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



 
   FORECLOSURE PREVENTION PART II: ARE LOAN SERVICERS HONORING THEIR 
              COMMITMENTS TO HELP PRESERVE HOMEOWNERSHIP?

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 24, 2010

                               __________

                           Serial No. 111-97

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


   FORECLOSURE PREVENTION PART II: ARE LOAN SERVICERS HONORING THEIR 
              COMMITMENTS TO HELP PRESERVE HOMEOWNERSHIP?






   FORECLOSURE PREVENTION PART II: ARE LOAN SERVICERS HONORING THEIR 
              COMMITMENTS TO HELP PRESERVE HOMEOWNERSHIP?

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 24, 2010

                               __________

                           Serial No. 111-97

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             JOHN J. DUNCAN, Jr., Tennessee
JOHN F. TIERNEY, Massachusetts       MICHAEL R. TURNER, Ohio
WM. LACY CLAY, Missouri              LYNN A. WESTMORELAND, Georgia
DIANE E. WATSON, California          PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts      BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                JIM JORDAN, Ohio
GERALD E. CONNOLLY, Virginia         JEFF FLAKE, Arizona
MIKE QUIGLEY, Illinois               JEFF FORTENBERRY, Nebraska
MARCY KAPTUR, Ohio                   JASON CHAFFETZ, Utah
ELEANOR HOLMES NORTON, District of   AARON SCHOCK, Illinois
    Columbia                         BLAINE LUETKEMEYER, Missouri
PATRICK J. KENNEDY, Rhode Island     ANH ``JOSEPH'' CAO, Louisiana
DANNY K. DAVIS, Illinois             BILL SHUSTER, Pennsylvania
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 24, 2010....................................     1
Statement of:
    Das, Sanjiv, CEO, Citimortgage, Inc.; Barbara J. Desoer, 
      president, Bank of America Home Loan; David Friedman, 
      president and CEO, American Home Mortgage Servicing, Inc.; 
      Michael J. Heid, co-president, Wells Fargo Home Mortgage, 
      Wells Fargo & Co.; David Lowman, CEO, Chase Home Finance, 
      Inc., JPMorgan Chase Bank; and Edward J. Pinto, Real Estate 
      Financial Services Consultant..............................    15
        Das, Sanjiv..............................................    15
        Desoer, Barbara J........................................    26
        Friedman, David..........................................    35
        Heid, Michael J..........................................    51
        Lowman, David............................................    63
        Pinto, Edward J..........................................    74
Letters, statements, etc., submitted for the record by:
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   122
    Das, Sanjiv, CEO, Citimortgage, Inc., prepared statement of..    18
    Desoer, Barbara J., president, Bank of America Home Loan, 
      prepared statement of......................................    28
    Friedman, David, president and CEO, American Home Mortgage 
      Servicing, Inc., prepared statement of.....................    37
    Heid, Michael J., co-president, Wells Fargo Home Mortgage, 
      Wells Fargo & Co., prepared statement of...................    53
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................   120
    Jordan, Hon. Jim, a Representative in Congress from the State 
      of Ohio, prepared statement of.............................     9
    Lowman, David, CEO, Chase Home Finance, Inc., JPMorgan Chase 
      Bank, prepared statement of................................    65
    Pinto, Edward J., Real Estate Financial Services Consultant, 
      prepared statement of......................................    76
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York:
        Letter dated June 30, 2010...............................   104
        Prepared statement of....................................     4


   FORECLOSURE PREVENTION PART II: ARE LOAN SERVICERS HONORING THEIR 
              COMMITMENTS TO HELP PRESERVE HOMEOWNERSHIP?

