[Senate Hearing 110-981]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-981
 
THE MORE YOU KNOW, THE BETTER BUYER YOU BECOME: FINANCIAL LITERACY FOR 
                           TODAY'S HOMEBUYERS

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


                                HEARING

                               before the

                            SUBCOMMITTEE ON
                            ECONOMIC POLICY

                                 OF THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

 FINANCIAL LITERACY AND EDUCATION EFFORTS TARGETED TO BOTH FIRST TIME 
 HOME BUYERS AND EXISTING HOME OWNERS AND TO IMPROVE ACCESSIBILITY TO 
                           EDUCATION PROGRAMS


                               __________

                         THURSDAY, MAY 1, 2008

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate /
                            senate05sh.html


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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware           CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey          JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii              MIKE CRAPO, Idaho
SHERROD BROWN, Ohio                  ELIZABETH DOLE, North Carolina
ROBERT P. CASEY, Pennsylvania        MEL MARTINEZ, Florida
JON TESTER, Montana                  BOB CORKER, Tennessee

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel

                       Aaron D. Klein, Economist
                  Megan Bartley, Legislative Assistant

                       Dawn Ratliff, Chief Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor

                                 ------                                

                    Subcommittee on Economic Policy

                  THOMAS R. CARPER, Delaware, Chairman
                 JIM BUNNING, Kentucky, Ranking Member
SHERROD BROWN, Ohio

                      Chuck Jones, Staff Director
              William Henderson, Republican Staff Director

                            C O N T E N T S

                              ----------                              

                         THURSDAY, MAY 1, 2008

                                                                   Page

Opening statement of Chairman Carper.............................     1

Opening statements, comments, or prepared statements of:
    Senator Bunning..............................................     4
    Senator Menendez.............................................     3
    Senator Dole
        Prepared statement.......................................    32

                               WITNESSES

Sarah Bloom Raskin, State of Maryland Commissioner of Financial 
  Regulation, on behalf of the Conference of State Bank 
  Supervisors....................................................     6
    Prepared statement...........................................    34
Kenneth D. Wade, Chief Executive Officer, Neighborhood 
  Reinvestment Corporation, d/b/a NeighborWorks America..........     8
    Prepared statement...........................................    47
Ronni Cohen, Executive Director, Delaware Money School...........    11
    Prepared statement...........................................   105


THE MORE YOU KNOW, THE BETTER BUYER YOU BECOME: FINANCIAL LITERACY FOR 
                           TODAY'S HOMEBUYERS

                              ----------                              


                         THURSDAY, MAY 1, 2008

                                       U.S. Senate,
                           Subcommittee on Economic Policy,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The subcommittee met at 2:03 p.m., in room SD-538, Dirksen 
Senate Office Building, Senator Thomas R. Carper, (Chairman of 
the Subcommittee) presiding.

         OPENING STATEMENT OF CHAIRMAN THOMAS R. CARPER

    Chairman Carper. The hearing will come to order.
    I want to welcome warmly our three witnesses today. We have 
been joined by Senator Menendez from New Jersey. We will be 
joined, I am told, by Senator Jim Bunning a bit later, and 
others of our Members may drift in and out. I just checked in 
with our cloakroom to see if we are likely to have votes during 
this hearing, and I am told that we will not likely have votes. 
So we can just focus on what you have to say and listen to you 
or take in your words and ask you some questions. We are 
delighted that you are all here.
    Our hearing today, as you will know, will focus on 
financial literacy and education efforts in our State and other 
States for both first-time homebuyers and for existing 
homeowners. The recent subprime mortgage crisis has put a 
spotlight on and has raised questions regarding the financial 
knowledge of homebuyers and homeowners. Buying a home is 
perhaps the most complicated financial transaction that most 
Americans will ever undertake. Studies have shown that most 
Americans lack a certain knowledge about the basics of buying a 
home.
    Financial innovation is generally a good thing. We should 
encourage markets to become more efficient and better able to 
manage risk. However, the fundamentals of the game tend to 
remain constant. Potential homebuyers will always need to 
determine if buying a home makes financial sense.
    Often, the potential homebuyer is not sure they are 
financially ready to buy a home or how much they can afford to 
borrow. Many times the homebuyer seeks advice from those also 
involved in the transaction, maybe the real estate agent, the 
real estate broker, perhaps the lender. And there is nothing 
wrong with soliciting the advice of brokers or lenders, but 
sometimes potential homebuyers need more than advice. 
Homebuyers need to know that they can and should meet with a 
qualified, independent counselor before starting down the path 
to homeownership.
    It is often said that homeownership is the American dream. 
I have said that myself. I suspect my colleagues have, too. But 
for many Americans, that dream is fast becoming something of a 
nightmare. The real American dream is sustainable hospital.
    Before sitting down with a lender, some homebuyers should 
meet with a qualified, independent counselor to look at their 
credit history, to examine how much debt they have, and to 
examine their income to determine whether they should remain a 
renter or whether they should purchase a home. The buyer also 
needs to have access to a counselor who can walk them through 
the many mortgage products available on the market. For some 
families, a fixed-rate product is best, and for some families, 
an adjustable-rate mortgage is better. The best decision 
depends on the buyer's personal circumstances. However, the 
buyer should look at their ability to repay the loan regardless 
of changes in interest rates.
    Again, these are things that a potential homebuyer should 
examine before purchasing a home. The more we know, the better 
buyer we become.
    Financial education is not stopped once a home is 
purchased. New homeowners receive a number of solicitations 
every day in the mail. They used to receive them every day on 
the phone as well. But some of these mailings urge the new 
homebuyers to refinance at a much lower rate and have some cash 
left over. Refinancing a mortgage can make great financial 
sense, but a homeowner needs to look at more than the new 
interest rate or how much cash they can pocket. Homeowners 
should also seek the advice of an independent, qualified 
counselor if they have questions about the pros and about the 
cons of refinancing.
    Many of the subprime loans now currently in foreclosure 
were refinanced. The homeowner started off with a fixed-rate 
mortgage, but opted for the exotic mortgage to pay less in the 
short term and get cash out of their home. As a result, many 
homeowners, too many homeowners, have little or no equity in a 
home that they can no longer afford because their adjustable-
rate mortgage is due to reset to a much higher rate. Many of 
these homeowners must now try to get back to a fixed-rate 
product in order to keep their homes and to avoid foreclosure.
    On April 10th, the Senate passed the Foreclosure Prevention 
Act of 2008, which included some $100 million for housing 
counseling. We will hear today from our witnesses about the 
state of our Nation's financial education. I hope we will hear 
testimony on not only the importance of financial education, 
but also on ways to improve the many literacy programs around 
our country. I also hope that we will hear how it can make 
financial education more accessible.
    Before I introduce our witnesses, let me yield to Senator 
Menendez and just say we are delighted you are here. Thank you 
so much for coming.

               STATEMENT OF SENATOR BOB MENENDEZ

    Senator Menendez. Thank you, Mr. Chairman, and thank you 
for holding what I think is a very important hearing. I really 
think it should be packed, as we have had other hearings 
packed, because at the end of the day--we are here. Don't worry 
about it.
    [Laughter.]
    But the reality is this is at the root of a lot of our 
challenges, and I really appreciate your leadership in bringing 
this up, because as we continue to work to help homeowners who 
are suffering from the subprime meltdown, I think it is equally 
important that we look at why so many Americans ended up 
entangled in mortgages that they could not afford in the first 
place.
    Over the last year, we have examined a number of factors 
that contributed to the crisis, and while there is no single 
specific cause, the lack of financial literacy is clearly at 
the top of the list.
    Let's be honest. I think no one knowingly accepts a bad 
deal. More often than not, they are misled into something they 
do not understand or led into an arrangement that sounds good 
but is not. And despite this, we have heard time and time again 
that because people signed agreements that they could not 
afford to pay, they are somehow accomplices, not victims. I 
think this assessment generally is not just wrong, but it is 
offensive. The vast majority of people facing foreclosure are 
in my mind, as I see it in my office increasingly, victims of 
unscrupulous mortgage lenders who really got snookered into 
contracts they did not understand. And the reason so many 
lenders were able to get away with it is because financial 
literacy in this country is below what it should be.
    Mr. Chairman, in a recent banking hearing, I asked our 
witnesses to gauge the average American's financial literacy on 
a scale of 1 to 100, and across the spectrum, they gave me all 
low scores, something along the lines of 20 or 30. Well, 20 or 
30 in making the major financial decisions of our lives is not 
a good score. We are talking about people trying to understand 
what they are signing.
    When I used to practice law, Mr. Chairman, I would go to 
great pains to describe to individuals who are entering for 
what them is probably the single financial transaction of their 
lives, purchasing of a home, what it is that they were getting 
into, both in their contract in the first place, what were the 
contingencies, what were the challenges, and in their mortgage 
commitments, what they were getting into there. And, generally, 
they did not know. It was only because of something that I saw 
as a responsibility to do, which I would say many of my 
colleagues did not necessarily spend as much time in telling 
their client what, in fact, they were getting into. They 
depended upon the mortgage lender or the broker to do that. 
But, in fact, these people were not getting the right 
information.
    How many understand their credit card agreements? They are 
very complex. There are layers and layers--I am, you know, an 
attorney, a legislator. I get those multiple-page forms and 
look at it and say, ``My God, how thick is it?'' They are 
designed to be complex and to be difficult because the harder 
to read, the harder to understand, the easier it is for 
unscrupulous lenders to get away with higher rates, extra fees, 
and terms that are not what they seem.
    There is no doubt that we have to punish predatory lenders 
who took advantage of homebuyers and tricked them into signing 
contracts they could not afford. But perhaps most importantly, 
what we need to do is arm the American people with the 
financial know-how so that they can continue to make--so they 
can ultimately make the right decisions.
    Finally, Mr. Chairman, I have introduced a bill, the 
Financial Education Counseling Assistance Act, that would help 
Americans with more tools, especially those Americans most at 
risk of financial peril. The bill will help organizations such 
as NeighborWorks to expand financial counseling services and 
help new organizations offer these services. These are vital 
for people who need some financial assistance but who, like the 
majority of Americans, cannot afford to hire a personal 
adviser.
    We have learned from the subprime crisis that often 
families in trouble hold on as long as they can until they are 
too deep in the hole to get out. We have also seen how a 
housing crisis not only takes people's homes away but their 
financial stability as well.
    So I look forward to the discussion that is going to be 
held, and I appreciate all of our witnesses coming forth, 
especially Mr. Wade from NeighborWorks. We have worked with 
NeighborWorks quite a bit on counseling issues, and I certainly 
appreciate seeing Commissioner Raskin here, who I understand is 
a former Senator Sarbanes staffer, sat behind here, so you know 
what this is all about, what is going on up here.
    Thank you, Mr. Chairman.
    Chairman Carper. Thank you, Senator Menendez.
    Senator Bunning, welcome.

