[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                   THE HOUSING CRISIS IN LOS ANGELES
                      AND RESPONSES TO PREVENTING
                      FORECLOSURES AND FORECLOSURE
                              RESCUE FRAUD

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

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 28, 2009

                               __________

       Printed for the use of the Committee on Financial Services


                           Serial No. 111-23






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20402-0001







                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

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

                 MAXINE WATERS, California, Chairwoman

NYDIA M. VELAZQUEZ, New York         SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
EMANUEL CLEAVER, Missouri            THADDEUS G. McCOTTER, Michigan
AL GREEN, Texas                      JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              GARY G. MILLER, California
KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
JOE DONNELLY, Indiana                WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
PAUL E. KANJORSKI, Pennsylvania      ADAM PUTNAM, Florida
LUIS V. GUTIERREZ, Illinois          KENNY MARCHANT, Texas
STEVE DRIEHAUS, Ohio                 LYNN JENKINS, Kansas
MARY JO KILROY, Ohio                 CHRISTOPHER LEE, New York
JIM HIMES, Connecticut
DAN MAFFEI, New York
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 28, 2009...............................................     1
Appendix:
    March 28, 2009...............................................    59

                               WITNESSES
                        Saturday, March 28, 2009

Abasto, Christian, Managing Attorney, Housing and Eviction 
  Defense Units, Legal Aid Foundation of Los Angeles.............    52
Battle-Bey, Marva Smith, President and CEO, Vermont Slauson 
  Economic Development Corporation...............................    17
Becker, Caryn, Policy Counsel, Center for Responsible Lending....    42
Brown, Hon. Jerry, Attorney General, State of California.........     5
Cordova, Martha..................................................    19
Faccuseh, Jazmin, Housing Counselor, East LA Community 
  Corporation (ELACC)............................................    29
Fertig, Dr. Ralph D., Associate Professor, Graduate School of 
  Social Work, University of Southern California.................    15
Fraga, Armando, Chief Investigator, L.A. County District 
  Attorney, Fraud Division.......................................    49
Gay, Lori R., President and CEO, Los Angeles Neighborhood Housing 
  Services.......................................................    28
Gross, Larry, Executive Director, Coalition for Economic Survival 
  (CES)..........................................................    12
Herrera, Pastor, Jr., Director, Los Angeles County Department of 
  Consumer Affairs...............................................    48
Johnson, Minelle, Housing Choice voucher recipient, Los Angeles, 
  California.....................................................    14
Marquez, Mercedes, General Manager, City of Los Angeles Housing 
  Department.....................................................    24
Montiel, Rudolf C., President and CEO, Housing Authority of the 
  City of Los Angeles (HACLA)....................................    26
Peters, Heather, Deputy Secretary for Business Regulation and 
  Housing, California's Business, Transportation and Housing 
  Agency.........................................................    46
Shannon, Susie, Housing and Homeless Advocate, Los Angeles 
  Coalition to End Hunger and Homelessness.......................    11
Teague, Ruth, Director, Los Angeles Office, Corporation for 
  Supportive Housing (CSH).......................................    31
Tull, Tanya, President and CEO, Beyond Shelter...................     9

                                APPENDIX

Prepared statements:
    Abasto, Christian............................................    60
    Battle-Bey, Marva Smith......................................    71
    Becker, Caryn................................................    78
    Faccuseh, Jazmin.............................................    91
    Fertig, Dr. Ralph D..........................................    93
    Fraga, Armando...............................................   176
    Gay, Lori R..................................................   179
    Gross, Larry.................................................   188
    Herrera, Pastor, Jr..........................................   197
    Johnson, Minelle.............................................   201
    Montiel, Rudy................................................   203
    Peters, Heather..............................................   208
    Shannon, Susie...............................................   214
    Teague, Ruth.................................................   220
    Tull, Tanya..................................................   225

 
                   THE HOUSING CRISIS IN LOS ANGELES
                      AND RESPONSES TO PREVENTING
                      FORECLOSURES AND FORECLOSURE
                              RESCUE FRAUD

                              ----------                              


                        Saturday, March 28, 2009

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
the Thomas Lakin Gymnasium of the Los Angeles Southwest 
College, 1600 West Imperial Highway, Los Angeles, California, 
Hon. Maxine Waters [chairwoman of the subcommittee] presiding.
    Members present: Representative Waters.
    Also present: Representative Watson.
    Chairwoman Waters. This hearing of the Subcommittee on 
Housing and Community Opportunity will come to order.
    Good morning, ladies and gentlemen. Welcome to the 
Subcommittee on Housing and Community Opportunity. This is our 
first field hearing of the 111th Congress, and I thank you for 
coming.
    I would like to thank Los Angeles Southwest College and 
College President Dr. Jack E. Daniels, III, for hosting today's 
hearing. Where is Dr. Daniels? Would you please come down 
front, Dr. Daniels? That is Dr. Daniels walking down the aisle. 
Please give him a round of applause.
    Dr. Daniels, we thank you for your generosity. Each time we 
ask you to be our host, or to allow us to come and hold a 
hearing or a town hall meeting or a play or community meeting, 
you are always responsive. You have never turned us down, and 
we thank you for that. Another round of applause for Dr. 
Daniels.
    I would like to thank Coach Washington. Is he here? You 
know, a lot of coaches don't like you to use their gymnasiums, 
but he allowed us to be here today. So give him a round of 
applause, too.
    I would also like to thank Dr. Janet Clark, the principal 
of the Maxine Waters Employment Preparation Center for 
delivering and setting up the equipment for this hearing. A 
round of applause for Dr. Janet Clark. Thank you.
    And I would like to extend a special thanks to Shawnee 
Stewart, Student Services and Faculty Coordinator, for 
connecting all of the dots. Without all of your help today, 
today's hearing would not have been possible.
    I would also like to thank our ranking member of the 
Housing Subcommittee, Shelly Moore Capito, who very much wanted 
to be here today but was unable to come.
    We may have some other members joining us who may or may 
not serve on the committee. If so, we welcome their 
participation.
    Today we will be examining the housing crisis in Los 
Angeles and responses to preventing foreclosures and 
foreclosure rescue fraud. I believe that this hearing is needed 
because Los Angeles is facing a severe housing crisis. When I 
first became chairwoman of the Housing Subcommittee, I wanted 
to have the subcommittee's first field hearing in the city with 
the most pressing housing needs.
    Accordingly, we held our first field hearing on the Gulf 
Coast, which was, and is still, recovering from Hurricane 
Katrina, which destroyed over 100,000 units of housing, 
arguably the single largest loss of housing faced by any one 
region at any one time.
    Although the Los Angeles area has not encountered a natural 
disaster on the scale of Hurricane Katrina, the lack of 
affordable housing, combined with the increase in foreclosures, 
amounts to a housing disaster in its own right. That is why I 
decided to hold the subcommittee's first hearing of the 111th 
Congress in Los Angeles.
    And I would like to thank our elected officials who are 
here today. I see Senator Rod Wright is sitting in the first 
row. Would you please stand? Give him a round of applause.
    And thank you for showing interest in being here with us 
today.
    I held two hearings in Los Angeles in 2007. We held a field 
hearing on foreclosures, and in 2008, we held a field hearing 
at Jordan Downs on the redevelopment of the public housing 
project there. But today's hearing is different from our 
previous hearings, not only in scope but in format, because we 
need a comprehensive solution to the housing crisis.
    We are going to look comprehensively at the housing 
challenges in Los Angeles. For the first time in years, all 
sectors of the Los Angeles housing market, including owner-
occupied housing, rental housing, Section 8, and public and 
assisted housing are in crisis. We have known for some time 
that affordable housing has been in short supply in Los 
Angeles.
    Nearly 100,000 households, or 8 percent, of all Los Angeles 
households live in affordable housing that is subsidized in 
some way. The need for this housing, however, is much greater, 
with nearly 1 in 4 Los Angeles renters paying more than 50 
percent of their income towards rent, and one-third living in 
overcrowded conditions. In fact, in order to afford the rent on 
a two-bedroom apartment, a renter in Los Angeles would have to 
earn $16.67 an hour and work 58 hours a week.
    In Los Angeles, demand simply outstrips supply, and the 
supply of affordable housing is constantly at risk. For 
example, according to the national housing trust, there are 282 
project-based Section 8 properties with 13,713 units in Los 
Angeles that may potentially be lost in the next 3 years.
    While Section 8 and public housing are supposed to provide 
housing opportunities for extremely-low-income families, we 
know that nationally only 1 in 4 families who qualify for these 
housing programs can actually participate in them. In many 
cities, Section 8 waiting lists are either too long or, as in 
the case of the Los Angeles Housing Authority, completely 
closed. Public housing is also disappearing nationwide.
    The winds and water of Hurricane Katrina didn't destroy the 
4,500 units in New Orleans' Big Four public housing 
development. The bulldozers of the Bush Administration did. 
Nationally, since 1995, we have lost over 200,000 units of 
public housing through demolition, disposition, or convention 
to vouchers. Several housing authorities, such as the San Diego 
Public Housing Authority, have gotten rid of their public 
housing entirely.
    This is why I am pleased that Rudy Montiel and Mayor 
Villaraigosa are committed to one-for-one replacement. We need 
to build more public housing units, but we also need to 
maintain what we have. This means rehabilitating deteriorated 
public housing units and investing in these properties and the 
people who call them home.
    Nationwide, there is an estimated $32 billion backlog in 
deferred repairs and maintenance for public housing. This is 
why I fought for $5 billion in the recently-passed stimulus 
bill for the rehabilitation of public housing. While only $4 
billion was provided, these funds represent the first step in 
addressing the backlog, and I am committed to fighting for more 
funding for public housing and all the other affordable housing 
programs, including Section 8.
    I am also concerned about the rising levels of homelessness 
in Los Angeles. As foreclosures increase, homelessness levels 
are also rising. Homeless service providers are reporting an 
increased demand for their service as renters who pay their 
rent on time and homeowners unable to come to terms with their 
mortgage servicers lose their homes.
    This isn't to say that there wasn't a homeless crisis 
before the current wave of foreclosures. According to the most 
recent HUD data, on any given day, Los Angeles has 
approximately 68,600 homeless people. In fact, there are more 
homeless people in Los Angeles than in any other city. Given 
the current state of affordable housing in Los Angeles, the 
foreclosure crisis is putting excess strain on an affordable 
housing system that is already stretched thin.
    According to RealtyTrac, foreclosure filings were reported 
on nearly 81,000 California properties in February 2009, the 
most of any State. This represents a 5 percent increase from 
January and a 51 percent increase over February 2008. The 
number of foreclosures in California is only expected to rise. 
According to the Center for Responsible Lending, 22 percent of 
subprime loans written in California in 2005 and 2006 will 
enter foreclosure. A projected 179,798 families will lose their 
homes. Nearly one-quarter of these families are in Los Angeles 
County.
    Thus far, mortgage servicers have been reluctant to modify 
loans to prevent foreclosures. I know firsthand how difficult 
it is to connect and to get a loan modification from a mortgage 
servicer. I am hopeful that the Making Home Affordable Program 
recently announced by President Obama, which builds off 
legislation introduced at the beginning of this Congress, will 
stop this unending avalanche of foreclosures.
    I am also planning to reintroduce legislation that I 
drafted as a result of my first hearing in Los Angeles to 
require mortgage servicers to work out loans with borrowers 
before foreclosing on their homes. This makes sense for 
homeowners, investors, and communities because no one benefits 
from foreclosure. The homeowner loses their home, the investor 
takes a significant loss on their investment, and the community 
loses tax revenue and only gains a blighted, abandoned home.
    But helping families to avoid foreclosure has gotten much 
more complicated with the entry of so-called foreclosure 
consultants and foreclosure specialists. For a fee, these 
individuals or entities promise to help save homes from 
foreclosure, but either charge an excessive fee for services 
that can be obtained for free from a qualified nonprofit 
housing counseling agency or deliver little or nothing for the 
money they receive.
    And they are very common. For example, several weeks ago, I 
was alerted to a fake HUD Web site that was taking applications 
online for the President's loan modification program. I 
contacted the Federal Trade Commission, the Federal 
Communications Commission, and HUD. Within hours, the Web site 
was taken down. However, it shouldn't take a letter from 
Congress for our regulatory agencies to become aware of these 
kinds of fraudulent activities.
    There are many varieties of mortgage foreclosure rescue 
fraud, but in each case the perpetrator makes misleading 
promises that consumers' homes will be permanently saved from 
pending foreclosure. Consumers, however, ultimately lose their 
homes and lose the money they paid to scammers.
    So let me say this for the record, and for all of you who 
are here today: Never pay anyone for a loan modification, never 
pay anyone to help you get a loan modification. Through the 
President's newly-announced foreclosure plan, it is free. It 
shouldn't cost anything, and anyone who offers to modify your 
loan for a fee does not have your best interests in mind.
    I will soon be introducing legislation to end these 
foreclosure rescue scams at the Federal level, and I am very 
interested to hear from our witnesses what they are doing to 
combat this problem at the State and local level.
    Because this hearing is so comprehensive, I have arranged 
the panels differently than you would normally see in a 
congressional hearing. On the first panel, we will hear from 
California State Attorney General Jerry Brown, who is going to 
testify about his office's lawsuit against Countrywide, one of 
the Nation's worst subprime lenders.
    Next, we will hear from housing advocates and residents of 
Section 8 and public housing. They will tell us about how this 
crisis started and their struggles with affordable housing. 
Third, we will hear from the people who are implementing 
solutions to address this housing crisis, including the 
foreclosure crisis. And, last, we will hear about how our 
witnesses are combatting these foreclosure rescue scams and 
what homeowners need to do, need to know to avoid being duped.
    Again, I am looking forward to hearing the witnesses' views 
on this very important program. And we will continue to move 
forward, and we will include any of our Members of Congress who 
appear today.
    Let me just say to our witnesses that we will provide a 
one-minute time cutoff warning to you after you have given your 
testimony. Each person will be allotted 5 minutes, and, again, 
we will warn you 1 minute before cutoff time.
    I would like to call up our first witness, and I am very 
pleased and proud to have with us today the Honorable Jerry 
Brown, Attorney General for the State of California. He is a 
friend.
    He is someone that I have known for many years and had the 
pleasure of working with when I served in the California State 
Assembly. I am very pleased and proud about his aggressive 
action to assist the homeowners of this of this country and of 
this State.
    And I say all of that because, as I understand it, there 
are other attorneys general who are taking note from what you 
are doing here, Attorney General Jerry Brown, and they are 
moving forward in their States also to address predatory 
lending, to deal with some of the predatory lending loan 
initiators, and to prepare to deal with the fraudulent claims 
by those who are seeking to earn a big profit from the most 
vulnerable by stating they can save their homes through loan 
modifications when in fact they are simply collecting money up 
front.
    So welcome, and thank you for being here. And the floor is 
yours, Mr. Attorney General.

