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



 
                     THE ROLE OF NEIGHBORWORKS AND
                   HOUSING COUNSELING INTERMEDIARIES
                       IN PREVENTING FORECLOSURES

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

                                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

                               __________

                              MAY 13, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-30


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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

                              ----------                              
                                                                   Page
Hearing held on:
    May 13, 2009.................................................     1
Appendix:
    May 13, 2009.................................................    47

                               WITNESSES
                        Wednesday, May 13, 2009

Bowdler, Janis, Associate Director, Wealth-Building Policy 
  Project, National Council of La Raza (NCLR)....................    28
Hasegawa, Lisa, Executive Director, National Coalition for Asian 
  Pacific American Community Development (National CAPACD).......    24
Hernandez, Colleen, President and Chief Executive Officer, 
  Homeownership Preservation Foundation..........................    21
Keating, Susan C., President and Chief Executive Officer, 
  National Foundation for Credit Counseling (NFCC)...............    23
Richardson, Cy, Vice President, Housing and Community 
  Development, National Urban League.............................    27
Wade, Kenneth D., Chief Executive Officer, Neighborhood 
  Reinvestment Corporation (now doing business as NeighborWorks 
  America), accompanied by Jeannie Fekade-Sellassie, Program 
  Administrator, National Foreclosure Mitigation Counseling 
  Program........................................................     6

                                APPENDIX

Prepared statements:
    Bowdler, Janis...............................................    48
    Hasegawa, Lisa...............................................    58
    Hernandez, Colleen...........................................    69
    Keating, Susan C.............................................    79
    Richardson, Cy...............................................    85
    Wade, Kenneth D..............................................   102

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Charles Wehrwein, President, Housing 
      Partnership Exchange, The Housing Partnership Network......   160


                     THE ROLE OF NEIGHBORWORKS AND
                   HOUSING COUNSELING INTERMEDIARIES
                       IN PREVENTING FORECLOSURES

                              ----------                              


                        Wednesday, May 13, 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 2:05 p.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Waters, Cleaver, Green, 
Clay; Capito, Biggert, Neugebauer, Marchant, Jenkins, and Lee.
    Chairwoman Waters. Good afternoon, ladies and gentleman. I 
would like to thank Ranking Member Shelley Moore Capito and the 
other members of the Subcommittee on Housing and Community 
Opportunity for joining me for today's hearing on, ``The Role 
of NeighborWorks and Housing Counseling Intermediaries in 
Preventing Foreclosures.''
    According to the Center for Responsible Lending, there have 
been over 77,000 new foreclosures since the beginning of this 
year. The Center estimates that by the end of this year, 2.4 
million foreclosures will have occurred, with 9 million 
projected over the next 4 years.
    We know that we have to do more to not only prevent 
foreclosures, but also to ensure that the loan modifications 
and repayment plans provided to borrowers are sustainable over 
the long term.
    Nonprofit housing counselors can play an important role in 
this regard. However, many of these counselors face significant 
challenges in assisting homeowners. In spite of the mortgage 
servicing industry's claims that they are modifying more loans, 
housing counselors are still encountering uncooperative and 
unresponsive mortgage servicers.
    In fact, according to NeighborWorks' own research, 
counselors have reported that they face significant challenges 
in dealing with servicers.
    Specifically, they report that servicers are generally 
uncooperative, take at least 45 days to respond to requests, 
appear to be understaffed and overworked, and frequently lose 
documents.
    While the Making Home Affordable Program is a good start, 
it is clear that unless servicers are required to engage in 
loss mitigation, the rate of foreclosures will only continue to 
increase. Given the obstacles faced by housing counselors, it 
is important that they have the resources they need to assist 
struggling homeowners. Unfortunately, that is often not the 
case.
    In spite of the $410 million this Congress has provided for 
the NeighborWorks National Foreclosure Mitigation Counseling 
Program, adequate and equitable distribution of that funding 
remains the major concern of the national housing 
intermediaries whose affiliates provide the bulk of this 
counseling.
    These intermediaries have raised several concerns about how 
NeighborWorks' system for providing funding is impacting their 
ability to provide much-needed counseling services to 
homeowners. While I understand that funding is limited, it 
seems that some of NeighborWorks' decisions on what to fund and 
how to fund it could be having impacts on the level of 
counseling received by homeowners.
    Specifically, I'm concerned about the seeming over-reliance 
of NeighborWorks on Level 1 counseling. This is counseling that 
consists of intake and developing a budget for the homeowner.
    This type of counseling does not actually include getting a 
loan modification, or repayment plan for the services. However, 
this type of counseling makes up 69 percent of all counseling 
performed.
    Level 2 and Level 3 counseling, by contrast, are more in-
depth and more hands-on. These are the kinds of counseling 
typically performed by some of the intermediaries who will be 
testifying later on today.
    Given the rising rates of foreclosures, I'm interested to 
hear from our witnesses why Level 1 counseling constitutes such 
a large percentage of the counseling provided.
    I'm also aware of several reimbursement issues that are 
causing difficulties for counseling intermediaries.
    For example, the number of duplicate homeowners requesting 
housing counseling services has frequently been pointed to by 
intermediaries as a leading cause for why they are underfunded. 
Duplications occur when the same homeowners contact different 
counseling agencies to receive help with their mortgages. 
However, only one housing counseling agency can receive 
payment.
    While I understand NeighborWorks' concern about the need to 
restrict funding for duplicates, there are several legitimate 
reasons why a homeowner may contact several different housing 
counseling agencies.
    First, the homeowner may have received insufficient 
counseling from one agency and is trying to procure counseling 
that is more suited to his or her needs.
    Second, the homeowner may have obtained a loan modification 
or repayment plan that was unsustainable, and may be in need of 
a new workout.
    Another reimbursement issue is that amount of funding 
provided for these housing counseling activities.
    Level 1 counseling has a lower reimbursement rate of $150 
for homeowners than Level 2, $250, or Level 3, $350 counseling.
    However, according to some of the intermediaries testifying 
today, these rates fall well short of the true cost of 
providing counseling, which actually lies between $750 and 
$1,000.
    While some intermediaries receive direct funding for 
mortgage services, and can absorb the shortfall, others cannot. 
This is an important point.
    Again, I look forward to hearing the witnesses' views on 
these very important issues.
    I would now like to recognize our ranking member.
    I'm sorry. Ranking Member Capito is ranking to Mrs. 
Biggert, but because Mrs. Biggert has another appointment she 
has to take, I will recognize her for 3 minutes.
    Mrs. Biggert. I thank the chairwoman, and I thank the 
ranking member for yielding to me, and I would also like to 
thank Chairwoman Waters for holding today's hearing and for her 
dedication to the issue of housing counseling, which I have 
been working on for it seems like many, many years.
    Most Americans can benefit from housing counseling, a kind 
of financial literacy that builds a financial foundation so 
that families can succeed as homeowners. Counselors are at the 
front lines of our Nation's housing crisis. They can help 
homeowners into a loan that best meets their budget and needs, 
steering them away from possible foreclosure down the road.
    To that regard, I would like to thank NeighborWorks and all 
of their housing counseling affiliates who have been 
spearheading efforts to help homeowners across the country keep 
their homes. Thank you.
    For the record, I would also like to thank DuPage and Will 
County of Illinois housing counselors, who put in long hours to 
help my constituents. The work of our counselors is vital to 
our housing recovery and the future of homeownership.
    Recently, for the third time, and as Title 4 of H.R. 1728, 
the House passed my bill, the Expand and Preserve Homeownership 
Through Counseling Act.
    The bill elevates housing counseling within HUD by 
establishing an office of housing counseling that expands the 
availability of HUD-approved housing counseling services, 
offers grants to State and local agencies, and launches a 
national outreach campaign.
    It requires HUD to consider appropriate ways, such as 
through technology, to streamline and improve the housing 
counseling grant process--review, approval, and award 
processes.
    The goal is to lighten the paperwork burden on counseling 
agencies, especially smaller agencies, so that they can devote 
more time and resources to counseling the homeowners.
    In that regard, I'm interested in learning about how 
NeighborWorks could partner with such an office at HUD and 
implement similar streamlining efforts. To meet the current 
unprecedented demand, we need our counselors to have the 
resources and technology available to devote time to counseling 
homeowners versus unnecessarily filling out forms.
    At the same time, the counseling agencies should be able to 
easily implement transparency measures to ensure that housing 
counselors are effectively utilizing time and resources to 
provide housing counseling to our constituents.
    In conclusion, I look forward to working with my colleagues 
on the committee, as well as the groups represented here today, 
to strengthen the housing counseling efforts across the 
country.
    With that, I yield back, and I thank you.
    Chairwoman Waters. Thank you very much.
    Mr. Cleaver, for 2 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. Thank you very 
much for calling this hearing to deal with, ``The Role of 
NeighborWorks and Housing Counseling Intermediaries in 
Preventing Foreclosures.''
    This is unquestionably the most significantly depressed 
moment in U.S. history economically, since October of 1929, 
which launched the beginning of the Great Depression. This is 
the Great Recession, and each time unemployment rises, we can 
expect a corresponding rise in the number of foreclosures.
    And if we're going to have this kind of a problem, we have 
to make sure that the efforts by the U.S. Government to fix the 
problems do, in fact, provide remedy.
    I do understand that intermediaries have some concerns 
about how NeighborWorks distributes funds and how much is paid 
out for services rendered, and so I am anxious to hear our 
witness, Mr. Wade, today, delve into these issues.
    And Madam Chairwoman, I yield back the balance of my time.
    Chairwoman Waters. Thank you very much.
    I will now recognize Ms. Capito, our ranking member.
    Mrs. Capito. Madam Chairwoman, thank you for holding this 
hearing to assess the effectiveness of the counseling programs 
funded by the Neighborhood Reinvestment Corporation, or 
NeighborWorks, as it is now called. NeighborWorks provides a 
wide range of housing and economic services to primarily low- 
and moderate-income people.
    This could include homeownership counseling and 
construction rehab, multi-family housing production, and 
management and economic development, and there are 236 of these 
partnerships operating in thousands of communities in all of 
the 50 States, Puerto Rico, and the District of Columbia.
    All of them are independent, tax-exempt, community-based, 
nonprofit entities and use the NeighborWorks funds to leverage 
other private and public funding to achieve their mission.
    While NeighborWorks has traditionally provided housing 
counseling to home buyers and homeowners, in 2005, 
NeighborWorks turned its focus to the growing number of 
mortgage loan borrowers facing foreclosure by creating the 
NeighborWorks Center for Foreclosure Solutions.
    In 2007, Congress created the National Foreclosure 
Mitigation Counseling Program, and NeighborWorks was tasked 
with its administration.
    During the Bush Administration, NeighborWorks received $380 
million through Fiscal Year 2008, and shortly after the Obama 
Administration took over, President Obama announced his plan to 
help troubled borrowers facing foreclosure. Congress 
appropriated an additional $50 million for NeighborWorks in 
Fiscal Year 2009 in the omnibus bill.
    Counseling is an important tool in helping potential 
homeowners understand the homeownership process and where they 
are in the process. It can also help troubled borrowers facing 
foreclosure due to the loss of a job, unexpected health 
problem, or other life event creating financial hardship.
    NeighborWorks received over $410 million in counseling 
funds over the last 2 years, and I think it's important that 
Congress conduct the appropriate oversight over these programs 
to make sure the money is being used for its intended purpose, 
and specifically that funding recipients are using the funds in 
an efficient and effective manner.
    Thank you again for holding this hearing. I look forward to 
the witnesses' testimony.
    Chairwoman Waters. Thank you very much.
    Mr. Green, you are recognized for 2 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chairwoman, I would like to associate myself with 
your comments. I think you spoke eloquently on this subject. 
And I would like to focus for a moment on the servicers.
    Madam Chairwoman, we have had hearing after hearing wherein 
the servicers have been pointed to as a source of a bottleneck 
in the process, and I am eager to hear more about this, because 
I have intelligence indicating that--as you have mentioned--it 
takes servicers 45 to 60 days or more to routinely give a 
response.
    I'm also concerned about different representatives from 
servicers giving different responses and different solutions, 
about the documentation that allegedly is being lost, about 
refinancing that is not affordable to the borrowers, and about 
the fact that modifications are often a lot less than repayment 
plans are offered.
    Many persons are upside down, and the economy and the 
housing crisis has contributed to this, and many of these 
persons can benefit from servicers that are willing to benefit 
from many of the laws that we have passed here in Congress so 
that they can help persons to make modifications such that they 
can stay in their homes.
    So again, I associate myself with your comments, and I'm 
eager to hear more about what the servicers should be doing and 
what they actually are doing.
    I will yield back the balance of my time. Thank you.
    Chairwoman Waters. Thank you very much.
    Mr. Marchant, for 1 minute.
    No? All right.
    Mr. Neugebauer?
    No? No opening statement?
    Mr. Clay, for 1 minute.
    Mr. Clay. Thank you, Madam Chairwoman, and thank you so 
much for calling this hearing today.
    Hopefully, we can get to some of the systemic causes of 
this foreclosure crisis.
    Now, we just got recently released data in the last week 
that tells us that African Americans, Hispanic Americans, 
people of color, were twice as likely to be pushed into 
subprime loans when they didn't necessarily have to have those 
subprime loans.
    So because of that was that now they are twice as likely to 
be going through foreclosure, when they didn't have to be.
    And so hopefully, this hearing today will be an airing of 
those circumstances, what caused people to go into foreclosure, 
and how we can prevent that from ever happening again.
    Madam Chairwoman, I yield back, and thank you for the 
opportunity.
    Chairwoman Waters. Thank you very much.
    And at this time, I'm pleased to welcome our distinguished 
first panel. Our first witness will be Mr. Ken Wade, the chief 
executive officer of NeighborWorks America.
    I want to thank you for appearing before the subcommittee 
today, and without objection, your written statement will be 
made a part of the record. You will now be recognized for a 5-
minute summary of your testimony.