                STATEMENT OF SENATOR JIM BUNNING

    Senator Bunning. I apologize, Mr. Chairman. I had a group 
from Kentucky and I could not get away, and I am sorry I was 
late, but I----
    Chairman Carper. We understand.
    Senator Bunning. Thank you for holding this hearing. 
Today's topic is obviously very timely. We only need to look at 
what has happened in the housing market over the last few 
years--more than a few, to know how important financial 
education is for homebuyers.
    There is a role for Government in protecting investors, but 
homebuyers must also arm themselves with information about 
financial services. And our school system, God rest it, ought 
to be able to help out here. We do not have good financial 
literacy being taught in our school systems. And I say that as 
a grandfather of 39 kids that they better learn what is going 
on when they get to the world and have to live in it and buy 
homes, because everybody wants to buy a home.
    I have some doubt that Government can be both a neutral and 
effective financial educator without giving consumers a false 
sense of security. We do not want to do that. We want to make 
sure that they are armed, or at least are wise enough to arm 
themselves with somebody who, like Bob just said, knows what 
the heck is in that contract or is in that mortgage or in 
whatever they are required to sign.
    I hope we can shed some light on resources available to new 
and repeated homebuyers in today's market. Maybe you and I will 
even learn something today, Mr. Chairman. I look forward to 
hearing from our panel of witnesses. Thank you all for being 
here.
    Chairman Carper. Senator Bunning, thank you.
    The first thing I would like to learn is when you have 39 
grandchildren, how do you remember everybody's name?
    Senator Bunning. My wife has a great memory.
    Chairman Carper. God bless her. All right. We are delighted 
you are here. It is good to be with you.
    Let me just provide a brief introduction for our witnesses 
and start off by saying to Sarah Bloom Raskin, Commissioner, 
welcome, welcome back, currently the Commissioner of Financial 
Regulations for the State of Maryland. I understand you are 
here today representing the Conference of State Bank 
Supervisors. As Senator Menendez has suggested, you are not a 
stranger to this Committee. How long did you serve here on the 
staff when Senator Sarbanes was here?
    Ms. Raskin. About 4\1/2\ years.
    Chairman Carper. OK, 4\1/2\ years. All right. We are glad 
you are back. It is a testimony to your legacy and to his 
legacy that you are now the Banking Commissioner for the State 
of Maryland. Congratulations. How long have you been in that 
post?
    Ms. Raskin. Only since August 28th.
    Chairman Carper. All right. Good enough.
    Ms. Raskin. It feels like an eternity.
    [Laughter.]
    Chairman Carper. I guess it does these days.
    Kenneth Wade, Kenneth D. Wade, Chief Executive Officer of 
NeighborWorks, and someone who was kind enough to come to our 
State--I want to say 1 or 2 years ago--when a nonprofit called 
INCALL, which is part of NeighborWorks' national network, was 
celebrating their anniversary, and we very much appreciated 
your coming there on that occasion. But as we all know, 
NeighborWorks America is a public nonprofit corporation 
established as the Neighborhood Investment Corporation by an 
act of Congress in 1978, and its Board of Directors includes a 
number of senior people in the Federal Government, as I recall. 
It is an interesting structure there.
    Ronni Cohen--all the actual words on this sheet of paper 
that are said about you, they do not begin to tell the story, 
but currently the Executive Director of the Delaware Money 
School. The Money School is part of the Delaware Financial 
Literacy Institute, which was created by our State Treasurer, 
Jack Markell. And for my colleagues, I would also say that 
Ronni Cohen is also one of the finest educators that we have 
had in Delaware in the last several decades. And every year in 
our State, as I am sure in your States, we have teachers that 
are nominated to be Teacher of the Year, and we have 19 school 
districts, so we have 19 nominees each year, and Ronni Cohen 
was selected as our Teacher of the Year, I want to say about 8 
or 9 years ago.
    Ms. Raskin. Exactly.
    Chairman Carper. And I was privileged to be there as 
Governor, I believe, when the presentation was made. But when 
we are trying to think about how to better educate people young 
and not so young with respect to financial literacy, we 
probably could not have anybody better at the table or in the 
venues than you. So thank you so much for coming today.
    Commissioner Raskin, I am going to recognize you. I want to 
say take no more than 30 minutes for your opening statement.
    [Laughter.]
    Chairman Carper. No. We are not going to be real tight on 
the clock today. I do not think we have any votes, so if you go 
over 10 minutes, we will probably rein you in, but your entire 
statement will be made part of the record. Thank you for 
joining us.

STATEMENT OF SARAH BLOOM RASKIN, STATE OF MARYLAND COMMISSIONER 
 OF FINANCIAL REGULATION, ON BEHALF OF THE CONFERENCE OF STATE 
                        BANK SUPERVISORS

    Ms. Raskin. Well, thank you. Thank you for inviting me 
today, and good afternoon, Chairman Carper, Senator Bunning, 
Senator Menendez, and distinguished Members. My name is Sarah 
Bloom Raskin, and I serve as Commissioner of Financial 
Regulation for the State of Maryland. I am happy to be here 
today to testify on behalf of the Conference of State Bank 
Supervisors on the importance of financial literacy counseling 
for potential homebuyers and new mortgage borrowers.
    Chairman Carper, I certainly do not need to tell you what 
an important role States have always played in the development 
and oversight of essential financial services in our country. 
Your understanding and support of the State's role in financial 
regulation is well known and longstanding, and we deeply 
appreciate it.
    But for Members of the Committee who may not be familiar 
with this role, I want to emphasize the importance of 
maintaining a system of local oversight and accountability for 
this most personal of financial products. For more than 4 
years, we at the State level have been working on solutions to 
the challenges raised by the revolution in mortgage finance 
during the 1990s and the fragmented system in place to 
supervise its players.
    CSBS is implementing a national licensing system, and we 
have a framework for a system of coordinated regulatory policy 
with the Federal banking agencies. Our goal is a streamlined 
consistent system of oversight that protects consumers and 
enforces best practices while maintaining a stable flow of 
credit through our markets. Pre-loan counseling and follow-up 
counseling to new borrowers is a key element of these best 
practices.
    Homebuyer and homeowner counseling and education are 
necessary, but they are not sufficient. It is important to 
combine such counselling and education with regulatory 
initiatives to bring greater transparency and accountability to 
the mortgage origination process.
    For the homeowners in trouble, though, counseling alone may 
not be enough. This is a multi-faceted problem with many routes 
and implications and demands a multi-faceted approach. In 
Maryland, we have learned that we need, and we are now 
providing, housing counseling offices that provide not only 
counseling but also other basic services, such as litigation 
support.
    Something else we are learning is that even at the point of 
foreclosure, there are important opportunities for counseling 
and education. In particular, we are seeing distressed 
homeowners become victims to foreclosure rescue scams and 
equity skimming scams. These scams are often complicated and 
intricate transactions that no homeowner should navigate alone. 
Maryland, for example, has enacted strong consumer protections 
now that ban these types of scams.
    One ironic benefit of the current crisis is that it is 
showing us what borrowers did not know and needed to. Thus, the 
architects of financial literacy programs can learn from this 
experience and readjust to help prevent future crises. A good 
financial literacy program includes at least three essential 
elements:
    First, participant involvement. Consumers gain confidence 
when they can identify the pieces of the process they already 
know. So a good training program should begin with the 
instructor asking practical questions that students can relate 
to.
    Second, train the trainers. Financial literacy instructors 
themselves need to know not only the nuts and bolts of personal 
finance, but also the psychology of money and how adults and 
young adults learn about it.
    Finally, financial literacy training is most effective when 
it can capitalize on so-called teachable moments, that is, 
teaching when the student wants the information and when the 
information will stick. Clearly, purchasing a home is one of 
these moments.
    Federal and State governments should endorse and promote 
the national industry standards issued last fall by HUD, 
NeighborWorks, and a host of industry leaders. We are and we 
should be looking for ways to help nonprofit counselors achieve 
and demonstrate compliance with these standards. We can and 
should work together to set similar standards for broader 
financial literacy programs. Federal and State governments 
should present a better aligned approach to building the 
capacity of the homeownership and financial education nonprofit 
sector.
    The national mortgage licensing system, proposed and 
developed by CSBS and Armor, comes at the issue from the other 
side, requiring standards of education for mortgage bankers and 
brokers as a condition for licensure. While in forums like 
these we tend to focus on the need to educate the consumer, in 
the structure and realities of today's marketplace, it is often 
equally important to educate the lenders and the lenders' 
agents.
    Any Federal initiative to improve consumer protection must 
recognize, support, and not interfere with the State's ability 
through legislative and enforcement authority to protect 
consumers from emerging problems. It is crucially important not 
to undercut the work we have already done and are continuing to 
do. Federal legislation should build on State expertise and 
efforts to protect our consumers. Our uniform licensing 
initiative is only one part of this effort.
    Congress has the ability and opportunity to create a new 
system of State and Federal coordination for protecting 
homeowners and enforcing best practices in the mortgage lending 
industry. Consumer education and counseling are crucial 
elements of those best practices, and CSBS would support 
Federal efforts to support and encourage these practices.
    We ask, however, that you remember that when it comes to 
protecting consumers, even globally funded mortgages are 
originated locally. Grass-roots outreach and education programs 
are more effective, more efficient, farther-reaching, and 
longer-lasting than top-down initiatives.
    Thank you for inviting me to testify on this important 
subject today, and I am pleased to answer any questions the 
Committee may have.
    Chairman Carper. Commissioner, thank you so much for 
joining us today and for your testimony.
    Mr. Wade.