STATEMENT OF THE HONORABLE JERRY BROWN, ATTORNEY GENERAL, STATE 
                         OF CALIFORNIA

    Mr. Brown. Representative Waters, thank you very much for 
inviting me. It has been a while since I have been at Southwest 
College. The committee of our democratic leaders spend most of 
their time in Beverly Hills or the other venues. I am very glad 
to be here and see so many people coming before you. And I 
don't want to take too much of the time, because there are a 
lot of advocates who should be heard from.
    I want to talk about three things: mortgage scams; mortgage 
modification; and the responsibilities of the Federal 
Government. First, on mortgage scams, my office is very 
actively engaged in both civil and criminal prosecutions and 
investigations of those scam artists who would exploit the 
vulnerability of homeowners in this State.
    As you just mentioned, don't pay anybody for a mortgage 
modification. Go to your bank and tell them you want it. If you 
think anything is not right, call the Attorney General's 
office, or call Congresswoman Waters' office and she can tell 
us. We have laws, we have investigators, and we will go after 
those who break the law by falsely representing what they can 
do and what they will do.
    We have examples, and we have actually arrested people, and 
have people on trial for forging documents, outright lies, and 
other forms of deception that have taken tens of thousands of 
dollars from people. So be on the lookout. And if you go to the 
Attorney General's Web site, you will get some helpful 
suggestions and some phone numbers to call.
    We want to hear about any kind of scam that you may know 
about, because there is more out there than we have been able 
to get hold of. So we rely on whistleblowers. We rely on 
advocates to tell us, and then we take action.
    So mortgage scam, we have to fight that, number one. Number 
two, the modification of mortgages. We sued Countrywide, and I 
want to just point out that we were only able to sue 
Countrywide as a large bank, because it was chartered by the 
State of California.
    All of the other big banks, many of them who had exploitive 
mortgages--these were under the control of the Federal 
Government, and the Federal Government has preempted, or taken 
over, the authority of my office, the Attorney General of 
California, all of the other States, so that we can't prosecute 
and we can't go after them for loan modifications unless the 
financial institution is regulated by the State.
    And as a matter of fact, we sued Countrywide literally 
within days before they were taken over by Bank of America, 
which is a federally-regulated institution. Anyway, we got the 
settlement, and we want to make sure that settlement, which 
promises loan modifications in the pay option ARMs instruments, 
that Countrywide is doing that.
    Now, we have a very good settlement, but it is only as good 
as it is operationalized. And I invite people who are here this 
morning to let me know, let my office know, actually how this 
is working, because it is one thing to bring a lawsuit; we did 
that.
    It is one thing to get a settlement; we did that. Now we 
are waiting for the tens of thousands of loan modifications and 
interest reductions that we were promised. So that is the 
second point.
    The third point, regarding the overall housing challenge. 
Listening to the report of Representative Waters is absolutely 
shocking, because we are now in a country that is spending 
trillions to bail out the banks and the financial industry, and 
the insurance company, this AIG, a company that most of us 
never heard about. And now we find out they are behind 
everything that is going on in the country.
    And the U.S. Government gives these insurance companies and 
these banks money, and then they pay all these big bonuses. And 
the bonuses are even written into Federal law in a Democratic 
Congress. So that tells you how powerful it is.
    Well, one good result of this--because I didn't know we had 
trillions of dollars. I didn't know it was there. They just 
found it in the last few months, and now they are spending it. 
Well, if we have all those thousands and trillions, why aren't 
we taking care of the housing challenge? What are we waiting 
for? They used to tell us we didn't have any money.
    It is not true. And what they are telling us is, if the 
banking system goes down, we are all done for. Yes, that is 
true. But what about the people? If they don't have a house to 
live in, we are all done for, too.
    So now is the time for equity, now is the time to take care 
of these unmet needs as we take care of the consequences of the 
crooks, the scam artists, and all of the big shots who have 
made all of this money. And they took bonuses because they 
traded wealth, but the wealth was a bubble. And now the wealth 
has to be taken from the taxpayers, otherwise, they tell us the 
system will collapse.
    Okay. Make sure the system doesn't collapse, but make sure 
you take care of the people system, the housing system, the 
affordable housing system, public housing, homelessness. Let us 
wrap them all up together and solve the total crisis, and do it 
now.
    Thank you.
    Chairwoman Waters. Thank you very, very much. As always, 
you are on top of it, Attorney General. You are very well 
informed. Your office has been very active and aggressive.
    And I would like to, at this time, yield myself 5 minutes 
to raise a few questions with you. The first question I would 
like to ask of you is: Will you direct your staff to document 
the increasing number of ads that are being placed on 
television by those who purport to be loan modifiers, and 
document what they are saying, and even have people call in, as 
I did one night, where they asked me for $3,500 to help me with 
a mortgage that was in trouble that I made up. I would like to 
ask you if you would direct your staff to document those ads 
and to review them to see what we can do to stop those ads that 
are coming on TV.
    Mr. Brown. Yes, I will. I make that commitment. Maxine, I 
want to work with you to accomplish it. So after this meeting, 
we will talk, and I will assign a specific person and we will 
get from you exactly what the objective is, and then we will 
figure out a way together and my staff will take care of it. We 
will document the ripoffs that are over the mass media, as best 
we can. We will get at it.
    Chairwoman Waters. I appreciate that. One more question. I 
am looking at ways to bring criminal charges in some of these 
actions at the Federal level. Do you think that is a 
possibility, to look at possible criminal charges, after you 
review all of this and get a handle on it and see what kind of 
harm is being perpetrated on the innocent citizens of this 
State?
    Mr. Brown. Sure. I would like to. I have to see the law and 
see the facts, but where there are possible criminal 
violations, we will act. We have arrested people. We have 
investigations going. If you have any information, we will jump 
on it, if it is within our State authority.
    Of course, the Federal Government, for the last 30 years, 
has been busily destroying the power of State law while it 
takes over as the Federal law, but then it doesn't do anything. 
And it is the strategy of the no-standard standard. So the 
Federal Government sees a State standard being enforced, and 
then it says, ``No. You have to follow the Federal standard,'' 
and the Federal standard is to do nothing. That is exactly what 
happened on the mortgage scam.
    Chairwoman Waters. Well, I thank you, and I am going to 
call on you again to come to Washington to help me fight 
preemption. It is rearing its ugly head again, and you are 
absolutely right that we have allowed the big interests to 
control the direction of public policy in the Federal 
Government, and they have preempted States who are doing great 
things. And so I may call on you again for that.
    Mr. Brown. Okay.
    Chairwoman Waters. Now, we have been joined by 
Congresswoman Watson. And I have to insert into the record that 
without objection, Ms. Watson will be considered a member of 
the subcommittee for this hearing.
    Thank you, Ms. Watson.
    And Attorney General?
    Mr. Brown. I have to grab an airplane, if I may.
    Chairwoman Waters. All right. Thank you very much.
    Mr. Brown. Congresswoman Watson, it is very good to see 
you, and I appreciate all your support over the years.
    Thank you.
    Chairwoman Waters. The Chair notes that we may have 
additional questions for this witness, which we may put in 
writing. And without objection, the hearing record will remain 
open for 30 days for members to submit written questions to 
this witnesses and to place his responses in the record.
    I will now introduce the second panel. I would like to ask 
the second panel to come forward as I call your name. First, 
Ms. Tanya Tull, who is the president and CEO of Beyond Shelter, 
a wonderful, wonderful nonprofit, doing great things in our 
community.
    The second witness will be Ms. Susie Shannon, housing 
advocate, Los Angeles Coalition to End Hunger and Homelessness, 
and who is responsible for helping us to initiate this hearing 
here today after a meeting in our office where she indicated 
she would like us to hold a town hall meeting. But I told her I 
would make it official and hold an official hearing.
    Thank you very much.
    Our third witness is Mr. Larry Gross, executive director, 
the Coalition for Economic Survival, who is well-known for the 
work that he has been doing. We are so pleased you are able to 
join us today.
    Our fourth witness will be Ms. Minelle Johnson, Housing 
Choice voucher recipient, Los Angeles, California.
    Our fifth witness will be Ms. Renita Pitcher, a Jordan 
Downs public housing resident, who may or may not be here.
    Our sixth witness is Dr. Ralph Fertig, professor, School of 
Social Work, University of Southern California. I would like to 
say I have known Ralph Fertig for about 100 years.
    [laughter]
    We worked in the War on Poverty together when we had ERA, I 
think, as our umbrella agency, and I was working in Head Start. 
We are old social workers together. He is older than I am, 
though.
    [laughter]
    Our seventh witness will be Ms. Marva Smith Battle-Bey, 
executive director, Vermont Slauson Economic Development.
    Ms. Marva Smith has been working in the community for many 
years, as a developer of both commercial and residential 
property. As a matter of fact, I think her biggest--well, her 
first big project was Slauson and Vermont Shopping Center. And 
since that time she has developed housing for low-income and 
moderate-income citizens, and I thank her for being here today.
    Without objection, your written statements will be made a 
part of the record. You will now be recognized for a 5-minute 
summary of your testimony, and we will start with Ms. Tanya 
Tull.

   STATEMENT OF TANYA TULL, PRESIDENT AND CEO, BEYOND SHELTER

    Ms. Tull. Madam Chairwoman and members of the subcommittee, 
thank you for allowing me to speak. My name is Tanya Tull, and 
I am the president and CEO--
    Chairwoman Waters. Would you pull that microphone a little 
bit closer?
    Ms. Tull. Yes. My name is Tanya Tull, and I am the 
president and CEO of Beyond Shelter, a nonprofit agency founded 
in 1988 in response to increasing numbers of homeless families 
in Los Angeles and the need for a more responsive approach to 
addressing the problem. Today the mission of Beyond Shelter is 
to develop systemic approaches to combat poverty and 
homelessness among families with children and to enhance their 
economic security and wellbeing.
    I have been working in the field of homelessness in America 
for more than 25 years, and helped to develop the first family 
shelters in Los Angeles, one in 1986 and the other in 1988. 
Because of my longevity in this field, and my contacts with 
practitioners across the country, I believe that I am in a 
position to speak for many of them when I say that it is 
imperative that we apply our resources more responsibly, 
including how we direct new money sent to flow into our 
communities, and that we take care to do so now when the lives 
of so many people in our country and here in the City of Los 
Angeles are literally falling apart.
    Unfortunately, I think that we are seeing just the tip of 
the iceberg, and that the situation will get much worse before 
it begins to get better. On the ground so to speak here in Los 
Angeles, one of the great mega cities of the world, we are 
facing a crisis of unprecedented proportions.
    In addition to tens of thousands of already homeless 
families with children here in Southern California, thousands 
of new homeless families, and those who are greatly at risk of 
homelessness, are joining their ranks. How did we get to this 
point? And what did we do wrong? More importantly perhaps, what 
can we begin to do right?
    Let us review history for a moment, because there is much 
that we can learn. During the first decade of homelessness in 
America, the 1980's, the thought was that we were dealing with 
a temporary problem, and that providing emergency shelter would 
solve it. However, we soon learned that we were wrong.
    During the 1990's, emergency shelters and transitional 
housing became part of a continuum of care that supposedly 
would lead to permanent housing at the end for those served by 
it, with the desired outcome being, of course, an end to 
homelessness. And yet as the years went by, no matter how hard 
we tried, nor how much we cared, the crisis continued to grow.
    In Los Angeles, we began to see families cycle in and out 
of shelters and transitional housing for months and sometimes 
years at a time. In response, in 1988, I founded Beyond Shelter 
and introduced an innovation in the field--the Housing First 
approach to ending family homelessness, and this model has 
since helped to impact both public policy and practice on a 
national scale, premised on the universal human right to 
housing.
    The basic methodology helps homeless families and 
individuals relocate to rental housing as quickly as possible, 
with the services traditionally provided in transitional 
housing instead provided after they move into permanent 
housing.
    The premise is simple: Access to affordable housing ends 
homelessness for the vast majority of homeless families. Do 
they then benefit from services? Of course they do. But those 
services are best provided after the family is back in 
permanent housing. And, furthermore, the services that homeless 
families most benefit from are those same services that benefit 
all low-income families, and that should be available in all 
communities.
    Over the past few years, as in those early days of 
homelessness in America, Los Angeles County has experienced an 
increase in family homelessness, and the numbers continue to 
grow. We all know today that in L.A. County, literally 
thousands of children and their families have no permanent 
stable or secure place to live.
    And, unfortunately, we are also beginning to see the second 
generation of homeless families in this City, families in which 
the parents experienced homelessness as children or teenagers, 
and now as young parents they are homeless again themselves. 
The recent economic crisis, resulting in job losses and 
foreclosure, is further aggravating this problem as new 
homeless families join the already homeless.
    Beyond Shelter has recently seen a significant increase in 
the number of requests for emergency assistance to prevent 
eviction, and we are currently receiving an average of 50 calls 
a day requesting funds from both renters and homeowners.
    And so if you think about it, and I truly hope you are, we 
are faced with a problem--emergency shelter versus permanent 
housing. Which do we fund? What do we do? The answer is that 
both are needed. While families who become homeless primarily 
need immediate and coordinated assistance to get back into 
permanent housing as quickly as possible, including access to 
rental subsidies and move-in funds, they also realistically 
need emergency housing during an interim period of time.
    Is that one more minute? That is it?
    [laughter]
    Oh, my goodness. Oh well. Okay. And so--
    Chairwoman Waters. If we are to get out of here today, we 
have to keep our testimony to 5 minutes. I thank you very much.
    Ms. Tull. Okay.
    Chairwoman Waters. And I really appreciate what you do and 
what you have said.
    Ms. Tull. Thank you.
    [The prepared statement of Ms. Tull can be found on page 
225 of the appendix.]
    Chairwoman Waters. So we are going to go on to our next 
witness. Let me stop for a moment and say this: I just learned 
that we don't have official translation. Let me apologize for 
that. I was just told by my staff that the committee in 
Washington did not want to pay for translation. If I had been 
told, I would have personally paid for it. We should never have 
a meeting in this community without translation, and I 
appreciate the volunteers in the back who are helping us out.
     And I promise you it will never happen again with this 
committee. Thank you very much.
    All right. Let us go on to Ms. Shannon.

STATEMENT OF SUSIE SHANNON, HOUSING AND HOMELESS ADVOCATE, LOS 
        ANGELES COALITION TO END HUNGER AND HOMELESSNESS

    Ms. Shannon. Thank you. Chairwoman Waters, Congresswoman 
Watson, and subcommittee staff. Thank you for holding this 
hearing today and for the opportunity to address you on the 
affordable housing crisis in Los Angeles.
    I am Susie Shannon with the Los Angeles Coalition to End 
Hunger and Homelessness, an organization which advocates on 
behalf of the homeless and those on the periphery.
    We are here in solidarity with our national coalition 
partners, spearheaded by NESRI and NTIC, and our local 
partners, the USC School of Social Work, L.A. Can, Power, Union 
de Vecinos, Beyond Shelter, the ACLU of Southern California, 
and ACORN, and support future hearings in other cities 
throughout the country.
    The City and County of Los Angeles were in a housing crisis 
before the foreclosure crisis and economic recession came 
along. The current economic collapse has only exacerbated the 
situation. Just under 74,000 people are homeless in Los Angeles 
County, and approximately 40,000 of those live in the City of 
Los Angeles.
    Currently, local government cannot meet the basic needs of 
our homeless population, has done an inadequate job preventing 
homelessness, and is not prepared to provide services for the 
21,000 estimated new homeless in Los Angeles County in the next 
2 years due to rising unemployment.
    Our homeless population has been harassed by police 
officers. This is part of the rising tensions of increasing 
homelessness. I have experienced that myself and seen it. On 
one occasion we were handing out blankets to the homeless, and 
a man came up to me who had cancer and asked for two blankets 
because it was raining, his stuff had been confiscated by 
police officers, and he wanted two blankets so he could put one 
underneath him and one above him. This is something that really 
needs to be addressed.
    Our shelter system is in crisis. On several occasions, we 
have been unable to find shelter space for our clients. Many of 
the emergency shelters in Los Angeles are full on any given 
night, and some keep waiting lists. The West Los Angeles PATH 
Shelter currently has a one-month waiting list.
    Our transitional shelters are full as well. Alexandria 
House, a transitional shelter for women and children, will not 
be taking any new residents for 9 months or longer.
    The Housing Authority of Los Angeles closed our Section 8 
applications in 2004. They are now servicing constituents who 
applied in 2002 and 2003, which has made it difficult for those 
of us who are trying to get people into Section 8 housing. 
HACLA has a set-aside of about 4,000 vouchers for the homeless 
as part of a special program. This program is now frozen until 
May 2009.
    The homeless population can only access these vouchers 
through one of HACLA's contracted nonprofit agencies, and the 
problem is that most of these agencies are full. We did a phone 
survey, and most of them have reported that they either met to 
capacity or exceeded the number of referrals that they made to 
HACLA for these vouchers.
    Our clients have also been purged from the Section 8 
waiting list, because it is difficult for them to maintain a 
consistent address during the lengthy time it takes between 
applying for Section 8 and being contacted for an interview. 
One woman called us. She called and said, ``I applied 17 years 
ago and still have not heard from HACLA.'' Another man was 
homeless and living in his car, had a colostomy bag, and needed 
to get into housing. And when I talked to HACLA, it turned out 
that he had been on the Section 8 waiting list and on the 
public housing waiting list but had been purged from both.
    Public housing also is in crisis. The waiting list for 
public housing can be years long, depending on whether it is an 
individual or a large family trying to access housing. We must 
preserve our public housing stock and expand the units 
available to extremely-low-income tenants. We support national 
legislation for an immediate moratorium on the demolition/
disposition of public housing nationwide.
    Of immediate concern in Los Angeles are the tenants 
residing at the Jordan Downs housing community. It is unclear 
whether all of the current tenants will be allowed to move into 
their replacement housing without having to reapply for public 
housing and endure background and other eligibility checks. 
About 600 families from Pico Aliso and Pico Village never made 
it back into replacement housing, and we want to make sure this 
doesn't happen at Jordan Downs as well.
    We support a national policy that will provide a 
presumption of eligibility for current tenants to ensure that 
public housing residents will be allowed to move into 
replacement housing. We want one-for-one replacement. We want a 
resident's right to return. We also seek reversal of all 
punitive policies, such as the one-strike eviction policies, 
mandatory community service requirements, and permanent bans on 
living in subsidized housing if convicted of a felony.
    More than 360,000 affordable apartments have been lost 
since Congress dismantled the Title VI Preservation Program in 
1996. For HUD-subsidized housing, Congress must enact a 
national right of first purchase in the preservation bill to 
address this problem.
    [The prepared statement of Ms. Shannon can be found on page 
214 of the appendix.]
    Chairwoman Waters. Thank you very much.
    We will move on to our next witness, Mr. Gross.

  STATEMENT OF LARRY GROSS, EXECUTIVE DIRECTOR, COALITION FOR 
                    ECONOMIC SURVIVAL (CES)

    Mr. Gross. Chairwoman Waters and Representative Watson, 
thank you for providing me the opportunity to testify on the 
housing crisis facing Los Angeles. I am Larry Gross, executive 
director of the Coalition for Economic Survival.
    CES is a 36-year old grass roots, multi-racial, multi-
cultural organization assisting renters living in private and 
government-assisted housing throughout Southern California. Los 
Angeles faces a tremendous housing crisis. This is a city of 
renters. Sixty-one percent of our residents are tenants, yet, 
as wages don't keep pace with rising rents, tenants are forced 
to pay a greater portion of their income for housing.
    Los Angeles has over 63,000 affordable subsidized units in 
nearly 2,000 developments serving low- and moderate-income 
households. In the next 5 years, these subsidies and rent 
restrictions on over 14,000 of these units will expire. Making 
matters worse, like much of the Nation, this area has been hit 
with a foreclosure avalanche. While attention has focused on 
the grim plight of people losing their homes, there are 
forgotten and overlooked victims in this national travesty. I 
am referring to renters.
    The L.A. Housing Department states that, ``Of the roughly 
13,000 foreclosures in L.A., over 3,000 are rental units in 
multi-family buildings.'' But in stark contrast to the 
foreclosed vacant homes, these rental units still have tenants 
living in them, tenants who pay rent on time, have done nothing 
wrong, but now their lives are totally upended, because banks 
want them out. Yet these banks had no problem begging Congress 
to bail them out with hundreds of billions of dollars paid for 
by these tenants and other taxpayers. These banks should be 
prohibited from unfairly evicting the very people who are 
paying their corporate welfare. Our rent control law provides 
some tenant protections from bank evictions, and recently the 
City extended these protections to non-rent-controlled housing. 
While this helped some, thousands are still left without 
guarantees of securing affordable housing. It is crucial that 
Congress take swift and bold action and must embrace effective 
proposals to provide needed relief.
    My written testimony has proposals detailed. I will 
highlight some of them. A comprehensive preservation 
legislation is needed. We support the many preservation 
proposals you have received from the National Housing Trust, 
the National Preservation Working Group, and the National 
Alliance of HUD Tenants. A preservation bill should include 
having Congress require owners leaving Federal housing programs 
to offer the properties for sale at fair market value to 
preservation purchasers.
    A preservation right to purchase would give local 
governments, tenant groups, and nonprofits working with tenants 
the right to purchase at-risk buildings and preserve them as 
affordable housing. The Green Amendment needs support for 
funding to organize HUD tenants. This funding is crucial to 
empowering HUD tenants and enabling them to participate in 
efforts to protect their rights and preserve their affordable 
housing.
    Action is greatly needed to preserve properties with 
maturing 40-year HUD mortgages as many maturity dates rapidly 
approach. Beyond the preservation law, these issues need 
consideration.
    The Section 8 voucher program benefits 2 million low-income 
families, including 289,000 California households. This program 
must be fully funded, but Congress should also fund 200,000 
additional incremental vouchers as L.A. would stand to gain 
thousands of new vouchers. Congress needs to continue to fully 
fund all project-based Section 8 contracts to protect the 1.2 
million low-income household recipients.
    About 25,000 Section 8 voucher families live in units 
subject to L.A.'s rent control law, which limits rent increases 
and provides eviction protections. Hundreds have received 
Section 8 termination notices in violation of our rent control 
law. Landlords incorrectly contend these notices are invalid. 
As a result, many Section 8 families have needlessly lost their 
homes.
    Congress needs to clarify the Section 8 statute to clearly 
state that voucher tenancy terminations must comply with State 
and local law. Likewise, Congress should clarify that tenants 
with enhanced vouchers have a statutory right to remain, so 
long as they comply with lease terms.
    You and your congressional colleagues face huge challenges. 
This Nation is looking to you for leadership and action. We 
wish you much success, and hope you will consider and support 
our recommendations.
    Thank you.
    [The prepared statement of Mr. Gross can be found on page 
188 of the appendix.]
    Chairwoman Waters. Thank you.
    Ms. Johnson?