                              ----------                              


                        THURSDAY, JUNE 24, 2010

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Cummings, Kucinich, Clay, 
Watson, Lynch, Connolly, Quigley, Kaptur, Norton, Davis, 
Cuellar, Speier, Driehaus, Chu, Issa, Duncan, Turner, McHenry, 
Bilbray, Jordan, and Luetkemeyer.
    Staff present: John Arlington, chief counsel--
investigations; Beverly Britton Fraser, counsel; Kwame Canty 
and Gerri Willis, special assistants; Velginy Hernandez, press 
assistant; Adam Hodge, deputy press secretary; Caria Hultberg, 
chief clerk; Marc Johnson, assistant clerk; Mike McCarthy, 
deputy staff director; Jason Powell, senior counsel; Brian 
Quinn and David Rotman, investigative counsels; Ophelia Rivas, 
assistant clerk; Shrita Sterlin, deputy director of 
communications; Lawrence Brady, minority staff director; John 
Cuaderes, minority deputy staff director; Jennifer Safavian, 
minority chief counsel for oversight and investigations; Adam 
Fromm, minority chief clerk and Member liaison; Benjamin Cole, 
minority policy advisor and investigative analyst; Seamus 
Kraft, minority director of new media and press secretary; 
Justin LoFranco, minority press assistant and clerk; 
Christopher Hixon, minority senior counsel; Hudson Hollister, 
minority counsel; Mark Marin, minority senior professional 
staff member; Brien Beattie, minority professional staff 
member; and Sharon Casey, minority executive assistant.
    Chairman Towns. The committee will come to order. Good 
morning, and thank you for coming.
    It took massive Federal intervention, using billions of 
taxpayer dollars, to save the banks from the edge of complete 
disaster. The banks and the financial system are now 
stabilizing, and, in fact, the major banks are even beginning 
to make money again. Unfortunately, the same cannot be said for 
millions of people who are unemployed or who are in danger of 
losing their homes.
    The threat of foreclosure is still at an all time high. 
More than 3.1 million Americans are delinquent on their 
mortgages by 60 days or more. A letter from the banks or phone 
call from the mortgage company is still keeping many homeowners 
awake at night agonizing over the potential loss of their home. 
For these people, the economic crisis is far from over.
    As I have said before, to its great credit, the Obama 
administration recognized early on that an important part of 
the Nation's economic recovery is keeping as many people as 
possible in their homes. This makes sense from both an economic 
standpoint and a public policy standpoint, and I salute him for 
that.
    The Home Affordable Modification Program [HAMP], is a 
central piece of the Treasury Department's effort to carry out 
that objective. HAMP had a troubled start, but it appears that 
some significant improvements have recently been made.
    More than 1.2 million homeowners have now started a HAMP 
trial modification, and 346,000 have obtained a permanent 
modification. The median savings to these homeowners is a 
little over $500 per month. Moreover, the number of permanent 
modifications has more than doubled in the last 3 months.
    But there are still major problems with HAMP. The chief 
complaint is the slow pace at which servicers are permanently 
modifying troubled mortgages. There is still considerable 
concern over confusing and conflicting communications from loan 
servicers to borrowers. And while more permanent modifications 
are being made, fewer delinquent borrowers appear to be 
qualifying for HAMP.
    Perhaps most important, many of the borrowers who obtain a 
trial modification drop out of the program later. In fact, it 
appears that a majority of the mortgage modifications obtained 
under HAMP may not be successful.
    A separate and deeply troubling issue is raised by a new 
study by the Center for Responsible Lending, which found that 
minority communities continue to experience significantly 
higher foreclosure rates than whites, regardless of their 
income levels. This confirms similar findings reported by the 
National Community Reinvestment Coalition in the committee's 
last hearing on HAMP. Today, I would like to hear from the 
banks exactly how this disparity can be addressed. Clearly, we 
need to do a lot better than we have done in the past.
    But this is not just about HAMP. I think the mortgage 
banking industry has to recognize that HAMP cannot be the only 
solution to the foreclosure crisis.
    Some of the banks appearing today have begun to save homes 
from foreclosures with principal reductions, second lien 
modifications and other help for the unemployed. These sound 
like good first steps, but I want to hear more, and I want to 
see broad participation throughout the mortgage loan industry.
    Foreclosure is a losing proposition for everyone involved 
if you stop and analyze it. The homeowner loses the house, the 
bank loses a big chunk of its investment, and the community 
loses a family with a stake in the community. What I am asking 
the banks to do is to help us find an effective way to stop 
these foreclosures.
    I want to thank our witnesses today for appearing, and I 
look forward to your testimony.
    I will now yield 5 minutes to the committee ranking member, 
but let me just say this before we move any further that we are 
going to give 5 additional minutes on each side, of course 
after your opening statement, we will give 5 minutes on the 
Democratic side and 5 minutes on the Republican side, and that 
can be split up five ways, six ways, as many ways as you want 
to split it up. But you have 5 minutes.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