    STATEMENT OF KENNETH D. WADE, CHIEF EXECUTIVE OFFICER, 
  NEIGHBORHOOD REINVESTMENT CORPORATION, D/B/A NEIGHBORWORKS 
                            AMERICA

    Mr. Wade. Thank you, Senator Carper, Senator Bunning, and 
Senator Menendez, for inviting me to be part of this hearing 
today. The importance of financial education and counseling 
cannot be overstated, particularly in light of the rise of non-
traditional financial services outlets, and obviously the 
rising foreclosure crisis that all of us are so concerned 
about.
    Today I would like to highlight five areas that we are 
working on that make a contribution in this broad area of 
financial literacy. One is a financial fitness program that we 
are operating that deals with basic financial literacy: a pre-
purchase education counseling program that we have; a post-
purchase education counseling program, which includes 
foreclosure prevention initiatives; the training that we do 
related to supporting all of these activities; and then the 
national industry standards that we are supporting, along with 
a broad set of other players in the industry, in order to 
create some standards that help govern this activity.
    First, in our financial fitness program area, we see that 
it is critical to help consumers and communities. For 
consumers, financial education is the key to protecting their 
assets and building wealth. For communities, it is clear that 
financial education programs promote stronger and more stable 
neighborhoods where residents are more resistant to downturns 
in the economy and other threats to their financial well-being.
    Our financial fitness program teaches basic financial 
planning, money management, both how to budget, save, invest, 
how to access financial services and financial institutions; it 
teaches about credit, taxes, and insurance. Those are all basic 
things that all consumers need in order to be successful in 
navigating this very complicated environment out here today.
    We also know that financial education works. In our own 
efforts, we have seen that financial education changes consumer 
behavior and improves financial confidence. And it also 
dramatically improves saving rates for consumers who 
participate in formal financial literacy efforts.
    We have provided financial fitness training to more than 
900 counselors since 2001, helping to create a network of fully 
trained people who are able to provide this kind of service to 
their local communities.
    We also have a very pre-purchase education and counseling 
effort. It is pretty clear that high-quality pre-purchase 
counseling that adheres to national industry standards helps 
people with budgeting, credit repair, making good decisions on 
their mortgage products, and through pre-purchase counseling 
and education, NeighborWorks organizations have been able to 
prepare foreclosure-resistant borrowers who qualify for 
reasonably priced traditional mortgage loans and achieve 
sustainable homeownership. We have been tracking the 
performance of the loans made through consumers who have been 
assisted with organizations in our network, and we have been 
able to demonstrate that there have been a significant--or to 
think about it another way, these borrowers perform better than 
subprime loans for sure, better than FHA and VA loans, and on 
par with prime loans. So I think it demonstrates that if people 
get good pre-purchase counseling, they can be successful 
homeowners, even if they have limited incomes.
    So we think the best defense against delinquency and 
foreclosure is objective education and advice before the 
borrower begins shopping for a home and selecting a product. In 
fact, the vast majority of consumers that we are seeing in 
foreclosure today by and large had no benefit of any pre-
purchase counseling from anyone.
    On the post-purchase education and counseling front, 
through our post-purchase counseling efforts, new homeowners 
learned all the things that you need to know when you become a 
homeowner for the first time: you know, how the home 
maintenance issues will affect you, how you have to set money 
aside to address that; how to evaluate and in many cases turn 
down all the plethora of additional financing offers you are 
going to get when you become a homeowner; how to evaluate 
refinancing opportunities to see if they make sense for you and 
your family; and, obviously, minimizing consumers' becoming 
overleveraged with more debt than they can handle.
    NeighborWorks organizations also establish an ongoing 
relationship with their customers so they know those customers 
know where to turn when they do or if they do get into trouble. 
And, obviously, like any other consumer, life events happen, 
illnesses, job loss, and the like. And so oftentimes consumers 
need someone to turn to that can help them work through those 
issues.
    Post-purchase counseling also helps people understand that 
if they do run into trouble paying their mortgage, it is also 
important to seek help early. That is one of the things that we 
have learned through our foreclosure prevention efforts. As you 
probably heard quoted, up to 50 percent of consumers who go to 
foreclosure every year never have any contact with their 
servicer. They do not respond to the phone calls, the outreach 
efforts, and the letters. In addition to that, a good number of 
consumers who finally do show up for assistance on average show 
up very late in the foreclosure process. So, clearly, being 
able to reach out to consumers early makes a big difference.
    That is why one of the things that we did to contribute to 
this issue in the foreclosure arena is develop a public 
education campaign with the Ad Council that we launched last 
June. It is a national public awareness campaign. It encourages 
struggling homeowners to call the toll-free number of the 
Homeownership Preservation Hotline, which is staffed by 
professional counselors 24/7, 24 hours, 7 days a week, which 
connects them with the kind of counseling that is possible to 
help them maintain homeownership.
    We also, as you know, have been charged with the 
responsibility of administering a consolidated appropriations 
foreclosure prevention counseling program. We have been pleased 
to be able to respond to that responsibility. We set up a 
program where over $350 million worth of requests came in for 
that effort, which was $180 million appropriated. And we were 
able to, within the 60 days of enactment of that legislation, 
award the first round of those grants, roughly $130 million 
that went out to help support foreclosure prevention 
counseling.
    We also do a lot in the area of training. It has been one 
of the areas that we have felt the need to make a contribution 
in for a long time. In the area of financial education alone, 
since 2004, our NeighborWorks America has issued 25,000 
certificates of completion to housing counseling professionals, 
both in the pre- and post-purchase counseling area.
    And then, in addition, as you know, we are also supporting 
national industry standards. One of the challenges facing the 
counseling community today is the ability to ensure that we are 
providing high-quality counseling to the consumers who need it. 
And so together with many other industry players, we have 
developed a set of national industry standards that helps set 
the bar, so to speak, for performance benchmarks in the area of 
not only foreclosure counseling but pre-purchase counseling as 
well. And those standards have been attached to my written 
testimony, so they are available to the Committee.
    In closing, let me just say that an informed consumer 
obviously knowledgeable of all the options available to them is 
key to sustaining and strengthening the family and their 
community. We have been able to demonstrate that pre-purchase 
education and counseling makes a real difference in terms of 
preparing consumers for the responsibility of sustainable 
homeownership, and that post-purchase counseling provides help 
to those families that run into unexpected problems or face 
major challenges once they become homeowners.
    Funding this important service obviously continues to be a 
challenge, and I know many organizations struggle with the way 
that you can pay for this service in order to make it broadly 
available. So we are committed to ensuring that we can do all 
we can to help ensure that every American who wants pre- and 
post-purchase counseling gets access to it, and we look forward 
to working with the Committee in any way we can to help ensure 
that becomes the case. And, obviously, I am willing to answer 
any questions that the Committee has.
    Chairman Carper. Mr. Wade, thank you. We will have, I 
suspect, a number of questions. Just hold on tight there, and 
we will recognize Ms. Cohen for her testimony, and then we will 
start our questions.
    Ms. Cohen, please proceed. Thank you.