STATEMENT OF MINELLE JOHNSON, HOUSING CHOICE VOUCHER RECIPIENT, 
                    LOS ANGELES, CALIFORNIA

    Ms. Johnson. Good morning. My name is Minelle Johnson, and 
I live in Los Angeles. I am 24 years old, and I have a 2-year 
old daughter. Her name is Essence.
    I had a very rough childhood. There were five of us, three 
girls and two boys, and my mother was a drug addict. Four of us 
were from my Dad, who didn't live with us. Then, my mother had 
the baby with her boyfriend. I am the oldest, and by the time I 
was 9 years old, I was taking care of all of the kids by 
myself.
    My mother left us for weeks at a time with no gas, no 
lights, no water, no food, or anything. I stayed home from 
school to take care of the baby and to make sure that the other 
kids went off to school each day. I would get them up and out.
    Finally, when I was 10, I called my grandma up to come and 
get us. She took the four older ones and the baby stayed with 
his father, who was stable at the time. We stayed with my 
grandmother for a while, and she adopted two of us. But my 
sister and I ended up going into foster care when she was 15 
and I was 16. We moved from foster home to foster home, and 
things were often really bad. But eventually I graduated from 
high school and was emancipated at the age of 18.
    I came back to L.A. to live with a cousin, but then I got 
pregnant with my baby. I had no job, no further education, and 
I had no one to turn to. After the baby was born, my cousin 
kicked us out, and for 2 months we started going to different 
places to stay, at different relatives' and friends' houses for 
a night or a few days at a time.
    After I stayed at a mission, and then in a hotel, I went to 
Beyond Shelter. I met my case worker who said right away that 
she would help me get a Section 8 and help me to find an 
apartment. Beyond Shelter moved me to a really nice hotel in a 
better area, and they helped me apply for a Section 8 voucher. 
I had never had an apartment of my own, but I always wanted to 
be independent. I just didn't know where to start and what 
steps I should take.
    After I worked with Beyond Shelter for 2 months, I received 
a Section 8 certificate. My case manager and a housing 
specialist helped me find my apartment, which I can afford with 
the Section 8. I moved in on February 7, 2008, over a year ago. 
My life has changed. Now that I have my own apartment, I don't 
have to sit up at night and worry about where I am going to 
sleep, what I can give my baby to eat, does she have enough 
diapers to last through the night, and who can I depend on.
    I have been able to work at different jobs over the past 
year, at See's Candy store at holiday times. Because I have an 
apartment of my own that I can afford with Section 8, I can 
make my dreams and goals a reality now. In the future, my 
dreams and goals are to go to college and major in interior 
design, and one day to have my own business. I want to send my 
daughter off to college as well to pursue her dreams and goals.
    I am not the only parent in this situation. There are over 
25,000 families on the waiting list for Section 8 in Los 
Angeles now. I learned that right now there are more than 
10,000 families here who are homeless like we were. The lowest 
priced one- and two-bedroom apartments are $875 to $1,000 a 
month. A lot of homeless families have incomes of $350 to $500 
a month, or less. Without the help of a Section 8 voucher, I 
don't think that a homeless family can get out of a shelter or 
off the streets.
    It is important for us to have a place we can call home. I 
want to work hard, increase my income, and fulfill my dreams. 
And I will, but it is hard for me and anybody else to look for 
a job or get more education when you don't know where you will 
sleep that night or what your child will eat.
    [The prepared statement of Ms. Johnson can be found on page 
201 of the appendix.]
    Chairwoman Waters. Thank you very, very much.
    The next person for the panel is Ms. Renita Pitcher. Is she 
in the audience? Ms. Pitcher is a public housing resident. And 
if she is not here, we are going to substitute someone for her. 
I am going to call on the next witness to testify, who will be 
Dr. Fertig, and then Marva Smith Battle-Bey. And I would like 
the Aliso Village constituents who are here to choose a person 
to represent public housing and have them come forward.
    So would you please come forward at this time, and I will 
call on Mr. Ralph Fertig. And then, I will get back to the 
person who has been identified.
    Without objection, it is so ordered.
    Please.

STATEMENT OF DR. RALPH D. FERTIG, ASSOCIATE PROFESSOR, GRADUATE 
    SCHOOL OF SOCIAL WORK, UNIVERSITY OF SOUTHERN CALIFORNIA

    Mr. Fertig. Congresswomen Waters and Watson, it is good to 
see you. Students and faculty from the University of Southern 
California School of Social Work have been researching the 
plight of homeless children and have--
    Chairwoman Waters. Pull the microphone a little bit closer 
to you, Ralph.
    Mr. Fertig. Is this better?
    Chairwoman Waters. Yes, that is better. I want everybody in 
the back to hear you.
    Mr. Fertig. Okay.
    Chairwoman Waters. You know you have all your students here 
today.
    Mr. Fertig. Well, not all, but a good--and they are the 
ones who have been studying, along with some of their 
professors who are also here.
    Chairwoman Waters. Okay. All right.
    Mr. Fertig. They have been studying the plight of homeless 
children. They have gone into the communities, they have 
checked for literature. They have gone into the shelters, they 
have interviewed the homeless, and they have come up with some 
findings. It is that upon which I draw.
    The current recession has driven at least 1,350,000 
children onto the streets of America. In Los Angeles, 41 
percent of those sleeping on the streets, in dumpsters and in 
alleys, are families and children. And 42 percent of the 
children who are sleeping on the streets are 5 years old or 
younger.
    Few shelters accept women. Even fewer accept families or 
children. Child Protective Services provides some help and 
rental assistance for families who meet at-risk factors, but 
for some peculiar reason, being homeless is not considered an 
at-risk factor.
    Preventing a family from becoming homeless costs one-sixth 
as much as intervening once the family has become homeless. The 
cost for long-stay families in shelters ranges from $27,000 to 
$55,000 per family.
    We have a doctrine called parens patriae, which obligates 
the State to intervene to protect children from abuse and 
neglect. Homeless parents have to choose between keeping their 
children on the streets with them or surrendering them to the 
parens patriae opportunity of foster care. Removal from their 
parents is traumatic enough. As Ms. Johnson can tell us, I am 
sure, you get bounced from family to family, from home to home.
    Children in foster care are 3 to 10 times more likely to 
receive a mental health diagnosis, have 6\1/2\ times more 
mental health claims, and are 7\1/2\ times more likely to be 
hospitalized for a mental health condition than children who 
are just on welfare.
    Over 80 percent of foster care youths register 
developmental, emotional, or behavioral problems, and 46 
percent do not complete high school. After aging out of foster 
care, 60 percent are unemployed. The average annual cost of 
keeping the average child welfare size family, which is 2.7 
children in foster care, is $47,608. That is 3 times the 
average cost of providing permanent housing and support 
services for a year, $13,412.
    Once youth are in the foster care system, they are unlikely 
to be reunited with their natural parents. Grace Corrales is in 
the audience. She can tell you the story of losing her home and 
losing her children to foster care and not being able to get 
them back until she could prove that she has housing. And going 
to housing agency after housing agency and told she can't get a 
house until she gets her children. It is a Catch-22, which has 
denied her the love of her children, the presence of her 
children.
    No program currently combines the programs of Child 
Protective Services with those of HUD. So based on these 
considerations, the graduate students of the School of Social 
Work of the University of Southern California are urging that 
you consider a 16-point program. One, affirm the protection of 
the family unit as a basic human right in line with our 
American values.
    Two, recognize that all Americans, and in particular 
children, have a basic human right to adequate housing. Three, 
recognize the significant harms and costs that homelessness 
poses to American children and youth, family life and values, 
and to American society. Four, recognize the unacceptably large 
number of children and youth throughout the country who yearly 
experience homelessness, often due simply to their family's 
inability to find affordable housing. Five, recognize that 
foster care placement for homeless youth is inadequate, 
possibly damaging, and an expensive substitute for assistance 
in retaining or obtaining affordable housing for families.
    Six, call upon Health and Human Services and other Federal 
agencies to prioritize their programs to provide homeless 
children with service-infused permanent housing with their 
parents wherever appropriate. Seven, support the expansion of 
rental housing assistance programs to serve families at risk of 
homelessness, and the adoption of policies to encourage State 
and local public housing authorities to create or expand set-
aside voucher programs for homeless families and youth.
    Chairwoman Waters. We will have to have the other seven or 
eight entered into the record. And I had made a commitment, I 
think, when we met with you guys to sponsor that legislation or 
resolution on behalf of the children.
    So thank you very much.
    Mr. Fertig. Thank you so much, Chairwoman Waters.
    [The prepared statement of Dr. Fertig can be found on page 
93 of the appendix.]
    Chairwoman Waters. We will move on to Ms. Marva Smith 
Battle-Bey.
    Thank you.

STATEMENT OF MARVA SMITH BATTLE-BEY, PRESIDENT AND CEO, VERMONT 
            SLAUSON ECONOMIC DEVELOPMENT CORPORATION

    Ms. Battle-Bey. Good morning, Congresswoman Waters, and 
Congresswoman Watson. Thank you for the opportunity to speak 
about the housing crisis. As you know, our organization is 
primarily involved in economic development, but we also do 
housing development.
    We have been afforded the opportunity to build at least six 
supermarkets in our community over the years, which we think 
provide affordable jobs, which of course leads to housing in 
our neighborhood.
    I want to talk, though, about the kind of drivers that are 
happening right now at home and in our region that are keeping 
us from the economic vitality and the quality of life that all 
Americans should enjoy and be able to obtain. Even though we 
have the immediate economic crisis, housing affordability and 
availability continue to be an issue in Southern California. 
For the past several decades, the growth of California's 
population has significantly outpaced the supply of housing.
    This lack of supply, in combination with the high cost of 
land and construction in California, has resulted in a 
particularly problematic shortage of affordable housing. The 
State of California's urgent need for more affordable housing 
for lower income households is well documented. You have some 
of those numbers.
    In the City of Los Angeles, unfortunately, between 2001 and 
2006, the City lost nearly 11,000 affordable housing units due 
to a number of other kinds of properties being built. In the 
last 5 years, about 90 percent of the new housing produced in 
the City is affordable only to households who make more than 
$135,000 a year. This excludes 90 percent of the population.
    Our population has significantly outpaced the production of 
housing. More than 25 percent of all Los Angeles households 
live in overcrowded conditions. More than 50 percent of the 
City's senior households are rent-burdened. This means they 
spend more than 35 percent of their income for rent.
    Although there are roughly two million workers in the City 
of Los Angeles, affordability is out of reach for nearly half 
of those workers. And I am not just talking about workers who 
make less than $25,000 a year, and some of our workers, like 
child care, janitors, food service, but I am also talking about 
people who are secretaries, truck drivers, people who work in 
retail industries, electricians who make $50,000 a year. 
Housing is out of reach for those people.
    What can you do in Congress? What do we want you to do for 
us? What we need is for you to look at reforming the Community 
Reinvestment Act. I understand that Congresswoman Eddie Bernice 
Johnson has reintroduced one. We need all of our legislators to 
sign on to that, to include all real estate, financing 
institutions, not just the banks, and put some teeth into the 
enforcement.
    We need more support as community-based organizations, who 
are really the social infrastructure out there, who try to make 
sure that these industries and people do not prey upon the 
failures that is happening in the private real estate market. 
We need your support, we have had it, we would like to continue 
to have that in our communities.
    We want to make sure that we can leverage public resources. 
Why don't we look at implementing and enforcing a State-wide 
inclusionary zoning ordinance, so that we can have affordable 
units and use the in lieu fees, you know, that can work for us 
for market rate development, streamline the entitlement 
process?
    I know you are not in the City of Los Angeles, but we need 
more streamlining in the process. Every time we try and build 
something, it takes forever to get it built in the City of Los 
Angeles. We are building right now one of the few small retail 
properties, and it has taken us only 6 months. But it took me 2 
years to get a drive-through from the City of Los Angeles, 2 
years to get that entitlement. That is ridiculous, and you want 
people to build in our neighborhoods. It is very hard.
    How about some green building efforts? Now that there is 
that czar in the White House, thank goodness he is from the 
State of California, maybe we can get some more affordable 
housing and eco-friendly work being done in the City of Los 
Angeles.
    We also want to encourage you to bring back and to work 
with private developers, to try and get some public and private 
work happening together.
    I have a lot more to say. It is all in my testimony. I 
thank you for allowing me to be here today.
    [The prepared statement of Ms. Battle-Bey can be found on 
page 71 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Cordova, thank you for coming up to testify on short 
notice, but I know you came prepared anyway. Please go right 
ahead.