    STATEMENT OF KENNETH D. WADE, CHIEF EXECUTIVE OFFICER, 
 NEIGHBORHOOD REINVESTMENT CORPORATION (NOW DOING BUSINESS AS 
     NEIGHBORWORKS AMERICA), ACCOMPANIED BY JEANNIE FEKADE-
    SELLASSIE, PROGRAM ADMINISTRATOR, NATIONAL FORECLOSURE 
                 MITIGATION COUNSELING PROGRAM

    Mr. Wade. Thank you, Chairwoman Waters.
    I am pleased to be able to be here before the committee and 
Ranking Member Capito, to highlight the successes of 
NeighborWorks America's efforts in the foreclosure mitigation 
area, and particularly NeighborWorks' efforts to administer the 
National Foreclosure Mitigation Counseling Program.
    Given the limited time, I will be brief in my oral remarks, 
allowing for ample opportunity for committee members to ask 
specific questions, but my written testimony does include an 
extensive program overview and information in response to a 
series of questions that we did receive from the committee.
    So in my oral remarks, I'll provide a brief background on 
NeighborWorks America, touch on some of our broader efforts to 
address the current foreclosure crisis, and then focus the 
remainder of my statement on discussing the National 
Foreclosure Mitigation Counseling Program.
    I do also have with me the person who administers that 
program on a day to day basis, Jeannie Fekade-Sellassie. She's 
right behind me here. And I may from time to time turn to her 
for responses that might be more detailed and would require me 
to consult with her.
    NeighborWorks America, as you know, was established in 1978 
by Congress. We receive an annual appropriation from the 
Transportation, Housing and Urban Development, and Related 
Agencies Appropriations Act.
    Our board of directors is made up of representatives of the 
Federal financial regulatory agencies--the Federal Reserve 
Board, the Federal Deposit Insurance Corporation, the 
Comptroller of the Currency, the Office of Thrift Supervision, 
and the National Credit Union Administration, along with HUD.
    The primary mission of our organization is to extend 
affordable housing opportunities, both rental and 
homeownership, and to strengthen distressed urban, suburban, 
and rural communities across America.
    Much of our work is carried out through the NeighborWorks 
network, which is comprised of 235 affiliated community-based 
organizations serving more than 4,500 urban, suburban, and 
rural communities in all 50 States, Puerto Rico, and the 
District of Columbia.
    With the growing foreclosure crisis, NeighborWorks America 
expanded its efforts on behalf of the Nation's neighborhoods. 
Throughout our history, we have had an opportunity to support 
community-based practitioners as they work to improve their 
communities; and because of our work and presence in those 
communities, we were an early leader in calling out the growing 
problem of foreclosures.
    We started the NeighborWorks Center for Foreclosure 
Solutions more than 5 years ago. We have been a national leader 
in training and certifying foreclosure counselors. We have 
convened groups to establish the national industry standards 
for housing and foreclosure counseling.
    We have supported local and Statewide foreclosure 
coalitions in areas that have been hard-hit by the foreclosure 
crisis, and we sponsored a public education outreach campaign 
to reach troubled borrowers.
    Let me just summarize briefly our results to date in the 
national foreclosure mitigation counseling program.
    To date, a total of $410 million has been appropriated, and 
the first appropriation required that we distribute a minimum 
of that funding, $50 million, within 60 days of award, and 
NeighborWorks was able to award $130 million in the first 60 
days. This included designing the program from scratch, 
identifying the eligible applicants, and doing all the work to 
get a program up and running.
    Because Congress' funding to NeighborWorks provided funding 
for training as well, we were able to provide training to 1,600 
counseling organizations throughout the country. We funded the 
counselors who have assisted more than 410,000 families facing 
foreclosure to date.
    The majority of the people counseled have been minorities, 
53 percent. NFMC grantees also are doing well in serving areas 
that were targeted by subprime and predatory lenders. Thirty-
seven percent of the clients are in ZIP Codes where the 
majority of clients are minorities. Forty-two NFMC grantees 
said that they would target their services also to low- and 
moderate-income minority neighborhoods or homeowners.
    One of the key statutory requirements that Congress had was 
for the NFMC program to ensure that a substantial portion of 
the funding went to areas of greatest need.
    I see I am running out of time here. So let me just say, we 
have had overall great success with the program, we have 
learned a lot in trying to administer this program, and we look 
forward to whatever questions the committee might have.
    [The prepared statement of Mr. Wade can be found on page 
102 of the appendix.]
    Chairwoman Waters. Thank you very much. I appreciate your 
being here today.
    I will recognize myself for 5 minutes.
    Most of what I'm concerned about I placed in my opening 
statement, but let's get right to this funding issue.
    Mr. Wade. Sure.
    Chairwoman Waters. I could go into long detail about the 
counseling services and where I think the strengths and 
weaknesses are, but let's deal with this duplication issue.
    Will you explain to us how you determine that there are 
duplicative services, and how you pay, and who gets paid?
    Mr. Wade. Sure. The program was designed to ensure that we 
could get the maximum number of borrowers served with the 
funding that was provided, so what we did was set up a program 
that reimbursed the counseling organizations based on their 
number of consumers served, and the level of service that they 
provided to those homeowners.
    We also wanted to ensure again that we could serve the 
maximum number of customers or borrowers, and so we did not 
allow organizations to serve, or we did not allow a consumer or 
borrower to be served more than by one organization except for 
in one case, where a borrower might receive a Level 1 
counseling service, and would then be eligible to receive a 
Level 2 service from another organization or for the same 
service.
    Chairwoman Waters. How do you determine that?
    Mr. Wade. That is determined based on the date that the 
organizations essentially upload the data into the system that 
would then determine who would get the reimbursement for that 
particular homeowner. So it would be a first-come-first-served 
basis.
    Chairwoman Waters. Technologically, how do you determine 
that?
    Mr. Wade. That's based on the date that the organization 
puts the person counseled into the system, because they're 
required to report on a per-homeowner basis.
    Chairwoman Waters. So how do you see, if there are two or 
three organizations who have served this person, how is that 
determined?
    I know it's determined by date. So everything comes to you 
by date, and you have a computer model of some kind--
    Mr. Wade. Yes.
    Chairwoman Waters. --that kicks out the duplication? Will 
you explain that to us?
    Mr. Wade. Sure. What happens is that we use a third-party 
vendor. The organizations are required to upload their data 
into the system. It records the date that a borrowers 
information is recorded, and the organization that submits that 
homeowner into the system first is the person that would get 
credited for serving that borrower.
    Chairwoman Waters. Who is your vendor?
    Mr. Wade. Socialserve. We did a competition to select a 
vendor to build this system. We didn't want to create a 
permanent infrastructure--
    Chairwoman Waters. How much did they charge you for this?
    Mr. Wade. Offhand, I don't know the charge for--
    Chairwoman Waters. Ask the young lady behind you--
    Mr. Wade. --but I do know that--do you know?
    Yes. We didn't bring that, but as you might recall, we were 
restricted in the amount of money we could use to administer 
the program, so all of that is within the cost of the 
administrative cap of 4 percent that was imposed on the 
administration of the program.
    Chairwoman Waters. All right. We're also hearing that many 
intermediaries believe that NeighborWorks favors Level 1 
counseling, which is not as in-depth, over Level 2 counseling.
    In your opinion, does NeighborWorks place more of an 
emphasis on Level 1 counseling? If so, what implication does 
this have for reducing foreclosures?
    I understand 69 percent of the counseling is in Level 1. Is 
that true?
    Mr. Wade. Sure. And we don't favor the level of counseling. 
All of that is determined by the local organization. They 
proposed the level of counseling that they would provide when 
they made their application, and they're allowed to upload 
borrowers into the system based on how they have served the 
customer.
    So we don't play any role in choosing how they serve the 
customer. That's totally driven by the--
    Chairwoman Waters. So do they have to determine when they 
first sign up, for lack of a better description, what level 
they want to deal with, and are they locked into that level?
    If I sign up, and I say, ``I want to do Level 1, because 
that's all I know and understand,'' and then I discover that, 
really, I can do Level 2 or 3, how do I rearrange my contract 
so that I could do that?
    Mr. Wade. That is a good question. The organizations did 
propose, on the front end, what they would propose to do.
    Chairwoman Waters. Yes.
    Mr. Wade. In most cases, the Level 1, the number of Level 1 
counseling units delivered are larger than what was originally 
proposed by the organizations who have been funded, and I think 
some of the organizations would be better prepared to tell you 
what some of the challenges have been with ending up with more 
Level 1s than they had initially expected.
    Chairwoman Waters. So you're saying that, in addition to 
those who signed up for Level 1, some of those who said, ``I 
can do 2 and 3,'' are now doing more Level 1s?
    Mr. Wade. Yes. And we--
    Chairwoman Waters. Do you have any way of correcting that--
    Mr. Wade. Yes.
    Chairwoman Waters. --so that you can get more to the 
modifications work with the servicers?
    Mr. Wade. We allow the organizations a 50 percent variance, 
because again, we allow them to respond to the homeowners that 
they encounter, and determine the level of service that they 
think is appropriate for them.
    So we give them wide latitude over the original proposed 
way that they had structured their program, given, you know, 
the challenges with any new program.
    Chairwoman Waters. All right.
    And lastly, I understand that some of those providing 
services also are getting paid by the servicers $1,000 when 
they can accept the $1,000 plus whatever you pay, also?
    Mr. Wade. We have limitations in the program that do not 
allow--will have a limited number amount of reimbursement that 
an organization can receive--
    Chairwoman Waters. What does that mean?
    Mr. Wade. --for a specific homeowner that they have 
received reimbursement from the program.
    Chairwoman Waters. So if you have an organization that is 
receiving monies from the servicers, $1,000, how many $1,000 
reimbursements can they receive?
    Mr. Wade. Sure.
    Chairwoman Waters. What percentage?
    Mr. Wade. Sure. So the way that we have structured the 
program, they are limited to take from the foreclosure 
mitigation program the amount that we reimburse, and then they 
could take from the servicer only an amount up to and what it 
cost for them to provide the service.
    And we do require that they bill the servicer first if they 
have that arrangement. So, in other words, the public money is 
used as a last resort.
    So as an example, there are a number of organizations that 
had relationships with servicers before this program got up and 
running.
    Chairwoman Waters. My question is, do they get that $1,000 
in addition to reimbursement from you if they're doing Level 1, 
2, or 3 under your definition?
    Mr. Wade. No, they would not.
    Chairwoman Waters. So--
    Mr. Wade. They can receive reimbursement for homeowners 
that they have not billed NFMC for.
    Chairwoman Waters. Well, maybe we'll get into that a little 
bit more.
    Thank you very much. I will now recognize Ranking Member 
Capito.
    Mrs. Capito. Thank you. Thank you.
    Mr. Wade, can you explain to me the $410 million at 
NeighborWorks, and I know that's a conglomeration of a couple 
different pots of money, and in your notes, it goes to 230 
nonprofits.
    Then, does it then go to other organizations from there? So 
does it pass through more than one?
    What I'm trying to get here is--
    Mr. Wade. Sure.
    Mrs. Capito. --I know you're limited to 4 percent 
administrative, but how many other administrative costs are 
loaded onto this by the time it actually gets to the consumer?
    Mr. Wade. The way this program is structured, there were 
eligible applicants prescribed in the legislation, so those 
included HUD-approved housing counseling intermediaries, and I 
think there are about 21 or so in total in the country; every 
State housing finance agency was eligible; and then 
NeighborWorks organizations who were part of that 235 
organizations in our network.
    The national intermediaries and the State housing finance 
agencies, many of them have sub-recipients who actually carry 
out the counseling activities, and so they were responsible for 
setting up the program, assembling a number of sub-grantees, 
and then passing the funding on to those organizations to 
actually carry out the program.
    Mrs. Capito. So would there be an administrative fee, then, 
for them, as well?
    Mr. Wade. Yes.
    Chairwoman Waters. What is that percentage, do you know?
    Mr. Wade. It is 5 to 7 percent, so that we limited the 
administrative cost to the State housing finance agencies and 
the intermediaries to anywhere from 5 to 7 percent, and each of 
them proposed in their application what percentage they would 
request in order to carry out the program.
    And that's essentially to deal with the reporting 
requirements they're responsible for, the program 
administration costs that they have, and the follow-up and the 
documentation that they to do to ensure that the grantees are 
in compliance.
    Mrs. Capito. Okay. Now, I'm kind of picking up from your 
comments that people are--that the organizations are 
reimbursed; in other words, you perform the service, and then 
you're reimbursed for it. Is that correct?
    Mr. Wade. Well--
    Chairwoman Waters. Excuse me. Before answering that, I have 
never done this before, but I'm going to interrupt.
    Mrs. Capito. Okay.
    Chairwoman Waters. There are less than 5 minutes on the 
vote, and you can pick it up and complete your question when we 
return.
    I would like to ask for your patience while we take three 
votes, and we will be right back. Thank you. The hearing is in 
recess.
    [recess]
    Chairwoman Waters. Ms. Capito, I interrupted you when you 
were in the middle of your question, so you can start off again 
with your 5 minutes.
    Mrs. Capito. Thank you, Madam Chairwoman. Thank you.
    I believe, as I recall where we were, I was asking you when 
somebody comes in for, or somebody, a client gets, say, the 
Tier 1 counseling, then is the organization reimbursed after 
the counseling occurs when they report?
    Mr. Wade. Right. That's a good question. The reimbursement 
level is based on the level of service.
    Mrs. Capito. Right.
    Mr. Wade. But clearly, in the first draw, an organization 
actually receives 68 percent of their total award at first--
excuse me--at second draw.
    Yes, the first draw is--
    Mrs. Capito. What?
    Mr. Wade. We have three draws, a four draw schedule set up.
    Mrs. Capito. Oh.
    Mr. Wade. At first draw, once you execute the contract and 
all of the paperwork is in order, you draw down 40 percent of 
your total award before you have delivered any service.
    Then at draw two, you're able to draw down 68 percent of 
your total award.
    But the reimbursement is based on a per homeowner 
reimbursement level, and it's reconciled to ensure that 
basically, at the end of draw four, you will not exceed the 
total amount of your award.
    So you're always in a forward-funded position. That was one 
of the things that groups were concerned about, would there be 
an opportunity to have funding up front in order to get 
started, even though the reimbursement was based on a per 
homeowner basis.
    Mrs. Capito. So when the grant is given, you're estimating 
the number of people they would serve?
    Mr. Wade. Yes, absolutely.
    Mrs. Capito. Okay. And what if they don't meet those 
expectations? Then in the fourth tranche, they don't get their 
final--
    Mr. Wade. Right, right. So the idea--
    Mrs. Capito. Is that a year schedule for--
    Mr. Wade. I'm sorry?
    Mrs. Capito. A disbursement schedule over a year, or over 6 
months, or--
    Mr. Wade. Well, it's based on the level of programmatic 
activity that they have achieved.
    So, for instance, for level--the second draw, once an 
organization achieves, yes, 25 percent of their units of 
service, then they're allowed to take the second draw.
    Mrs. Capito. Okay. So that's an accountability measure for 
you--
    Mr. Wade. Yes.
    Mrs. Capito. --and a transparency measure. I appreciate 
that.
    Mr. Wade. Right.
    Mrs. Capito. I noticed that of the $180 million that was 
funded through the NFMC, $30 million of that was for legal 
services.
    Mr. Wade. Yes.
    Mrs. Capito. Can you tell me how you're tracking that, how 
that has been expended--
    Mr. Wade. Sure.
    Mrs. Capito. --and any other information about--
    Mr. Wade. A little bit. Sure.
    Now, that funding had a limitation on what it could be used 
for. It was not allowed to be used for any civil litigation. It 
could be used to assist a homeowner who had any other variety 
of issues that might need legal consultation.
    The funding goes--
    Mrs. Capito. Surrounding the purchase of a home, or I mean 
surrounding--
    Mr. Wade. No, no, around--
    Mrs. Capito. --their foreclosure?
    Mr. Wade. --around their foreclosure--
    Mrs. Capito. Not other issues?
    Mr. Wade. Right. No, no. You're absolutely right. Around 
foreclosure-related issues.
    So, for instance, there were consumers whom a counselor 
might have thought had been defrauded, as an example, so you 
could consult a legal organization in order to help you 
understand whether there might be a cause of action that could 
be brought on behalf of that homeowner.
    Mrs. Capito. How much of that has been expended, do you 
know?
    Mr. Wade. We have awarded roughly $25 million of it; $5 
million was returned to the Treasury because there was a lack 
of demand for that in the second round of applications, so we 
did not fully award the total $30 million. And so roughly $25 
million was awarded.
    Mrs. Capito. Could those go to like a legal aid or 
something of that nature?
    Mr. Wade. Well, the organizations were the eligible 
applicants, so they had to be the counseling organizations that 
actually received the funding.
    They could, in partnership with a legal aid organization, 
pay the legal aid attorneys to do the work. They could hire 
attorneys themselves. We allowed either arrangement.
    Mrs. Capito. Okay. Last question on the servicers.
    I think that's a real sore spot in terms--I know in my 
office, trying to help people reach their servicer is very 
difficult and frustrating, and then a lot of strong-arming or, 
you know, at least not being able to get the answers quickly, 
and I noticed that's part of the complaints by a lot of the 
counselors, where the weaknesses are.
    What steps should be taken to help mitigate this problem?
    Mr. Wade. Well, clearly, one of the things that will be 
helpful, we assume, would be the new program that has been 
rolled out.
    Up until this point, there had not been a widespread 
program that most servicers subscribed to. There were a lot of 
initiatives that one servicer or one lender might have, but was 
not broadly available.
    You also had the complication of servicers who typically 
service for a variety of investors, all of whom had different 
rules, and that created confusion, additional time and energy 
for both servicers to sort through what they could do with a 
customer who might be in a loan that was owned by Fannie Mae or 
Freddie Mac versus something that was in a private label 
security, and those caused complications, as well.
    So we think the new program will go a long ways toward 
helping address that. We also assume that the incentive 
payments that are being paid to servicers through the TARP 
program give them an additional incentive to get consumers 
either refinanced or modified. So we think that will be a great 
help.
    And presumably, that additional funding will also help them 
address the capacity challenges, because I mean, at some point, 
at the end of the day, it just seemed like they didn't have 