 STATEMENT OF RONNI COHEN, EXECUTIVE DIRECTOR, DELAWARE MONEY 
                             SCHOOL

    Ms. Cohen. It is an honor to be here today, and Senator 
Carper has been very important in my career as a classroom 
teacher, where I did try to teach financial education for over 
33 years. I did get out of schools before the No Child Left 
Behind Act, and there was more chance to teach financial 
education.
    In my role now as Director of the Delaware Financial 
Literacy Institute, our signature program is the Delaware Money 
School. This is the vision of Delaware Treasurer Jack Markell, 
and it was created in 1999, and it became a nonprofit in 2001. 
We offer now over 600 classes a year free across the State of 
Delaware. We offer classes in basic budgeting, credit repair, 
business startup, homeownership, and we offer the classes to a 
very diverse community of learners.
    In my position, I have been following, obviously, the 
exotic and toxic mortgage dilemmas and the tragedies. I 
appreciate this opportunity to share these experiences that I 
have had. Mine basically have been with low- to moderate-income 
people who are looking for financial education.
    Yesterday, of course, somebody called and asked if we 
taught martial arts, and we do not, but other than that.
    Most of grew up believing that homeownership was the 
American dream, and if you did not believe in it, people said 
to you, ``You have to own. You are throwing your money away if 
you rent. This is for your future. This is for your family's 
future.'' And we saw that that dream became nightmares, as 
Senator Carper has said. We saw people who would just go on the 
Internet, look at houses, look at the multiple listings, and 
drive around to find their dream home. They really did not 
educate themselves. So it was no wonder the subprime market 
blossomed.
    For those who thought it was never possible to own a home, 
signs that said ``No money down. Let us put you in the home of 
your dreams'' were very appealing. These were big billboards. 
These appeared everywhere. In our culture of instant 
gratification, many were tempted by these ads, the adjustable 
rate mortgages, and they did not think or did not know to worry 
about the balloon payments and the rising fees down the road.
    With the low and zero down payments and lax document and 
credit checks, many jumped at this chance and became instant 
homeowners. And often these homebuyers were led to believe that 
owning would be cheaper than renting, and it could be. But 
buyers did not always check or understand the fine print or 
their capacity to pay mortgages and living expenses before they 
jumped on this bandwagon. No one thought about the taxes, the 
trash removal, the maintenance, the upkeep, the utilities, the 
furniture to fill the dream house, and the inevitable 
emergencies.
    While these options provided opportunities for more 
consumers to get into the housing market, they did pose 
considerable risk because of the higher monthly payments. And 
we know that the complexity and variety of mortgage products 
require consumers to take an active and informed role when 
evaluating products. And one of the important parts of that 
role is to ask questions, and people often are embarrassed to 
ask questions. Without this training or education, making 
personal financial decisions is a confusing, frustrating, and 
dangerous road to maneuver for most Americans.
    The Delaware Money School is able to offer its 600 classes 
across the State because we have over 100 partners. We have 125 
volunteers who are experts in the field that offer free 
introductory classes covering the basics of financial 
education. The problem is not all people who need this 
financial education avail themselves of these free classes. 
Some potential buyers decide it is not worth taking the time 
when that dream house might not be available, someone else may 
get it. So they skip the housing homeownership free financial 
education classes. They skip the one-on-one counseling, and 
they get right to the mortgage--and I have had people call me 
and say, ``When I got to sign my papers, the figures were not 
what I thought they were going to be.'' And one of the things 
the counselor can do is help you prevent that from happening.
    Often, a counselor can tell you that that $400,000 house 
that you have been prequalified for is not the house you are 
going to be able to afford. Two years ago, I had an AmeriCorps 
volunteer who made $15,000 a year who prequalified for a 
$400,000 house. She thought that was really funny, but she 
actually prequalified, and it was scary that on $15,000 she 
could have the house of her dreams. She did not buy the house. 
She just wanted to see what she prequalified for.
    It is ironic now that laws mandate that people declaring 
bankruptcy have to study financial education, but not all 
first-time homebuyers are required to participate despite the 
statistics showing that informed buyers are less likely to 
encounter problems making their mortgage payments. So the 
Delaware Financial Literacy Institute and my partners recommend 
financial education for all first-time homebuyers, not just for 
those applying to special products. And what should it look 
like? It is what has been mentioned here today. Budgeting: the 
old concept of spend less than you earn, live within your 
means. Goal setting: Where do you want to be? Is this the house 
of your dreams? Is this a good first house? Where do you want 
to be 10 years down the road?
    The concept of paying yourself first. One of my students 
said, ``Doesn't that mean I take my spending money first and 
then I pay my bills?'' So there is a lot of education that 
needs to be done.
    Financial education must include the wise use of credit, 
building a positive credit history, repairing poor credit, and 
improving credit scores. It should include banking basics, what 
account is best for you. One important thing that we like to 
teach is being a responsible renter. If you have a good rental 
history, that will help you.
    Rational decisionmaking is something we do not teach, but 
that is something that should be a part of financial education, 
looking at pros and cons, costs and benefits; looking at loan 
products, predatory lending practices, and, last but not least, 
financial education should let people identify the people in 
the community who can help them with financial decisions, 
people who are not motivated by commissions and sales.
    Many of our housing instructors teach these basics. We have 
people who are from NeighborWorks that teach financial fitness. 
These are free courses. They also offer a seminar for which 
they are beginning to charge, and they bring in the major 
players: the mortgage broker who can explain what points mean, 
what PMI is, about closing costs; a realtor, an attorney, a 
home inspector, and an insurance agent.
    And one of the best things about these pre-homebuying 
classes is the opportunity to ask questions in a small group. 
And sometimes someone will ask a question that will spur your 
own question. This targeted personal financial education itself 
often comes, we find, during the counseling session, the one-
on-one counseling, where the information can be targeted to the 
individual buyer's needs.
    There are books on the market: ``Homebuying for Dummies,'' 
``The Idiot's Guide to Buying a First Home.'' There are many 
Internet sites that will help you buy a home. They just do not 
provide you with an adviser who can help you make the best 
choice.
    Whatever the means, the potential homebuyer must have a 
grasp of basic financial concepts and be able to grasp the 
meaning of mortgage terms and the necessity to read and 
understand the mortgage documents and requirements, to not be 
embarrassed to ask questions when they do not understand. 
Delaware Bank Commissioner Robert Glen and his Deputy, Gerry 
Kelly, have worked tirelessly on preventing foreclosures and 
building awareness of predatory practices. From their 
experiences and from those we have talked to with Money School 
instructors, it is clear that homebuyers who have had basic 
financial education, counseling, and access to counseling are 
significantly less likely to go into foreclosure because they 
have made wise mortgage choices.
    In Delaware, through the Community Reinvestment Act, 
corporate sponsors sponsor the Delaware Financial Literacy 
Institute and have made it possible for us to offer free 
financial education. With Citigroup, we have a unique program 
targeting low- to moderate-income women, getting them prepared 
for homeownership, business startup, Purses to Portfolios. What 
it gives these women is a cadre of professionals they can call 
for information at any time.
    Two weeks ago, the President of Discover Bank approached us 
to develop a housing program for Kent County, which has the 
highest foreclosure rate in Delaware. Discover, Bank of 
America, and State Farm fund financial education summits for 
high school juniors, getting them ready to understand the rules 
of financial choices. And JPMorgan Chase has provided funding 
for us to teach asset building and financial concepts to at-
risk youth.
    One strategy I think that was particularly helpful was 
developed by PNC Bank with Interfaith Housing and 
NeighborWorks, a homebuyers club that meets 11 weeks. Not only 
do they have classes, they provide dinner and child care, which 
is critical to the young homebuyer. They go over all the basic 
concepts of financial education, and during the duration of the 
club, buyers become acquainted with counselors and get familiar 
with them and know they can call for help. They learn to repair 
their credit, if necessary, and the counselor helps them look 
at specific mortgage products and what best suits the buyer's 
needs. The best thing is it is not an overnight decision to buy 
a home. There is time to judge the merits of waiting to qualify 
for a mortgage with better terms.
    Talking with my partners, in conclusion, I would like to 
say that what we need is all first-time homebuyers, especially 
those in the low- to moderate-income bracket, should be 
required to complete basic financial education, including the 
pros and cons of different types of mortgage products. They 
need to understand predatory lending. The Deputy Bank 
Commissioner said I should ask that you work to simplify the 
mortgage documents. When you get that pile of documents and you 
are there by yourself, perhaps with your attorney, and you are 
afraid to ask questions, if there were a simpler form or one 
form, perhaps, earlier in the process, it would be much more 
helpful.
    We know that homebuying counselors must be certified and 
required to maintain and update their certification. And a 
number of counselors have said to me, ``We do not get people 
coming back to the post-homeownership classes. They figure they 
are in the house, they do not have to worry.'' And in order to 
protect these people so that they can keep their home, sweet 
home, there should be some type of incentive, perhaps a tax 
credit, like the Home Energy Improvement Credit, for people who 
do pursue this post-homeownership education, because it is 
critical that we give homebuyers the tools not just to buy that 
home, but to hold onto the American dream.
    Thank you all.
    Chairman Carper. Thank you, and I thank each of you for 
just really wonderful testimony, excellent testimony.
    Let me just make an observation. I think about my 
generation or even my children's generation, and I consider the 
generation of my parents who grew up in the Great Depression. 
Today, when I watch television--I do not watch a lot of it, but 
I think of this almost as an instant gratification society. I 
remember seeing commercials that ``You are worth it. It costs a 
lot of money, but you are worth it.'' And ``Have it now,'' and 
``Pay for your furniture in 3 years, but you can have it 
today.''
    To what extent does that mentality, the notion that we can 
have it all and we can have it now, we do not have to wait, to 
what extent does that play into this problem or lead to this 
problem?
    Ms. Cohen. I believe people right now, instead of having 
their first starter home, when they find that they can pre-
qualify for a larger home in a great neighborhood with very 
little down, they jump on the chance to get that home now, not 
starting with the starter home and moving up, but starting 
right away with the home above their means.
    Chairman Carper. I remember when I was looking for my first 
home, the advice I got was buy the biggest home that you can, 
the biggest home that you can qualify for, because the 
expectation is that housing prices will go up, they almost 
always have, at least in the long run, and you will be able to, 
you know, trade out of that at some point in time and into 
another house, but buy the biggest house you can in terms of 
your buying power. I remember that advice. I did not do it, but 
probably a mistake.
    [Laughter.]
    Other thoughts on this notion of instant gratification? To 
what extent does this play into it, Mr. Wade?
    Mr. Wade. I mean, I think clearly that is a challenge we 
have in this country. We have got a negative savings rate. I 
think Americans are saving less now than they have ever saved 
in the country's history. I think the revolution in financial 
services is a good thing, because obviously today there are 
more financial services products than ever before.
    The downside, it seems, to that new environment is that 