[GRAPHIC] [TIFF OMITTED] T3041.001

[GRAPHIC] [TIFF OMITTED] T3041.002

[GRAPHIC] [TIFF OMITTED] T3041.003

[GRAPHIC] [TIFF OMITTED] T3041.004

    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Chairman, thank you for holding today's hearing to 
examine the continuing failure of this administration's 
response to the foreclosure crisis.
    At the outset, I must express my extreme disappointment 
that the committee will not hear from the Treasury Department 
today. Since the committee's last hearing on HAMP 3 months ago, 
Treasury has continued its pattern of secrecy, dishonesty, and 
failure.
    Treasury has refused to implement the Special Inspector 
General's recommendations for reform of the program; it 
continues to misrepresent the original goals of the program so 
as to disguise its ineffectiveness; and, most importantly, the 
Obama administration's technocratic tinkering in the housing 
markets has continued to fail the American people.
    Just this week, we learned that Treasury has kicked 
substantially more people out of the HAMP program than have 
received sustainable mortgage modifications. As the Wall Street 
Journal recently reported, many of these Americans are actually 
worse off for relying on the administration's promises.
    I look forward to hearing from the mortgage servicers here 
today. They play a vital role in the process, and their 
perspective is necessary and helpful in examining this Federal 
program. But inviting the implementers of the program while 
ignoring the designers of the program and the people ultimately 
responsible for the waste of $75 billion of taxpayer money is 
simply a failure of oversight.
    I am also disappointed, Mr. Chairman, that GAO was 
disinvited from today's hearing. GAO has been investigating 
HAMP on an ongoing basis and they published a report this 
morning focused on the performance of mortgage servicers to 
coincide with their expected testimony at this particular 
hearing. Their perspective would also have been valuable for 
this committee to hear.
    Mr. Chairman, I respectfully urge you to invite the 
Treasury Department to answer for its failures at another 
hearing in the near future. We have a joint responsibility to 
the American people to hold this administration accountable, 
regardless of political affiliations.
    The servicers we hear from today have worked to comply with 
800 HAMP rules issued in over 15 different sets of guidelines. 
Not surprisingly, they have been able to offer far more 
mortgage modifications privately outside of HAMP than within 
it. Ultimately, however, the best mortgage modification is a 
job, and, unfortunately, this Congress and this administration 
has stifled private sector job creation through their big 
government anti-economic growth agenda. The implications of 
these policy mistakes are being felt by former homeowners 
across this great country.
    Thank you, Mr. Chairman, and I yield back.
    [The prepared statement of Hon. Jim Jordan follows:]

