Are you familiar with, I believe 
there are laws that cover the country with regard to paper, 
commercial paper, right?
    Mr. Gross. Uniform commercial code.
    Chairwoman Waters. Uniform commercial code, right?
    Mr. Gross. Yes.
    Chairwoman Waters. So even though you are not a lawyer, you 
know what I am talking about, right?
    Mr. Gross. A little bit.
    Chairwoman Waters. Yes. But, so if we can have a uniform 
commercial code that addresses consumer paper, why couldn't we 
do the same thing with mortgages? Because I was--the grief we 
were getting across the country from the national servicers 
that it is very hard to put credit--to describe what predatory 
lending is so you could regulate it, because lending is so 
different across the country. But if you have uniform 
commercial paper, you ought to be able to have uniform 
predatory lending laws, don't you think?
    Mr. Gross. I am betting that you could come up with a 
designation.
    Chairwoman Waters. Okay. I thought so.
    Ms. Sutton. Just one final question.
    Chairwoman Waters. Yes.
    Ms. Sutton. You said that you didn't want to sign on to the 
Compact because it is difficult when you are dealing with other 
States if you agree here. Was there something in the compact 
that would not have been acceptable or a practice that you 
could have applied?
    Mr. Gross. Not that I remember.
    Ms. Sutton. Okay.
    Mr. Gross. And I would note for the record that Countrywide 
does report all of our portfolio management loss mitigation 
statistics nationally, and we report them on a State level 
basis, so any State regulator who wants access to this 
information, it is led by an initiative from Ohio Attorney 
General Tom Miller, and they are all reported through Deputy 
Commissioner of Banking, Mark Pierce, in North Carolina. So our 
information on a State-level basis is available to any 
regulator.
    Ms. Sutton. Thank you, Mr. Gross.
    Chairwoman Waters. Thank you.
    Mrs. Tubbs Jones. Madam Chairwoman, I apologize. For the 
record, they are doing workout in the next room--Washington 
Mutual, Countrywide, National City, Freddie Mac, Litton Loan 
Service, Neighborhood Housing Services, Community Housing 
Solutions, the Housing Advocates, Legal Aid Society, the East 
Side Organizing Project, and ACORN. They are next door and 
available to help you do workouts.
    Chairwoman Waters. All right. Thank you very much. I am 
supposed to spend my time now asking Mr. Gross and Mr. Van 
Buskirk about the affordability standards Countrywide and 
members of the Ohio Bankers League are using in their loss 
mitigation efforts with distressed borrowers. But I would like 
you to start to think about that while I--I guess offer a kind 
of apology and help to accept the blame for the situation we 
find ourselves in.
    Our regulators have already admitted in hearings that they 
dropped the ball, that they are responsible for this 
foreclosure event that we are in. Members of Congress, some of 
us, have certainly admitted that we dropped the ball on our 
oversight responsibility, and we did not require enough of our 
regulators so that they were able to get away with not doing 
the kind of auditing and the kind of questioning of all these 
new and exotic products that were coming on the market, so that 
we could understand what was happening.
    But as I look here today, I see further responsibility can 
be taken. While I am very much aware that the economy certainly 
plays a role, when people lose their jobs and we have financial 
difficulties and cannot make our payments and we cannot take 
care of our mortgages.
    But, you know, and I am very close with the Realtors, but I 
am wondering if some of our Realtors were selling these 
properties that they did not wince at some of the products that 
were being offered to their clients and say, ``I can't do this. 
This just doesn't seem right. I know that based on what I know 
about this client there is no way that this is going to work 
with the reset, given, you know, the amount of income that they 
have.''
    I am also wondering when the Fed--the Home Loan Bank 
situation, you have participating banks that you give low-cost 
money to. I am wondering if--how many of those banks were 
predatory lending, and if there is something interesting--what 
was going on, and certainly with the Ohio Bankers Association, 
what kind of early-on discussion did the Association have about 
these products.
    And how many of the banks and the associations were 
involved with particularly mortgage brokers and bankers who 
were out there pushing these products with no responsibility? 
As a matter of fact, in the State of California, Countrywide--
we had two ways by which brokers could be licensed. And 
Countrywide utilized the one where if they got their license, 
they could go out and hire people without those--those brokers 
being licensed. We are changing that in the legislation, but we 
literally had these mortgage folks working out of the backs of 
their cars with all kinds of utilization of these products and 
some fraud, etc.
    So I think that we all have to take some responsibility to 
work very, very hard. We owe an apology to the American people. 