people basically are financing today's activity with tomorrow's 
money, and that is a big challenge we have and something that I 
think, you know, we need to do a little public education 
around. And I think all of us know that--I know when we were 
created 30 years ago, the big challenge was access to financial 
services. That is what the Community Reinvestment Act was all 
about. Today it is not so much access. It is whether you are 
going to get the financing that is right for you.
    Chairman Carper. Commissioner Raskin?
    Ms. Raskin. Yes, I would just add in terms of the instant 
gratification, there has been a delinking really of ability to 
repay, right? So because of this instant gratification 
mentality, the notion that there should be the ability to repay 
comes across as foreign to a lot of people. And in Maryland, we 
were successful in actually legislating an ability to repay, 
but I have to say it was not particularly easy. And you would 
think that it would be just, you know, complete common sense.
    I think another aspect of the instant gratification 
argument is a lot of people were using their home equity as 
really an ATM, and the sense that the run-ups in home values 
was a good source of cash. And, you know, the pairing of the 
instant gratification is really clashing with that as we see 
downward pressure on home values.
    Chairman Carper. All right. Thank you.
    Ms. Cohen spent--did you say 3 years of your life as an 
educator in schools, but you continue to be certainly very much 
of an educator. In our State, in fact, I think in almost every 
State in this country, we have all adopted academic standards 
that say what we expect our students to know in math, science, 
English, and social studies, and other subjects, and we 
basically say we are going to measure their ability to master 
certain skills in those subjects, certain knowledge in those 
subjects. And we leave it--not entirely, but we leave it 
largely up to schools and to teachers to figure out how to 
teach the math or how to teach the science and so forth.
    I am wondering if--it seems to me like particularly in sort 
of like basic math and maybe pre-algebra, the notion of buying 
a house and figuring out what compound interest is, those kinds 
of subjects just really lend themselves to taking academic 
standards, particularly in math, and being able to apply them 
in our everyday lives. Are you aware, whether it is Delaware or 
Maryland or other States, are we actually doing that?
    Ms. Cohen. We are trying. In Delaware, we do not have 
required economics or consumer economics. Some consumers 
economics is taught in family and consumer science. We find 
that people do not know the rule of 72. They do not know 
compounding interest. But those are not measured in our State 
standards. Very few of the economic concepts, consumer economic 
concepts, are measured in our standards. And basically one of 
the things is teachers who learn to integrate those concepts 
across the math and English curriculums, science curriculums, 
can get in some economic financial education, but it is 
basically under social studies. And social studies is on the 
back burner. We, unfortunately, do not think it is--we do not 
put our values in civic education, financial education. But 
they are critical life skills, and a lot of teachers in 
Delaware will say to you, ``I do not do anything until after 
the test is over. And then I only have 2 months to teach.''
    So it is tight. In Delaware, we have a wonderful elective, 
Keys to Financial Success. It has been copied in Pennsylvania. 
It has been copied in some other States. But it is an elective, 
and the University of Delaware has just said they would not 
accept it as college credit. So we are working on that. But it 
can be taught. It can be taught effectively. And what they do 
is look at homebuying. They look at learn more, earn more, 
looking at the U.S. Department of Labor statistics on higher 
education will impact your earnings over your lifetime.
    There are lots of ways we can teach children if we make the 
time, but I guess it goes back to the fact that we do not 
educate teachers in financial education. So they come out of 
colleges with no financial education themselves.
    Chairman Carper. And as a result, it is difficult for them 
to create a lesson plan that actually relates an academic 
standard in math to lessons in life, whether it is buying a 
home or handling your credit cards or your personal finances.
    Anybody else on this before I yield to Senator Bunning?
    Ms. Raskin. I would just say that that idea of integrating 
financial literacy concepts into an existing curriculum is--
that is quite an original concept, so that even if we hit 
resistance in building a core curriculum that focuses just on 
financial literacy, you would think that at least financial 
literacy concepts could become integrated into the existing 
curriculum. And I think that is a good idea.
    Chairman Carper. All right. Thank you.
    Senator Bunning.
    Senator Bunning. I am just going ahead of you because I 
have got to get to a meeting. Sorry.
    First of all, Kentucky has been very not well educated. I 
mean, we are about 46th in education in the 50 States. But on 
this subject, on foreclosures, I want you to know that we are 
the sixth best in the United States, 1 to 2 percent foreclosure 
rate. And why? We are only first in horseracing. We will prove 
that Saturday.
    Why are we doing well in foreclosures, or as well as we 
are? I just had a meeting with the community bankers and our 
banking community, our realtors, our homebuilders, our mortgage 
brokers, which were a major problem in this crunch and crisis 
that we have had, and our regulators. And it is because of the 
cooperation of all of those people that we did not go off the 
trolley--I mean, we kept on the tracks.
    My question is on this: From your perspective, can 
Government stay on the track without going overboard? In other 
words, can we as the Federal Government, which is what we are 
talking about, keep things in perspective without taking sides 
here? Anybody.
    Ms. Raskin. Sure. I think that that is what we all 
achieve--what we try to achieve as regulators. We never want to 
overreact, and the tendency as a regulator is to always be 
behind the eight ball. So we are often in a position where we 
did not catch it when we should have caught it, and we need to 
compensate, and we overcompensate. And that clearly is not 
ideal, and I think that what good regulators try to do is try 
to have measured responses and tailored responses, and to react 
appropriately to the situations that they find themselves in.
    I happen to believe that, with good regulation, you can do 
it. You can achieve a balance, and you will not create more 
problems, you know, than you started with.
    Senator Bunning. But the situation we find ourselves in now 
is because we did not. The Fed, who was responsible since 1994 
for governing mortgage brokers and all banks, did not regulate 
properly, and we got into sophisticated ARM, sophisticated non-
traditional mortgages. And we also had a lot of personal pride 
come into the effect, and I liked his opening line where he 
said, ``Did we try to overextend?'' Well, I don't know anybody 
in the world that doesn't try to buy the biggest house with the 
least money down. But, in fact, when I grew up, you could not 
do that. They would not give you a 30-year mortgage if you did 
not have a certain amount down.
    The people that were put into $400,000 homes, prequalified 
for them, were actually renters. They rented for 5 years, and 
then when all of the bills came due, they got stuck with the 
bill. And so they became what we call foreclosed, or about two-
thirds are going to be foreclosed out of their homes, and they 
were actually renters during the 5 years or 6 years that they 
were in the home, not paying--or not having enough money down 
to pay for it.
    We have to do some solving of some problems of those who 
can not afford the home they are in, and we are going to do 
that in the Banking Committee. This hearing will help us.
    Can you think that the FHA--and I ask everybody--can have a 
role in solving this problem without getting way overboard on 
the amount of money that they can borrow from the FHA?
    Mr. Wade. Sure. We generally feel that the FHA has a role 
to play. We think it has been an underutilized resource. It is 
a resource that exists, created by the Government basically to 
serve this niche. They have not been very competitive in recent 
years, so we think expanding the FHA's ability to serve more 
people would be a great contribution that can be made to help 
address this issue.
    There is no question there is room for, I would say, 
modernizing the regulatory regime. I think with regulation it 
oftentimes lags behind innovations in the market. That is just 
the way it works. I mean, that is just the nature of----
    Senator Bunning. Nobody is watching the store.
    Mr. Wade. Right. Absolutely, Senator. And in a sense, I 
think the current regulatory environment needs to come up to 
the current--and recognize the current innovations in the 
market and be modernized to address that. And one of the 
challenges we have today, and I think while I do not know a lot 
about the specifics in Kentucky, at least what we have heard 
from some of our members there is that you still have a robust 
community banking network. People have primarily relied on 
those institutions for financing home purchases. Typically, 
that is not where the problem has been in the market.
    Senator Bunning. Zero problem. None.
    Mr. Wade. Right. It has been traditionally, you know, 
primarily in the subprime sector. That has been the main 
driver. And I would say that the regulatory environment just 
was not adequate to address the innovations that the subprime 
market brought forward. So I think that is one of the things 
that I know the Committee is wrestling with. Where is the right 
balance to strike between enhancing the regulation that is 
necessary, and obviously not impeding innovation that is 
necessary that has made financial services more broadly 
available in this country than it has ever been before?
    Senator Bunning. Thank you, Mr. Chairman.
    Chairman Carper. You are welcome, and thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. Thank you to 
all. Ms. Cohen, I was interested in that story of the young 
AmeriCorps individual. For $15,000 I cannot pay my rent in 
Washington, much less own anything at the end of the day.
    Let me ask you all, on a scale of 1 to 100, with 100 being 
the best score, how would you rank the average American's 
financial literacy abilities?
    Mr. Wade. You know, I had not really thought of it along 
those terms, but I would say clearly probably less than 50 
percent. But I would say some of that is not necessarily the 
fault of the consumer in this regard. We do not expect the 
consumer to understand certain other kinds of things that are 
complex in the marketplace. So most consumers when they have a 
legal matter, they need to get an attorney.
    I think one of the questions that I think we need to think 
about today, particularly in the mortgage finance arena, has it 
become so complex that consumers need a mortgage adviser at the 
time of that transaction? And I think that is really the 
challenge that we are facing in the mortgage arena. It has 
become so complex. The average consumer does not do it often 
enough to become proficient. I mean, it is not like, you know--
you know, when you are buying clothes and food, you do that 
often enough, you kind of know what milk ought to cost. But in 
the case of mortgage finance, you do not do it enough, and 
there are so many innovations in the market, it is very hard 
for the consumer to be proficient. And so I think that is one 
of the challenges that we have got to address.
    Ms. Cohen. I have a comment. I think that some Americans 
believe they know more than they actually do know, and I think 
that is a problem.
    When the Money School started in 1999, the first 12 classes 
were on investing. When I became the director in 2002, the 
instructor said to me, you know, ``These people should not be 
investing.'' People tell them, ``You should invest. You should 
invest.'' ``These people are deeply in debt. They need to be 
paying off their credit.''
    So we have revamped what we offer, and we do still offer 
investment classes, but we have had to do--our big favorite is 
a crash course in credit, Kiss Debt Good-bye. Those are the 
ones that are most popular, and those are the ones people take 
over and over again.
    We did a study of the Money School last year, and we found 
the people who did take Money School classes on a consistent 
basis--and that is what we are looking at--they were able to 
reduce their debt, they were able to start saving, and they 
were able to begin the road to homeownership. But I think if 
you look at Jump Start, the average high school student is not 
well versed in financial education. We do not teach it. We do 
not talk about money. That is the whole problem. We do not talk 
about money. It is embarrassing to tell people. We tell very 
intimate details of our life, but we do not talk about our 
financial situations.
    In Delaware, we have over 300 women who have now amassed 
over 8,000 hours of financial education, and what we are 
working on is not taking one course, not just taking 10 
