[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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48-876 PDF WASHINGTON : 2009
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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
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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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