And I really came here today quite upset, and I am trying to be 
calm and to contain myself because the latest news is this. 
Countrywide has something called Friends of Mozilo. The friends 
of the chairman or the CEO, the president, the founder, or 
whatever all those titles are at Countrywide Bank were people 
who got special rates and special considerations. And some of 
them are elected officials--Senator Dodd; Senator Conrad; Jim 
Johnson, who was the CEO of Fannie Mae; Donna Shalala, who was 
the head of Health and Human Services; Ambassador Holbrooke; 
and Alfonso Jackson, who was the Secretary of HUD--all were 
friends of Mozilo's and got special consideration for their 
loans.
    Not only did they get a reduced interest rate, but some of 
them were able to borrow money above and beyond the standards 
of Countrywide, where they were lending for multiple units and 
properties that were not even supposed to be funded according 
to the criteria of Countrywide. And, of course, general shock 
that Jim Johnson, even while he was running Fannie Mae, was 
able to get a special loan and special consideration on 
multiple properties.
    And so, you know, the American people, and particularly the 
poorest and most vulnerable in our society who were being raped 
with these predatory loans, added value products, and 
extraordinarily high interest rates and resets that are going 
to quadruple ought to be mad as hell at all of us about what is 
happening. And I do think that some of the people who testified 
here today talk about--we have to dig deeper. There is no way 
that we should allow, even with the sale--Countrywide can't get 
off with the sale just to Bank of America.
    We have to dig deeper. We have to explore some of what 
Congresswoman Marcy Kaptur asked about, who started it, whether 
or not people conspired to target neighborhoods, on and on and 
on. So I just must say that because it is so uncomfortable as a 
public policymaker in the middle of Congress doing this work to 
keep discovering what we are discovering.
    This latest transfer with Mozilo with this little private 
banking that they were doing with professional people and the 
very people that we expected to protect the people of America 
were getting privileged loans is just unacceptable. And we are 
going to have to deal with this.
    Not only my committee but the entire Congress of the United 
States has to do this. We have to subpoena the people. And we 
have to join some lawsuits. Meanwhile, let me get back to the 
Bureau of Standards.
    Countrywide, you get beaten up a lot, but you ought to be 
beaten up.
    [Laughter]
    Chairwoman Waters. I mean, you know, I thank you for being 
here today, but I don't feel sorry for you at all. And if you 
end up getting hit hard, just grin and bear it, as you are 
doing, because you have become the poster child for what is 
wrong. I know Ameriquest and Century and some of the others 
that are out of business were just as bad as you are. Thank you 
for coming, and accepting the blows.
    Now tell me, about the affordability standards in 
Countrywide and also I will get back to the rivers of the Ohio. 
Use it in your loss mitigation efforts. Is that understandable? 
Do I have--
    Mr. Gross. Yes, ma'am.
    Chairwoman Waters. --to be more specific than that?
    Mr. Gross. No, that's very specific.
    Chairwoman Waters. All right.
    Mr. Gross. When we are gathering financial information from 
a customer today--
    Chairwoman Waters. Would you speak up so everybody can hear 
you?
    Mr. Gross. Yes. When we are gathering information from the 
homeowner regarding their income and expenses, which would be 
gross income versus their expenses, we will use two traditional 
ratios, one which is called the monthly housing expense, which 
is principal, interest, taxes, and insurance, which is 
typically going to fall somewhere in the 33 to 38 percent of a 
person's or a household's gross monthly income.
    The second ratio is the total monthly obligations, which 
includes the monthly housing expense and all other obligations 
they might have, which depending upon the homeowner and what 
area of the Nation they live in, that would probably cap out 
somewhere in the 45 to 50 percent of the household's gross 
monthly income.
    Chairwoman Waters. You have strict standards on 
affordability for loss mitigation efforts. That may for example 
require better than $200 in residential income left over after 
a borrower's household expenses, including payments on all 
secured and unsecured debt are taken into account. And that 
requires 20 percent residual income per person. Under the same 
analysis, VA and FHA also imposed similar standards on services 
of the loans that they guarantee.
    Mr. Gross. Yes. And the final item that I was going to 
mention was we would generally try to leave approximately 
somewhere between $75 to $100 net disposable income per 
household member.
    Chairwoman Waters. What do you mean you ``try?'' Is that a 
standard or not?
    Mr. Gross. It is a guideline.
    Chairwoman Waters. So it could or could not be the case?
    Mr. Gross. Yes. It would be the standard. What I outlined 
to you before was generally that we would be in compliance with 
the same thing that either Fannie Mae or Freddie Mac outlines.