                  STATEMENT OF MARTHA CORDOVA

    Ms. Cordova. [Speaking in Spanish]
    Chairwoman Waters. Un momenita, por favor.
    I would like to have an interpreter come up. Okay. Please 
go right ahead.
    Ms. Cordova. I want to thank you for giving me the 
opportunity to speak.
    Chairwoman Waters. Put the microphone right up to Ms. 
Cordova, so we can hear her.
    Ms. Cordova. My name is Martha Cordova. I lived in Aliso 
Village for 17 years. I am currently living at 1560 College 
View in Monterey Park. When they came to tell me that I had to 
move out and they were going to tear my housing down, I am just 
a single mother with four children.
    So HOPE VI forced me out of my community. My community 
consisted of 685 units, which means 685 families, or close to 
3,000 people, would be forced out of our neighborhood. So the 
Housing Authority operated Aliso Village, and we were told that 
Aliso Village was a blighted community and that it was better 
off if it was torn down and all of the residents relocated.
    She is saying that what really happened was that President 
Clinton and Congress had decided to reduce the public housing 
units across the United States by 100,000 units. So Congress 
ended up reducing the amount of funds available for maintenance 
and operation of public housing and increased the amount of 
funds available for demolition through HOPE VI.
    This forced housing authorities all over the United States 
to submit applications for demolition in order to stay in 
business. I first found out about the demolition of my 
community in 1988. When I heard the news, I felt desperation 
and fear, because I did not know what was going to happen. I 
was worried about where we were going to live. I was concerned 
for my children, because they would have to attend a new school 
in a new community where we did not know anyone and nobody knew 
us.
    Housing Authority kept telling us that they would give us a 
Section 8 certificate, and with this certificate we could live 
anywhere. The Housing Authority told us that we would be able 
to live in a better place than public housing, but Section 8 
certificates are not accepted everywhere or in the better 
neighborhoods or in every part of town. As we began looking for 
new housing, we found that only in some of the poor communities 
of Los Angeles--landlords would only accept Section 8 in those 
communities.
    Chairwoman Waters. Thank you very much.
    And I would like to thank you for coming up to do the 
interpretation. Would you please go ahead and translate.
    Ms. Cordova. So she was saying that where she was able to 
find landlords that would accept Section 8 were in poor 
communities, and where she ended up living was in housing that 
was worse than the housing that she was living in, in Aliso 
Village.
    Chairwoman Waters. Thank you very much. I appreciate all of 
you coming.
    Do not leave. Please do not leave. This is the point in the 
hearing that we get to raise a few questions. But before I do, 
I would like to welcome our assemblyman from the 52nd District, 
Mr. Isadore Hall, III, is here.
    And of course I would like to also welcome one of the 
founders of Southwest College and Drew University and Martin 
Luther King Hospital, Ms. Lillian Mobley is here.
    Without Ms. Mobley, we wouldn't be here today. There would 
be no Southwest. Thank you very, very much.
    I will now recognize myself for 5 minutes for questions. 
Ms. Shannon, you mentioned some of the obstacles to people 
living comfortably in public housing. You talked about one-for-
one replacement, which Barney Frank and I certainly support, 
and we have an agreement, for example, from our executive 
director of the Housing Authority, Mr. Montiel, that in the 
redevelopment of Jordan Downs, there will absolutely, 
unequivocally, be one-for-one replacement.
    You raised some other questions that are not clear. The 
other questions are on Federal law that have to do with zero 
tolerance on individuals being able to live in public housing 
who have committed crimes. That is a Federal issue. It is in 
Federal law. And while the progressives of our body would like 
very much to change that, because we think some people are 
being unfairly penalized, it is a hot political potato.
    And I suspect that it is going to take a lot of organizing 
by public housing tenants all over this country to convince 
their own legislators. Many of the people who come to us have 
not yet talked to their own legislators about whether or not 
they will join us in that battle.
    We also are concerned about displacement in HOPE VI-type 
projects. And, again, we are committed to one-for-one 
replacement. We have no guarantees of undoing the law that is 
the zero tolerance law. We think it is going to take a lot of 
organizing, a lot of pushing, and, still, we would never be 
able to get the blue dogs, the Republicans, and the 
conservatives on the issue. So it is a long shot that needs to 
be worked on.
    You also mentioned guarantees for those who live in public 
housing where there is redevelopment, guarantees that they 
would go back in without having to re-apply or to make new 
applications. We have not talked in depth about that with Mr. 
Montiel, but my staff and I have taken a look at this, and we 
are working on this, because we want to include this in our 
legislation. We think that if you live there when they tear it 
down, you ought to be able to live there when they build it up.
    So we don't want people being removed because all of a 
sudden they re-apply and somebody finds, oh, we discovered that 
back in 1913 you had a problem. So we are going to use this as 
an excuse to keep you out. We are very mindful of that, and we 
are going to work very hard to make sure that doesn't happen, 
not only in redevelopment here but any place in the country.
    Maybe somebody did talk about it, but I don't remember. We 
are absolute--in the reauthorization of McKinney-Vento, we are 
absolutely committed to permanent housing for the homeless. 
Permanent housing for the homeless means a lot of things, but 
most of all it means supportive services. It means ongoing 
appropriations in order to provide the service for many of 
those who are homeless who are suffering from all kinds of 
disabilities.
    Mr. Gross, have you been involved in the struggle for 
permanent housing for the homeless? I understand there is some 
difference of opinion about that, whether or not we should be 
expanding shelters or whether or not we should put large sums 
of money into permanent housing for the homeless. What is your 
take on that?
    Mr. Gross. It is really not our expertise. Our focus has 
been preventing the increase in the homelessness by preserving 
our affordable housing stock and ensuring that there is not 
increased displacement pushing existing tenants out on the 
streets. And I think Ms. Shannon is more equipped to answer 
that question.
    Chairwoman Waters. Let me just say to you that, as you 
know, housing preservation is a big issue with the chairman of 
our committee, and we expect to have a huge bill on housing 
preservation that you can look forward to. And I think we will 
be successful with it.
    Ms. Shannon, did you want to say something about permanent 
housing for the homeless?
    Ms. Shannon. Yes. What I do know is that the L.A. Homeless 
Services Authority is expecting $73 million to come in HUD 
funding, which will provide for 191 new units for the homeless. 
Our estimate, though, of the growing number of homeless, given 
the unemployment rate and our rise now in Los Angeles County to 
10.5 percent, is that we will be looking at adding an 
additional 21,000 homeless people in Los Angeles County in the 
next 2 years.
    So while we are happy for the funding, of course, it just 
doesn't go far enough. And, unfortunately, our homeless 
situation will become worse we think in the next 2 years, even 
given this funding.
    Chairwoman Waters. Thank you very much.
    Let me just close my portion by saying that my staff 
reminded me, because they have to do all of this work, that 
since the Democrats took over Congress in 2007, we increased 
operating assistance by $900 million nationwide for public 
housing, and we have $4 billion in the stimulus package that 
was just approved. So give us a round of applause.
    Thank you. I will now recognize Congresswoman Watson. Thank 
you for being here, Congresswoman. Please, go right ahead.
    Ms. Watson. I want to thank Chairwoman Maxine Waters for 
holding this hearing in the field.
    When I look out over this audience, this is the fabric of 
California's cloth, and you are what America is. We have a new 
Administration that is sensitive to the issues you are bringing 
forth. And I want to thank the panel for this most valuable 
information.
    The chairwoman says that she is going to have a bill, and 
if she says that she will get 100 percent support from the 
Progressive Caucus, and I am sure our own Black Caucus, and 
probably most of the Democratic Caucus members.
    I was very interested in Ms. Battle-Bey's report. I know of 
your development and your work over the years. I want to know, 
why is it taking so long from the City--and I see someone here 
from the City, Jim Clark--to get clearances and get these 
permits? What is your take on it?
    Ms. Battle-Bey. Well, even though they have what is called 
the one-stop process, it still is just a very lengthy process. 
I can't explain it. I don't know why it takes so long. And even 
with expediting, we almost always go to our local elected 
official and City Council to get things expedited. But even 
with expediting, we are told, ``Oh. Well, that is 6 months,'' 
you know, so I have no idea, really, why it is that slow.
    Ms. Watson. I am going to ask the chairwoman if she will 
ask Jim Clark to report back to us on the functioning of those 
departments, because that paperwork is really getting in the 
way of serving the clients.
    Chairwoman Waters. You may do that and put it right in the 
record.
    Ms. Watson. All right. Then, I have permission to put it in 
the record, Jim. Please be my chief of staff.
    [laughter]
    This will be very familiar. But we would like to have the 
City let us know why they cannot process these permits. All of 
the paperwork is unnecessary. And if we have a system that is 
computerized, we ought to be able to do it sooner. So I would 
like you to get back to us as to why it takes so long to 
process these claims.
    Dr. Fertig, it is so good to see you, and we go--all of us 
go way back.
    Mr. Fertig. We do.
    Ms. Watson. And you are still in the fight. I think your 
particular suggestions will become the meat of a bill. And I 
would like you to keep us informed of ways we can help you from 
Washington, with what you have in writing, and I would just 
like to support what the chairwoman said. You put your comments 
in writing; they go into the record. And so we can use that 
input, even if you didn't have time to read your whole script, 
let us say. We have that information that we can use to 
develop.
    I want to announce to all of you that I am now chair of a 
subcommittee, and it is the House Subcommittee on Government 
Management, Procurement, and Organization. We are going to take 
some of your input back, because we are going to oversee how we 
can better and more effectively, at the Federal level, get 
resources out to the State, the county, and the City.
    And so we will be holding hearings to see if we can support 
the legislation by adding more information on resources that 
are needed locally, so please keep us informed.
    Dr. Fertig?
    Mr. Fertig. May I say that McKinney-Vento is point 9 of the 
16 points.
    Ms. Watson. Yes.
    Mr. Fertig. And the full body of it has been submitted to 
the committee. I am so grateful to the two of you. Our years of 
work together have been so meaningful and helped make America 
so much better with your leadership, each of you.
    Ms. Watson. Thank you.
    Mr. Fertig. And we thank you so much for taking up this 
legislation.
    Ms. Watson. Thank you.
    Ms. Cordova, we want to thank you for filling in and 
telling us your story.
    There should be no homelessness in the City of Los Angeles, 
as long as we have HUD properties boarded up.
    I am going to ask the chairwoman if she would inform the 
mayor that we would like to have all of that HUD property 
opened up, and let college students and high school students 
who are in building, and so on, turn those into homeless 
shelters. And we can pay the City a dollar a week, a month, or 
something like that.
    There is no reason to have property that is boarded-up in 
the City of Los Angeles.
    Chairwoman Waters. Well, let me respond to that--if I asked 
the mayor, I would be asking the wrong person.
    [laughter]
    This is HUD's property, the Federal Government's property. 
We should be asking the President and Mr. Donovan, the HUD 
Secretary.
    Ms. Watson. Yes.
    Chairwoman Waters. But we get the message. We get the 
message.
    Ms. Watson. Yes. And, Mr. Gross, thank you for your input. 
And, Ms. Shannon, you bring these issues into reality when you 
come and you testify in front of the committee. So I want to 
thank all of you at the panel, and I want to thank all of the 
audience for caring enough to come here this morning. And thank 
you, Chairwoman Waters.
    Chairwoman Waters. Thank you very much, Ms. Watson.
    The Chair notes that members may have additional questions 
for this panel, which we may wish to submit in writing. Without 
objection, the hearing record will remain open for 30 days for 
members to submit written questions to these witnesses, and to 
place their responses in the record.
    The panel is now dismissed, and I would like to welcome our 
third panel. Thank you very much.
    Our first witness is Ms. Mercedes Marquez, general manager, 
City of Los Angeles Housing Department, the woman who is 
responsible for the housing trust fund, the stabilization, CDBG 
funds, all of that. So thank you for being here today.
    And if I may share with the audience, your expertise is 
noted around the country. They wanted you in HUD, and you 
preferred to stay here because you love the City so much.
    Next, we will have Mr. Rudy Montiel, president and CEO of 
the Housing Authority of the City of Los Angeles. For all of 
our tenants who are leaving, this is your time to hear what Mr. 
Montiel is going to say. So you may want to stay, because this 
is the person who runs the public housing. I don't want you to 
think I run it. He does.
    Ms. Lori Gay, president and CEO, Los Angeles Neighborhood 
Housing Services, one of those HUD-approved agencies 
responsible for counseling new home buyers, and working with 
loan modifications, all of that.
    Also, we have on this panel: Mr. Charles Boyd, deputy 
neighborhood officer for housing safety, from the Los Angeles 
Urban League; Ms. Jazmin Faccuseh, housing coordinator, East 
Los Angeles Community Corporation; and Ms. Ruth Teague, 
director, Los Angeles Corporation for Supportive Housing.
    Without objection, your written statements will be made a 
part of the record. Each of you will be recognized for 5 
minutes, and I think I will start with Ms. Marquez.

  STATEMENT OF MERCEDES MARQUEZ, GENERAL MANAGER, CITY OF LOS 
                   ANGELES HOUSING DEPARTMENT

    Ms. Marquez. Good morning.
    Chairwoman Waters. Good morning.
    Ms. Marquez. My name is Mercedes Marquez and I am the 
general manager of the Los Angeles Housing Department. Please 
pardon my froggy throat today. I have a cough, and so I hope it 
won't be too horrible.
    Chairwoman Waters. If you forgive me for mine, I will 
forgive you for yours.
    [laughter]
    Ms. Marquez. I was asked today to focus in on foreclosure 
activity and the NSP program that the City of Los Angeles is on 
the precipice of launching. We have been mapping in the City of 
Los Angeles for the last few years all of the foreclosures in 
the City, and I can tell you that for the years 2007 and 2008, 
we have experienced now over 21,000 foreclosures in a little 
over 17,000 buildings.
    Now, that is a very large number. But in our City we have 
nearly 1.4 million housing units, and that makes them very 
difficult to find, those 21,000, when they are among 1.4 
million. So we went about doing this by mapping extensively, 
and we were able to do City-wide maps, and then broke those 
down to City Council level maps and worked with each City 
Council member to identify pin-by-pin block areas within their 
council districts that would be the focus of the NSP recovery 
work.
     What I can tell you is that something like Mr. Gross has 
mentioned in the previous panel, that of these 21,000, we have 
now somewhere in the area of 6,500 of those are multi-family 
dwellings. We differ in that somewhat from other cities, not 
only because we have a number of multi-family buildings, but 
because we are counting them. In most other cities they are 
counting units as a whole, but we are actually breaking down 
single-family from multi-family, because they require very 
different outcomes.
    Interestingly, the vast majority of multi-family buildings 
that are in foreclosure are located in South Los Angeles. About 
96 percent of those are under rent control. And, as Mr. Gross 
said, they are occupied.
    Now, the City in December passed--we were one of the first 
major cities in the country to pass an eviction moratorium on 
all foreclosure-related evictions, because we were very 
concerned about what would happen to the mass of tenants who 
were living in this occupied housing.
    We continue to have issues, but let me talk to you a little 
bit about what we are going to do. We are meeting 2 to 3 times 
with lenders and Realtors. We are meeting with contractors. We 
have now trained over 300 lenders and Realtors and home buyer 
educators about the NSP program, and we are working very 
particularly with the National Association of Minority 
Contractors to help them qualify for RFPs when we put them out 
on rehab.
    We have also done something, I think, very important for 
the City. We have developed a nonprofit corporation called 
Rebuild Neighborhoods L.A., and its purpose is to purchase and 
dispose of this property. In other words, the Housing 
Department which administers their nearly $33 million in the 
first round of NSP that is arriving any moment now--we signed 
our contract well over a month ago, so we are waiting for the 
money now. They will be a sub-recipient to us.
    So they were created under CDBG, and we have actually put 
forward a plan that has been approved by the mayor and City 
Council, which funds them for 4 years, because we believe we 
are going to be in this business a long time, and we did not 
want to face a shortfall on admin down the line as they really 
got rolling. So they are funded for 4 years of admin.
    And what we are going to do is a couple of things. One, on 
single-family homes, we have 21,000 foreclosures, but we only 
have at this point 4,000 RAOs. So that means that Los Angeles, 
unlike other cities, if you were to focus in on Cleveland or 
Detroit or Pittsburgh or other cities, we actually have a 
housing market.
    We are being studied by several organizations across the 
country as--really, as a strong market city is what they are 
calling us, because most, now, of our RAOs are getting two and 
three offers on a single-family home across the City. So that 
means that the City of Los Angeles will focus its efforts on 
those homes that are not being picked up, those that are in the 
worst condition. So we are doing a couple of things.
    One, for families, for the homes that are in better 
condition, we are offering a walk-in program, a soft second, 
and a rehab loan, for them to come in with us for the homes 
that are in better condition and purchase them within the 
impact areas that the City Council has set aside. The Housing 
Department will do all of the underwriting, and that way we 
will get families with income in sooner. So that is one way to 
be immediately stabilized.
    Then, the nonprofit will go about and begin to acquire 
single-family homes that are in worse condition. For those, we 
are talking about right sizing. You both may remember years ago 
there was a model program, actually Los Angeles was one of the 
models in the country, for something called EHOP. And it was 
when we had homes that HUD was selling for a dollar. We had an 
agreement with Enterprise. They bought them from us for a 
dollar and rehabbed them.
    We learned some very important lessons. It was actually 
quite successful, and the Housing Department also ran that 
program. What we did was something called right sizing. What we 
know, particularly in South Los Angeles, is that we have some 
beautiful streets, and we have gorgeous lots. They are large, 
but some of the homes are too small for today's families' 
needs.
    We have many two-bedroom, one-bathroom homes on a large 
lot. So what we are going to do is right size them and spend 
the money now to rehab them as three-bedroom, two-bath homes, 
so that they make an impact for the next 50 years.
    The next thing we are going to do, then, is buy multi-
family property in bulk. We are going to work across South L.A. 
We are going to focus all of the money that is set aside for 
folks at 50 percent or below of AMI.
    And I personally thank you for that, Congresswoman, because 
it meant I didn't have to have a fight about that. And so I am 
grateful for not having to have that.
    We are going to buy them, rehab them, and put them out as 
affordable housing with 55-year covenants.
    Chairwoman Waters. Thank you very much, and we will have 
some more questions about the neighborhood stabilization 
program.
    I would like to--here he is, Mr. Montiel, the executive 
director of our Housing Authority.

  STATEMENT OF RUDOLF C. MONTIEL, PRESIDENT AND CEO, HOUSING 
          AUTHORITY OF THE CITY OF LOS ANGELES (HACLA)

    Mr. Montiel. Good morning, Chairwoman Waters. Good morning, 
Congresswoman Watson.
    My name is Rudolf Montiel. I am the president and CEO of 
the Housing Authority of the City of Los Angeles.
    Although HACLA is the largest provider of affordable 
housing in the City, serving over 70,000 households, we are 
assisting but 20 to 30 percent of the need in this City. We 
have delayed recently--because of the Omnibus Appropriations 
Act, we will not provide any increase in funding for Section 8 
this year, have delayed the opening of our wait list.
    We are anticipating, though, when it is opened later in the 
year that we will receive applications from 300,000 households. 
Although the challenges are great, we believe that working 
closely with the City family, and moving forward Mayor Antonio 
Villaraigosa's housing plan, we have done some things to help 
the situation.
    Since arriving here in 2004, we have gone from 4,000 
homeless set-aside vouchers to 9,100 vouchers in service as of 
today. We were instrumental in the creation of the City's 
Permanent Supportive Housing Program, providing HACLA vouchers 
to help underwrite those units. More importantly, in the last 2 
years, we have received the largest allocations, in partnership 
with LAHSA, the largest allocations of McKinney-Vento homeless 
housing in the history of Los Angeles.
    Our Section 8 program today is fully leased up, and is a 
high performer. Unfortunately, being fully leased up also means 
that we cannot serve any other new families, new households.
    The most important activities that we are undertaking, led 
in large part by the mayors and the City family, is a 
redevelopment of Jordan Downs into a vibrant mixed-income 
community that will have one-to-one replacement of public 
housing units. Let me repeat that: one-to-one replacement of 
public housing units.
    Secondly, we will have the right to return for tenants, 
because simply we do not have to displace tenants as we build 
the new Jordan Downs, because we have acquired vacant land 
adjacent to the property. We also are not planning on imposing 
any onerous barriers to return for the tenants. For example, 
some housing authorities around the country have applied 
minimum credit scores. It is my personal view that if people 
had good credit scores, they probably wouldn't need to live in 
public housing.
    And through the creation of this vibrant urban village, we 
also are looking to bring in neighborhood-serving retail 
opportunities, things like a sit-down restaurant in Watts, 
perhaps a grocery store, and job opportunities. But probably 
the most important thing that we can do when we redevelop 
Jordan Downs is redevelop Jordan High School. And through the 
Mayor's Partnership for Schools, he has committed to bringing 
this high school into the partnership to transform it into a 
high-performance learning academy for the people who so 
desperately need it in Jordan Downs.
    I will touch a bit on the neighborhood stabilization 
program, because it does have a linkage to Jordan Downs. We 
believe that one of the first things that we can do is take 
advantage of the competitive grants and the NSP to acquire 
property in close proximity to Jordan Downs, and offer to 
residents, the higher-income residents of Jordan Downs, to have 
the property rehabbed, and then to bring that family in either 
in a straight-out purchase or a loan--a lease-to-own program 
that will put them into homeownership at the front end of a 
HOPE VI type redevelopment, not at the back end.
    With that, I would like to close and recognize you, 
Chairwoman Waters, for your leadership in this country to 
really look after the rights and the needs of the people who 
need public assistance for housing, whether it is Section 8, 
public housing, or McKinney-Vento.
    And with you and Ms. Watson and our able congressional body 
here in Los Angeles, we hope to see even bigger and better 
things in the future.
    Thank you.
    [The prepared statement of Mr. Montiel can be found on page 
203 of the appendix.]
    Chairwoman Waters. Thank you very much, Mr. Montiel.
    I see that Ms. Lori Gay has come in, from Neighborhood 
Housing Services, who is working with these banks to do loan 
modifications. How is it going, Ms. Gay?

     STATEMENT OF LORI GAY, PRESIDENT AND CEO, LOS ANGELES 
                 NEIGHBORHOOD HOUSING SERVICES

    Ms. Gay. Thank you, Madam Chairwoman. I appreciate you 
allowing me to be a bit tardy today. It is a pleasure to speak 
before the subcommittee.
    How is it going? We thought we were making progress. I talk 
like that a lot now. And as things change, we have to adapt 
ourselves very quickly to rapid change. So the new plan that is 
out, Making Homes Affordable, we are encouraging people to go 
on the Web site, see if it deems them potentially eligible with 
the SFT, and then we encourage them to call their lender or 
call a HUD-approved counseling agency, so they come right back.
    We are doing now 3 nights a week, sitting with families in 
workshops, clinics, and them counseling them immediately with a 
plan in mind. I put a map at the back of my testimony that 
shows a high volume of dots in your district. Over 500 in the 
last 6 months have come through our counseling services.
    Every single dot on that map we have geographic analysis on 
now, so anything that any congressional leader within the L.A. 
County area wants to see about every single person we have 
counseled in the last year, we can run an analysis on it, where 
people who are in trouble, African-American, are they female 
head of household, are they over age 35, are they paying their 
bills, are they going to church or synagogue?
    Those kinds of things that create a face to foreclosure I 
think is the work we are focused on as well as pushing through 
now with the opportunity we see ahead with the Obama plan to be 
able to get more families to stay in their homes. It is not a 
perfect science.
    But I think that it does give us an opportunity. What we 
need help on--and I saw some of my friends from the GSEs here 
as I was walking in--is just how do we push for the enforcement 
side, the implementation of the plan, so that as families call 
for help, they are not told that the plan is not in place, and 
that they can't be helped. And if they have a trustee sale next 
week, or they are at notice of default, you know, hearing that 
from a lender is very disturbing. So we are spending a lot of 
time pushing back.
    I am personally--at every point at every workshop we are 
doing--taking every customer that I counsel and trying to walk 
them through and stay with them, and that is a lot on behalf of 
any counselor. But what I find is that we read about these 
things in the paper, we know what legislation is passed. But in 
reaching the field, and really getting in the trench with 
families, it takes a while.
    And so the help that we would ask for would be how much we 
can push so that families don't end up losing when we have a 
plan in place that might assist them. And I think we will keep 
testing our system, we will keep pushing with the advocacy that 
we have, but any help, you know, from leadership would be 
great.
    And I think the other thing we have tried to do from a data 
analysis standpoint is keep track of every involvement with 
every servicer. We know exactly how many calls we have taken, 
how many calls it takes to get the response. You know, those 
kinds of things we need to be able to feed back to you, so that 
you know who we are struggling with and who we are seeing 
success with.
    I think most of the housing counselors could tell you off 
the top of their head what successes they have, because it is 
still a bit slim. It is better than it was, but we still have a 
journey to go.
    The last thing I will say is that we have lots of data now. 
We have lots of lessons we have learned, and now we are 
entering what I call the ``property phase.'' There are people, 
and there is property.
    And how do we work as joint units to be able to make sure 
that neighborhoods are stabilized to the best of all of our 
ability? I don't think there is any one entity that can do the 
work ahead. We have encouraged everything from patient capital 
being put into CDFIs to now, as of next week, I will start 
cross-training my competition again, the developers in 
neighborhoods, to try to help them strengthen their skill set 
in purchase rehab/resell by neighborhood. And we think that is 
important.
    I can't service Little Tokyo as well as the Little Tokyo 
Service Center, just as an example. And so I think we are 
there, and we want to continue to be available and to work with 
everyone to make sure that our teamwork makes the dream work.
    Thanks very much.
    [The prepared statement of Ms. Gay can be found on page 179 
of the appendix.]
    Chairwoman Waters. Thank you.
    Thank you very much.
    Ms. Jazmin, I think I pronounced your name incorrectly 
before. Would you please share with me the correct 
pronunciation of your last name?
    Ms. Faccuseh. It is ``Faccuseh.''
    Chairwoman Waters. Could you say it again?
    Ms. Faccuseh. ``Faccuseh.''
    Chairwoman Waters. Yes, ``Faccuseh.'' Ms. Jazmin Faccuseh, 
housing counselor, East LA Community Corporation. Thank you.