enough people to deal with the demand as it scaled up.
    Mrs. Capito. Okay. Thank you, Madam Chairwoman.
    Chairwoman Waters. You're welcome.
    Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Mr. Wade, thank you for being here.
    Are the individual intermediaries who provide telephone 
counseling compensated at the same rate as those who perform 
face-to-face counseling?
    Mr. Wade. That's a good question.
    I mean, really, we have organized the reimbursement based 
on the level of service you provide, irrespective of modality. 
So Level 1 can be delivered by telephone or in person, as can 
the other levels of counseling, as well. So it's not tied to 
whether it's telephonic or in person. It's the level of service 
you provide the homeowner.
    Mr. Cleaver. Do you have any data that would suggest that 
either of the services, either by telephone or in person, is 
more impactful? You know, when you audit the program at the end 
of the year, I mean--
    Mr. Wade. No, that's a good question.
    One of the challenges we have right now is, we don't get 
performance data from the servicers, so we have hired Urban 
Institute to use a third-party service that all the servicers 
report in to, that has loan performance in it.
    We will be doing matches with the homeowners assisted 
through this program to be able to track the performance of 
those homeowners over time. So we will be in a position to 
answer that question more definitively.
    We have a preliminary report where they have done some 
preliminary matches that we think we'll be able to release by 
the end of this month that will give us some initial data, but 
I would say the early matches have suggested that about, in 
total, about 76 percent of the homeowners who have been helped 
in this program, or have been counseled, are still in their 
homes.
    Now, we don't have that broken out by type of service, but 
we will be able to do that.
    Mr. Cleaver. Madam Chairwoman, I don't know when that 
information would be available to the committee, but if the 
Chair would so embrace, I would love to have some information 
on that research as soon as possible.
    Mr. Wade. Yes.
    Chairwoman Waters. Thank you very much.
    The Chair will, for the record, ask that the research be 
submitted to us--
    Mr. Wade. Sure, absolutely.
    Chairwoman Waters. --as soon as possible.
    Mr. Wade. Absolutely.
    Mr. Cleaver. It's all trying to make sure that, at this 
difficult moment economically, we do what is working.
    Do you encourage the borrower to contact the community-
based agencies who are providing the service?
    Mr. Wade. Absolutely. I mean, NeighborWorks, we do provide 
a Web site where a consumer can go and look up the local 
organization that's closest to them. We also refer consumers to 
the homeownership preservation homeowners hotline.
    And so we provide the opportunity to refer borrowers to the 
range of counseling opportunities that are available to them.
    Mr. Cleaver. Other than public service announcements, and I 
have heard a few in Kansas City--we have an agency in Kansas 
City that does, in fact, subcontract with you.
    But other than the public service announcements I have 
heard, and of course I'm only home on the weekends, but I have 
not seen any other advertisement that would attract people who 
are in trouble to go to them.
    In the budget, are there dollars expended for getting the 
word out?
    Mr. Wade. Right. We have in the grants that were made to 
the eligible applicants, they are allowed to use a portion of 
those grant funds for outreach.
    We have, through our own efforts as well, contributed to a 
range of outreach efforts. We have worked with local 
organizations to do local outreach fairs.
    We have done work with local organizations to do local 
telethons, to provide literature or resources so they could do 
door-to-door outreach. We have done a couple of telethons with 
Univision, one in Boston and I don't remember where the other 
one was offhand, in order to reach borrowers.
    So we're trying a variety of means. I would say we have not 
done anything in any extensive way to do paid advertising.
    That's very expensive, and so we have not spent any money 
on paid advertising, other than maybe a few times when we might 
have been participating, and folks bought an ad in a local 
community-based newspaper or something like that.
    Mr. Cleaver. Well, I just think marketing is so critically 
important in this arena. It's amazing how little, I mean, with 
all of the modes of communication we have today, it's amazing.
    Congressman John Lewis was asked the question, at a town 
hall meeting, ``Do you live in the White House?'' And of 
course, he told them no.
    But at a time when all this information seems to be 
available, the truth is, it seems that no information is 
available.
    I run into people over and over and over again who are 
unaware of the program, in spite of the fact that I know in 
Kansas City, the agency involved is doing everything all day, 
24 hours a day, but it doesn't seem to be resonating like it 
should, and I would just suggest that we think about marketing.
    I yield back--I don't have any more time.
    Chairwoman Waters. Thank you, Mr. Cleaver.
    Mr. Green.
    Mr. Green. He yields back the time that he has borrowed. 
Thank you.
    And, Mr. Cleaver, am I to understand that Mr. Lewis has 
moved out of the White House?
    Thank you for appearing, Mr. Wade. I will try to be as 
brief as possible.
    But I do want to know if I am getting some sort of mixed 
signal, because on the one hand, we get indications of 
servicers wanting to modify, not refinance, not give a payment 
plan, but wanting to modify, and on the other hand, I have 
information here today indicating that there is some degree of 
difficulty associated with getting modifications.
    So which is correct, please?
    Mr. Wade. Well, early on, when this program first began, 
there were only a handful of modification programs out there 
that were substantially reducing the payments of homeowners. I 
think that's a fact.
    So early on in the program's history, the vast majority of 
modifications offered to homeowners were basically repayment 
plans, and they were probably not sustainable, although our 
data will probably help validate that.
    Over time, as new programs were introduced, more servicers 
were providing more substantial modifications.
    And I would say it really wasn't until the IndyMac program 
that got initiated by the FDIC, was there, in a sense, with the 
whole portfolio, an approach that created a modification 
opportunity that was driven by the borrower's ability to pay.
    And I think that's the standard that was set with the 
IndyMac program, that was built on based on the new 
Administration's program.
    Mr. Green. If I may, are you receiving some resistance, no 
resistance? Kindly give me some indication as to what the 
circumstance is.
    Mr. Wade. The interface with the servicers is still a big 
problem. So even with the new program, it's--you know, we had a 
feedback session again with some counseling organizations last 
week.
    A number of them indicated that even though many of the 
servicers have signed up for the Administration's program, when 
they contacted the servicer to get their, you know, borrower 
engaged, they were told that, ``We have signed up, we're not 
ready yet, our systems aren't up and running yet.''
    So I think there are still challenges with the servicers, 
no question about it. It's still a problem.
    Mr. Green. Have you received any intelligence indicating 
that servicers may have been amenable, or maybe I should say 
more amenable, to modification when there was the possibility 
of the bankruptcy option, and now that the possibility has been 
removed, there is less compliance, or less of a desire to 
modify?
    What I'm getting at is very simply this: Did bankruptcy 
have an impact, the possibility of bankruptcy have an impact on 
the behavior of servicers?
    Can you kindly respond?
    Mr. Wade. We have not done anything to do any broad-based 
survey in that regard.
    Mr. Green. Any anecdotal?
    Mr. Wade. Right. No, no.
    I have been on a couple of panels, in places where 
servicers have participated, and there was an assumption that, 
if homeowners were allowed to have their principal residence 
considered in bankruptcy, that it would create a backstop that 
would motivate more servicers to be more aggressive with their 
modifications.
    Mr. Green. Thank you, Madam Chairwoman. I'll yield back.
    Chairwoman Waters. Thank you very much.
    I would like to yield to each member additional time. We 
have so few members here today.
    And I yield to myself an additional 2 minutes, because it's 
very important for us to learn more about what is happening 
with NeighborWorks, because of the concerns that have been 
raised in several quarters.
    First, I would like to ask you, for those counseling 
agencies that put a value on their work, and they are getting 
paid from the servicers, if they say that their work is worth 
$1,000, and the servicers give them $600, can they get a 
maximum, what, $350, from you to make up for what they value 
their services at?
    Mr. Wade. Well, I think theoretically, they could, in this 
regard. The program is designed--
    Chairwoman Waters. Not theoretically. What are the rules?
    Mr. Wade. Well, when I say, the rules are that an 
organization that has a contract with the servicer must take 
the servicer payment first.
    If that does not fully cover their costs, then they can 
also bill the NFMC program for the balance of what their total 
costs might be.
    Chairwoman Waters. So you have some counselors who are 
making a lot more money than other counselors?
    Mr. Wade. We don't think that is the case, because we have 
done 179 on-site compliance reviews, and in no case in those 
reviews were any of those groups billing the NFMC program and 
receiving a payment from the servicer for the same client.
    So we do monitor that, because we want to ensure that, 
number one, the taxpayers' money is the last--
    Chairwoman Waters. Of course, but what I'm asking, what I 
really want to know is what the rules are, if, in fact, they 
say, ``My services are worth $1,000,'' and they have a 
contract--I don't know what the contract says, with the 
servicers. The contract should cover whatever it is they agreed 
upon.
    But if the servicer says, ``I'm not paying you $1,000,'' 
and they bill you $350 of that, they can get the $650 or 
whatever from the servicer plus $350 from you, if they decide 
to ask you for it?
    Mr. Wade. Yes, I would say the rules probably do permit 
that, but again, we have had no occasion from our on-site 
reviews where that has been the case, and we have been pretty 
clear in the program guidance that there are limitations on 
what this program is willing to reimburse for the services 
provided.
    Chairwoman Waters. Okay, I don't quite understand your 
answer.
    If those are the rules that they are working by, you are 
saying that they don't really apply the rules, and they don't 
ask for what the rules say they can have, but that's a part of 
the rules, that they could do that?
    Mr. Wade. Well, I would say this. A group would have to 
demonstrate that what they are providing, just as an example, 
to follow your example, say that they say that what they do 
costs $1,500, they would have to document that and we would 
have to accept that it was accurate and appropriate--
    Chairwoman Waters. Can all of the counselors in the program 
do that, or just certain ones who have contracts with 
servicers?
    Mr. Wade. Now, do which piece? The--
    Chairwoman Waters. Does everyone have the opportunity to 
request reimbursement from the servicers and from you?
    Mr. Wade. Yes. Yes. Everyone has that opportunity.
    I mean, if they have an agreement with the servicer, we 
don't control that--
    Chairwoman Waters. So everyone does not have that 
opportunity? For those counselors who don't have contracts with 
servicers, they cannot get the same amount that someone else is 
getting because they have a contract? Is that right?
    Mr. Wade. That is true. That is true.
    Chairwoman Waters. Okay. Secondly, let me ask, you talked 
about the HUD-approved counselors, the housing finance 
agencies, and NeighborWorks.
    Do your reimbursements work the same for each of these 
agencies?
    Mr. Wade. Yes. Exactly the same. There's no difference.
    Chairwoman Waters. Okay--
    Mr. Wade. Well, only in one case. The intermediaries and 
the State housing finance agencies get an additional amount. 
They can bill up to 7 percent for administrative--
    Chairwoman Waters. Why?
    Mr. Wade. Because they are typically administering a 
program that has sub-recipients, and so we allowed for that.
    So for instance, NeighborWorks organizations are only 
allowed reimbursement on a per-person basis up to now, in round 
two, the $450, and an additional 20 percent for programmatic 
support, as all counseling agencies can receive, and then the 
State housing finance agencies and national intermediaries are 
also allowed up to an additional 7 percent to administer a 
group of sub-recipients.
    Chairwoman Waters. Let me just move on, and I want to note 
that, so that we can take a closer look at that.
    Intermediaries are also concerned that NeighborWorks' 
various reporting requirements are confusing, change frequently 
without notice, and are time-consuming, and punitive.
    For example, if one field is left unfilled, the 
intermediary won't be paid. So they do the work, they submit, 
and they have fields that they have to fill out, or close in, 
or however you do it. If one is left unfilled, then what do you 
do, kick it back to them?
    Mr. Wade. We have a number of fields that they are required 
to report. There are some fields that are optional.
    The required reporting elements are required to be 
completed before they are allowed to get reimbursed for the 
service provided.
    Chairwoman Waters. Did you recently change your guidelines 
so that a number of these counseling agencies had to re-enter 
their 600 data files?
    Mr. Wade. Well, we--how many data files, I'm sorry?
    Chairwoman Waters. Six hundred.
    Mr. Wade. I'm not aware of the number of--
    Chairwoman Waters. Did you recently change some guidelines?
    Mr. Wade. We have made some changes. For round two, we did 
add some additional data elements, because there were some 
additional requirements that came with the second round of 
funding, that we had to include.
    We did make some changes in round one to allow a little 
more flexibility, so there were some data elements that started 
out as being required, that we moved to optional in order to 
give groups additional flexibility.
    Chairwoman Waters. So the question becomes, when you make 
changes, and your counseling agencies don't know about those 
changes, they are not informed in a timely fashion, if they 
submit under the old rules, are you penalizing them?
    Mr. Wade. No, we give groups adequate notice on changes 
that are made to the reporting, and we don't penalize groups.
    We always allow groups to--so, for instance, if you submit 
information on a client and it's not complete, you are 
notified, and you have the opportunity to correct that and get 
it back in the system so you can get reimbursed.
    Chairwoman Waters. Okay. Thank you very much. We appreciate 
your being here today. We will continue our questioning with 
the next panel, unless we have members who have additional--
yes?
    Mr. Green. I have. Yes, thank you.
    Chairwoman Waters. Yes, please, Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    Mr. Wade, let's quickly visit on the question of diversity 
within your business model. I'm talking now about Asian 
Americans and Pacific Islanders, specifically, as well as 
others.
    But can you address the question of diversity in terms of 
how you're able to communicate with communities that have rich 
cultures, but require, I think, some linguistic talents 
available to them?
    Mr. Wade. Well, we did ask all organizations to clarify the 
population groups they were going to serve, what language 
capacities they had to serve that client base, and we took that 
into account in both the awards that were made, and we do, you 
know, obviously capture demographic information on who the 
agencies have served.
    Mr. Green. Have you made awards to organizations that are 
identifiably Asian American or Pacific Islander, in terms of 
the community that they will perform outreach to?
    Mr. Wade. We have done a few awards to NeighborWorks 
organizations who fit that category.
    As I recall, none of the State housing finance agencies or 
HUD intermediaries would qualify as Asian American or Pacific 
Islander organizations.
    Mr. Green. And is there some reason why they wouldn't 
qualify?
    Mr. Wade. Well, just, they're not--no one has become a HUD 
housing counseling intermediary, so that was a limitation in 
the legislation.
    Now, there are sub-recipients of State housing finance 
agencies and the other intermediaries who would qualify as 
organizations based in that community, but there is no--there 
are no HUD housing counseling intermediaries that meet that 
qualification.
    Mr. Green. Because my time is up, let me just ask if you 
would, in writing, give me the list of those that cater to the 
communities that I have called to your attention?
    Mr. Wade. Sure. Absolutely.
    Mr. Green. All right. Thank you very much. Thank you, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much.
    Mr. Cleaver, did you have any additional questions?
    Mr. Cleaver. One question, Madam Chairwoman. Thank you.
    One of the problems we have, and our Chair has been dealing 
with this, in the Financial Services Committee, we try to get 
small, minority businesses involved, and one of the problems we 
always run into is the payment schedule.
    You know, you have a subcontractor who is doing work for a 
major, and if they are 45 days late, you know, paying the 
subcontractor, it could almost put him or her out of business.
    And I guess the same question I'm asking of you, about 
those who are involved in the program, is there any undue 
length of time between the time there's a submission or an 
invoice--I don't know how--
    Mr. Wade. Absolutely. I understand the question.
    And we provided guidance to all the national intermediaries 
that they should provide reimbursement to the sub-recipients 
within 14 days, because we did understand the challenge with 
smaller organizations who, you know, are trying to provide this 
service--
    Mr. Cleaver. Is it happening? Do you know--
    Mr. Wade. We do understand that there are a couple of State 
housing finance agencies that have chosen to do this on a 
strictly cost-reimbursement basis, but otherwise--
    Mr. Cleaver. That should be unacceptable.
    Mr. Wade. Right.
    Mr. Cleaver. That's unacceptable. I mean, we can run people 
out of business.
    Mr. Wade. Right.
    Mr. Cleaver. And these are not-for-profit agencies, which 
means they don't have a reserve, or anything else. I don't know 
how we address this, but I really--
    Mr. Wade. We did learn that recently, in a debriefing 
session that we had. We are going to follow-up with those 
couple of State housing finance agencies to understand exactly, 
you know, what's going on there. And we are considering whether 
there are additional requirements that we need to develop in 
order to address that issue.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much.
    And again, I appreciate your testifying before us today, 
and I assure you that one of the things we're going to have to 
do is to make sure that the complaints that we are getting are 
followed up and investigated, for those agencies who feel that 
they are not being paid properly, that their work has been 
consigned to the Number 1 level, etc., and they feel that other 
agencies are getting paid more, or you have this business about 
those who are contracting with servicers getting paid more.
    We really do have to make sure that we have fairness and 
equality in the payment for these services. Otherwise, this 
whole thing is going to unravel.
    Thank you very much for being here today.
    The Chair notes that some members may have additional 
questions for this witness, 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 this 
witness and to place his responses in the record.
    This panel is now dismissed, and I would like to welcome 
again the second panel: Ms. Colleen Hernandez, president and 
CEO, Homeownership Preservation Foundation; Ms. Susan Keating, 
president and CEO, National Foundation for Credit Counseling; 
Ms. Lisa Hasegawa, executive director, National Coalition for 
Asian Pacific American Community Development; Mr. Cy 
Richardson, vice president, housing and community development, 
National Urban League; and Ms. Janis Bowdler, associate 
director, Wealth-Building Policy Project, NCLR.
    Thank you all for being here today.
    Again, 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, starting with Ms. Colleen Hernandez.