    Chairwoman Waters. Well, let me just ask this so I know. 
The more I learn about servicing and servicers, the more 
fascinated I am. Countrywide services its own loans. Is that 
correct?
    Mr. Gross. We service loans for Countrywide's mortgage 
business, yes.
    Chairwoman Waters. And who else do you service?
    Mr. Gross. Fannie Mae, Freddie Mac, and privately issued 
securities, some whole loan owners.
    Chairwoman Waters. So you make a lot of money? You are a 
big servicer?
    Mr. Gross. Yes, we are.
    Chairwoman Waters. And many of the loans that were 
initiated by Countrywide were purchased on the secondary market 
by Fannie Mae and Freddie Mac. Is that correct?
    Mr. Gross. That is correct.
    Chairwoman Waters. So there is a little professional 
relationship going on here? They have to be the same loans 
that--
    Mr. Gross. We sell loans to Fannie Mae, Freddie Mac, and 
other investors. And they hire us to service those loans on 
their behalf.
    Chairwoman Waters. Very interesting. Very, very 
interesting. Now let me ask one more question: In the servicing 
of loans, do you contract out your servicing to anybody?
    Mr. Gross. Generally speaking, no.
    Chairwoman Waters. Not generally. Do you contract out your 
services to anybody?
    Mr. Gross. There are certain isolated--
    Chairwoman Waters. No. Do you contract out--
    Mr. Gross. Yes.
    Chairwoman Waters. --your services? Whom do you contract 
out to?
    Mr. Gross. It depends upon the--
    Chairwoman Waters. Just give me the name of one or two of 
the other servicers you contract out to.
    Mr. Gross. Oh, other servicers?
    Chairwoman Waters. Yes.
    Mr. Gross. No, we do not. We service all of the loans on 
behalf--
    Chairwoman Waters. Well, what were you referring to?
    Mr. Gross. I was referring to we may hire an outside firm 
to assist us in certain aspects of servicing the loan.
    Chairwoman Waters. Don't go do that with me.
    Mr. Gross. Well, that is the answer to the question.
    Chairwoman Waters. Well, the answer to the question is you 
do contract out. Do you hire any offshore? And I have to put it 
in a way that you don't--
    Mr. Gross. Yes, we do them offshore.
    Chairwoman Waters. You have offshore people who help you 
with some of the aspects of the servicing--
    Mr. Gross. Yes.
    Chairwoman Waters. --that you are alluding to now in 
nuancing on me. Where are those offshore contractors that help 
you with some aspects of the servicing? Who are they?
    Mr. Gross. They are employees of Countrywide. And they are 
in India and Costa Rica.
    Chairwoman Waters. India and Costa Rica?
    Mr. Gross. Yes.
    Chairwoman Waters. And what percentage of the servicing 
done out in India and Costa Rica are modifications or--
    Mr. Gross. None.
    Chairwoman Waters. None?
    Mr. Gross. None.
    Chairwoman Waters. So what do they do for you?
    Mr. Gross. Mainly office functions during off-hours because 
they are--
    Chairwoman Waters. So they answer their telephone, maybe. 
And what do they do for you?
    Mr. Gross. On very infrequent occasions, yes, we do have a 
telephone staff there that is handled primarily for customer 
service-oriented discussions.
    Chairwoman Waters. So what does one in India do for an 
American homeowner in Ohio?
    Mr. Gross. Most typically the type of calls that they would 
get would be a homeowner calling in to say, ``I'm going to make 
my June 1st payment on June 23rd.'' And we would note that, and 
we would say, ``Thank you.''
    Chairwoman Waters. Well, let me just say this: In addition 
to some of the things that we are trying to get into for that 
is to make sure that no part of your business--we talked about 
offshore. I alluded to it. I think they should be out. I think 
all brokers should be licensed in Ohio.
    One of the things I think we ought to do is we ought to 
prevent and outlaw offshore contracting for any services. 
American taxpayers, particularly with these predatory loans and 
these resets, are paying high interest rates. And there is 
enough money in there for you to hire people from these 
communities. If you have legitimate jobs, they deserve to have 
them.
    But it is an insult, really, to talk about your hiring 
people offshore to have a piece of paper with 10 responses to 
questions where someone says, ``I am behind in my loan,'' and 
all they say is, ``Yes,'' or they can say, ``I want this loan 
to be repaid. I will catch up. I cannot pay for 10 days,'' and 
a paper to tell them ``Yes'' or ``No.'' ``Yes, you may do 
that,'' or ``No, you may not do that.'' That is absolutely 
outrageous. And that is why we are so upset with Countrywide 
for so many things.