   STATEMENT OF JAZMIN FACCUSEH, HOUSING COUNSELOR, EAST LA 
                 COMMUNITY CORPORATION (ELACC)

    Ms. Faccuseh. Thank you. Good morning, or should I say good 
afternoon by now.
    Chairwoman Waters. Yes.
    Ms. Faccuseh. My name is Jazmin Faccuseh, and I am a 
housing counselor with the East LA Community Corporation.
    Chairwoman Waters. And I am going to ask you to bring the 
microphone closer. Speak a little louder so they can hear you 
in the back.
    Ms. Faccuseh. So, as I was saying, my name is Jazmin 
Faccuseh. Is that better?
    Chairwoman Waters. That is better.
    Ms. Faccuseh. Okay. And I am a housing counselor with the 
East LA Community Corporation, ELACC. The East LA Community 
Corporation is dedicated to creating social and economic 
justice in low-income neighborhoods in and around East Los 
Angeles through affordable housing development, community 
organizing, and economic opportunities for low-income families.
    Since 2007, when ELACC launched its first foreclosure 
prevention program, we have opened up loan modification cases 
for over 500 families. We continue to see clients through 
weekly clinics and one-on-one foreclosure counseling, resulting 
in the prevention of foreclosures in many of our cases. But our 
work is complicated by: One, the prevalence of fraudulent 
foreclosure assistance services; two, the worsening economic 
circumstances of clients; and, three, the limitations on the 
Federal programs designed to respond to the foreclosure crisis.
    Number one, fraudulent foreclosure assistance. The problem: 
Over 50 percent of our families who come to our organization 
seeking help to prevent a foreclosure have paid thousands of 
dollars to fraudulent foreclosure assistance services. These 
services charge money up front and then do nothing. When the 
family finally realizes that they have been scammed, it is 
often too late for a housing counselor to help.
    The solution: We need legislation that heavily regulates 
private foreclosure prevention services. It should be a crime 
to charge money up front, especially when they can receive 
these services from a HUD-approved counseling agency. Federal 
programs should require lenders to be sympathetic to borrowers 
who have fallen victim to a scam and make extra effort to work 
with the homeowner.
    Number two, the worsening economic circumstances of 
foreclosure prevention clients. The problem: When we began our 
foreclosure prevention work in 2007, the vast majority of our 
clients were having difficulty with mortgage payments that 
increased when their ARM loan adjusted up.
    Today, however, our clients' payment hardship is more 
likely the result of unemployment or other loss of income 
caused by declines in many business sectors. Even the Making 
Home Affordable plan will not help in this situation, since 
banks will not modify loans where there is little or no income.
    The solution: We advocate that banks follow the example of 
Citibank and institute long-term forbearances of up to 12 
months for homeowners who have become unemployed or suffered a 
significant loss of income. Citibank has recently begun 
offering 3-month forbearances and should be congratulated and 
encouraged to extend this forbearance time.
    The problem: With the collapse of the housing market, our 
clients are, on average, underwater by a loan-to-value ratio of 
150 to 175 percent or more. This means that a home purchase for 
$450,000, 2 or 3 years ago, is now worth at or around $250,000. 
This loan-to-value ratio makes homeowners ineligible for the 
Federal refinance programs that only allow for a loan-to-value 
ratio of 105 percent, which is not realistic in our cases.
    The solution: Get banks to write down principal where the 
writedown would enable the homeowner to refinance into an 
affordable loan. Principal writedowns are in effect a short 
sale without the sale. It is generally agreed that a 
foreclosure costs a bank on average $60,000. The banks can take 
this cost and not only preserve homeownership but prevent 
blight by writing down mortgage by this amount. If they are 
willing to allow short sales, a principal writedown is no 
different.
    Number three, while the Making Home Affordable plan will be 
helpful to many homeowners, there are still issues it does not 
address. The problem: The majority of the loans are held by 
loan servicers who say they cannot be bound by this program. 
Servicers are bound by contracts with their investors that 
limit their ability to modify loans.
    The solution: A Federal soft second loan subsidy. For those 
situations where the lender refuses to either write down 
principal or defer principal, the Federal Government should 
provide a soft second loan directly to the homeowner. CDBG 
funds have long been used to fund soft seconds for low-income, 
first-time home buyers, enabling them to purchase homes.
    This soft second subsidy for those in danger of foreclosure 
could be structured like the financing of the purchase of toxic 
assets. In exchange for lending money, rather than paying 
interest, the homeowner could agree to share any further equity 
in the home at the time of sale. This type of government 
investment is no different than the program recently proposed 
by the Treasury Department where the Government would finance 
the purchase of toxic assets with an eye toward recouping the 
profiting from this investment when the value of the asset 
rose.
    By providing a soft second subsidy directly to the 
homeowner, the Federal Government is making an investment that 
will allow taxpayers to profit at the time the home is sold for 
a profit. This bottom-up solution is cheaper and will go a long 
way to stop the creation of future toxic assets.
    Thank you.
    [The prepared statement of Ms. Faccuseh can be found on 
page 91 of the appendix.]
    Chairwoman Waters. Thank you.
    Ms. Teague?

    STATEMENT OF RUTH TEAGUE, DIRECTOR, LOS ANGELES OFFICE, 
            CORPORATION FOR SUPPORTIVE HOUSING (CSH)