 STATEMENT OF COLLEEN HERNANDEZ, PRESIDENT AND CHIEF EXECUTIVE 
         OFFICER, HOMEOWNERSHIP PRESERVATION FOUNDATION

    Ms. Hernandez. Thank you, Madam Chairwoman.
    I am president of the Homeownership Preservation 
Foundation, and I certainly appreciate the opportunity to 
testify today, along with my colleagues in the housing 
industry, to share some of the challenges that we face in 
serving homeowners.
    My group was formed in 2003, and our mission is to be the 
trusted ally to the homeowner, providing help and hope and 
support for folks facing foreclosure.
    We own and operate the Homeowner's HOPE Hotline, 888-995-
HOPE, which provides free telephone counseling service to 
distressed homeowners. The hotline operates 24/7, all over 
America.
    In the last 16 months, we have counseled 486,000 
homeowners. On an average day now, we receive 7,000 calls.
    So today, I would like to discuss how and where we do our 
work, where our funding comes from, what results we produce, 
and what challenges we face.
    How does the hotline work? When you dial this number, you 
talk to a call center worker who answers your questions. About 
30 percent of the people who call simply have questions. And 
then they dispatch the call to counselors.
    Now, we give all homeowners a choice. We say to them when 
they want counseling, ``Would you rather have face-to-face 
counseling or telephone counseling?''
    If they say face-to-face counseling, our locator database 
finds the counseling agencies who have asked us to receive 
calls, and tells the caller what the three closest agencies to 
them are.
    If they choose a telephone counselor, they're connected to 
one of our 600 counselors at 9 HUD-approved nonprofits in our 
network: Auriton; Springobard; Novadebt; Money Management 
International; Greenpath; By Design; and the Consumer Credit 
Counseling Services of Atlanta, San Francisco, and Dallas.
    Our counselors are the trusted allies of homeowners. As a 
reference, I provide in the packet the information, an article 
in the Washington Post that describes a day in the life of a 
hotline counselor, and what transpires during a counseling 
session.
    Counselors basically listen to the story of the homeowner. 
They say, ``You're behind in your mortgage. What happened?'' 
And then they listen for as long as it takes to that story, and 
within the story are the nuggets of the solution.
    After that, they review, in great detail, the income and 
expenses, and during that time, the light bulbs begin going off 
in the mind of the homeowner about the choices that they have 
on how they earn their money, how they spend their money, and 
how they might dedicate more resources to their mortgage.
    We are a trusted third party that takes fresh eyes and an 
independent look at their options and helps them determine the 
best bet for saving their home. We are also a bridge to the 
servicers.
    Where do we do our work? All over America. In America, 
there are 43,000 ZIP Codes, and last year we counseled people 
in 22,777 of them. That's part of the beauty of the hotline. 
Everybody with access to a telephone can access this service, 
and they can do it at their convenience, any time of the day or 
night.
    Where does our funding come from? This year is $62 million: 
$15 million comes from NFMC, NeighborWorks; $46 million from 
mortgage servicers, who are reimbursed by investors; $1 million 
from HUD; and $720,000 from Fannie Mae.
    The funding we receive from industry is significant, 
because it's flexible. The more we counsel, the more they pay. 
But more importantly, it's helpful to homeowners, because in 
the counseling process, we capture data from them which we 
transfer instantaneously to the servicer, to give them the 
jumpstart that they need to resolve the problem.
    Does the work that we do produce results? Every day I ask 
myself that question, and the answer is yes. And here's how we 
know.
    A member of our network, CCCS of Atlanta, studied 21,000 
people who received counseling in 2007. After 1 year, they 
looked at data from the credit reports, and they saw that, in 
fact, 71 percent of the people counseled were still in their 
homes and had avoided foreclosure. Copies of that research are 
on our Web site.
    So when we evaluate the effectiveness of the hotline, we 
asked the following:
    Did homeowners reach out for help? Yes. About 7,000 a day.
    Did they go through counseling? Yes. About 2,000 a day.
    Did their information get to servicers? Yes. 100 percent of 
the time.
    Did they avoid foreclosure? Yes. About 70 percent of the 
time.
    There are a couple of challenges that I would like to 
highlight for your attention today, and the first is that scams 
are proliferating.
    Every day, the first thing I do in the morning is Google 
foreclosure prevention, and every day there is a new scam that 
promises results for just a couple thousand dollars, and I know 
you're aware of that and are doing what you can.
    The second challenge is, there is so much talent and 
commitment in the housing counseling industry, much of it 
represented at this table, and yet the resources don't match 
the demand.
    Our desire at the Homeowner's HOPE Hotline is to give every 
consumer who calls the choice between face-to-face counseling 
and telephone counseling, and to make sure that there are 
adequate resources. The homeowners in America count on the 
counseling industry, and we are counting on you.
    Thank you.
    [The prepared statement of Ms. Hernandez can be found on 
page 69 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Ms. Susan Keating.