courses, but making financial education lifelong learning.
    Ms. Raskin. I would really echo the sentiments of the other 
panelists. Clearly, Americans are not well versed in these 
transactions, and they are complicated. Even after the point of 
purchase, what we are now seeing, as homeowners move closer 
into foreclosure, is the complexity in which they have found 
themselves, because they do not often just have first 
mortgages, they have got second mortgages. And now what we are 
asking them to do is to go into situations where they are going 
to enter into some kind of mitigation possibilities with their 
servicer. It is mind-boggling trying to figure out exactly what 
the borrower entered into and how they got to the point that 
they now find themselves in.
    One sort of interesting fact we are seeing--and we are 
going out into the communities to talk to people who are in 
foreclosure, and last night, for example, we had a meeting in 
Prince Georges County, right over the line here, and we have 
had a number of these. And as we continue these seminars, these 
foreclosure fora, we are finding that people know more. They 
are actually learning quite a bit more than they probably knew 
when they bought their homes. They are speaking at an 
increasing level of sophistication, which is obviously--it is a 
good thing, but it is also evidence of how difficult situations 
have become.
    Senator Menendez. Well, I appreciate your answers. I notice 
that you all diplomatically did not score, but I will derive 
from your answers some of the views.
    You know, in my view, certainly I do not expect people to 
know the nature of some of the mortgage transactions and 
whatnot in detail. But I think part of the question is a 
baseline--although we are focusing, Mr. Chairman, on mortgages 
today and homeownership, the reality in my view is financial 
literacy widely spread. You know, we are going to have a big, a 
huge credit card problem in terms of growing debt of credit 
cards. We want people to have credit cards. We want them to 
make the right decisions as to how they do that. And there is a 
whole host of other financial transactions that we make that 
are not necessarily as uncommon as the purchase of a home, but 
that at the same time does not have the level of financial 
literacy needed for people to make informed decisions.
    So let me just close and ask two last questions. One is, 
Commissioner, you talked about your State passing ability to 
pay as a State standard. If, in fact, we had that as the 
standard in a regulatory process, wouldn't we, you know, cut 
through a lot of the challenges of individuals? Certainly the 
AmeriCorps individual would not have received their commitment. 
And we would actually have a system in which people would 
likely qualify. They may not buy the biggest house, but they 
will get to buy a house if they qualify. And they are not going 
to end up losing their home. Wouldn't that be something 
significant?
    And then, last--and anyone else who wants to respond to 
that. Last, isn't there some incentive, whether in the 
marketplace itself, to get people to do particularly pre-
purchase education, maybe even post-purchase education, Mr. 
Chairman, isn't there some incentive that the marketplace--you 
know, like in driving insurance, you know, car insurance. If 
you take certain courses, if you do certain things, you 
actually get a benefit on your insurance premium. Is there 
something along those lines that we can do in the private 
sector? And if not, what is there governmentally that might be 
done to create an incentive for people to move to the pre-
counseling? If you could just talk about those two issues, I 
would appreciate it.
    Ms. Raskin. Sure. I will just back up to address some of 
your comments. Credit cards clearly are something that is a 
much more accessible and widely used tool that financial 
literacy can be geared around, and I think that is just an 
excellent point, and it shows quite a bit of foresight, 
because, you know, what we are learning and what we are seeing 
in the housing context is that we now face a very different 
marketplace when we buy a home than our parents did when they 
bought homes and just dealt with a bank and it was a bank that 
held onto the mortgage, and we did not have all these different 
players.
    Similarly, we are going to learn things, and we are 
starting to see things in the credit card context, and I can 
speak just, you know, from the perspective of my children who 
are, you know, pre-teenage years, and they think that 
transactions all occur by swiping plastic. To them, you do not 
hold onto cash; you actually use plastic. This sort of ties in, 
also, to sort of the cultural pressures, too. I mean, you know, 
the Barbie doll now has her own ATM that, you know, she swipes 
and this is what children now see as the toy.
    In terms of the ability to repay, yes, I mean, I clearly 
think that that is a very important legislative solution, and 
it is not a silver bullet, by any means. But we are hoping in 
Maryland that that is going to be a big step forward. Lenders, 
too, benefit from an ability-to-repay standard. You would think 
this is Banking 101, but good credit risk management would 
indicate that an ability to repay is something that lenders 
would support as well.
    And then, finally, in terms of the incentives in the 
marketplace, that is a very important thing to think about, and 
one thing that just comes to mind, listening to you--and I am 
not sure this is what you quite had in mind, but, you know, we 
do have credit scores. Now, this isn't an incentive, but it is 
something to watch because credit scores are now the metric by 
which a lot of people--it is determined whether a lot of people 
get access to certain kinds of credit. And I think the way the 
credit system and the credit scoring system works is something 
that we need to study.
    Mr. Wade. Sure. Let me start with the latter question 
there. We support the notion of creating market incentives to 
help incent counseling. A number of years ago, actually the FHA 
used to have such an incentive. They would offer a discount to 
consumers who participated in counseling. The notion was that 
obviously if a consumer took advantage of pre-purchase 
counseling, they would be a better customer for the FHA and 
would mitigate the risk. We are recommending that Fannie and 
Freddie consider that sort of thing as well, because to a 
certain extent I think, you know, while there is anecdotal 
evidence from our own network, I think if you talk to all of 
the local jurisdictions that have downpayment and closing cost 
assistance, where they require counseling, they will also have 
the same kind of positive loan performance with those consumers 
as we have been able to indicate in our network.
    So I think there is a value to ensuring that consumers get 
it up front. It is good for the consumer. It is a risk mitigant 
for the institution. And there ought to be a way to create an 
incentive in the marketplace to make that a more likely 
occurrence.
    In addition to that, I would agree that on the broad 
financial literacy front, doing more better and earlier as 
well--I mean, there is no question--I mean, I know when I went 
to school, I did not know any college student that had a credit 
card, unless it was their parents'. Today, college kids get 
solicited directly on their own merit for credit. So we have, 
in a sense, less financial education occurring today and access 
to more credit than ever before. And I think that is part of 
the dynamic that we are struggling with.
    I have heard that as well, having a couple of educators in 
my family, that some of the focus on the standards today, 
reading and writing, have crowded out some of the things that 
used to be part and parcel of the curriculum that we had in all 
of our public schools, and that is a challenge we have got in 
the public school arena. It is one of the places that we 
obviously have an ability to do a lot. And then I think the 
colleges need to do more as well for students who end up there. 
I saw a statistic the other day that the average college 
student comes out of college $5,000 in debt on consumer debt, 
set aside the student loans. This is just consumer debt--store 
charges, credit cards, and the like. It seems to me we are not 
doing something right if that is the case.
    Ms. Cohen. I taught fourth, fifth, and sixth grade 
economics and entrepreneurship, and the last year I taught, one 
little boy said, ``We are going to have a terrible Christmas.'' 
And one little girl said, ``Why?'' And he said, ``Well, my 
father was laid off at Chrysler.'' She said, ``So what?'' And 
he said, ``Well, we won't have money.'' She said, ``Just go to 
the man in the machine. He'll give it to you.''
    And I must have made a terrible face at her, and she said, 
``OK, OK. It could be a woman in a machine.''
    So I had done well with gender equity, but I had not done 
well with the whole principle of banking.
    When I was little, we went to the bank with our parents. We 
walked through the bank. We actually saw our parents put cash 
in the bank. Nowadays, the most children see is a drive-through 
where the dog can get dog biscuits and they can get lollipops. 
And they see the ATM machine, which dispenses cash. That is it. 
``Where are you going?'' ``I'm going to the grocery store to 
get money.''
    So we really have to begin earlier. We have actually 
started in Delaware the National Council for Economic 
Education, and the Delaware Council on Economic Education have 
actually worked with us to start lessons for daycare providers 
and pre-school providers on teaching financial education. And 
what we are teaching is rational decisionmaking, making wise 
choices.
    We just created a hundred kits for first-grade teachers 
which integrates financial education across the reading 
curriculum so that teachers in the first grade can start 
working with children about making wise choices about money. 
And it is being done in places, but I agree, it has to begin 
earlier, and the other thing I would like to say is we have 
these 300 women who get--we issue a little award certificate if 
you finish 10, 20, 30, or 100 hours. We now have people 
surpassing 250 hours. They earn volunteer hours in the earned 
income tax credit as cash coordinators and tax preparers. That 
certificate, which will not get them anything, is rewarding to 
them, and learning can be its own reward. And I think that is 
what we need to give people--the financial education to have 
their dreams come true.
    Senator Menendez. Thank you very much.
    Chairman Carper. Well, these are great responses, aren't 
they? I am glad we are here.
    Commissioner Raskin, you sat today on this side of the 
table, but previously you sat on this side of the dais, and 
something that Mr. Wade said--he was talking about--I think in 
response to your question about FHA, maybe. He talked about FHA 
needs--maybe there is some lesson there for Fannie Mae and 
Freddie Mac. And we are going to be possibly marking up 
legislation in a week or so here dealing with the creation of 
an independent regulator for Government-sponsored enterprises 
like Fannie Mae and Freddie Mac, and we will have an 
opportunity to consider the very issue that I think you have 
raised, Mr. Wade. And we have already adopted and sent out of 
the Senate over to the House FHA reauthorization. And we will 
end up, I suspect, in a conference with the House and be able 
to consider further changes to FHA going forward as we try to 
make it relevant for the 21st century.
    That is sort of a lead-in to my question, Commissioner 
Raskin. Having sat today now on both sides of the tables here, 
what lessons are there maybe for us, a to-do list, if you will, 
for us as Federal legislators, as we attempt to deal with these 
issues? One of the things we have done is we have provided in 
the legislation, which included FHA reauthorization, $100 
million for housing counselors. That is one of the things we 
have done. But what else could we do or should we do in the 
context of the legislation, especially that we are going to be 
considering here next week or so in this room?
    Ms. Raskin. Well, that is a great question, a great 
opportunity, and I will say that to pick up on just a bit of 
the dialog that I had with Senator Bunning, you know, we--it is 
an opportunity now. I mean, what we are seeing at the State 
level is really heart-breaking. And we talk about, you know, 
the foreclosure crisis, and I know there is an instinct to be 
very abstract about it. And we talk about the importance of 
counseling and a multi-faceted approach. And, you know, one 
thing that when I--what is sort of hidden behind these words is 
the fact that the foreclosure crisis has a very human face. And 
when people call counselors and we say we need a multi-faceted 
approach, it is because many people who call are calling, you 
know, saying that they are about to commit suicide. I mean, it 
is a very--it is a dysfunction in the market that has a very 
human face to it.
    I think that as you all go forward and contemplate and 
enact legislation that is going to help in this set of issues, 
I would ask that you, you know, very carefully consider the 
efforts that are being done by the States. We are the lines of 
first defense, and we are seeing it very close up and personal. 
And it is, again, I think there is a lot that we are doing at 
the State level. I happen to believe that the crisis that we 