    Ms. Teague. Thank you. I have a little bit of a throat 
thing going on, too, maybe from trying to fit everything into 5 
minutes practicing last night, so please indulge me.
    Chairwoman Waters and Representative Watson, good 
afternoon. My name is Ruth Teague, and I am the director of the 
Corporation for Supportive Housing's Los Angeles office, and I 
appreciate this opportunity to testify.
    CSH is a national nonprofit organization that works with 
communities to help build permanent housing, coupled with 
supportive services to end homelessness. Our Los Angeles office 
was established in 2003, and since then we have provided over 
$22 million in loans and grants to other nonprofits, which will 
result in the development of over 2,000 units of housing for 
homeless individuals and families in Los Angeles.
    Several indicators reflect significant growth in 
homelessness in L.A. County from 2007 to 2008, particularly 
among two-parent families, as I have referenced in my written 
testimony. Yet while the economic downturn and foreclosure are 
exacerbating the difficulty working class families have finding 
affordable housing, the fact remains that long before the 
current economic crisis, L.A. was struggling to meet the 
housing needs of vulnerable people.
    Our primary challenges to addressing homelessness for those 
struggling with multiple barriers to housing stability are 
twofold. One is insufficient housing subsidies, and the second 
is insufficient alignment of housing finance systems with 
services funding systems.
    Despite many good efforts on the part of the City and L.A. 
County, housing development subsidies are insufficient to meet 
the need. We are grateful to the City of Los Angeles for the 
commitment of $50 million annually toward a new Permanent 
Supportive Housing Program.
    Some of these projects they have financed, however, are 
currently stalled due to the State's inability to sell bonds 
issued under Proposition 1C. These project delays are driving 
up development costs and threatening the fiscal strength of 
nonprofit housing developers.
    Compounding the problems at the State level, many equity 
investors and low-income housing tax credit projects have cut 
off their investments in housing for homeless people. Such 
investor behavior should be analyzed by the Federal Government 
for the potential impact of redlining projects that serve the 
most vulnerable populations in the greatest need of housing.
    Other cities throughout the county have made varying 
degrees of commitment toward the development of supportive 
housing. However, at the current rate of production, limited 
primarily by the availability of housing subsidies, L.A. County 
will not be able to significantly reduce homelessness for 
decades.
    Our second primary challenge is that services funding 
systems are not well-aligned with housing finance systems in 
Los Angeles. Because of this, homeless service delivery 
primarily occurs outside of a permanent housing setting, and 
service providers in L.A. struggle with the task of connecting 
their clients with permanent housing.
    So the emergency housing and shelter system is clogged. The 
Federal Government could play a role in encouraging better 
funding alignment and greater collaboration between City and 
county government by developing policies for health and human 
service programs that target resources to housing-based 
services for the most vulnerable. Stronger incentives should be 
created to link services to housing for homeless people, so 
they receive the supportive services they need after they are 
placed in affordable housing.
    While the influx of $42 million to Los Angeles and homeless 
prevention funds from the stimulus package will help avert 
homelessness for thousands affected by this crisis, we believe 
the following are essential to our work in reducing 
homelessness in L.A. and nationwide:
    One, reauthorize the McKinney-Vento Homeless Assistance 
Program in 2009; two, establish better partnerships within HHS 
and HUD to increase funding for services and permanent 
supportive housing; three, capitalize the National Housing 
Trust Fund; and, four, improve existing Federal affordable 
housing programs to better serve those hard-to-house families 
and individuals, including ex-offenders, people who have 
serious mental and physical disabilities, the elderly, and 
youth aging out of foster care.
    Thank you.
    [The prepared statement of Ms. Teague can be found on page 
220 of the appendix.]
    Chairwoman Waters. Thank you.
    I have a couple of people I would like to introduce who are 
here today. The mayor of one of my cities in my district, Mayor 
Harold Hofmann from the City of Lawndale, is here.
    Thank you, Mr. Mayor.
    And also, Robert Pullen-Miles, councilman from the City of 
Lawndale is here.
    He was here somewhere. Thank you very much for coming 
today.
    I would like to thank all of our panelists for testifying 
here today. And we may have more questions, but right now I am 
going to recognize Congresswoman Watson before she leaves--she 
is just about to leave, she has to go to another engagement--in 
case she wants to ask a question.
    Ms. Watson. Thank you. First, Mr. Montiel, thank you so 
much, and we are going to have further conversations. We have 
some housing proposals right in the Crenshaw area.
    Can you in one minute bring me up to date on what we are 
doing with the Morotown project that was supposed to be 140 
units, and low-income housing there, or senior housing there?
    Mr. Montiel. Yes. Congresswoman, that is actually not in 
our purview. I understand it is in the purview of the CRA. I am 
not truly up-to-date on the latest details on that, so I would 
prefer to defer comment for the CRA. But I would also volunteer 
to have Ms. Cecilia Stellano, the very competent leader of that 
organization, get back with your office with a report next 
week.
    Ms. Watson. All right. I have a staff member here. He will 
give you his card. And if you will inform her that we will be 
calling her, and it is Mr. Ken Bell--
    Mr. Montiel. Absolutely.
    Ms. Watson. --behind me.
    Mr. Montiel. Absolutely.
    Ms. Watson. Ms. Gay, thank you for your continuing hard 
work. You mentioned that you are receiving hundreds of calls 
into your office. Can you give the people here in this audience 
one or two things they can learn through calling your line? You 
have been very helpful. You have been there in the community. 
People are calling us by the hundreds wanting help. Maybe you 
could just tell them some information.
    Ms. Gay. Sure.
    Ms. Watson. Go to your lender first, or whatever.
    Ms. Gay. Right. A couple of quick things. You can always 
call your lender as a first step. And if you feel--
    Ms. Watson. Should they do that?
    Ms. Gay. We always encourage people to talk directly to 
their lender about their situation. Some of the lenders are 
overwhelmed, and so they are encouraging families to call a 
HUD-approved counseling agency in their area. If a family wants 
to call our toll-free number, 888-89-LANHS, we can sit with 
them Tuesday through Thursday nights, 6:30 to 8:30 p.m.
    We are sitting--well, it is really 6:00 to 8:30 p.m., we 
are spending time with families one-on-one and in group 
counseling sessions, happy to look at their documents, happy to 
be of assistance, and then we can assist them with reaching 
their lender after they get their documents together, if they 
would like to go that course.
    Ms. Watson. Thank you.
    Ms. Gay. Thank you.
    Ms. Watson. Ms. Marquez, you are kind of responsible for a 
department in the City. How can we make the system more 
effective and efficient for our customers who need that 
information? How can they get into the area where they can get 
specific help? Can you tell us really quick?
    Ms. Marquez. Well, I would say on some of the land use 
issues--
    Ms. Watson. Yes.
    Ms. Marquez. --for instance, that you mentioned, I can tell 
you that the mayor directed 12 agencies to work together on 
something called ``12 to 2''--go to from needing writeoffs/
signoffs from 12 agencies to 2 agencies, led by the planning 
director, Gail Goldberg.
    Ms. Watson. Can you give us a list of those agencies, 
inform our offices in the area, and tell Mr. Clark to follow 
up, please?
    Ms. Marquez. I would be happy to.
    Ms. Watson. Great.
    Ms. Faccuseh, I really appreciate your presentation, 
because you gave us the problem, and you gave us solutions. And 
we are in the business of trying to find solutions to the 
problems, so we are going to be calling you, too. And I am sure 
the Chair would. I think your report was very, very informative 
and helpful.
    Ms. Faccuseh. Thank you.
    Ms. Watson. So thank you.
    And, Ms. Teague, we will be calling you, too.
    Ms. Teague. Thank you.
    Ms. Watson. My office is located right in the center of the 
Wilshire area, we are getting dozens and dozens of calls--
people need help. They want information. As a result of this 
hearing, and a follow-up one that I will have on the 11th of 
April, we hope that we can lead them in the right direction. So 
I wanted to get your information, too.
    I am taking all of your reports with me, and they have been 
very, very helpful. It is all in writing, and thank you, 
Chairwoman Waters, for allowing us to gather this. It saves our 
staff a lot of time, and so on.
    I just want to thank all of you for your input. It has been 
very, very valuable to us as the policymakers, and I am sure 
that you are going to see some response as soon as we get back 
to Washington.
    I want to thank the audience. And I have to take off for 
now, but thank you for your input. It is very, very valuable.
    Chairwoman Waters. Thank you, Congresswoman Watson. I am 
pleased you were able to participate in the hearing today, and 
I look forward to working with you.
    I recognize myself for 5 minutes for a few questions.
    Mr. Montiel, thank you for the work that you are doing on 
the entire housing plan for the City of Los Angeles, working 
with the mayor. The mayor was out at Jordan Downs. I am very 
pleased about that, because that is my emphasis, to keep 
pushing to make sure that you have real community involvement, 
and that the residents are coming along with you, because I 
have seen attempts to rehab public housing. And we get started, 
and then all of a sudden people didn't realize certain aspects 
of it.
    So I am very intent on having the information shared 
generously and often. And I understand the mayor is coming back 
to a larger town hall meeting?
    Mr. Montiel. That is correct, Madam Chairwoman.
    Chairwoman Waters. I will attempt to join him at that time, 
and let us see if we can move forward making sure that 
everybody understands this a premier project for the mayor. 
Okay?
    Ms. Gay, thank you for coming today. I know your hands are 
full. You know, we have not been able to solve the problem of 
the tremendous number of foreclosures and the ability to do 
loan modifications. As you said, the institutions or servicers 
are overwhelmed, and they haven't done a very good job, I know.
    I have a dedicated full-time person on my staff working 
with our families, and when they reach a really tough point, 
they call me. And I have learned to tell loan modifiers how to 
do loan modifications--
    [laughter]
    --based on everything that I have learned about them. And 
they have--I think it was ABC did a stint on my doing loan 
modifications and showing the waiting times and all of that. I 
am hopeful that the President's plan will help to eliminate 
some of this. But what I am focusing on right now is the 
purchase of the toxic assets, which will be a lot of the bad 
loans. They are calling them ``cash for trash.''
    And if they are in our hands, then maybe we can put 
together a government effort to do loan modifications faster, 
better, and maybe have a little more flexibility. I am 
interested in the writedown of principal, and I think we have 
go to do some more work on that.
    Everybody recognizes that, you know, we can write down the 
interest rates. I am not so sure that we have figured out what 
to do about people whose FICO scores have been messed up, who 
can't get refinancing. There are still a lot of loopholes here, 
but just continue to do what you are doing. It is rough work, 
and I have tried to encourage--I did meet--finally, I did meet 
with one of the CEOs. I usually don't meet with them, because I 
don't like any of them.
    [laughter]
    But I did meet with one of the CEOs and asked them to try 
and put storefront operations out in some communities and see 
how it works. I am sick and tired of people getting lost in 
these menus trying to get to the servicers. So I think we have 
a commitment that they will at least try one on a temporary 
basis and see how it works or something.
    So, yes?
    Ms. Gay. Can I note for you that Chase opened their 
homeownership center in Glendale, from 8:00 a.m. to 8:00 p.m., 
Monday through Friday.
    Chairwoman Waters. They don't have any foreclosures in 
Glendale.
    [laughter]
    Ms. Gay. Well--
    Chairwoman Waters. You heard what Ms. Marquez said. They 
are all down in South Central L.A. Why did they open it in--
    [laughter]
    Ms. Gay. They had to test it where it was comfortable 
first, I think.
    Chairwoman Waters. Right.
    [laughter]
    Ms. Gay. And so we have encouraged them that they don't 
have to be fancy. There are a bunch of nonprofits. We are all 
given desk space. We don't care.
    Chairwoman Waters. What you have to do is go down to the 
office and show them the way to where the foreclosures are.
    Ms. Gay. That is it. You are right.
    [laughter]
    But I do think that it is a beginning, and so I love that 
idea. We are encouraging it. See, we don't have a lack of 
demand. So when a servicer tells me they can't quite get to 
people, I don't know what that is, because I have a couple 
thousand people a month we are talking with. I think that your 
point is well taken, and we will continue to encourage that as 
well.
    Chairwoman Waters. Thank you very much.
    Ms. Marquez, I think you have one of the more exciting 
programs in the country, your neighborhood stabilization 
program. I like the idea--what do you call it? Adding that 
bathroom.
    Ms. Marquez. Right sizing.
    Chairwoman Waters. Right sizing. That is such a sensible 
idea, to take these properties that don't have a second bath or 
so and make them--rehab them in ways that will be suitable for 
families.
    Oh, I wanted to ask about the money. Your first allocation 
was only about, what, $13 million?
    Ms. Marquez. It is $38.2 million.
    Chairwoman Waters. 32.8 million. Better than I thought. 
Okay. Very good.
    Ms. Marquez. Well, it should have been at least double 
that.
    Chairwoman Waters. That is right. With the addition of the 
stimulus package, you will get some more. We don't know how 
much that is. But can you tell whether or not the amounts that 
you are getting are going to match the problem in Los Angeles?
    Ms. Marquez. Oh, not by a long shot.
    Chairwoman Waters. Okay. That is what I thought.
    Ms. Marquez. Not by a long shot. I do think that what we 
are doing now is understanding where HUD is going, which I 
think is in a very positive direction. So matching what is 
going on with NSP, taking a look at the new allocation of CDBG, 
the new ESG, which is really just ESG in name only for this 
particular allocation.
    I think $29 million is coming to the City of Los Angeles, 
and we already met this week several agencies to begin talking 
about how we take a portion of that and layer it with what is 
going on on NSP, because, as you heard these women speak, there 
are going to be many who just are way above the LTV values. And 
they are not going to be eligible for any kind of loan 
modification.
    So we are going to be faced with people who are way 
underwater, but are working, but still are not going to be 
eligible.
    And that means, how are we going to help? One thing, some 
CDBG dollars can help in that, as soft seconds. But also, as we 
are looking are relocation issues for folks--and we know that 
there are many who should never have bought in the first place.
    Chairwoman Waters. Yes.
    Ms. Marquez. So they are going to be renters again. And 
this new ESG allocation, because it now goes up to 50 percent 
of AMI, focuses that and allows us to help them transition, and 
allows us to help them transition within the same neighborhoods 
that they are already living in, so that we are both helping 
them and helping that neighborhood and their neighbors.
    So we are talking about how we layer it, and then that 
leads us to the competition on NSP II. Because we have--we 
designed NSP I for future money, we are actually very well 
placed for the next competition.
    Chairwoman Waters. That is great. And let me just say that 
the way you have structured this with your nonprofit that will 
be making decisions about any number of banks, I would like 
to--and I have worked with you, with the contractors. Thank you 
very much for the meetings you have had with the contractors, 
and they are very interested. And I think some of them have 
joined together, joined interests--
    Ms. Marquez. They have.
    Chairwoman Waters. --in order to take on more, and I 
appreciate that.
    I want to make sure that for those nonprofits who qualify 
for the program that they use the agents in the community--for 
example, whether or not it is contractors or real estate 
people, etc., we had this discussion some time ago with 
Enterprise when they first did the REOs that we had. So that 
must be a part of the evaluation.
    Ms. Marquez. It is. We have met already with the Southwest 
Realtors Association.
    Chairwoman Waters. Oh, good.
    Ms. Marquez. I meet with them regularly.
    Chairwoman Waters. Okay.
    Ms. Marquez. So they are friends. We are all taking a look 
at how you do this. And, in fact, I owe it really to the 
Southwest Realtors who have educated me about the housing 
stock, the private housing stock in South Los Angeles, and that 
is why we are doing the right sizing program.
    Chairwoman Waters. Well, that is very good. They were 
involved in the first discussion with Enterprise some years 
ago, and so their multi-cultural task force has gotten a lot of 
experience in this, and I thank you.
    We have some private developers who would like to be 
involved, and I am--as I remember, it is--you will have 
involvement for both private and nonprofit?
    Ms. Marquez. That is right.
    Chairwoman Waters. Some of the private developers, again, 
will be in the situation where they want to develop a small 
number within a huge number. Is that something which is being 
looked at?
    Ms. Marquez. Yes. What we are doing is we have--we are 
taking the minority contractors as a good example. The last 
time we met we brought in folks who do bonding to talk about, 
what is the right level of bond insurance? What can they 
afford? What can a small contractor, even if they group 
together, is it a million dollars? Or is that 10 homes? Is it 
more? So that we get the bundles to something that is in the 
reach of a very good qualified small contractor.
    And then, we will have a variety of different opportunities 
looking at what make sense as a minimum, and also what makes 
sense as a maximum. So there will be opportunities for 
everybody. I have also made a commitment to the minority 
contractors, particularly, that before we come out with an NFP, 
so--while I can still speak to them before the competition, we 
are going to come out and do a training, particularly with 
them, going over the NFP, so they know how to fill it out and 
what they are going to need.
    So we are actually working with them all the way along to 
give them the best opportunity. They have been--from the first 
meeting that you and I attended together, they whittled down to 
a very strong core, and they seem to have broken up now in two 
groups that will work together. We are also thinking about 
having a requirement for L.A. residents first to get these 
contracts.
    So we are taking a look at everything within the law to 
make it possible for people in the community to get these 
contracts.
    Chairwoman Waters. That is good. And I think we have some 
people in the audience today who came especially to hear you, 
because I had a conversation with them about what you are 
doing, and they are interested. And before you go out that 
door, somebody is going to stop you. Okay?
    Ms. Marquez. All right.
    Chairwoman Waters. All right. Thank you.
    Okay. Ms. Faccuseh, I think you referred to the President's 
plan in your testimony. I held a hearing on the President's 
plan, and I am worried about some gaps in the plan. I worry at 
two levels.
    One, as I recall, for those persons who may have a 30-year 
mortgage, and may have a decent interest rate even, who would 
like to refinance, and because of their situation with lower 
wages or income than they had when they went into the purchase, 
and maybe for some other reasons, they kind of fall through the 
cracks, they can't get refinanced. They don't qualify, because 
you have to have these great FICO scores in order to refinance.
    And some of our members are trying to figure out what to do 
about having to have these strong FICO scores. These were 
people who performed on their mortgages for years. They had a 
great job, and they could afford to pay it. But now they have 
been laid off, they have less income, and they can't afford the 
mortgage.
    I don't see anything in the President's plan, as I recall, 
to help them. Do you?
    Ms. Faccuseh. No, I haven't. And a lot of the people would 
not be eligible to afford that home at fair market value based 
on their income now. Even if you were to write down principal, 
not at fair market value but somewhat above fair market value, 
they would not qualify, because a lot of the homes--as Ms. 
Marquez mentioned, a lot of the homeowners were never eligible 
for those homes to begin with.
    So, I mean, it is going to be really hard, but that is not 
something that has been addressed.
    Chairwoman Waters. What about the second part of the plan, 
for loan modifications for people in ARMs who, again, are going 
to have--they are going to have problems qualifying even for a 
loan modification, as I see it. What holes do you see in that 
part of the plan for people who are in these adjustable rate 
mortgages who got in with little or no down payments, resetting 
with margins of 3 or 4 percent higher than the interest rates 
they were paying, and they were the ones who perhaps really 
couldn't afford the home to begin with. What do you see in the 
President's plan that will help them?
    Ms. Faccuseh. I mean, one thing that would help right now, 
they can't force a lot of the servicers who are private 
investors, and they say that they are not--I guess they don't 
have to follow this plan. It is different when the owner of the 
loan is one of the like other traditional big banks.
    A lot of these loans that we are seeing are owned by 
individual private investors, and they are saying--there is no 
safe harbor for these servicers who try to modify these loans, 
and there should be some kind of legislation to allow some of 
these servicers to be able to modify some of these loans, 
because a lot of the investors, I mean, that is--they say that 
they are not bound by anything that I guess Obama has planned.
    Chairwoman Waters. But all servicers are eligible for the 
incentive, the $1,000. Would they be eligible for that, based 
on what you have seen in the plan?
    Ms. Faccuseh. They should be eligible for that, but, I 
mean, it is really hard. They have until the 31st of December 
to decide what plan--part of the plan they will adopt, what 
they will edit out, and whether they will agree or not.
    Chairwoman Waters. I think we all have to spend more time 
to really understand this plan and what it does and what it 
does not do, because I am left with a lot of questions about 
it, too. And I have asked my staff to look into it a little bit 
more, and we may have to offer some suggestions for 
clarification or for making it more meaningful than perhaps it 
is now.
    Do you have any other suggestions at this time, or would 
you like to write us and--
    Ms. Faccuseh. I could write them in.
    Chairwoman Waters. Okay. Thank you.
    Okay. Ms. Teague, you just have problems with everything.
    [laughter]
    Ms. Teague. I have heard that before.
    Chairwoman Waters. You want some more money. You want some 
more subsidies. You want L.A. to be able to afford to do 
everything from--
    Ms. Teague. The need is great.
    Chairwoman Waters. Yes, yes, yes. Have you looked at the 
mayor's overall housing plan and--
    Ms. Teague. Yes.
    Chairwoman Waters. --what he is attempting to do? And the 
Housing Trust Fund? Doesn't that make you feel good?
    Ms. Teague. Yes. And we thank the mayor, and we thank Mr. 
Montiel and Ms. Marquez, in particular, for making that program 
happen. It wasn't easy.
    Chairwoman Waters. And even though we didn't talk about it 
a lot, it holds out hope for first-time home buyers, doesn't 
it?
    Ms. Teague. Yes.
    Chairwoman Waters. And it will be affordable, for 
affordable housing. And I suppose, even though I don't know all 
of the parts of the plan--I guess we could ask--it seems to me 
right now with the interest rates as low as they are, and with 
us putting in the stimulus package $8,000 for first-time home 
buyers, that that Housing Trust Fund could be extremely helpful 
in helping us to create some more housing, don't you think?
    Ms. Teague. Yes, I do. Yes, I do.
    Chairwoman Waters. So do you want to thank them for that, 
too?
    [laughter]
    Ms. Teague. Thank you, again. They should also be commended 
on using the Permanent Supportive Housing Program of the 
Housing Trust Fund to try to prioritize those people who need 
supportive housing the most.
    Chairwoman Waters. Okay.
    Ms. Teague. They have worked very hard on identifying the 
most vulnerable homeless people who are most likely to die on 
the streets.
    Chairwoman Waters. Yes.
    Ms. Teague. And they have been providing subsidies and are 
open to prioritizing those individuals for the housing that 
gets financed.
    Chairwoman Waters. At some point, I would like to have a 
roundtable, not a hearing, not a town hall meeting, but a 
roundtable with stakeholders about the homeless in downtown 
L.A. It seems to me that the more I learn about the various 
factions, and the various thinking and philosophies, that we 
have a lot of work to do.
    Yes, ma'am, Ms. Marquez?
    Ms. Marquez. You had raised a question at another panel 
about the balance between shelters.
    Chairwoman Waters. Yes.
    Ms. Marquez. And permanent supportive housing.
    Chairwoman Waters. Yes.
    Ms. Marquez. And, you know, while ultimately no one should 
even be in a shelter, and we should put forward much more of a 
rainbow of what permanent supportive housing is, and because it 
is many things, it is very different levels of service, but at 
this point in the history of Los Angeles we don't have what I 
would call a comprehensive sheltering program.
    So it is not enough to say we are just going to build 
permanent supportive housing if every night we don't have a 
place for people to sleep while they are waiting.
    So we are challenged to do both, like other cities have had 
to do. Eventually, you phase out shelters to a very limited 
number of beds, because you have made such a dent. But we are 
not there yet, so we don't have the luxury of deciding whether 
we should have one or the other. We have to have both.
    And what we really need is a wonderful connector system 
between those folks in the--one, on the streets into the 
shelter, and then from the shelter into the permanent 
supportive housing. We are missing those things.
    Chairwoman Waters. Well, you are absolutely correct, and, 
if so, it is a complicated problem. And one of the reasons it 
is so complicated is too many communities are not willing to 
bear their share--
    Ms. Marquez. That is true.
    Chairwoman Waters. --of sheltering for the homeless. And I 
think that if we had more communities willing to do that, that 
it would not create the kind of concentration that causes so 
much concern, you know, by so many in downtown L.A. We spent 
quite a bit of time there a few days ago, and, you know, my 
daughter was with me. And despite the fact, you know, her 
mother has been doing this kind of work all of her life, and I 
thought she knew everything, she had the audacity to be 
shocked--
    [laughter]
     --at what we experienced, and I said, ``Well, I want you 
to come back, and I want you to bring your son back, and I want 
you to bring people back to see, you know, what we are 
confronted with in downtown L.A.'' It is a problem, and people 
are homeless. They need sheltering, and they need supportive--
permanent solutions to be housed. And the business people have 
a right to be concerned.
    And so it is--one of the things I think that we have to 
really spend some time on is how we can reconcile the 
contradictions of developing downtown, and with all of these 
new lofts and all of this development that is going on, and 
have some permanent supportive housing in that community, and 
also have some sheltering in all other communities.
    So it is a problem, and I want to work on it. I really do.
    Ms. Teague, did you have anything else?
    Ms. Teague. I would like to add that in addition to the 
concentration that your daughter saw, perhaps on Skid Row, 
South Los Angeles has an even greater homelessness problem. And 
this regionalization of the solution is something we are 
working very hard on, and the Corporation for Supportive 
Housing here in Los Angeles, trying to work with some of these 
smaller municipalities around the county to help them start to 
invest in supportive housing.
    I think that the main issue is that our shelter--our 
emergency housing system is clogged, and so now when we see 
more homeless families coming into homelessness for the first 
time, they are being told, as you have heard from previous 
testimonies, ``We are full. We can't take you in.''
    And I think that by creating more permanent supportive 
housing, more permanent affordable housing, and creating those 
linkages between the services system and the housing systems we 
will be able to--service providers will be able to more easily 
move people through that continuum of care into housing to be 
able to help people stabilize their lives more quickly when 
they are suffering from homelessness because of the economic 
downturn.
    Chairwoman Waters. Let me just tell you, and I will tell 
you how I know this, the downtown concentration of homelessness 
is South Central. When I walk through, they say, ``Hey, Maxine, 
how are you doing?'' I know they are from South Central. So 
many of the people in downtown are from South Central, and the 
concentration looks bigger downtown, because you have the Patch 
Park and you have the sheltering services that are 
concentrated. So you see more people.
    Out here what happens is people come out late. The homeless 
come out late at night, and they sleep in Will Rogers--what is 
now the Watkins Park, and other places like that. And then, in 
the morning they are up and kind of roving in the alleys and 
out of sight, and then they are back maybe at night.
    So, but when you go--when you drive through South Central, 
you will see the homeless maybe on the street here and there 
with their carts, and what have you. But you don't see, you 
know, 300 or 400 at one time like you see in downtown L.A. It 
is a problem that we really have to get our arms around. I 
mean, we really have to do this, and I am committed to it.
    And I thank all of you for all of the work that you are 
doing. Thank you so much.
    Ms. Teague. Thank you.
    Chairwoman Waters. We are going to call on our last panel. 
This is Panel four. Ms. Heather Peters, deputy secretary for 
business regulation, Department of Business, Transportation, 
and Housing, State of California. My long-time friend Mr. 
Pastor Herrera, Jr., director of the County of Los Angeles 
Department of Consumer Affairs. It is so good to see you. How 
is the family?
    Mr. Herrera. My best wishes to you from my Mom, 93 years 
old.
    Chairwoman Waters. I shall come see her very soon. I will 
be out for the entire month of April. I think I shall come.
    Mr. Herrera. Thank you.
    Chairwoman Waters. Thank you.
    Mr. Herrera. We appreciate that.
    Chairwoman Waters. Mr. Armando Fraga, the chief lieutenant, 
Los Angeles County District Attorney, Fraud and Corruption 
Division; Ms. Caryn Becker, policy counsel, Center for 
Responsible Lending; and Mr. Christian Abasto, managing 
attorney, Legal Aid Foundation Eviction Defense Center.
    Thank you all for your patience. I am looking out, and most 
of you have been here since the beginning of this hearing. And 
I thank you so very much for that.
    I will start out with Ms. Heather Peters. Please begin.
    Ms. Peters. Thank you very much for having me, Chairwoman 
Waters.
    Chairwoman Waters. Excuse me. No? You are in the wrong 
spot. We promised Ms. Caryn Becker, policy counsel, Center for 
Responsible Lending, that she could be number one, because she 
really does have to leave.
    Thank you.