 STATEMENT OF SUSAN C. KEATING, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, NATIONAL FOUNDATION FOR CREDIT COUNSELING (NFCC)

    Ms. Keating. Thank you, Madam Chairwoman.
    I am Susan Keating, the president and CEO of the National 
Foundation for Credit Counseling.
    And just by way of background, the NFCC is the Nation's 
oldest and largest network of community-based nonprofit 
financial counseling agencies.
    We have been in existence for almost 6 decades, and have 
106 member agencies that provide services in nearly 850 
communities across this country.
    As the largest HUD housing counseling intermediary, and as 
one of the largest recipients of funding under the National 
Foreclosure Mitigation Counseling Program, the NFCC is very 
proud of its ability to provide housing-related counseling, as 
well as a broad range of financial counseling and education 
services. Last year alone, NFCC member agencies provided 
services to over 3 million consumers.
    The NFCC commends Congress for recognizing the value of 
counseling in stemming the tide of foreclosures and for 
providing funding to make counseling available to those at risk 
of losing their homes.
    Has the NFMC Program made a difference? The answer is an 
unequivocal yes. While I could provide you with literally 
thousands of stories of the people the NFCC has assisted, let 
me give you two examples.
    A couple in Sumter, South Carolina, were both tragically 
diagnosed with cancer 7 months apart. Because of their medical 
expenses, they were 3 months delinquent on their mortgage and 
home equity loan. We helped them to get both loans modified 
with significantly reduced interest rates, resulting in a 
savings of $375 per month.
    A single parent in Thousand Oaks, California, went through 
a divorce and then lost her job. The ARM on her home reset, and 
she could not afford the new payments. In an effort to save her 
home, she turned to a ``workout company'' that charged fees, 
but provided no assistance. Then she came to us. We helped her 
structure a household budget, modified her mortgage, and her 
savings was $600 per month.
    Through the NFMC Program, Congress has made it possible for 
thousands of American families to not only keep their homes, 
but to begin the process of rebuilding their financial lives. 
However, there is lots more still to be done, and I would 
really like to focus on four specific areas.
    First of all, the mortgage crisis reflects a national 
failure to promote housing counseling. As a consequence, a 
significant number of homeowners bought homes they could not 
afford with mortgages they did not understand.
    The remedy is pre-purchase counseling for first-time home 
buyers, and also for those who are considering subprime or non-
traditional mortgages.
    The creation of the Office of Housing Counseling within 
HUD, as passed by the House last week, represents a major step 
forward.
    Second, if we are to sustain housing-related counseling, 
there must be long-term funding for the NFMC Program and other 
counseling initiatives.
    Federal grants have helped finance the expansion of housing 
counseling, but without additional and dedicated Federal 
funding, nonprofit agencies will not be able to provide these 
vital services.
    Third, it is imperative that consumers have access to 
counseling services that meet their individual needs. The NFCC 
was critical of the Bush Administration's efforts to funnel all 
mortgage foreclosure prevention inquiries through a government-
sanctioned hotline operated by a single intermediary, which in 
turn utilized the services of only 10 counseling agencies.
    Given the size and scope of the problem, it made no sense 
to limit the resources being used to address it when there were 
many other HUD-approved agencies that were ready and able to 
provide assistance.
    While there have been some improvements, it is unfortunate 
that the new Administration has not recognized this weakness 
and is following along the same path.
    When homeowners call the government-sanctioned hotline, 
they should be entitled to seek counseling services through a 
qualified entity that best represents their needs, whether that 
be the local NFCC member agency, a faith-based organization, or 
another community-based group. Consumers should have access to 
all available resources, and that has not happened.
    Fourth, today we are focused on fixing financial problems. 
Looking forward, we have to do more to prevent financial 
problems with broad-based financial education and literacy 
programs.
    The NFCC's recent financial literacy survey found that 41 
percent of Americans grade themselves a C, D, or F on personal 
financial knowledge. Only 42 percent keep track of their 
spending, and more than one-quarter say they do not pay their 
bills on time.
    Twenty-eight percent of mortgage holders admit that their 
mortgages have different terms than what they thought they had 
when they took out the loan. Is it any wonder why we had a 
financial meltdown?
    We believe there has to be a national strategy for 
financial literacy, and a national system of delivery. We must 
empower consumers to better understand the services and 
products that are being offered.
    Chairwoman Waters. Thank you so much.
    Ms. Keating. Thank you, and thank you for this opportunity.
    [The prepared statement of Ms. Keating can be found on page 
79 of the appendix.]
    Chairwoman Waters. Thank you.
    Ms. Hasegawa.

   STATEMENT OF LISA HASEGAWA, EXECUTIVE DIRECTOR, NATIONAL 
  COALITION FOR ASIAN PACIFIC AMERICAN COMMUNITY DEVELOPMENT 
                       (NATIONAL CAPACD)

    Ms. Hasegawa. Thank you, Chairwoman Waters, and members of 
the committee.
    And I just want to also thank Congressman Green, for your 
leadership with the Congressional APA Caucus' Housing Task 
Force. So I thank you.
    I am Lisa Hasegawa, and I'm the executive director of the 
National Coalition for Asian Pacific American Community 
Development. We're celebrating our 10-year anniversary this 
year.
    And I'm here today to really highlight what some of the 
structural issues have been in terms of access to NFMC funding 
for Asian American and Pacific Islanders serving community-
based organizations.
    Unfortunately for Asian Americans and Pacific Islanders, 
historically, the system of housing counseling basically has 
been like NFMC--I'm sorry--the NeighborWorks affiliates and 
mainstream organizations, and there hasn't been--at this time, 
there are probably about five API-specific HUD-approved housing 
counseling organizations, and none of them receive funding from 
HUD.
    And so I think that there's a major gap in terms of the 
existing system for serving our communities in a linguistically 
and culturally competent manner.
    Now, we have been working, over the past several years, 
with NeighborWorks, with the Homeownership Preservation 
Foundation, etc., to build that capacity, but it has been a 
challenge.
    I think that what unintentionally has happened with the 
infusion of resources with the NFMC program has actually 
widened the capacity gap.
    It was--I think it made sense for the--for NeighborWorks 
America, when they were designing this program, to invest 
resources where there was existing capacity, but unfortunately 
for Asian Americans and Pacific Islanders, it infused resources 
into a system that didn't serve us to begin with.
    And so let me just go over a little bit about what we are 
doing to try to partner.
    Again, we are currently working with the National Council 
of La Raza, and several of our member organizations have been 
able to get NFMC contracts through partnering with the National 
Council of La Raza. So Seema Agnani, who was here earlier, with 
Chhaya CDC from New York, they are an organization that has 
language capacity in five different South Asian languages, and 
they're serving the Queens Community in New York and Jackson 
Heights.
    And they just recently did a study, for example, doing 
their own data and research, looking at the foreclosure 
listings, and doing a name count, and they came out with a 
study that basically said that over 50 percent of the 
foreclosures in a particular time period in certain ZIP Codes 
were with South Asian families, and they think that was a 
conservative estimate.
    We have been seeing those kinds of stories from our 
organizations, particularly those that are serving the Filipino 
community in California, the Korean community in Southern 
California, the Southeast Asian community in Central Valley in 
Minnesota, and the South Asian community, particularly in the 
Jackson Heights area.
    There's a recent Federal Reserve report that came out that 
validated that, where they looked at our population data, and 
overlaid that with a map of where Asian Americans and Pacific 
Islanders were living, and so there was a lot of correlation.
    Unfortunately, Home Mortgage Disclosure Act data does not 
disaggregate by Asian American and Pacific Islander sub-
populations, so it has been very difficult to really show the 
challenges our communities have been facing. I have additional 
statistics in my written testimony that go further to show that 
need.
    There have been some positive steps forward. We have been 
working with Bank of America and Freddie Mac in particular to 
fund some of the work that we have been doing that hasn't fit 
within the prescripted eligible activities and grants 
requirements that is currently existing with NeighborWorks 
America's NFMC program.
    And so those flexible dollars have been really helpful for 
us to build the capacity of our organizations. We have gotten--
NeighborWorks has given us scholarships to their trainings, to 
train more counselors who are bilingual and bicultural, but 
that kind of capacity building takes time.
    And so what we have been trying to do, for example, is to 
create systems and models where community-based organizations 
that have a lot of expertise and a lot of capacity, that have 
the language capabilities, that have the trust with the 
communities, they can play a role in this foreclosure crisis.
    They really want to play a role, but because only certified 
housing counseling and foreclosure counseling organizations 
were eligible for that funding, basically, they have been 
telling me that they are blocking the doors for some of the 
NFMC counseling organizations, because they are being asked to 
set up the--do the outreach, recruit people, provide the 
translation, provide the space, and all of that work, for no 
compensation whatsoever, because they are not eligible to 
receive NFMC funding. And so it's a real challenge for a 
community-based organization.
    So I encourage us to all think about ways in which we can 
compensate community-based organizations for the translation 
and interpretation services that they provide, and also for the 
case management that they provide.
    I think earlier we were talking about the differences 
between the face-to-face counseling versus the phone 
counseling, so a lot of folks will come and have many multiple 
issues, mental health issues, etc., that often can't be dealt 
with over the phone, and so you have this network of community-
based groups who haven't been able to meet those needs with the 
current funding systems.
    So I appreciate the opportunity to testify, and the rest of 
my comments are in my written statement.
    Thank you.
    [The prepared statement of Ms. Hasegawa can be found on 
page 58 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Cy Richardson.

    STATEMENT OF CY RICHARDSON, VICE PRESIDENT, HOUSING AND 
          COMMUNITY DEVELOPMENT, NATIONAL URBAN LEAGUE

    Mr. Richardson. Chairwoman Waters, I am Cy Richardson, vice 
president for housing and community development at the National 
Urban League.
    And I very much thank you for the invitation to testify 
before the subcommittee today on the issue of foreclosure 
prevention, the role of housing counseling intermediaries, in 
this vitally important field of service delivery.
    Our views are based on decades of program-delivered 
experience, but many of the key findings are culled from 
lessons learned from the past 18 months through our 
participation as a grantee under the National Foreclosure 
Mitigation Counseling Program administered by NeighborWorks.
    The National Urban League has been a certified HUD housing 
counseling intermediary since 1997, and through the excellent 
work of our local affiliates, we provide various types of 
housing counseling and education services to individuals on a 
one-on-one basis, including the critically important heavy 
touch, face-to-face counseling under the NFMC program.
    I need to be clear that the Urban League believes that in-
person, one-on-one, face-to-face counseling is the most 
effective form of foreclosure intervention and prevention for 
individuals in crisis.
    An internal census taken to gauge the service delivery 
characteristics of our affiliates in this area reveals that 
approximately 70 percent of our clients are African American, 
20 percent are white, and roughly 10 percent are Hispanic.
    And over the last three fiscal years, we have seen 
exponential growth in the number of homeowners coming to the 
Urban League in search of foreclosure counseling services 
across each of these racial categories.
    It must be stated, though, up front, that the National 
Urban League certainly appreciates NeighborWorks' dedication 
and diligence with regard to devising the NFMC program design, 
not to mention the sheer hard work it takes to manage the 
emergency funding for foreclosure prevention nationwide.
    However, for the purposes of this hearing, I would like to 
briefly describe the major issues and concerns we have found 
with NeighborWorks and their administration of the program, 
along with clear recommendations for problem resolution.
    First, the way the program is structured, by tying payment 
to goals by geography set at the onset of the year is highly 
burdensome and problematic, and ultimately, it creates an 
ineffective and rigid obstacle course that prevents effective 
draw funds for timely reimbursement of services rendered.
    This is a moving, breathing crisis that is changing every 
day, and in real terms, any goals projected are based on old 
and outdated information as soon as they are made, and are 
likely to be inaccurate. I hope we can revisit this today.
    Disaggregation of data is an important problem for us. We 
recommend a disaggregated approach to payment to intermediaries 
for their affiliates' work, and there are a number of ways this 
could be done, including payment to intermediaries, the full 
draw payments, when the overall threshold is met, or possibly 
increasing the number and pace of draws to the intermediary, 
possibly even on a monthly basis.
    With regard to variances and the locality service delivery 
that Mr. Wade talked about earlier, currently, variance 
thresholds are at 25 percent, and we must meet or exceed at 
least 75 percent of each established MSA goal or risk 
deductions from our counseling funds.
    We believe NeighborWorks should increase the MSA variance 
threshold to 50 percent, allowing more room for the real and 
unknown vagaries of client flow and keeping the funds flowing 
to our top performers. This will give our intermediaries more 
flexibility to reallocate goals as needed, and keep the 
payments flowing to those areas that are on pace.
    We're also recommending that NeighborWorks reduce and 
simplify the administrative requirements involved in reporting 
and management, as well as increasing the amount of program-
related support funds that are allowed for the total counseling 
award, or otherwise helping supplement this funding for other 
resources. Our colleagues can speak about this issue a bit 
later.
    With regard to issues of client duplication, under the 
circumstances, we support the idea put forth by NeighborWorks 
of applying a set percentage threshold to all intermediaries on 
this issue, but we believe this percentage should be at least 5 
percent.
    The national average, according to NeighborWorks, from the 
database, is 5 percent, not the 3 percent, as they finally 
agreed and codified in recent weeks.
    Finally, in terms of much-needed marketing supports, we 
recommend that NeighborWorks allocate $2 million of the $6 
million recently awarded to them for a rescue scam awareness 
campaign, or some other agreed-upon amount that we can 
collectively agree upon, to facilitate expansion of the 
campaign and ensure greater reach into minority neighborhoods. 
I know my colleagues will speak on this, as well.
    We also believe that together we can make effective changes 
to the design and cooperation of this program that works for 
both Congress and for the agencies doing the actual work to 
stem the foreclosure crisis.
    We trust that you will give due consideration to these 
issues that we have laid out today, as they are obstacles to 
effective program delivery, and it's in all of our best 
interests to get this done.
    Thank you very much.
    [The prepared statement of Mr. Richardson can be found on 
page 85 of the appendix.]
    Chairwoman Waters. Thank you.
    Our last witness will be Janis Bowdler.