    I am not going to go any further with questioning, Mr. 
Gross. I just want to say to you I thank all of you for being 
here, despite the fact that you are going to feel a little bit 
burned when you leave here today. I contained myself a lot 
better than I thought I could, but I thank you all for 
participating.
    I would like to thank all of the nonprofits and 
organizations that are attempting to help in so many ways. I 
liked some of what I heard. We are going to take some of that 
into consideration to see how we can better help you. I liked 
some of the information I heard about what HUD can possibly be 
doing. And, again, we have a lot of work to do. There is no end 
in sight on these foreclosures. You would think they would be 
winding down by now, but they are not.
    So, with that, yes?
    Mrs. Tubbs Jones. I would like to introduce one more person 
who has come into the hearing. It is our newest councilwoman in 
the City of Cleveland, Mamie Mitchell. She has the Ward 5. 
Thank you, Councilwoman.
    Chairwoman Waters. Thank you.
    Mrs. Tubbs Jones. Let me ask all of the folks who are 
participating here to please thank my colleague, the Chair of 
the Housing and Community Opportunity Subcommittee of the 
Financial Services Committee, Congresswoman Maxine Waters, for 
convening this hearing.
    Chairwoman Waters. Thank you very much.
    Mrs. Tubbs Jones. Let me thank the key member of the Ohio 
delegation, Marcy Kaptur, for joining us today.
    Let me thank my colleagues Charlie Wilson and my sister in 
Ohio, other sister in Ohio, Congresswoman Betty Sutton, for 
being here.
    Chairwoman Waters. Thank you.
    Ms. Kaptur. Madam Chairwoman, I apologize --
    Chairwoman Waters. Absolutely.
    Ms. Kaptur. I just wanted to say to Congresswoman Tubbs 
Jones, thank you, and thank you to your wonderful, wonderful 
staff. It is a reflection of all you do for us here, including 
Cleveland State University. And I want to thank Betty Sutton, 
one of our crackerjack Congresswomen but also a crackerjack 
lawyer. So I am glad she is here today. And I know this is the 
beginning of a whole new day.
    Thank you again, Chairwoman Waters. I leave today with 
better spirits than I came. Sometimes it is very frustrating 
working in Washington. Today I saw America the way it should 
be. It was a very respectful discussion regarding the points of 
view from people from all walks of life here. And we all 
learned together to try to help our country. This would not 
have been possible without this chairwoman setting the tone and 
coming out here, allowing us to face you directly, and to us. 
This is the way America should look. Thank you.
    Chairwoman Waters. You are certainly welcome. And I would 
like to thank all of our members who are present here today. 
This Ohio delegation has been fantastic in coming to organize 
this hearing that we had today. And, again, I would like to 
thank the staff from my office and from all of your offices who 
worked on this.
    I thank you so much for your presence. There are times when 
I hold hearings where I am the only one there because members 
are so busy and they have so many people at them and so many 
issues to deal with. But you have certainly demonstrated your 
concern about this issue of foreclosures in your State, and I 
am very appreciative of it.
    We have learned a lot here today. And we will work together 
to organize time on the Floor so that everybody understands 
what took place here today and to give some exposure to 
Washington. And so this has been very, very helpful to all of 
us.
    Again, let me thank all of those individuals representing 
the institutions that are in the other room doing workouts. We 
are going to do follow-up on those. I have asked all of the 
citizens who are involved in trying to work out some kind of 
form, a release, so that we could get the information because I 
don't want anybody sending me back a form that they did 10 
workouts.
    I want the names of the workouts, and I will call each one 
of the persons who is supposedly backed up. And I am going to 
find out what happened with them. And if, in fact, a workout is 
not a workout, then I am going to get back to the institution 
that claimed it was a workout.
    Without objection, let me just enter into the record 
written submissions from the following organizations: Policy 
Matters Ohio; Ohio Credit Union; United Way; the Poverty Center 
at Case Western Reserve University; Lake County Fair Housing 
Resource Center; Cynthia Dayton, City Manager; Rashad Young of 
the Lake County ERMA, E-R-M-A, Program, submitted by 
Representative LaTourette; and a statement from Mayor Marcie L. 
Fudge from Warrensville, Ohio.
    With that, this hearing is adjourned. Thank you.
    [Whereupon, at 1:55 p.m., the hearing was adjourned.]


















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                             June 16, 2008

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