     STATEMENT OF CARYN BECKER, POLICY COUNSEL, CENTER FOR 
                      RESPONSIBLE LENDING

    Ms. Becker. Thank you. Good afternoon, Chairwoman Waters, 
and subcommittee staff. Thank you for holding this hearing 
today and for inviting me to participate. I do have prepared 
remarks, but I think I could also answer some of the questions 
you had in the previous panel for the Obama plan, so I can do 
it either way. Do you want--should I go through my prepared--
    Chairwoman Waters. No, please, whatever is comfortable. And 
I am certainly interested in us really knowing and 
understanding the plan better. I am still looking at it. Any 
information you could share would be very helpful.
    Ms. Becker. Okay. Thank you. I will go through and I will 
talk about the plan as well.
    Chairwoman Waters. Okay.
    Ms. Becker. In 2007, a record 85,000 California families 
lost their homes to foreclosure. Last year, that number 
skyrocketed to 235,000, and more than 40,000 families in Los 
Angeles County alone lost their homes. The future is continuing 
to look grim. Current information, we have 1 in 10 homeowners 
nationwide who are in or at risk of foreclosure, and nearly 1 
in 5 homeowners who are underwater on their mortgages, 
including 1.9 million in California and 300,000 in Los Angeles.
    On top of this, California faces another wave of defaults 
and foreclosures in the next several years when hundreds of 
thousands of homeowners with payment option ARMs will face 
extreme payment shocks with payment increases of up to 100 
percent, and sometimes even more than that.
    CRL has estimated that 460,000 Californians could lose 
their homes this year, and as many as 1.5 million over the next 
4 years. The flood of foreclosures we are seeing today goes 
beyond the typical foreclosures that we have seen in years past 
that are usually brought on by job loss, divorce, and similar 
instances.
    This current crisis originated in losses triggered by the 
unsustainability of the mortgages themselves, which was brought 
on by a system that has been wrought with misaligned incentives 
that assigned very little value to the quality and 
sustainability of the mortgages. The need to take strong action 
to avoid preventable foreclosures is no longer in doubt. 
Foreclosure prevention benefits not just the parties to the 
mortgage but neighbors, communities, local and State 
governments, the housing market, and the economy as a whole.
    Unfortunately, to date, voluntary loan modification efforts 
have been woefully inadequate, both in terms of numbers and the 
substance of the modifications. The Administration's Making 
Home Affordable Program takes a significant step forward to 
improve both the number and the quality of loan modifications.
    Significantly, the program emphasizes sustainability by 
setting an affordability standard at 31 percent of the 
borrower's income. To date, a large percentage of loan workouts 
have not targeted affordability and have, instead, actually 
increased the borrower's monthly payments, all but guaranteeing 
the failure of that workout. Applying the programs--the 
Administration's affordability standards should reduce 
borrower's payments and greatly increase the success of loan 
modifications going forward.
    I am going to talk now about how the Administration program 
has targeted some of the obstacles that have hindered 
modifications to date, and that sort of goes back to the last 
panel discussion. So, first, the program is addressing 
servicers' misaligned financial incentives. Right now, the 
servicers get--they get paid for foreclosures. It costs them a 
lot of money to do a loan modification, so they really haven't 
had that financial incentive to go forward with them.
    The program addresses this by paying servicers both up 
front for a qualifying loan modification, and also pays them 
over time for a successful loan modification.
    Second, we have all heard about some of the shortfalls in 
staffing at the servicers that have--and you have experienced 
yourself. And we feel like the payments to the servicing 
companies for these modifications can assist them to hire and 
train staff to meet the demand.
    Third, one of the main problems that was touched on in the 
last panel is the risk of investor lawsuits. A lot of these 
loans are owned by investors, and the Administration program 
addresses this in several ways. First, it has called for a safe 
harbor from lawsuits when the modification meets the standards 
of the program, and it also provides incentive payments and 
other insurances to the investors to make a modification more 
appealing to them.
    Additionally, by creating this sort of industry and 
national standard for modification, the program reduces the 
uncertainty and risk, which can often lead to litigation risk.
    Fourth, another structural impediment to many modifications 
has been the existence of second liens. The Administration has 
indicated that they will be announcing a plan to deal with 
these second liens, and I think those details will be important 
as well.
    So while the Administration's plan has tried to address 
each of these obstacles, you know, success obviously remains to 
be seen. Widespread participation by servicers will be 
required, particularly, as we have discussed, for those 
servicing loans held by private label securities, because this 
group accounts only for 16 percent of the outstanding loans, 
but 60 percent of the delinquencies.
    Several other elements will also be important to make the 
plan effective. First, perhaps the most key component of the 
plan is permitting judicial modifications in bankruptcy, and 
this is something that requires legislative action. We applaud 
the House for passing H.R. 1106, which provides this 
authorization.
    The judicial modifications are essential, both because they 
provide greater incentives to the investors and the servicers 
to proceed with modifications on their own, and also by 
providing a last resort for borrowers who aren't able to get a 
modification through this program.
    [The prepared statement of Ms. Becker can be found on page 
78 of the appendix.]
    Chairwoman Waters. Thank you, and I am sorry that we 
couldn't spend more time on this. I know that you have to 
leave. So rather than have you wait through all of the other 
testimony for a question, let me just ask you if you have taken 
a look at the bankruptcy legislation, and if you have looked at 
the requirements that are placed in the legislation prior to 
being able to actually go into bankruptcy, and whether or not 
you think it is too much of a stumbling block to actually get 
in bankruptcy for a modification, or whether or not you think 
those requirements are realistic.
    Ms. Becker. Right. We have supported the version that was 
passed out of the House and the requirements. We feel like it 
is a good balance between really making it a last resort for 
the borrower to go through bankruptcy and providing those added 
incentives for the servicers and investors to agree to a 
modification before the borrower actually ends up in 
bankruptcy.
    Chairwoman Waters. Can you tell me what you understand 
about the asset management portion of this plan? Is this the 
Sheila Bair type loan modification that she has done with those 
banks that she has closed, like IndyMac, where she basically 
writes down interest? I think she may write down principal, 
too, doesn't she?
    Ms. Becker. Yes. I think there is a forbearance.
    Chairwoman Waters. Forbearance?
    Ms. Becker. Right.
    Chairwoman Waters. Okay. So is that what you understand 
about the asset management portion of this money?
    Ms. Becker. What the plan would require would be, first, 
for the servicer to accept the reduction to 38 percent of the 
borrower's income, and then the Administration will share the 
losses and an additional reduction to 31 percent of the 
borrower's income.
    And the way that it is accomplished is largely--will be 
through interest rate reductions down to--I can't remember if 
it is 2 or 3 percent, but there also is--
    Chairwoman Waters. Well, it seems to me that they have to 
go outside of the servicer community as we know it, and that 
they have to spread out the ability to parcel out some of these 
toxic products to others, like folks who do, I don't know, 
money management, etc., etc. Is that your understanding?
    Ms. Becker. I think once it is up and running--my 
understanding is that there will be sort of a streamlined 
program to basically just, you know, run each loan. If a 
servicer signs up, they have to agree to basically run every 
qualified loan through this program. And so some servicers 
already have technology that allows them to do sort of a quick, 
you know, plug-in the numbers and it spits out an answer for 
you.
    So I think, you know, the standards will be set for how to 
determine both whether there is a greater return for the 
investor and, you know, what the affordability is for the 
borrower. You know, I think it can be done in-house.
    Chairwoman Waters. Finally, servicers are not regulated. I 
have asked some of the servicers, particularly those companies 
servicing companies owned by the banks, what the training is, 
how does one get to become a servicer. And while we talk about 
fraud, and some law firms and others just are hanging out a 
shingle and charging people, we need to do something. What do 
we need to do?
    Ms. Becker. Well, we came in earlier on this issue, 
Chairwoman Waters. We supported the bill that you introduced 
last year, and we believe, at a minimum, that a duty between 
the servicer and the borrower is essential. And to realign some 
of these interests, like we have talked about.
    I mean, currently, it is in the servicer's interest to 
foreclose on borrowers and not to seek out alternatives before 
that. So we definitely support strong legislation on that 
issue.
    Chairwoman Waters. Okay. Well, thank you very much, and we 
won't hold you any longer.
    Ms. Becker. Thank you very much.
    Chairwoman Waters. Thank you so very much.
    Now, Ms. Peters.

  STATEMENT OF HEATHER PETERS, DEPUTY SECRETARY FOR BUSINESS 
 REGULATION AND HOUSING, CALIFORNIA'S BUSINESS, TRANSPORTATION 
                       AND HOUSING AGENCY

    Ms. Peters. Thank you, Chairwoman Waters, for having me 
once again before your subcommittee. My name is Heather Peters. 
I am the deputy secretary for business regulation and for 
housing for the State of California, and I also chair the 
Governor's Task Force on Non-Traditional Mortgages.
    Traditionally, one opens testimony before Congress with a 
thank-you to the chair, and to the members. I would like to 
open my testimony with a thank-you to the people who have come 
here today. There are a lot of other things they could be doing 
today, it is a beautiful day in Southern California, yet they 
chose to be here. And I am going to ask each of them to take 
out a pen and a piece of paper if they have it, because I am 
going to ask of them some input and give them some very helpful 
information.
    Now, starting more traditionally, thank you, Madam 
Chairwoman, for your work, tireless work on this, particularly 
H.R. 3221 that created the NSP program that we have heard so 
much of today. Without your leadership, that absolutely would 
not have been part of the bill. I am honored to have the 
ability to implement that in the State of California.
    One thing I want to point out while I have the opportunity 
is Representative Watson was talking about her oversight. And 
one of the things that is so important is transparency right 
now, and that initial allocation of approximately $4 billion 
was very clearly set forth in the statute to take into account 
those in most need.
    California has 27 percent of the foreclosures, and when 
that was implemented by HUD there were additional factors that 
were brought into account that spread the money through the 
Nation. And California only received 14 percent of the funding.
    It was spread throughout the Nation. I was in Washington 
meeting with my counterparts at other States, and they were 
looking at me saying, ``We wish we could give you the money. We 
don't even need it. We don't know what to do with it.'' And 
with all due respect to other States, if you think that 
Glendale doesn't have a problem, I can tell you Wyoming and 
North Dakota don't need the money as much as California does 
either. So we are hoping that in the new funding we are better 
represented.
    I have been asked to come here today to talk about real 
estate scams, and it is a pressing issue for all of us. One of 
the things that is not well-known, and I am glad to have the 
opportunity to publicize here today, is that California has 
very strong laws on the books already against this. It is 
already a crime.
    We have laws that require either a lawyer, licensed lawyer, 
or a licensed real estate broker to be providing these 
services. If you are not one of those, and you are charging 
someone a fee, you are acting illegally. We are working with 
task forces, including the Los Angeles Task Force, the L.A. 
County Real Estate Fraud Task Force, and many Federal and 
regional task forces, to enforce those laws.
    It is a misdemeanor to violate the Mortgage Foreclosure 
Consultants Act, punishable by a year in prison or a $10,000 
fine. It is a misdemeanor to be unlicensed--to do licensed real 
estate work without a license, punishable by 6 months in jail, 
a $20,000 fine for an individual, or a $60,000 fine for a 
corporation. We have worked closely with Attorney General 
Brown's office, and he does charge felonies.
    What we need today is to get the word out that these are 
the laws, and to get our tips in order. At the California 
Department of Real Estate, we currently have over 500 open 
cases which we are pursuing in conjunction with local law 
enforcement.
    But everyone who has their paper out, and their pen, I want 
you to write down this phone number. It is (213) 620-2072. That 
is (213) 620-2072. That is the Los Angeles of the California 
Department of Real Estate. Every time you encounter one of 
those advertisements on the radio, on the telephone, on the 
Internet, I want you to call and report them because we will 
find them, we will track them down, and we will prosecute them.
    Thank you.
    Additionally, we have been very creative. We have gone out. 
We have trained local housing counselors on how to spot this. 
We have trained local law enforcement. We are working very 
closely with the State Bar. It is not just enough for one 
person to have a license, and then hire a call center. Every 
single person providing those services needs to be licensed.
    We have gone out to local foreclosure homeownership fairs, 
and we have pulled the people who are trying to mine the 
audience out and cited them right there. We went and attended a 
seminar where they were trying to recruit additional people to 
do this work. We shut it down immediately, arrested the man who 
was running it, and informed everyone that it was illegal what 
he was doing.
    Just last week we had the Department of Corporation, the 
Department of Real Estate, shut down an operation that in just 
a few months had collected several million dollars in fees. So 
we are very actively seeking this out, but we need your help. 
Please help.
    Additionally, I want to write down a phone number for 
homeowners who may be in trouble. I ask everyone in the 
audience to carry this, ladies, in your purse, gentlemen, in 
your wallet, because you will come across people in your 
neighborhood who need help. It is 888-995-HOPE, 888-995-HOPE. 
Those are free counselors available 24 hours a day to help 
people. No one should ever pay a dollar for consulting. This is 
available through the government.
    Additionally, a member was mentioning oversight. California 
and Governor Schwarzenegger has established a task force. Two 
days ago they announced making sure there is transparency in 
all of the money that is coming to California. The Web site is 
recovery.ca.gov. The task force has existed for 2 days. They 
have already had two meetings. We want to make sure that you 
can see where we are spending the money.
    In closing, I just want to say that there is always a 
silver lining to the darkest of clouds. It is difficult to see 
past the challenges we are facing right now. But when I last 
spoke with you in November of 2007, only 20 percent of 
California families could afford to buy a median-priced home in 
California. Now, unfortunately, we are facing a crisis. The 
good news is that now more than 50 percent of California 
families can afford to buy the median-priced home.
    My goal moving forward is to make sure there is safe 
financing available. Through CAL HFA, we have safe financing, 
and I would implore the chairwoman to please help us work with 
Treasury and HUD to make sure that our housing finance 
authorities receive some of the same support that our banks 
have.
    Thank you very much.
    [The prepared statement of Ms. Peters can be found on page 
208 of the appendix.]
    Chairwoman Waters. All right. Thank you. Thank you.
    Mr. Herrera?

STATEMENT OF PASTOR HERRERA, JR., DIRECTOR, LOS ANGELES COUNTY 
                 DEPARTMENT OF CONSUMER AFFAIRS

    Mr. Herrera. Good morning. I am so happy to be here, 
Congresswoman Waters. It is good to see you again, and thank 
you again for visiting this issue here in Los Angeles. In fact, 
just last month, there were 8,500 notices of default that were 
filed, which comes to about close to 100,000, on an annual 
basis, of people who may be losing their home in L.A. County.
    Definitely, we are in a crisis here, and L.A. County is 
trying to do its best, not only working with everyone here at 
this table, but everyone who has been speaking before you 
today, to make a dent in this problem.
    The Department of Consumer Affairs was created in 1976, 
with basically the role of assisting consumers with fraud, and 
also counseling them and providing them information. And in 
that vein, the Department established a Real Estate Fraud and 
Information Program which serves as the central reporting 
agency for fraud.
    We work with government agencies, community-based 
organizations, many of them that are here today, law 
enforcement, legal services, and industry groups, not only to 
detect but investigate real estate fraud here in L.A. County. 
We accept complaints, we counsel individuals, homeowners and 
consumers, and we do investigations regarding foreclosure 
consultants, as you have mentioned, predatory lending, 
fraudulent recorded documents, many of them are forgeries, and 
refinancing transactions.
    In 2008, we counseled over 37 homeowners just in our Real 
Estate Fraud Information Division, and we have opened over 
1,300 cases for investigation. And the top areas of those 
investigations, as you have mentioned, are basically 
foreclosure consultants, home loan modification facilitators, 
and attorneys engaged in foreclosure consulting, which is a 
very disturbing trend now, because they do contract with a 
third party to supposedly provide assistance, and they charge 
exorbitant fees and people lose their homes.
    I think this is a trend that we are seeing now, and I am 
glad to hear that the Department of Real Estate is really 
looking at these ads, because there needs to be some attention 
paid to that.
    As far as what we are doing for homeowners, this is our 
message to homeowners: If you need help with foreclosure, the 
service is free. You can contact the Department of Consumer 
Affairs, you can contact the home certified counseling 
agencies, and, as mentioned before, the lender. That should be 
the first point of contact.
    And, of course, there is an adage, ``You get what you pay 
for.'' So many homeowners feel that if they pay for the service 
they are going to get better service. Unfortunately, that is 
not true in today's environment. There are services available, 
and if people want to contact our office, here is another 800 
number for them to write down. It is 800-973-3370. And our real 
niche is the fraud investigation. There is a lot of people 
doing counseling, but I think we can do the fraud 
investigations.
    Chairwoman Waters. Can you give the number again?
    Mr. Herrera. Okay. 1-800-973-3370. Outreach and 
collaboration is very important. We have task forces here, we 
have good ways of distributing information.
    As far as our recommendations, we need to really strengthen 
our laws in home lending and disclosures. I mean, that is one 
that is so important for consumers, because most consumers, 
when they do buy a home, they are not knowledgeable of how they 
are going to do or how this process is going to play out.
    We need to look at the current legal provisions for home 
loan foreclosure consultants, and we need to strengthen those, 
and also not exempt attorneys from those provisions. Here in 
Los Angeles we have a notification program where every time 
there is a deed, a trustee or a quitclaim deed, we notify the 
homeowner.
    In a motion by Supervisor Mark Ridley-Thomas, we are 
looking at legislation to add notices of default, so that 
homeowners can immediately get notification that there is help 
and assistance before they contract with the foreclosure 
consultant. And, additionally, we need resources for 
counseling, translations, and just education.
    I thank you for this opportunity, and we look forward to 
working with you in the future.
    [The prepared statement of Mr. Herrera can be found on page 
197 of the appendix.]
    Chairwoman Waters. Thank you so much.
    Mr. Fraga?

  STATEMENT OF ARMANDO FRAGA, CHIEF INVESTIGATOR, L.A. COUNTY 
               DISTRICT ATTORNEY, FRAUD DIVISION

    Mr. Fraga. Good afternoon, Chairwoman Waters, and thank 
you. I appreciate your allowing me to be here today.
    This is our first time here, and I am glad to be here to 
give you the law enforcement perspective. We have been working 
with a lot of these agencies on a task force in Los Angeles 
County for approximately 10 years, and we--fraud has been 
around, especially real estate fraud--this is my third cycle as 
an investigator, as a supervisor, and now as a lieutenant.
    Every time there is an economic cycle like we are in now, 
the crooks come out and they figure out, what is the fraud of 
the moment? Right now, the fraud of the moment is foreclosure 
consultant fraud, home equity sales contract fraud, loan 
modification fraud, and also bankruptcy fraud, to forestall 
foreclosures, but it is not really forestalling anything. It is 
just they are paying these people fees, and they are not doing 
anything for them.
    I think most of us here have already addressed, and prior 
speakers have addressed a lot of the different things, but what 
I want to address is some of the challenges that law 
enforcement face, so you can get that perspective, because I 
think everybody knows the perspective and have seen the 
perspective about what can we do for the foreclosures, you 
know, on the legislative level, and so on.
    But it is a little different from law enforcement and what 
we do, because we are really like the last resort. Prevention 
is huge, I think, and I think we need to do more of that. But 
by the time they get to us, they are in dire straits. They are 
usually already out of their home or about to be out of their 
home, and what can we do? Not a whole lot other than try to put 
these people in prison and investigate the case.
    Right now, since the foreclosure cycle started, you know, 
several years ago, we are receiving thousands of complaints, 
you know, throughout Los Angeles County, just Los Angeles 
County, forget about the State. And there is not enough 
resources for us to investigate this.
    I have a staff of six senior investigators for Los Angeles 
County, and a supervisor. Recently, because of the economic 
cycle, a lot of local law enforcement municipalities and the 
large agencies are curtailing a lot of their investigators and 
detectives working these cases. Why? Because lack of funding 
for their departments.
    So what does that do? That puts the burden more on, you 
know, the Department of Consumer Affairs, the Department of 
Real Estate, the Los Angeles County District Attorneys Office, 
and we have limited resources. Right now, we are in a hiring 
freeze, so we are not allowed to hire anybody, so we are trying 
to just maintain the staff that we have. But the volume of 
foreclosures and the volume of crooks and the volume of 
problems are just getting larger and larger.
    Also, what you need to know about these types of cases, and 
I am sure you do, just knowing in buying a home. It is not an 
easy task to just buy a home, and the stack of papers that you 
have to go through are very, very cumbersome and complex. Well, 
we have to deal with all of those complex papers, and they are 
very labor intensive.
    On the law enforcement side, we not only have to get what 
the victim has been told, and the limited information sometimes 
the victims are given, we also have to get an escrow file, we 
have to get a loan file, we have to get a title file, we have 
to get a broker file, and, quite often, if all these entities 
are involved, which quite often they are, all the files are 
different.
    Another problem that we are challenged with in law 
enforcement, we have to prove this beyond a reasonable doubt. 
We have a very high standard. And, quite often, a lot of these 
organizations, especially a lot of these institutions, 
financial institutions that were handing out these loans that 
shouldn't have been handed out, they are out of business. Some 
of these title companies have gone out of business.
    These appraisers are no longer around. A lot of these 
things are missing. Where do we go? Well, what do you think 
they are going to do? They trash them. That doesn't allow us to 
prove the crime, so how can we prosecute it? So there has to be 
better regulation on how we deal with that paperwork, so law 
enforcement can get it to prosecute them.
    While we want to help a lot of people, I feel terrible for 
all of these people who are here and around Los Angeles County, 
but throughout the United States, that we can't help, because 
up to a certain point we realize that we can't prove it, and we 
have--now we spent all of that time, the valuable resource and 
limited resources we have, and now we can't--I have to decide 
we have to shut it down, we can't prove it, now we need to move 
on to another case.
    That is just horrible. All those regulatory--the 
regulations that we have aren't enough. And there is a lot of 
things that are missing there.
    Let me go on to--and I want to talk to you about tools and 
resources we need. Obviously, the resources we need are 
investigators and prosecutors. Also, the prosecutors in Los 
Angeles County, we have six prosecutors to do all of the 
prosecuting of real estate fraud in Los Angeles County. It is a 
little ridiculous when you look at the numbers that they have 
all brought up about how many were seen coming into Los Angeles 
County.
    There is not enough funding. We need more funding. And, 
unfortunately, economic times what they are, budgets are 
frozen. No one is able to hire more. Also, the expertise in 
those areas, not only to investigate but to prosecute, take 
years to develop. And, you know, when the crisis hits, we 
should already be in front of the curve, not behind the curve.
    So even if we were to bring people in today, investigators 
and prosecutors, it takes a while for them to learn how to 
prosecute, how to investigate this. So that is an issue.
    I think the outreach programs, I have been to several, and 
I have participated in them, those are tremendous. Although 
people say get on the Internet, do this and that, a lot of 
our--the people that are victims don't have access to that, 
because they have limited funds to begin with, so they don't 
have funds to pay for the Internet. That is why these community 
outreach programs are tremendous of value to them, like, you 
know, right now a lot of the people that are here are hearing 
this probably for the first time.
    We should get out there more often, as often as we can, 
weekly, you know, at a minimum and continue to do that, because 
that is how we educate people to prevent them from being a 
victim of fraud.
    And greater regulatory oversight I think is on all levels--
the appraisers, the loan brokers--the underlying factor on all 
this stuff, and I have seen it, because I have been in law 
enforcement now 29 years, is greed. Where there is money, these 
crooks are going to go after it. And they go to where the crime 
of the moment is.
    We have to be smart enough as, you know, you are in 
Congress, we are here as, you know, in the civil and in the 
criminal end, to move along with whatever the crime of the 
moment is, and adapt to it, not wait until we are too far 
behind and then we are not effective.
    [The prepared statement of Mr. Fraga can be found on page 
176 of the appendix.]
    Chairwoman Waters. Thank you. And you touched on something 
that my staff is trying to spend a lot of time on, to see what 
we can do, and hopefully we can get more help in this area.
    Mr. Fraga. Thank you.
    Chairwoman Waters. Thank you.
    Mr. Abasto?