STATEMENT OF JANIS BOWDLER, ASSOCIATE DIRECTOR, WEALTH-BUILDING 
       POLICY PROJECT, NATIONAL COUNCIL OF LA RAZA (NCLR)

    Ms. Bowdler. Good afternoon. I am Janis Bowdler, the 
associate director of the Wealth-Building Policy Project at 
NCLR. Thank you so much for inviting me. All of you have been 
really great champions of the Housing Counseling Program, and 
that is clear to us. We thank you for your support.
    Latino communities are watching a generation of wealth slip 
through their fingers, and nonprofit housing counseling 
agencies are really on the front lines of this battle, yet 
support for their work has not kept up with demand.
    Congress must strengthen the counseling infrastructure, and 
doing so will ensure that services are widely available to 
combat foreclosure, and in the future, help homeowners avoid 
common lending traps.
    In my testimony today, I'm going to talk a little bit about 
NCLR's approach to housing counseling, and then I'm also going 
to talk about some of the challenges to implementing the NFMC 
program.
    As you have heard from all of my colleagues already, NCLR 
is one of a couple dozen housing counseling intermediaries. Not 
many people have talked about the role of intermediaries, but 
that's important, as well.
    Intermediaries provide quality control, training, 
partnerships, develop technology, do a lot of work to advance 
the housing counseling field in general, and NCLR is the only 
network that focuses specifically on the Latino community.
    Over the last decade, NCLR has used one-on-one counseling 
to help thousands of families secure their first home. As my 
colleague Cy stated, this is the most effective way to reach 
our communities. There are several studies that show that this 
is a proven methodology, especially for communities of color.
    When the foreclosure crisis hit, we applied the same 
approach to foreclosure prevention counseling. In the last 12 
months, we counseled over 750,000 delinquent homeowners--I'm 
sorry--7,500--I added a couple of zeroes there, my mistake--in 
the last 12 months, which is a 250 percent increase over our 
previous year.
    But this approach is not without its costs. On average, it 
takes our counselors 15 hours to help a family through the 
process. We focus on in-depth counseling, because we need to 
help homeowners understand their options, find the best 
possible resolution, and get connected to other resources.
    We don't focus on phone counseling or provide referrals. 
Instead, we keep our clients in-house, and we work with them 
all the way to the solution.
    The demand for foreclosure prevention is on the rise, but 
we're concerned that demand is outpacing capacity, and without 
a robust system in place, families are going to get lost with 
the foreclosure scam artists, which brings me to the NFMC 
program established last year.
    The funding was appropriated to NeighborWorks America for 
quick turnaround to counseling agencies. They did successfully 
turn the money around quickly, which is not to be 
underestimated.
    They are one of our partner intermediaries. We have sat 
with them, worked on the industry standards that Mr. Wade 
testified about earlier, and we have often worked together on 
public policy issues.
    But it's important for us to bring up the challenges in 
implementing this program, because it's having a crippling 
effect on the nonprofits out there trying to meet the needs of 
their community.
    Several of the challenges have already been covered, and 
there's more detail in my testimony, so instead of the five 
that we have outlined in the full testimony, I want to focus on 
two.
    And that is that the reporting requirements have been 
extremely burdensome. We already had a reporting system in 
place for HUD that had been working for decades, but when this 
program came in place, we had some over 40 additional data 
fields that we had to complete. Technology did not keep up with 
that. So we all work from one of two or three technology 
platforms.
    Every time they make a change to the system, we have to 
wait for the technology to be updated, which means that we're 
all busy doing work, but the technology is not capturing the 
data. That creates a lag, and homeowners fall through the 
cracks. We don't get reimbursed.
    As an example, in our first quarter of reporting, NCLR 
reported to HUD 2,000 families. We could only report to 
NeighborWorks 465 families.
    Our increased cost to administer the program, you heard 
that we can only capture a small amount of that, our cost 
increased by 40 percent to administer these programs, based on 
TA that we had to provide to our network and expanding 
technology, etc.
    The other is this issue on how the fee structure actually 
incentivizes Level 1 counseling over the more in-depth 
counseling. So let me talk a little bit about this, because 
it's very important.
    You get paid, what is it, $100, $150 for that Level 1. It 
takes about 20 minutes to an hour. You can spend all day, over 
and over, doing intake and referral, and earn as many $150 fees 
as you have 20 minutes in a day.
    But it takes up to 15 hours over the course of 3 to 6 
months, with all the challenges working with the servicers, to 
get reimbursed for that last $250.
    Now, there are other challenges that I can go into more in 
the Q&A, but in this way, it makes more sense, and it 
incentivizes that initial intake and referral to get the quick 
buck, rather than take the time to do the most effective 
counseling, which is the one-on-one, and which takes a lot 
longer, and only pays out a little bit more money.
    So that's why we think we see these really high numbers in 
Level 1, because the incentive is not there. You don't get paid 
until all the way out at that 6th month, when you have been 
putting time and incurring staff expenses, until you see that 
resolution. That is a huge problem.
    So I'm running out of my time, I'm going to stop there. But 
the rest is in my written statement.
    [The prepared statement of Ms. Bowdler can be found on page 
48 of the appendix.]
    Chairwoman Waters. Thank you all very much.
    I will now recognize myself for 5 minutes.
    Let me first start with Ms. Hernandez.
    Could you quickly explain to me how you're connected to the 
HOPE NOW Hotline in a different way than other counselors are? 
You said something about that.
    Ms. Hernandez. Yes, I certainly can.
    First of all, there is no HOPE NOW Hotline. There is only 
the Homeowner's HOPE Hotline. And the way we are connected to 
the HOPE NOW Alliance is that we are a partner with them, and 
they use their considerable industry outreach capacity to send 
borrowers to the hotline, in hopes that we will capture the 
data that they need to give a jumpstart to the resolution.
    Chairwoman Waters. Okay. I'm sorry. Is that any different 
from any of the other counseling agencies?
    Ms. Hernandez. Yes, I think it is. I think we got 
preferential treatment in the HOPE NOW Alliance when Secretary 
Hank Paulson formed the HOPE NOW Alliance in October of 2007, 
and in order for people to be admitted to it, the threshold 
criteria was they would agree to fund counseling at the 
Homeowner's HOPE Hotline.
    So we're a partner with HOPE NOW, and we receive funding, 
$150 per case, per completed case, from the servicers, so in 
your earlier questions about the funding stream, ours is pretty 
clean.
    A homeowner comes in, and they tell us who their servicer 
is. We do a 60-minute counseling session with them. We transmit 
the data to the servicer, and at the end of the month, we bill 
the servicer.
    And there are--80 percent of the people who call us have 
loans owned by members of the HOPE NOW Alliance. The other 20 
percent call us--
    Chairwoman Waters. Do you also bill NeighborWorks?
    Ms. Hernandez. We bill NeighborWorks. Right.
    Chairwoman Waters. And how do you get paid for that? I 
mean, the service that you just described, that you get $150 
from the servicers for? How do you calculate or value?
    Ms. Hernandez. Oh. It costs, our service costs $150. So 
between our overhead and the triage call center, the call 
center workers who do the intake, and the counselors, the 9 
counseling agencies, the cost is $150 altogether. So we collect 
$150 from the servicer. We retain, from the servicer payment, 
$30 of that for our overhead in triage--
    Chairwoman Waters. No, no, no, no. My question is, how much 
do you collect from NeighborWorks?
    Ms. Hernandez. And then, yes, so we collect $150 per 
session from NeighborWorks.
    Chairwoman Waters. So you're getting $150 from the servicer 
and $150 from NeighborWorks?
    Ms. Hernandez. No. Every session is only funded by either a 
servicer or NeighborWorks.
    Chairwoman Waters. Oh.
    Ms. Hernandez. There's never--
    Chairwoman Waters. Is that right?
    Ms. Hernandez. Right.
    Chairwoman Waters. Okay.
    Ms. Hernandez. So we use the NeighborWorks money to fund 
the counseling for borrowers who don't belong to the HOPE NOW 
Alliance servicer ranks.
    Chairwoman Waters. So do you do face-to-face counseling, 
also?
    Ms. Hernandez. We don't. We only do telephone counseling.
    Chairwoman Waters. How large is your organization? I mean, 
where are you located, and do you have chapters, or offices in 
places other than one city or one State?
    Ms. Hernandez. Yes. We are a 501C-3. Our headquarters is in 
Minneapolis. We contract with nine large HUD-approved nonprofit 
counseling agencies all over the country. And they are, I 
think, in about 23 cities. So they are on contract with us. 
They are vendors for this service.
    Chairwoman Waters. How do they--
    Ms. Hernandez. We have 10 people on our core staff and 6 
members on our board.
    Chairwoman Waters. Okay. How do your--those that you 
contract with, how do they get paid, and do they get paid $150, 
also?
    Ms. Hernandez. They get paid--we retain $30 of the servicer 
money. They get paid $120. So we develop an annual contract 
with them, and they have performance goals, and they have 
standards of excellence that they must meet, and we have 
quality control audits--
    Chairwoman Waters. So that get $120 whether or not they're 
doing what would be considered Level 1 or Level 2 or Level 3, 
it doesn't matter?
    Ms. Hernandez. It's all Level 1.
    Chairwoman Waters. All Level 1?
    Ms. Hernandez. Yes.
    Chairwoman Waters. So this $150 for you, $120 for those you 
contract with, simply is for answering the phone and taking a 
name and telephone number, and referring them someplace else?
    Ms. Hernandez. No. No. The $150 that we collect from either 
servicers or NeighborWorks is for a comprehensive counseling 
session. That's the only way we reimburse, is for a 
comprehensive counseling session--
    Chairwoman Waters. What does that mean? Does that mean 
you--
    Ms. Hernandez. That means that the--
    Chairwoman Waters. --you follow through to loan 
modifications?
    Ms. Hernandez. We follow through with the servicer to send 
the data. If there is a foreclosure date pending, we're on the 
phone with the servicer. If the homeowner chooses, they can 
contact their counselor back and say, ``They have offered me 
this mod or this repayment, do you think it's a good deal?''
    Chairwoman Waters. Okay. Let me just say this. I have done 
implementation of loan modifications from my office, and what 
happens is, when I contact the servicer, any number of things 
can happen.
    One is, they could they inexperienced. They give me a 
waiver, my constituent, to talk to the servicer.
    If that servicer has not taken into consideration, for 
example, that Social Security is income that has not been 
calculated into the consideration, and I bring that up and I 
say, ``And maybe you should consider this and that and the 
other,'' and they have been talking with them already, and then 
they say, ``Okay, all right, we'll take another look at this,'' 
and I follow it, follow it, follow it, until either I get a 
loan modification or not.
    Is that what you're doing?
    Ms. Hernandez. No.
    Chairwoman Waters. Okay. All right.
    Ms. Hernandez. Can I just compliment you on--
    Chairwoman Waters. No, no, no. I'm going to go on to--well, 
my time is up, so I'm going to go to Mr. Cleaver, and then 
perhaps we'll have another round. Thank you.
    Mr. Cleaver?
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me welcome Colleen Hernandez from the Fifth 
Congressional District, who was pretty much the housing czar 
with the Kansas City Neighborhood Alliance for years in Kansas 
City, and I wanted to welcome her here.
    I want to go to Mr. Richardson, first of all.
    I don't know if you were here when Mr. Wade was giving 
testimony. I asked him the question about the face-to-face 
versus telephone.
    I mean, it's not a trick question. I don't know. But you 
seem to be a bit more emphatic that face-to-face was far more 
workable than--Mr. Wade suggested that there needed to be 
research, empirical data.
    Mr. Richardson. No. I would take issue with that statement, 
for two reasons.
    One, there is quantitative data to suggest that one-on-one, 
face-to-face customized counseling generates the best and 
better outcomes for clients.
    And two, for organizations like ours that are interested in 
stabilizing households, you have to develop relationships that 
cannot be generated telephonically.
    They can only be understood, diagnosed, and possibly solved 
through many hours, as my colleague Janis said, of in-depth 
conversation and relationship building with the client, so 
there's no controversy around that, as far as we're concerned.
    Mr. Cleaver. Are you sure?
    Mr. Richardson. Yes, sir.
    Mr. Cleaver. I'm--that's a rhetorical question.
    Ms. Hasegawa. Second. Third.
    Mr. Cleaver. Oh, okay. Well, yes. Then--
    Mr. Richardson. Mr. Cleaver, if I can just add, treating 
clients as commodities in this crisis is wrong.
    Mr. Cleaver. Well, then, if you're right, if you're 
correct, and I don't have any reason to question the 
authenticity of what you and Ms. Bowdler have stated, then 
don't you think we can maybe make some adjustments?
    Mr. Richardson. Absolutely. I think we need to address some 
of the key points that we have made in terms of program design 
amendments.
    NeighborWorks needs to understand that most groups that are 
serving a predominantly minority constituency are dealing with 
the hardest to serve cases. These cannot be solved over the 
phone. These can be solved only by rolling one's sleeves up and 
asking the core, key questions that will get to the root cause.
    In many cases, as it was identified in the New York Times 
today, it's our folks who are in these bad products. You cannot 
get them out of these bad products in 20 minutes on the 
telephone. It takes time, effort, and we do--80 percent of our 
work is Level 3, that face-to-face counseling that should end 
in a resolution.
    Only about a quarter of our work is Level 1, and we prefer 
to see it through until we get folks to Level 3.
    Mr. Cleaver. I'm assuming ditto, ditto?
    Ms. Hasegawa. I'll just say one thing about the phone 
counseling. I think that there are situations where, for our 
communities, you know, some of our counseling organizations, 
like that speak Thai, for example, they're getting calls from 
across the country, because they don't have those, you know, 
services that are available and accessible in the language.
    So that's why we are working to provide some telephonic 
interpretation services, but I still think that the preference 
would be for the face-to-face in terms of the long-term 
wellbeing of the families.
    Mr. Cleaver. We need the face-to-face. That would be the 
predominant of dealing with the crisis. But we would also need 
to have telephonic--
    Ms. Hasegawa. Supplement, as a supplement, absolutely.
    Mr. Cleaver. Yes, okay.
    Yes, Ms. Keating?
    Ms. Keating. Congressman Cleaver, the NFCC's position is it 
ought to be about client choice. Services ought to be delivered 
in any way that is going to get us to a solution and help 
stabilize that family.
    Mr. Cleaver. Yes, I am for that. I don't think you're going 