are dealing with now is a failure of regulation, and it is a 
failure of regulation up and down. I mean, I am not going to 
say it was the Federal regulators or it was, you know, the 
State regulators. It was a failure of regulation, and I think 
we need to obviously correct that. And I think we need to 
correct it at all levels, at the State level and at the Federal 
level. And I would like to urge you as you move forward to 
consider carefully what is being done at the State level, 
because I can say at least from the perspective of Maryland and 
from very many other States that are dealing with this that 
there are a lot of very, very strong initiatives going on. We 
are dealing with this in our own backyards. It is very 
complicated, but we are acting, and we are acting, I think, 
quite wisely.
    Chairman Carper. One of our colleagues, Senator Martinez, 
two of our colleagues, I think Senator Feinstein, have put 
their heads together, I believe on legislation dealing with 
mortgage brokers, and the question is certification, licensing, 
continuing education for mortgage brokers----
    Ms. Raskin. And that is a very----
    Chairman Carper [continuing]. Not for us to spell out what 
it ought to be, but to direct--maybe to set some kind of 
minimum standards, but to then say to States these are the 
minimum standards, and if you want to go beyond that, you are 
free to do that.
    Does that kind of thing make any sense? Again, what I am 
looking for in response to my question is: What are the kinds 
of things that we should do? And I mentioned we provided an 
extra $100 million for NeighborWorks, this idea of the mortgage 
brokers' licensure, ongoing education, the question of FHA, 
should there be something in FHA where people actually benefit 
financially if they go through the pre-purchase counseling. 
Those are the kinds of things I am looking for that you might 
think are good ideas that we should pursue.
    Ms. Raskin. I would just add then, to be very concrete, 
that something like Feinstein-Martinez, you know, would have 
the full--it has the very full support of regulators on the 
State level. That would, in essence, permit the States to 
coordinate better in terms of their creating standards, 
licensing standards for brokers, for originators, for many of 
the entities that have gone unregulated. And that is a very 
good first step.
    Chairman Carper. Other ideas? Mr. Wade, you sort of opened 
this up, at least in my mind.
    Mr. Wade. Well, I would say, you know, I think a lot of the 
things you have commented on clearly, and other panelists, are 
what is needed. You know, we need to modernize the regulatory 
regime. I know that the Fed has out for comment regulations 
that would govern these high-cost mortgages. That is something 
that obviously we need clarity on in the market so that we can 
end up with a clear set of rules. I think obviously regulations 
for brokers at the national and State level are important.
    I think one of the challenges with the regulatory 
environment today, you know, the mortgage market used to be 
somewhat contained State by State. You know, it is pretty much 
a national market. So I think you have to do it in concert.
    Chairman Carper. Even international.
    Mr. Wade. And international, absolutely. So I think the 
coordination between the Federal and the State is very 
important, and we have seen even in some of the cases that have 
been--actions that have been brought against brokers, they will 
leave one State and hop right across the border and operate, 
you know, with a new name, and it is just very hard, I know, 
for the States that have attempted enforcement actions to keep 
track of that.
    We also think that, you know, clearly being able to create 
a clear way that the counseling resources or the counseling 
activities can be paid for over the long term. I think in the 
short term the emergency assistance that Congress has provided 
is going to be great. I think over the long term we are going 
to have to be able to provide a sustainable way to support 
counseling.
    Chairman Carper. It is interesting you should say that 
because as we consider creating a strong, independent regulator 
for Fannie Mae and Freddie Mac, one of our principles is to be 
able to--for them not to have to live from year to year on the 
appropriations that we provide.
    Mr. Wade. Right.
    Chairman Carper. But to have a source of independent 
funding.
    Mr. Wade. Right. So those would be just some of the things 
I would offer.
    Chairman Carper. All right.
    Ms. Cohen. I guess my only concern is that we cannot 
regulate ethics. The mortgage broker who says you can buy more 
house, the realtor who says you can buy a better house, that is 
always going to be. I guess it has always been. But that is why 
financial education is so critical.
    Chairman Carper. We cannot legislate or regulate that. I 
wish we could also have somehow the ability to rescind the laws 
of supply and demand when we watch what is going on in terms of 
commodity prices, although I suspect that some of that that is 
going on is not really supply and demand but the work of 
speculators and scam artists and so forth.
    I want to come back to the point that I made early on, and 
that is, virtually every State has established academic 
standards of what students ought to know and be able to do. A 
lot of the times--and my own kids, one of whom, Ms. Cohen, 
taught and who turned out really well, in no small part because 
of your stewardship. But any number of times I worked with my 
kids on their homework, and they have said, ``We have to learn 
this for the test''--and not the State test, but just for the 
test that they were preparing for. And they would say, ``I am 
not really sure I will ever use this in my life.'' But 
everybody, almost everybody in this country is going to use 
credit cards. The lion's share of people are going to own a 
home. And in terms of using our academic standards and trying 
to create lesson plans, a curriculum that helps students learn 
and embrace the standards and understand the math or science, 
but to make it relevant in their lives, it just seems to be a 
no-brainer. And I do not think it is appropriate for the State, 
certainly not the Federal Government, but for States to say to 
teachers, ``This is the lesson plan you have to learn.'' But it 
is tough when an educator himself or herself is not especially 
financially literate to create a lesson plan that enables us to 
make relevant that academic standard in the life of a person. 
They deal with their own personal finances.
    I am not sure how to make--that is not one that the Federal 
Government can do. It is not one that the Federal Government 
can do.
    Ms. Cohen. I think we need to go back to teacher education. 
In 1972, I had the opportunity to study with Marilyn Kourilsky, 
who invented the system called ``mini-society,'' which for some 
teachers is all they have ever studied in economics, but 
children create a community in the classroom, and they create 
the rules, they create their currency, they set the prices. It 
made me change as a teacher that I began to be a learner as 
well. But there are ways to integrate this into our lessons. 
There are really clever lessons out there. It is just giving 
teachers the liberty to do this. And we do have Councils of 
Economic Education in every State, and they are doing 
unbelievable things. It is just getting it to the teachers who, 
at the end of a school day, are so tired they are not going to 
go to in-service. We need to get those materials out. We need 
to get workshops out. And they are there. It is just hopefully 
the testing will get back in line and teachers can get back to 
teaching.
    Chairman Carper. All right. Thank you.
    Are you all aware of any States that are doing a 
particularly admirable job with respect to financial literacy? 
We are very proud of what Delaware is doing, and I suspect some 
other States are equally proud of what they are doing. But are 
you all aware of some States that are doing an especially good 
job, commendable job from which the rest of us might learn?
    Ms. Cohen. I obviously think we are best.
    [Laughter.]
    But we do have a strong Delaware Council for Economic 
Education. What I think we are missing is we need to teach 
children entrepreneurship. That is the best way for them to 
learn why they are learning, what they are studying, why it is 
important, and to show them that they can build assets. And I 
think that is the way--that is the exciting way for kids to 
learn.
    You hear people say that economics is the dismal science, 
but you can teach fourth, fifth, and sixth graders, and they 
think economics is fun. We are in the 24th year of our economic 
competition in economics, personal finance, and 
entrepreneurship where 500 kids across the State compete in 
economics, and they think it is fun.
    So there are ways we can do this. California has some great 
economic educators, personal finance educators. The State of 
New Jersey actually has a very strong coalition of people 
teaching financial education. The Federal Reserve is out there 
offering great, great lessons plans. The U.S. Mint. There are 
materials out there. It is just getting the teachers to access 
them and finding the time to do them.
    Chairman Carper. All right, thanks. OK.
    I just have a couple more, and we will let you go. 
Something that Senator Menendez said made me write down this 
question. My wife and I never thought a lot about figuring out 
how to perform childbirth, participate in childbirth, until my 
wife became pregnant. And then we signed up for childbirth 
lessons. We never thought a whole lot about parenting skills--
hopefully we had some from our own--being reared and all. But 
we never thought about learning them until we actually had a 
child on the way.
    I remember my boys who I think wanted to drive from the 
time that they got in the car coming home from the hospital 
after they were born, but we really focused on learning how to 
drive when they were eligible and started to take driver's 
education.
    Some States are actually requiring people to go through 
counseling when they are contemplating getting married to be 
able to create more lasting unions.
    Citing all those is a way of--the notion of when somebody 
is preparing to buy a house, who wants to buy a house, is that 
the time for States to say, ``And, by the way, before you buy 
this house, you have got to go through this counseling.'' Is 
that appropriate or inappropriate? Mr. Wade and then others.
    Mr. Wade. I would agree that we need a better job of 
baseline financial literacy for all citizens, I mean, no ifs, 
ands, or buts about it. But I think there are certain things 
that do provide the teachable opportunity, and clearly at the 
time of a home purchase--you know, you can sit through a class, 
and if you are not interested in really purchasing a home, it 
is not clear that the complexity of a home purchase will stick 
enough with you when you are actually ready to make the 
transaction. So we think for at least the home purchase, that 
is the kind of financial education and counseling that is best 
handled at the time that the consumer is thinking about 
purchasing a home. It seems to have the best payoff. People 
value it, clearly, and it does seem to have an effect.
    There are some baseline things you can do to help teach 
people about generally, you know, what APR is and how, you 
know, interest rates work. But I think the complexity of the 
mortgage market suggests that you do need something also at the 
point in time that the consumer is ready to take action.
    Chairman Carper. I remember when we were refinancing our 
home--there was a time when interest rates were going down, and 
we wanted to refinance our home. We also wanted, I think, to 
build a room or something onto our house, a garage onto our 
house. And we took it as an opportunity to refinance at a lower 
mortgage rate, to take some money out of the house and use it 
for building onto our house. And we were asked by the bank at 
the time if we wanted to pay our mortgage payments through 
automatic deduction from our--they basically said you will get 
a lower interest rate if you use your checking account and we 
just automatically deduct twice a month, once a month. And so 
that was a real incentive, and we said OK, we will do that.
    I wonder if rather than for States to mandate this kind of 
thing, this kind of training, but to say if you go through it, 
there is a financial advantage for you. How might that work? 
How might we incentivize folks to do this kind of thing? Any 
ideas?
    Mr. Wade. Well, clearly on the pre-purchase side, as I 
said, historically the FHA did provide a concession on rate for 
consumers who took advantage of counseling. We think another 
variation on that theme, rather than a rate concession, might 
be a rebate to the consumer. I think if you look at the way the 
auto finance world works, they have kind of figured out that 
consumers seem to value a rebate back to them more than a 
slight break on the rate, even sometimes when the break on the 
rate will be more.
    So I think there are a lot of creative ways that you can 
think about how to create an incentive to get consumers to take 
advantage of the counseling and to a certain extent reward them 
because it is going to create a better credit risk for the 
lender anyway. So it seems to me that some value ought to 
accrue to the borrower.