 STATEMENT OF CHRISTIAN ABASTO, MANAGING ATTORNEY, HOUSING AND 
  EVICTION DEFENSE UNITS, LEGAL AID FOUNDATION OF LOS ANGELES

    Mr. Abasto. Good afternoon, Chairwoman Waters.
    Chairwoman Waters. Good afternoon.
    Mr. Abasto. Thank you for the invitation to testify 
regarding the housing crisis in Los Angeles. My name is 
Christian Abasto. I am the managing attorney of the Housing and 
Eviction Defense Units of the Legal Aid Foundation of Los 
Angeles.
    Chairwoman Waters. Speak up and speak right into the 
microphone, please. They can't hear you in the back.
    Mr. Abasto. I will speak up louder.
    Chairwoman Waters. Okay.
    Mr. Abasto. My name is Christian Abasto. I am the managing 
attorney of the Housing and Eviction Defense Units of the Legal 
Aid Foundation of Los Angeles.
    I have been practicing housing law in Los Angeles for over 
10 years. Behind me is Mr. Bill Flanagan, who is an expert in 
litigating foreclosure and predatory lending scams, and loan 
modifications, in case the chairwoman has questions that I 
cannot answer.
    The Legal Aid Foundation of Los Angeles is the frontline 
law firm for poor and low-income people in this area. For 80 
years, LAFLA has been providing critical legal services in this 
community. There are five points I would like to make with my 
testimony.
    First, our low-income clients are being slammed by both the 
economic crisis and the foreclosure crisis. Lenders are not 
willing to enter into reasonable loan modifications with people 
in foreclosure. To address this problem, bankruptcy judges must 
be given the authority to modify loans to make them affordable, 
so that homeowners can stay in their homes.
    Second, because of the foreclosure crisis, scammers are 
targeting homeowners and renters with schemes designed to steal 
their money. Third, the foreclosure crisis has caused an 
increased number of unjust evictions. Fourth, the Federal 
Government must ensure that Section 8 voucher tenants receive 
the same protections, rent control protections, as other 
tenants have under State or local law.
    Fifth, Congress and our local leaders must find a way to 
prevent and cure the significant blight that the mass 
foreclosure-related evictions are causing in our neighborhoods.
    In response to the growing number of foreclosures, our 
Consumer Unit restructured its intake process to prioritize 
this crisis. In 2009, as of mid-March, LAFLA has assisted 760 
persons and is litigating 38 homeownership foreclosure cases in 
Federal and State court.
    One example that has been already discussed that we have 
seen is the foreclosure rescue scam. The scammer approaches 
people in foreclosure, offers to stop the foreclosure, takes 
their money, and does nothing.
    Another version of that scam that we have not heard today 
affects tenants and is caused by the abundance of vacant 
foreclosed homes in low-income neighborhoods. The scammer 
approaches people desperate for affordable housing, offers them 
one of the vacant foreclosed homes that they don't own, takes 
their money, and then the bank shows up later and throws them 
out.
    In 2008, the Housing and Eviction Defense Units counseled 
over 7,000 persons. We provided full representation for 428 
families in unlawful detainers, Section 8 administrative 
hearings, and affirmative lawsuits. Our legal representation 
netted over $1.4 million in monetary compensation for our 
clients, and the preservation of 222 rental units.
    We have seen a significant increase in unjustified 
evictions by banks of tenants in rent-controlled properties. I 
think as was discussed earlier, rent control ensures that 
tenants in these units cannot be evicted without good cause. 
However, because of ignorance or bad faith, some banks target 
these tenants and harass them into moving out of their homes, 
in violation of the law. The best solution to this problem is 
legal representation for these tenants. The banks are very 
quick to back off when a lawyer shows up against them in court 
or writes them a letter.
    Section 8 voucher tenants are also suffering, and this is 
actually related to a point that Chairwoman Waters already 
brought up--preemption. Some courts have found that our local 
rent control protection laws are preempted by Federal 
regulation. Therefore, Congress needs to clarify that Section 8 
voucher tenants have the same protections as regular tenants, 
have the same rent control protection and the same eviction 
control protections as any other tenant in Los Angeles.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Abasto can be found on page 
60 of the appendix.]
    Chairwoman Waters. Well, thank you very, very much.
    Let me just say to this panel that you have offered us 
valuable information relative to this question of fraud that is 
basically information that has not reached the public policy 
arena in Washington yet. We have dealt in this committee with 
FHA and those fraudulent loan initiators, some of whom have 
gone to prison, come back, and go out and start all over again. 
And we have stepped up to the plate on that, but we need to do 
a lot more. And I am certainly instructed by what I am hearing 
here today.
    Ms. Peters, I want to ask you a question. These loan 
modifications that are brought by attorneys or mortgage 
brokers, under California law, it seems that they are allowed 
to charge a fee. However, many of them guarantee, as has been 
said so many times here today, a loan modification or charge 
up-front fees equal to the amount of the loan value. Some 
require borrowers to pay even when they don't provide a 
modification.
    Can the State perhaps just disallow or stop charging a fee? 
Can they make that illegal in some way? We had a couple of 
legislators here today who, you know, I think I might follow up 
with. But from the Governor's office, has this been looked at?
    Ms. Peters. Well, thank you for the question. It is very 
important. Right now, you can legally charge a fee if you are 
an attorney acting within the scope of that license, or if you 
are a real estate broker. However, you cannot, as a real estate 
broker, charge an up-front fee unless you have had a written 
fee agreement reviewed by the Department of Real Estate. And 
even if you have that, if a notice of default has been filed, 
it is already illegal to charge an up-front fee.
    And what we see is that, you know, the notice of default is 
filed, the scam artists pick it up from the courthouse, and 
call up. That is already illegal, and that is what we are 
cracking down on.
    Chairwoman Waters. Is there some kind of presumption that 
this is in the scope of a lawyer's license?
    Ms. Peters. No, I don't believe there is. The State Bar 
would be--
    Chairwoman Waters. Can we just declare that through law, 
that it is not?
    Ms. Peters. We very well might be able to.
    Chairwoman Waters. Will you take a look at that?
    Ms. Peters. I will.
    Chairwoman Waters. Because I think that before we are able 
to get at it at the Federal level, national level, I think 
States can start to do this. And that is one way of looking at 
it, whether or not you can declare this to be outside of the 
attorney's scope of license.
    Ms. Peters. Yes. We work very closely with the State Bar, 
and I promise you I will follow up.
    Chairwoman Waters. Take a look at that. I would appreciate 
it very much.
    Ms. Peters. Additionally, Madam Chairwoman--
    Chairwoman Waters. Yes.
    Ms. Peters. --you were asking for details about the Obama 
plan.
    Chairwoman Waters. Yes.
    Ms. Peters. While people have their pens out, the Obama 
Administration actually has a very user-friendly Web site where 
a homeowner can go and answer questions, click here if this 
applies, click there, and automatically find out if they 
qualify.
    I don't have that direct link, but you can get to it 
through our Web site, www.yourhome.ca.gov. That is 
www.yourhome.ca.gov, or, in Spanish, www.sucasa.ca.gov. And you 
look for the little red, white, and blue icon. There are red 
and blue houses on the right-hand side. And it is very user-
friendly, and it will get you to a HUD-approved counselor, 
regardless of the outcome. Whether you qualify or not, there 
are lots of other programs that can help.
    Chairwoman Waters. All right. The staff just gave me a note 
that the Web site is www.makinghomeaffordable.gov.
    Ms. Peters. Thank you.
    Chairwoman Waters. Okay. Thank very much.
    Let me just ask Mr. Herrera and Mr. Fraga, based on the 
difficulties that you are confronted with, what you just 
described is maddening, Mr. Fraga, in terms of not being able 
to really do anything for people. By the time they get to you, 
they have paid money, they have been--the scheme has worked, 
basically. And here you are with six attorneys, or whatever, 
dedicated to trying to deal with this in all of the county.
    Do you refer them--you have no legal place to refer them, 
is that right?
    Mr. Herrera. We often do still, you know, we try to, you 
know, assist them with, you know, the Department of Consumer 
Affairs if--
    Chairwoman Waters. But you don't go into court on their 
behalf, do you?
    Mr. Herrera. No, we don't. We work with the prosecutory 
agency, the Attorney General, the District Attorney, or--
    Chairwoman Waters. But you need the attorneys to develop 
the case and to do the investigation and to come up with the 
information that will help you win. This is what you would do, 
Mr. Abasto, if you had all of the resources to do it, isn't 
that right?
    Mr. Abasto. Yes, Madam Chairwoman. We have the same problem 
as the District Attorney. We don't have enough resources to 
meet the demand.
    Chairwoman Waters. As I recall, and staff can give you some 
assistance here, I think the chair of our Financial Services 
Committee attempted to write into--to help homeowners who 
attempt to get a modification, and it is discovered that they 
didn't even sign the document, that the median income has been 
falsified, etc.
    We see it there, but then nobody does anything about it, 
because the servicer does not look at that. The servicer is 
there to determine whether or not a loan modification should be 
given.
    So what we need to do is try and give some support to Legal 
Aid or to--two things I am getting out of here today. Yes, Mr. 
Abasto?
    Mr. Abasto. And one very important point. We could write 
all the laws that we want, but the low-income people need 
lawyers to represent them to enforce those laws.
    Chairwoman Waters. Well, that is what I am getting at.
    Mr. Fraga. And it probably goes further than that, is that 
the laws that we currently have are inadequate to really put 
these people away for a longer prison sentence. Like you 
mentioned earlier yourself, a guy goes in, comes out, does it 
again, comes in, comes out, and they are not going to be 
licensed. None of these crooks that--at least we have 
investigated and we prosecute, none of them are licensed. They 
may have been licensed at some point, but the crooks aren't 
going to be licensed. They are not going to care about the 
regulations and about the licensing. That is just the way it 
is.
    And right now, we are hitting them also from our--on our 
consumer side, Consumer Protection Division. On the civil side, 
predatory lending, we are going to have to do it civilly, 
because the level of proof is much less than beyond a 
reasonable doubt. We also are going after assessors.
    There are assessors. Right now people are trying to get 
their properties reassessed, and now that we have a lot of 
crooks out there, they are saying that they can do it. Even 
though the county can do it free, they send it out, making it 
look like it is an official county document or State document, 
and they are saying that it is $179 or something like that. And 
if you don't it in 30 days, you are going to be charged a late 
fee.
    These people don't know--a lot of them were paying it. We 
are going after them, too, out of our consumer protection on 
the civil side. So these crooks are looking for things of the 
moment, and you just can't believe some of the stuff that is 
out there. But we--
    Chairwoman Waters. Do we need some criminal penalties?
    Mr. Fraga. We need some criminal penalties on this stuff. 
And then, the ones that we have, like I think Ms. Peters 
mentioned, the loan modification--okay, it is great that that 
there is legislation, it is great that there is law also on the 
foreclosure consultant fraud stuff, too, as well. But they are 
misdemeanors, or they are misdemeanors to a law or a felony.
    Well, that doesn't do anything for us. I can't even touch 
those, because we don't prosecute misdemeanors in the District 
Attorney's office.
    Chairwoman Waters. Okay.
    Mr. Fraga. We don't investigate those.
    Chairwoman Waters. We will take a look at that, too.
    Mr. Fraga. But another thing that I wanted to mention to 
you is, if I could, is we need to improve the manner and 
verification of which we accept records at the County 
Recorder's office, at the Registrar Recorder's. It is too easy 
for somebody to go in there and file a document with no 
verification. That is ridiculous.
    Anybody can go in there--I can go in there today and file a 
reconveyance on your property that your property is fully 
reconveyed, and there is nobody that is going to verify it. I 
can record anything.
    Chairwoman Waters. Has this ever been discussed at the L.A. 
County?
    Mr. Fraga. I don't know. I am just bringing it, because you 
asked us for what things do we need.
    Chairwoman Waters. Yes.
    Mr. Fraga. I am telling you this is something we need.
    Chairwoman Waters. Mr. Herrera?
    Mr. Herrera. Through the home notification program, if 
there is a reconveyance of grantee deed of trust or quitclaim 
deed, you know, that recorded document has to be sent to the 
homeowner. And that has been really very, very effective. We 
are now talking to enhance that, to include the notices of 
default, because we know there is the fraud there.
    I just wanted to make a comment. One of the things, of 
course, that we see is many homeowners, they are so frustrated, 
so overwhelmed by this problem, they forget that they can also 
complain. And they forget about complaining to agencies, such 
as ours or the district attorney or whatever agency they can 
come to. So we really need to get the word out that they need 
to complain so that people could take action.
    And, hopefully, you know, by being here today and by the 
community representatives here, they will get the word out that 
is very much needed. And we do need the resources to do the 
investigations, because that is the basis, so that we can work 
with the District Attorney to--
    Chairwoman Waters. Well, this information is very, very 
helpful.
    Mr. Fraga. And what they are doing in terms of the notices 
that go out is great, having the notice of default, but there 
are a lot of other documents that aren't even included. I mean, 
we can go in and change it so now I am the new owner, and you 
are never going to know, and now everything is coming to me, 
the crook. So that notice is valuable. I am not saying it is 
not.
    But there are those crooks that are a lot smarter, and they 
are going to make sure that that notice is going to come to me, 
the crook, not the real homeowner. So we have to do a little 
bit better there.
    Chairwoman Waters. I asked Attorney General Jerry Brown, 
who was our first witness here today, if he was willing to look 
at criminal penalties. And he is not only dedicated to 
aggressively using his office, he said he will certainly look 
at employing a criminal penalty. So I want to work with you.
    Mr. Fraga. One last thing I wanted to say before--sorry to 
interrupt you--is just restrict access to real estate--I know 
it is public record, right?
    Chairwoman Waters. Yes.
    Mr. Fraga. But you have to restrict access to those public 
records, because what the crooks are doing, there is companies 
out there that you pay them a $100 fee or a $150 fee and they 
will--and every day they will still download you the list of 
all the people that are in foreclosure, just like a salesman. 
So they go out, they have all the addresses, they start 
knocking on doors, and they are working on numbers.
    If we stop that, where access is only on a right-to-know 
and a need-to-know, you know, to title companies, people that 
are really in that field, rather than just anybody, Tom, Dick, 
or Harry, we would be better off. Restricting the access to 
those records is important.
    I mean, when they want to request something from the 
District Attorney's office, we have the Public Records Act that 
we have to deal with, right? They have to make an official 
request, and so on. Why do we make it so easy for the crooks to 
just get the list of--anybody can go online and see what you 
owe and what you own. That is ridiculous.
    And then, they will steal your identity, steal the 
information, and they will start doing things on your property. 
And even if you get the notices in the mail, you are already a 
month or two behind.
    Chairwoman Waters. Thank you. We will take a look at all of 
that, working with the county and the State.
    Before you leave, Ms. Peters, in Federal law, I think we 
dealt with the licensing of real estate brokers. Now, does that 
cover the State, all of the State? So we will have no more 
Countrywides, where you have one licensed broker, in a bank 
like Countrywide was, who licensed, then, all of their loan 
initiators. That won't happen anymore.
    Ms. Peters. Well, not exactly. The State will still 
regulate an entity like that. However, everyone who is touching 
that file needs to be licensed and properly identified in a 
national database.
    Chairwoman Waters. So there will not be any brokers on the 
street who are not individually licensed, is that right?
    Ms. Peters. They will be individually registered. They will 
be subject to education requirements. They will be subject to 
background checks, which in California they always have been. 
But now every individual will be registered nationally. They 
may not be individually licensed, but they will be individually 
registered.
    Chairwoman Waters. I think our Federal legislation called 
for licensure? Do you have two different agencies--
    Ms. Peters. Yes.
    Chairwoman Waters. --that are licensing still?
    Ms. Peters. Yes.
    Chairwoman Waters. So what is the difference between the 
registration and the licensing?
    Ms. Peters. Right. We are working right now with the 
legislature to implement the Federal legislation and level that 
playing field across the licenses. So we are working with our 
legislators to--
    Chairwoman Waters. Do we need to follow up on this?
    Ms. Peters. No, we will absolutely comply with Federal law. 
We are working on it right now, and its bill, in this 
legislature currently.
    Chairwoman Waters. Thank you all so very much for being 
here with us today. The Chair notes that we may have members 
who have additional questions for this panel, which they may 
wish to submit in writing. Without objection, the hearing 
record will remain open for 30 days for members to submit 
written questions to these witnesses, and to place their 
responses in the record.
    Thank you for being here today.
    We also--before we adjourn, the written statements of the 
following organizations will be made part of the record at this 
hearing: community leaders submitting written testimony, all of 
them, the USC students, etc., etc., will all have their written 
statements entered into the record. Is that sufficient?
    Thank you very much. This subcommittee is adjourned.
    [Whereupon, at 1:25 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             March 28, 2009


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