to find anybody in here who--well, let me just speak for 
myself. I agree with you. And that is why I have been raising 
the question, trying to find out what works, because I think 
whatever it is that works is what people will move toward.
    And so I want to come back--Ms. Hernandez, is the best 
technology being utilized presently?
    Ms. Hernandez. No, it's not.
    And if I could comment on something that was just said a 
few minutes ago, we do not envision this as a battle between 
telephone counseling and face-to-face counseling. I agree 100 
percent with what Susan Keating just said, that the consumer 
should have a choice in how they want this service delivered.
    In the first week in February, we convened a meeting where 
we said to every intermediary that we could talk to, ``Can we 
send calls straight to you from our triage call center?''; and 
in response to that, we have added 600 new agencies, so that we 
say to the consumer, ``Do you want this in person or do you 
want it on the phone?''
    Ten percent want it in person, and 90 percent want it on 
the phone. Why do they want it on the phone? Mainly because 
it's free and it's convenient, and partly because there's a 
measure of anonymity. They're a little bit embarrassed, and 
they like the fact that they can get the help that they need.
    So I would take issue with the fact that this is 
commoditizing a client, that in fact, ours is a full, 
comprehensive real counseling service that takes it through 
resolution if the homeowner decides to engage us at that level.
    But in response to your question, and I'm delighted to have 
that question, is technology being used to the fullest, we all 
know that servicers are at capacity, that it takes too long to 
get to resolution, and one of our affiliates, the Consumer 
Credit Counseling Services of Atlanta, has piloted a 
technological solution with Wells Fargo, and now with Bank of 
America, called Early Resolution Counseling Portal, and they 
are having, to your point, they are having tremendous results 
in expediting with every single person who calls.
    What happens is, when a telephone counselor, somebody calls 
in and they listen to the story on the phone, they can get on 
their computer screen what the loan facts are, how delinquent 
are they, who is their servicer. But the most important thing 
they get is, what are the investor work rules.
    So when they propose a solution to the servicer, that has 
already been vetted through the investor work rules. That's one 
of the biggest impediments that slows things down.
    This technology has been piloted for the last 16 months in 
Atlanta with Wells Fargo. We believe that industry should 
migrate to that and migrate quickly. We think it would greatly 
expedite--
    Mr. Cleaver. Why isn't it happening?
    Ms. Hernandez. I think that's a good question for the 
committee to ask the servicing industry. I don't know why it 
isn't happening. We're certainly doing everything we can to 
promote it.
    Mr. Cleaver. Ms. Bowdler?
    Ms. Bowdler. A follow-up on something. Coming back to the 
issue of telephone counseling versus in-person counseling, I 
don't doubt that folks who come through the hotline, that a 
certain percentage of them in fact prefer phone counseling, but 
I think what's important for the communities that we serve, the 
communities of color, they have been hardest hit. They have the 
most complicated of situations. They were the targets of 
predatory lending. They are in the communities where they're 
seeing their home values go down.
    It's infinitely more complicated to deal with that, which 
doesn't lend itself well to the phone issue.
    On the technology issue, excellent points on the need for 
better technology to relate to the servicers, but we're still 
also struggling for technology to relate with one another.
    So a constant problem is, on the one hand, we want to be 
able to partner with the hotline and get those referrals, but 
oftentimes, we get referrals without information, which means 
we have to start from scratch, but because the hotline has 
already inputted that data, as Mr. Wade was describing earlier, 
they get credit for that Level 1, which means our initial $150 
is already spent. We have $200 left to collect. And we have to 
work for the next 6 months in a dysfunctional system to try to 
collect it.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much.
    Mr. Green.
    Mr. Green. Thank you, Madam Chairwoman.
    And I would like to, Madam Chairwoman, recognize Ms. 
Hasegawa, Lisa, for her outstanding work. She has been working 
on these issues for some time now, and a lot of what she does 
is done without any degree of compensation other than just 
knowing that you have done a good deed, and my suspicion is 
that applies to all of you.
    Let me ask, if you would, Lisa, could you kindly give us 
some examples of why we might need to be sensitive to culture, 
some reasons why culture, having persons who can relate to 
cultures is important?
    Ms. Hasegawa. Sure, absolutely.
    I think that I'll use an Asian American example and a 
Native American Hawaiian example.
    With Native Hawaiian communities, we are working with the 
Council for Native Hawaiian Advancement and the Hawaiian 
Community Assets.
    Even though language is not an issue in that situation, 
culture and understanding of how some of the loans are 
structured on Native Hawaiian homelands, and sort of the 
communication style, even in English, right, with Native 
Hawaiians, and that trust is extremely important, because there 
is a mistrust of existing government systems, right, and 
programs, that have for years and years discriminated against 
Native Hawaiian communities.
    And so I think that is the approach, the trust and the 
relationships that the Native Hawaiian community-based 
organizations have, has been critical to their success, and 
this is where language is not an issue.
    And then similarly, I think that because of the linguistic 
isolation of many of the communities, there are a lot of 
referrals to friend or family, etc., and so it creates this 
environment where they don't have access to accurate 
information about what options are available, and so because of 
that, we have heard, for example, of some scams that were going 
on in the Lao community in Minnesota.
    They were offering, you know, to do a refi. So they were in 
actually really good loans, and then, like 7 percent, and then 
they got into 14 percent loans for a cashout refi, and the 
whole scam basically was saying that you would get two tickets 
to go home to Laos, right.
    And so these are things that prey upon, you know, people's 
lifelong dreams to go home, right, and to take their families 
with them, and so some people took that, thinking that their, 
you know, price for their home was going to go up, etc., and 
then they found themselves in a really bad situation.
    So there are things like that that are happening, that are 
very, you know--and I talked to some community leaders in 
Minnesota, and they said, ``Oh, we thought that the foreclosure 
crisis was only going on in Minneapolis,'' you know, with the 
Lao community, because there's just that lack of information in 
those communities, except for the scams that are being taken 
advantage of with ethnic media.
    The people who are at the scam are really good at doing 
outreach and using ethnic media, and so if they can do it, we 
should be able to do it.
    Mr. Green. And with reference to intermediaries, is it true 
that--I think this has been addressed--we have no AAPI 
intermediaries?
    Ms. Hasegawa. That is correct. We have been building--one 
of the criteria to become a national HUD housing counseling 
intermediary is, you have to have a nine-State network.
    And so we have been working very hard to make sure that we 
have HUD-approved counseling agencies that are also funded and 
have the capacity to be able to have that nine-State network. 
Then we would have to apply to become a HUD housing counseling 
intermediary, and then that would just be the eligibility, and 
then we would have to then apply to get funding from HUD, and 
then to able to partner.
    So it is a process that we have had to go through, and we 
have talked to HUD about the possibility, and they are awaiting 
our application.
    Mr. Green. Well, I would like to offer assistance with this 
process, and if you need the assistance, please contact the 
congressional office so that we can be of assistance to you.
    Ms. Hasegawa. Thank you, Congressman.
    Mr. Green. And I'm concerned about this, because in my 
congressional district--
    Ms. Hasegawa. That's right.
    Mr. Green. --we have the ballot printed in three languages.
    Ms. Hasegawa. Yes.
    Mr. Green. The ballot is in English, Spanish, and 
Vietnamese--
    Ms. Hasegawa. Yes.
    Mr. Green. --soon to be in Chinese, and if we can diversify 
with a ballot to this extent, surely we can diversity with the 
intermediaries and make sure that all communities are receiving 
the kind of assistance that's available and that's necessary.
    Ms. Hasegawa. Absolutely.
    I'll just bring up one comment that I have in my testimony, 
and that's Title 6, and obligations of NeighborWorks America, 
Freddie Mac and Fannie Mae, and HUD in particular, with the 
Making Home Affordable Program.
    One of the qualifications, eligibility requirements to have 
access to some of these products is that you have to have 
housing counseling, go through a housing counseling session, 
and that's all well and good if you speak English, or if, you 
know, you happen to live in a city where there is a bilingual 
HUD-certified housing counseling organization or counselor.
    And so that we are very concerned about the disparate 
impact and access that our communities are going to and other 
limited English-proficient communities are going to have to 
those products, given the problems with the system that 
currently exists.
    So Title 6 is the discrimination based on race and national 
origin, and discrimination based on language spoken is one of 
those forms of discrimination.
    NeighborWorks has consistently told us that they don't feel 
that they are obligated to Title 6 because they get a direct 
appropriation from Congress and that it's not a Federal grant.
    So we have been going back and forth with them on that, and 
I think that one of my recommendations was to get clarification 
on that issue, and also now that Freddie Mac and Fannie Mae are 
also regulated by HUD in a new way, I would ask to reconsider 
whether they also may be obligated.
    But it is the case that financial services organizations 
are not obligated, and so that has been a challenge.
    And I would also say that any recipient of HUD funding is 
obligated to Title 6.
    And so there's the obligation and then there's also the 
enforcement of the obligation--
    Mr. Green. My time is up, but I'm going to ask you, if you 
would, to contact our office so that we can further these 
discussions.
    Ms. Hasegawa. Absolutely.
    Mr. Green. Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much.
    Ms. Capito.
    Mrs. Capito. Thank you.
    I would just like to go down the row. I want to ask--I'll 
ask three questions, and they should be fairly short.
    How many people have you served with your--through the 
counseling, housing counseling; how much money has your 
organization received; and have you received any of the money 
for the legal counsel, or the legal assistance?
    Ms. Hernandez?
    Ms. Hernandez. In the last 16 months, we have served 
486,000 people with the Homeowner's HOPE Hotline counseling. 
The Federal grant that we have--our annual budget is $62 
million; $15 million of that is from Federal sources, from 
NeighborWorks NFMC. And your third question on legal, we have 
received no legal funding.
    Mrs. Capito. Okay. Thank you.
    Ms. Keating?
    Ms. Keating. Do you want me to answer that question?
    Mrs. Capito. Sure.
    Ms. Keating. Actually, through the NFMCP, our intermediary 
agencies have conducted just under 70,000 actual sessions, and 
we have received the highest level award available in Round 1, 
which was the $15 million in NeighborWorks funding.
    Mrs. Capito. And did you get any of the legal?
    Ms. Keating. Yes, we did, $1.7 million.
    Mrs. Capito. Have you spent that?
    Ms. Keating. No, we have not. We are in the process now of 
executing against that.
    Mrs. Capito. Let me ask you, as a clarification question, 
you receive your funding from NeighborWorks and then you fund 
down to a sub-grantee, correct?
    Ms. Keating. Yes, we do.
    Mrs. Capito. And then what is your administrative fee on 
that?
    Ms. Keating. It is 4 percent. There were also program 
dollars available in Round 1. We distributed most of the 
program dollars out to agencies so that they could actually 
build capacity and basically address the needs of their 
communities.
    Mrs. Capito. Okay. Thank you.
    Ms. Hasegawa. We currently don't get any money directly 
from NFMC for the reasons I stated earlier. We do have a 
contract with the Homeownership Preservation Foundation for 
translation for their hotline, that we're currently working on 
the technological systems issues, to try to figure out.
    We had a $15,000 grant, which I do not think was NFMC 
funding, to do outreach planning, and that was from 
NeighborWorks, but we currently don't get any funding. Some of 
our member organizations do get funding through the National 
Council of La Raza as sub-grantees.
    In terms of the numbers of people, it would be included in 
Janis' numbers, and we don't--we're not collecting that data, 
because we're not the intermediary, and we don't get any legal 
money, either.
    Mrs. Capito. Okay. Thank you.
    Mr. Richardson. In Round 1, we served approximately 4,600 
clients and our appropriation was about $1.2 million, in Round 
1, NFMC, and we did not go in for any of the legal assistance 
funds.
    Mrs. Capito. Thank you.
    Ms. Bowdler. Also for Round 1, we got $2 million. We served 
7,500 families--this time I got my number right--and we 
received no legal assistance, money for legal assistance. And 
we include six national capacities groups.
    Mrs. Capito. Your funding comes down through NeighborWorks, 
then, right?
    Ms. Bowdler. That was just the money we got through the 
NFMC program, yes, through NeighborWorks.
    Mrs. Capito. Okay. That's really all I wanted to know, just 
for informational purposes. Thank you.
    Chairwoman Waters. Thank you very much.
    I would like to also give this panel a second round, since 
we have so few members here, and I will first yield myself 
another 5 minutes.
    I would like to go back to the Homeownership Preservation 
Foundation, and let me just say this, that you do have a lot of 
support, all of you, all of the counseling agencies in and the 
Congress of the United States. We're anxious to have families 
have counseling assistance and services.
    We're really focused on the foreclosure problem that we 
have, and we really want these counseling services to be very, 
very strong in helping to get loan modifications.
    So I am trying to figure out how to do that. The numbers 
are rising, and we don't seem to be making much of a dent that 
we can see.
    And one of the things I'm going to have to do is find out 
how you calculate, how do you get your numbers, because there 
is some confusion here.
    Let me first understand, Homeownership Preservation 
Foundation, you get your referrals through the HOPE line; is 
that right?
    Ms. Hernandez. We own and operate the Homeowner's HOPE 
Hotline.
    Chairwoman Waters. Okay. And then do you refer them to 
these other counseling agencies, or do you do what is necessary 
to connect those callers with the servicer? What do you do?
    Ms. Hernandez. We do all three of those things, and we are 
very focused on doing what the consumer asks to be done. So--
    Chairwoman Waters. Do you follow up when you do--a consumer 
calls you, and you connect them or put them in touch with the 
servicer; do you follow up to see if there was a loan 
modification, or you simply turn it over to the servicer?
    Ms. Hernandez. We leave it to the--at the end of a 60-