    Chairman Carper. So kind of a related item, we learned when 
our boys were actually old enough to start driving that we 
could realize--even though our insurance rate was going to go 
up, it would not go up by as much if our kids were good 
students.
    Mr. Wade. Right.
    Chairman Carper. We learned that it would go up, but it 
would not go up as much if they would not only just take 
driver's ed in school, but also take a defensive driving 
course, and that incentivized us all. I am sure it does others, 
too.
    Anybody else on these points before we move on? Yes, ma'am.
    Ms. Raskin. Yes, I would just add in terms of, you know, 
the teachable moments, at the time of a home purchase, that 
clearly is a teachable moment. And we have considered and there 
is a task force in Maryland that has been established for 
looking at improving financial literacy. But there can be 
gradations, too, because some of the proposals that have been 
put out have to do with home purchases involving a subprime 
loan or home purchases involving a certain kind of adjustable 
rate loan. So you can tie the literacy, obviously, the 
counseling, to particular kinds of purchases, and you can 
consider gradations.
    Chairman Carper. I am going to direct this question--I want 
to telegraph a pitch. I am sitting next to a guy who is in the 
Hall of Fame, the Baseball Hall of Fame, Jim Bunning, who has 
actually pitched no-hit games in both the American and National 
Leagues. With deference to him, I am going to telegraph a 
pitch, and the last question I am going to ask--I am not there 
yet, but the last question I will ask is in terms--three of our 
colleagues were here. There are probably four or five who did 
not come on the Subcommittee to be able to hear, although they 
have the ability in many cases to watch on television from 
their offices, and I am sure some of them and their staffs do.
    The last question I will probably ask is a take-away for 
those of us who are here on this Committee, on our staffs, and 
those who did not come in person, take-aways from what you have 
heard said here today that you really think we should take to 
heart as Federal legislators. There are some things we can do. 
There are a lot of things we cannot do. We are not classroom 
teachers. We are not principals in schools. We do not write 
lesson plans for schools. But we can provide some money for 
counseling, for housing counseling. We can do some things with 
respect to reauthorization of FHA or providing regulations 
through a strong regulator for Fannie Mae and Freddie Mac. 
There are some things we can do, but there is a lot we cannot.
    But just be thinking, if you will, as we come here to the 
end, about some things that you would really want us to take 
away. And it could be in sort of a form of a to-do list, but 
just lessons learned for us that you think you would especially 
like to emphasize.
    And while you are thinking of that, Ms. Cohen, let me just 
say, you identified a number of initiatives where the Delaware 
Money School has partnered with a private sector financial 
institution. Let me just ask, how important do you feel these 
partnerships are? And does this contribute to making the 
courses that you offer more effective?
    Ms. Cohen. The funding we receive is critical to the 
Financial Literacy Institute. Basically, the people on our 
staff are administrators, and we have these volunteer 
instructors. But the contributions we have make it possible for 
us to offer free classes. We do not offer anything that costs 
money. So we have had a problem now with the housing counselors 
who charge a fee. We can no longer advertise the class that has 
the fee because that is not the Money School policy.
    If we did not have funding from our corporate sponsors, we 
would not exist. We have a small grant in aid from the State. I 
was told it was a big grant in aid, but according to our 
budget, it is small. But we subsist on these contributions.
    Chairman Carper. What are the incentives for financial 
institutions or others to make these contributions?
    Ms. Cohen. CRA.
    Chairman Carper. Talk a little bit about that.
    Ms. Cohen. I learned about this when I took this job. I did 
not realize that MBNA gave grants to schools when MBNA was in 
Delaware and existed. But the CRA officers look for ways to 
provide funding to programs that will meet their requirements 
for CRA credits, Community Reinvestment credits. Avanta called 
us last year--no. AIG called last year and said they wanted to 
put money in financial education, could I use $50,000? Well, I 
am a small----
    Chairman Carper. What did you say?
    Ms. Cohen. I said, ``Oh, no, I am not interested.''
    [Laughter.]
    I wanted to start a program in prison, so I got money from 
AIG. We think financial education is critical in prisons.
    In 2004, Citigroup came to us and said, ``We do not want a 
1-day women's conference. We want an ongoing financial 
program.'' Their sponsorship, which will be about a half 
million dollars through the end of this year, allowed us to 
create--to put momentum into our financial education program. 
And not only do we have a huge--we have a 1,500-women 
conference every other year, but we are able to advertise. We 
do not have a marketing budget unless someone gives us money 
with marketing dollars. We were able to bring the Purses to 
Portfolios program across the State. It is now being replicated 
in Philadelphia. It has been replicated in Florida. We were 
able to advertise. And not only did that bring women in, it 
increased the visibility of the Money School.
    And so we really rely on corporate dollars. Our individual 
donors, we have generous individual donors, but that is a very 
small portion of our budget.
    Chairman Carper. I remember when I was in the House of 
Representatives on the House Banking Committee, and we had a 
big debate in the Committee on whether or not Community 
Reinvestment Act evaluations, CRA ratings should be made public 
or remain at the time private. And we had quite a debate in 
Committee and later on the floor, and those of us who felt that 
it was probably a positive thing for them to be made public 
prevailed. And we are really blessed in our States with a 
number of financial institutions who--it is almost a badge of 
honor for them to earn outstanding on their CRA.
    Ms. Cohen. It is.
    Chairman Carper. And we have figured out by virtue--I am 
not sure if they would be quite as ardent about it if no one 
ever knew what an institution's CRA rating was. But it is 
public knowledge, and the institutions take great pride in not 
a race to the bottom but a race to the top.
    Ms. Cohen. I think one of the things that people do not 
realize is we get our dollars from corporate sponsors. We also 
get a huge amount of volunteer help. We have a new finance 
director this week. We had somebody from one of our corporate 
sponsors come in and work with her.
    When I first opened our office, we had no equipment. One of 
the corporate sponsors sent us a fax machine and a computer.
    So they provide technical advice. They provide marketing 
advice. They will chaperone and judge our events. So it is a 
lot of time commitment. Our board is almost 50 percent 
corporate sponsors; the rest are from nonprofits and just 
public citizens who are interested.
    So I think people do not realize how really vital community 
reinvestment is.
    Chairman Carper. Well, we do in our State.
    Ms. Cohen. We do.
    Chairman Carper. All right. And this is really a chance for 
you to just tell us some of your closing thoughts along the 
lines that I outlined before when I telegraphed that pitch. 
Just take-aways for those of us who are here and those of us 
that are not.
    Ms. Raskin. Sure. Well, first of all, I do commend you for 
holding this hearing, and it really is quite forward-looking. 
And what I have most appreciated listening to the other 
testimony and listening to the comments of your Committee and 
your views is how you have been able to put financial literacy 
really into the context not just of the current crisis, which 
clearly has all our minds completely focused, but into the 
context of really the whole notion of consumer debt and the 
problems to come from that and looking back to see whether 
financial literacy can be made into an effective tool that can 
help mitigate the next set of issues that come our way. And for 
that I do really commend your vision.
    In terms of another take-away, I would say that I would 
urge the Committee in its deliberations in considering reform 
to really build on what the States are doing in terms of 
enforcement, in terms of building an important set of tools to 
license and register and track and examine mortgage originators 
and lenders and the other players in this very diverse field. 
And I think you are considering legislation that does that, 
and, again, that the States do have a very strong base in this, 
and I think to build on top of that would be exemplary.
    Chairman Carper. All right. Thank you, Commissioner Raskin.
    Mr. Wade.
    Mr. Wade. Sure. I also would like to commend you for this 
hearing. It is pretty timely given what is happening in the 
market today. I would just highlight, you know, five things 
right quick that I would see as take-aways from our 
perspective.
    One, pre- and post-purchase counseling works, and so I 
think to the extent that we can make it more broadly 
accessible, it will help us avoid these kinds of problems in 
the future.
    We have got to modernize the regulatory framework so that 
it, you know, obviously is set up to deal with the market that 
we have today, which is very complex and much different than we 
have ever had before.
    Modernize FHA. It is a resource that the Federal Government 
has. It has been underutilized. It is right there, and it seems 
like it is an easy win.
    Help us promote the industry standards so that we can 
ensure that the kind of counseling that is out there is high 
quality so that we can ensure consumers get something that will 
work for them.
    And then you could also help us with the community 
outreach. We have offered the opportunity to have folks 
publicize the toll-free number that we are supporting, that 
belongs to the Homeownership Preservation Foundation, as well 
as, you know, help co-brand the Ad Council ads so that we can 
reach many more consumers who are in trouble out there so they 
can get the kind of help that they need.
    Chairman Carper. I am going to go back to one of your 
points, and that is modernization of FHA. Any particular do's 
or don'ts there that you would especially like to emphasize or 
underline?
    Mr. Wade. Well, no particular dont's. I think the things 
that seem to be on the table all make sense: Increase the loan 
limits so the FHA can be much more competitive in a lot of the 
markets. Allow the FHA to be able to, obviously, adjust its 
risk premiums to take into account additional risk it might be 
taking on. Allow the FHA, particularly in this crisis, to be 
much more flexible than it would have been, than it would be 
normally, recognizing that we are in a crisis and we need every 
tool available to help consumers. And then, you know, clearly, 
if the FHA--and I know that they are thinking this through, but 
obviously finding a way to create incentives so that we can 
ensure consumers get access to counseling.
    Chairman Carper. Good. Thank you very much.
    The last word to Ronni Cohen. Ms. Cohen?
    Ms. Cohen. One of my very good sponsors has a big poster 
that says ``Knowledge is your greatest asset.'' And so I really 
do urge you to do what you can for pre- and post-homeownership 
education. I think it is critical. And in Delaware, we have 
found it has been very successful, significantly helping the 
homebuyer.
    Thank you.
    Chairman Carper. Thank you. This has been a wonderful 
hearing, and it is because of the testimony that you brought to 
us today, the ideas that you have brought to us today. 
Sometimes you have folks who testify, and it is almost like 
they are a silo or a stovepipe, and the interaction between the 
two and the interplay between the two is not that great. That 
has not been the case here at all today. And I think there has 
been a bit of a synergy that has flowed out of your 
testimonies, which has been most welcome and I think most 
helpful.
    My colleagues and I may be submitting some additional 
questions in writing. We would ask that if you receive those, 
you respond to us promptly so that we could have the full 
record for this hearing.
    And, with that having been said, again, it is great to see 
all of you. Welcome back to the scene of your earlier crimes 
when you were telling Paul Sarbanes what to say and what to do. 
You managed him well. We miss him.
    Mr. Wade, thank you for the leadership that you provide in 
an important organization. And thanks for coming to Delaware to 
help celebrate INCALL's anniversary a few years ago.
    And to Ronni Cohen, thank you for continuing to be just a 
terrific educator, even though you are no longer in the 
classroom of our schools where you were, again, just a 
terrific, a widely admired teacher. Thank you for continuing to 
have the heart of an educator and the heart of a teacher and 
making sure that a lot of folks in our State benefit from that.
    With that having been said, I think this hearing is 
adjourned.
    [Whereupon, at 3:48 p.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]
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