minute counseling session, the counselor says, ``Here's my 
name, here's my direct number. I'm sending your file to the 
servicer. And if you don't hear back from them in 5 to 10 
business days, call me back and let's follow up.'' That's one 
kind of case.
    Another kind of case is if there is a foreclosure date 
pending, the counselor gets the servicer on the phone and they 
work towards a resolution.
    The third kind of case is the one through ERCP, where they 
have live connection between the counselor and the servicer, 
both focused on the solution, while the homeowner is on the 
line. That, frankly, is our preference, because it expedites 
resolution.
    Chairwoman Waters. Now, all of those you consider in the 
Group 1 category where you get paid $150 for each of those 
kinds of services?
    Ms. Hernandez. Yes.
    Chairwoman Waters. Okay. And how many referrals do you make 
to other counseling agencies?
    Ms. Hernandez. Not as many as we would like. When the 
homeowner calls the hotline, 30 percent of the time, they don't 
want to talk to a counselor, they just have a question, they 
just have a simple question like, ``Is your service in Spanish, 
are you open on Sunday, how do I reach my servicer,'' etc.
    The other 70 percent want to talk to a counselor, and at 
that point, the call center worker says, ``Do you want this 
service in person, in your community, or do you want it on the 
telephone now?''
    And the person--if they want it in person, in their 
community, then we have a locator database that we have 
requested the intermediaries join, and if somebody says, ``I 
want it in person,'' we find in our locator database the three 
counseling agencies nearest to them, and we give them the 
contact information. That's the end of it. We don't bill 
anybody for that.
    Then, when they call the intermediary, they call the agency 
that we referred them to, that agency can bill NFMC for a Level 
3 $450 session if, in fact, that's what they conduct. So--
    Chairwoman Waters. So if a citizen calls you and you refer 
them to the servicer, you get information, you connect with 
their servicer, and they call another agency, is that 
considered a duplication?
    Ms. Hernandez. If we counsel them--yes, if we counsel them 
through Level 1, and at the end of that, we connect them to a 
servicer, and we file first, then--and somebody else files 
later, then that would be considered a duplication.
    Chairwoman Waters. So if that person that you refer them 
to, if that person--if the person you referred says, ``Well, 
the servicer was supposed to call me back, I never heard from 
him, so I called back, and I was referred to this other place, 
and I called this other counseling agency, and guess what they 
did? They not only got the servicer, but they got me a loan 
modification.'' Is that a duplication?
    Ms. Bowdler. The way I understand how it works is, if 
through the hotline they receive that initial intake, they 
bill, they get $150.
    If they were to come see an NCLR group, even if we had to 
start from scratch, we can still only bill for Level 2 and 3, 
which is $200.
    So if they were to have come to me first, I could bill for 
the whole thing, but because they went there first, I can still 
bill for that $200, but I can't get the initial payment. That 
would be considered a duplication.
    And then as I stated, the impact is that we end up doing 
work that takes months, and we only--not only do we only get 
paid $200 for it, but--
    Chairwoman Waters. How many--rather than how many, how many 
of you feel that you're getting--you're servicing in what would 
be described as a duplicative way, clients who have talked to 
someone else first, and didn't get satisfaction, or maybe they 
were connected to a servicer who didn't follow up, and you're 
doing the second and third level work; how many of you find 
yourselves in that position?
    Ms. Keating. Chairwoman, if I--
    Chairwoman Waters. Yes.
    Ms. Keating. --may, we do see examples of that.
    I think one of the issues, and you have been touching on 
this throughout the hearing, is on how the government-sponsored 
hotline was initially set up, it was very focused through one 
intermediary.
    Those agencies were only providing Level 1 services, and 
that created this artificial notion of what is Level 1 or Level 
2, rather than starting with the homeowner, and--whether it is 
face-to-face, by phone, or whatever--getting at the root cause 
and working towards solutions.
    So I would just say, even though there have been some 
recent changes with the hotline, where a second question is 
being asked, there is spillover. If this is going to be the 
government-sanctioned hotline, we have to figure out how to use 
the full capacity of all the HUD intermediaries and all those 
agencies, whether it be by phone, face-to-face, whatever, and 
provide all the resources to deal with this problem right now. 
Even with all of our resources together, we cannot fix what has 
happened in America here.
    Chairwoman Waters. Let me just ask, do you any of you 
believe that every housing counseling agency should train and 
develop people to really help implement loan modifications, and 
from intake to finish, you should be responsible for it?
    Ms. Keating. I would say it really depends on the client 
and what the situation is.
    Congresswoman, I would say that's really going to vary. 
It's also going to vary depending upon the type of the loan and 
so forth.
    So I would just say I think we need very well-trained 
counselors. For instance, at the NFCC, all counselors are 
certified. They go through extensive housing certification and 
so forth, to provide these services.
    Can they actually be negotiating all the loans, given the 
complexity, and the creative that are out there? They can 
probably take it to a point.
    What they have to be able to do is reach the servicer and 
be able to talk and be the advocate for the consumer, and have 
all the facts, and have taken the time to get all the facts and 
information, so that they can be that advocate, and work 
through, again, to get a modification taken care of.
    Chairwoman Waters. Thank you very much.
    Mr. Green.
    Mr. Green. Yes. I would like to follow up on what the Chair 
is bringing to our attention, because it seems to me that we're 
encouraging, as has been said, the intake process, which is 20 
minutes, and then we find some other entities having to go 
through this 20-week process, which will net a lot less, I hate 
to say cash, but money, and a lot of the people are working, 
trying to make a living, who are performing the services.
    So why would we not want the intake person or entity to 
take this to fruition, as opposed to passing on the hard work 
to someone else? That was the question. And I would like to 
just hear another answer to that question.
    Why is it that we won't pursue it with one entity, so that 
we don't find this incentive to take the 20-minute way out, as 
opposed to the 20-week way out?
    Ms. Hernandez. Could I respond?
    Mr. Green. Please.
    Ms. Hernandez. First of all, the work that we do is not 20-
minute work. Our average counseling session is 60 minutes, and 
that's at the consumer's choice. We can complete that process 
in 60 minutes.
    We, as I mentioned, when Congressman Cleaver was asking, 
what works, we're very focused on what keeps the homeowner in 
the home and helps them avoid foreclosure. Seventy percent of 
the time, our people stay in the home a year later, and avoid 
foreclosure. So we are completely committed to resolution in 
our model set.
    And so there is an intake function that is our call center, 
but what is not being clear here is that, from the call center, 
we transfer people, we--if the consumer wants to talk to a 
face-to-face counselor, and that's their choice, then we 
transfer them immediately. We don't bill anybody for that. 
We're not competing with that.
    We're saying to the consumer, ``What do you want?'' And if 
they want face-to-face--10 percent of the time they do--then we 
connect them, if there is somebody in their community who 
offers that service.
    Mr. Green. Ms. Hernandez, permit me to ask, and this is 
only for edification purposes, if you take 60 minutes, let's 
make it 60 minutes, but when you're finished, you receive about 
$150 for the Level 1, right?
    Ms. Hernandez. Yes.
    Mr. Green. Now, assuming that the problem is not arrested 
at this point, the Level 2 is where there may be many more 
minutes than 60, many more hours.
    And the concern that I'm raising is, if we don't do 
something with the 60-minute process that sort of connects the 
60-minute person with the longevity, what we have done is, 
we're passing the toughest part of this battle to people who 
are going to receive a lot less in terms of an emolument.
    Now, if I'm incorrect, I would like to have someone to help 
me. Would you like to jump in, Mr. Richardson?
    Mr. Richardson. Yes. I would like to--
    Mr. Green. Please.
    Mr. Richardson. --as a coda to that point, I'll say this. 
We gladly take on that work, because--and hopefully, we'll be 
able to resolve the compensation issues with NeighborWorks.
    But we gladly take on that work, because we are in the 
household stabilization business. We ask the question, what is 
the root cause of the foreclosure; is it a job loss; is it a 
health crisis; is it a family crisis? And we, and La Raza and 
others, have programs that respond to that.
    We try to stabilize the entire situation, and not look 
myopically at just the question about what caused--
    Mr. Green. Well, permit me to ask you this: What percentage 
of your cases start out as Level 1 cases?
    Mr. Richardson. Roughly a quarter.
    Mr. Green. So 75 percent do not start out as Level 1?
    Mr. Richardson. Correct.
    Mr. Green. See, listen, now. We're talking about 
fundamental fairness at this point. If 75 percent of your cases 
don't start out as Level 1, then I have in my mind a concern 
with reference to whether or not you should be getting the 
other 75 percent of that Level 1 business, as well.
    We want everybody to be treated fairly. That's all that I'm 
trying to raise now. And I think Ms. Bowdler, I think you 
initiated this.
    What percentage of your business is Level 1?
    Ms. Bowdler. How many do we get referred from the hotline?
    Mr. Green. Yes.
    Ms. Bowdler. That I don't actually know. I think a larger 
portion of ours probably come in the door straightaway.
    But we get a lot of--we have heard a lot of complaints and 
issues around Spanish language capacity. So we have a lot of 
overflow of folks who weren't able to get Spanish language 
service from other places. So we have to start over at Level 1 
with everybody.
    Mr. Green. I believe you start at Level 1, but you're not 
compensated at Level 1.
    Ms. Bowdler. Right, that's right.
    Mr. Green. Okay. So I'm really looking at a compensation 
issue now.
    Ms. Bowdler. That number, I'm sorry, I don't know off the 
top of my head, but I can get it to you.
    Mr. Green. Okay.
    Madam Chairwoman, my time is up, but I can sense that there 
is a fairness and equity issue that we have not quite addressed 
appropriately, and I'm not sure where we go, but I can sense 
it.
    Chairwoman Waters. Mr. Green, I think you're right, and we 
have been trying to get at that, because we're unveiling 
information that we simply did not understand or know prior to 
today. I think it's becoming clearer to us what is happening.
    Like I said, we want good counseling. We want everybody to 
be involved. But there appears to be something here that we're 
going to have to correct, and namely, one of the things that I 
see is precisely what you're getting at, and that is, it 
appears that one agency that's getting the referrals is getting 
paid for the Level 1. I don't know whether they're spending 20 
minutes or 1 hour, or they're referring to the servicer with no 
followup, and they're getting paid.
    They're showing back up, perhaps, are the ones who are 
taking them from start to finish, or putting more time, more 
work in. But certainly, when they show back up, they're not 
getting the Level 1 $150.
    One more question, if I may, and that is, I would like to 
know, Ms. Hernandez, where do you get your 70 percent? And tell 
me--I'm told by my staff that somehow you're relying on 
RealtyTrac to help you come up with these numbers. How do you 
do that?
    Ms. Hernandez. No, not RealtyTrac, the credit bureaus. So 
this was a study done by our affiliate, Consumer Credit 
Counseling Services of Atlanta on 21,234 people that they 
counseled through the HOPE Hotline with comprehensive 
counseling in 2007.
    They took that case file, they fast-forwarded a year, and 
they looked at credit bureau statistics to say, ``Have you in 
fact gone through foreclosure?'' Then they also bumped that 
data up against the address, up against RealtyTrac, to see if, 
in fact, the address a year later was the same as the address 
the client reported.
    So their data, that it was in fact 71 percent were still in 
their homes, and had avoided foreclosure, came from credit 
bureaus, so that foreclosure shows up on the credit report, and 
it did not show up on these credit reports.
    Chairwoman Waters. Our information says after 1 year, they 
collected data from credit bureaus and RealtyTrac.
    Ms. Hernandez. Yes. So that's what I--
    Chairwoman Waters. Well, I want to know, what role did 
RealtyTrac play?
    Ms. Hernandez. The RealtyTrac was just the address, so if a 
client reported, ``I'm at this address when I'm counseled,'' 
and a year later, am I still at the same address, did that 
address go through foreclosure, that's what RealtyTrac tracks.
    Then we would know from that part of the database whether 
or not the property had gone through foreclosure, but we know 
from the homeowner, from their credit bureaus, that they did 
not go to foreclosure, they avoided foreclosure, they were 
still in their homes.
    Chairwoman Waters. We're going to have to take a look at 
this.
    Ms. Hernandez. We welcome that.
    Chairwoman Waters. The calculation of data. Yes. I'm sorry. 
We have held you here for a long time.
    And Mr. Cleaver, did you have any last questions that you 
would like to ask?
    Mr. Cleaver. No.
    Chairwoman Waters. Let me just say to our panelists today, 
thank you so very much. Don't forget, we're committed to 
strengthening counseling. None of us here are afraid to ask for 
money. We want to do that.
    But we have to make sure that we have fairness in the 
system, we have to make sure that we're not simply a referral 
agency going back to the same people who have been collecting 
the fees and doing the foreclosures to begin with.
    Don't forget, we're talking to servicers, and we don't want 
to just leave people in the hands of servicers and not follow 
it through, and know whether or not, for sure, without relying 
on data that's coming from places that, you know, we can't 
really confirm.
    Based on our own work, we want to know whether they got a 
modification or not.
    And so I'm going to try and lead this committee through 
changing some of the rules of this game so that everybody has 
access, everybody's getting paid. I would like to see you get 
more money.
    But I'm not so sure about this Level 1, 2, 3, stuff. I want 
people who know how to do it, and know how to get those loan 
modifications and not simply refer people and leave them in the 
hands of servicers.
    So thank you so much for being here today. We look forward 
to working with you.
    Ms. Keating. Thank you very much.
    Chairwoman Waters. The Chair notes that some members may 
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.
    The panel is now dismissed. Thank you very much.
    Before we adjourn, the written statement of the following 
organization will be made part of the record of this hearing: 
The Housing Partnership Network.
    The hearing is now adjourned. Thank you very much.
    [Whereupon, at 5:13 p.m., the hearing was adjourned.]


                            A P P E N D I X



                              May 13, 2009


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