    [GRAPHIC] [TIFF OMITTED] T3041.005
    
    [GRAPHIC] [TIFF OMITTED] T3041.006
    
    Chairman Towns. I thank the gentleman for his statement. 
But let me just indicate to you that we did have Treasury in, 
we did have GAO and we had SIGTARP. And, of course, you can't 
do but so much in 1 day.
    Mr. Jordan. GAO's report came out this morning, Mr. 
Chairman. That is what we needed to hear about.
    Chairman Towns. The gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. 
Chairman, first of all, thank you for holding the hearing.
    I am concerned about the claims published in the Washington 
Post this past Monday that a growing number of borrowers are 
failing to move from the HAMP program's initial stage into a 
permanent loan modification.
    More than 100,000 borrowers lost their mortgage aid in May. 
About half of those dropped from the Federal program received 
another type of loan modification from their banks, according 
to the government data. But housing counselors have complained 
that those alternative loan modifications are typically not as 
generous as what the government program offers and often come 
with hefty up-front fees.
    I am interested to see how these options have been 
communicated with the borrowers. Getting started and 
understanding the process can be one of the toughest steps in 
loan modification efforts.
    Mr. Chairman, for over the last 15 months I have held four 
foreclosure prevention workshops in my district, and I can tell 
you that the key is that we have to have effective and 
efficient programs. It is one thing to talk about them. It is 
another thing to actually carry them out. Hopefully, the people 
who are testifying before us today can help us get better 
insight as to how we can keep people in their homes.
    I have told my constituents that they must protect their 
house. The house is their No. 1 investment in most instances, 
and a very, very important investment, and I think that we need 
to be doing more and more to help people retain their home so 
that they can have stability, and so they can keep their 
families stable and also, of course, so that we can keep 
neighborhoods stable.
    With that, Mr. Chairman, I yield back.
    Chairman Towns. The gentleman yields back. I now recognize 
Mr. Turner.
    Mr. Turner. Can you clarify for us how the time is 
allocated? Are you saying there is 5 minutes over there and 
there is 5 minutes over here?
    Chairman Towns. He yielded back. We still have 3 minutes 
left on this side. Now you have your entire 5 minutes on your 
side.
    Mr. Turner. OK, great.
    Mr. Chairman, you said, as you know, you acknowledged the 
request by the ranking member for a representative from 
Treasury, and you said we can only do so much in 1 day. I can 
tell you that we would come back. We are a hard-working 
committee and everybody would be delighted to be here.
    Chairman Towns. Would the gentleman yield for a second? We 
have had Treasury.
    Mr. Turner. You haven't had them since Monday when they had 
their report issued that said that this program is failing, and 
I have some very serious questions. You know, just yesterday, 
just yesterday, the Treasury Secretary appeared before the 
congressional oversight panel where he was asked a question 
about HAMP, and do you know what he said?
    He said, ``This program was not designed to prevent 
foreclosures. It was not designed to sustain homeownership at a 
level that would be unachievable, imprudent to try to do.'' He 
goes on to say when someone asked him, ``Well, do you think it 
should go to 65 percent of homeownership level?'' He said, ``I 
think you are describing exactly the objectives that have 
shaped this program.''
    The chair of the congressional oversight panel responding 
to his comments said this: ``I was very surprised and very 
frustrated by the notion that the Secretary seemed to be saying 
that a program that helps only a tiny handful of families 
facing foreclosures is a successful program because in effect 
the rest deserves to lose their homes.'' She says, ``I thought 
that was shocking.''
    I find it shocking. I find it inconsistent with the 
chairman's opening statement about what this program is to do, 
and certainly Secretary Geithner is responsible for ensuring 
the success of the program. I also find it inconsistent with 
what the President told the American people this program was 
going to do.
    Now, we have an absolute crisis, and it is not over. I am 
from Montgomery County, OH, and the foreclosure rate is 
staggering in my community. Ohio has seen the foreclosures 
continue to mount. And clearly this needs to be addressed, not 
only by Treasury addressing this program and giving people real 
answers as to its goals and objectives, but also for the 
financial institutions, because we cannot lose focus here that 
the financial institutions got us in this mess, this is not a 
government-created mess, by their lending practices that did 
not make sense, that were not sound business decisions, that 
did not protect the banks, and did not protect capital 
investments.
    The concern that I have as I looked at Treasury and then to 
the financial institutions is that decisions are being made 
currently that don't protect capital. Every Member of Congress 
can tell you that the realtors in their communities tell them 
that it is virtually impossible to get loan servicers, banks, 
financial institutions, to work with the home buyer, to get a 
short sale, to do things that would avoid foreclosure. This is 
what I don't understand, and I am looking forward to some 
information today.
    The test under the HAMP program, it is supposed to preserve 
capital for the banks, but apparently it is not a program that 
even the banks are with zeal pursuing.
    When you look at the market, any time that we can avoid 
foreclosure, you make more, you preserved your capital; the 
market sustains more because when the home goes into 
foreclosure, prices in the neighborhood drop; and families are 
sustained.
    So I am interested today in why isn't this program working, 
why isn't Treasury here, but also from you guys, why aren't you 
operating in what we would all believe a market standard of 
capital preservation, because we are continuing to proceed 
toward foreclosure at rates where we all know people are 
approaching the financial institutions with deals and offers 
that are being rejected that would have a higher return than 
foreclosure does. I am interested in some of those answers 
today.
    I yield back.
    Chairman Towns. I now recognize Mr. Kucinich.
    Mr. Kucinich. Thank you very much, Mr. Chairman.
    Chairman Towns. You have 3 minutes.
    Mr. Kucinich. I am going to take 1 minute, if you will let 
me know when that is done.
    We know that the State of Ohio received another $172 
million so that people could be counseling individuals on how 
to stay in their home, and I am grateful to the administration 
for that. But we also know that servicers have been referring 
eligible borrowers to foreclosure until they have been 
evaluated for HAMP. Treasury had to intervene to try to put a 
stop to that practice.
    We know that Bank of America has 13 percent permanent 
modifications; JPMorgan Chase, 20 percent; Wells Fargo, 22 
percent; CitiMortgage, 23 percent; American Home Mortgage 
Servicing, 16 percent. This whole program is about keeping 
people in their homes, and yet we are finding that the 
servicers apparently are not stepping up in a way that can 
encourage more and more people to stay in.
    We know that people are not given reasons, understandable 
reasons, why their home affordable mortgage modification 
program is denied, that it is sketchy as to how people appeal a 
denial, and to have their denials reviewed before they face 
foreclosure. These are all things that this hearing is going to 
get into. We are glad you are doing what you are doing, but it 
is not enough.
    Chairman Towns. The gentleman's 1 minute is up.
    The gentleman from Virginia, he has 2 minutes left.
    Mr. Connolly. I thank the chairman.
    I just want to say I appreciate the steadfastness of our 
friends on the other side of the aisle in wanting to look at a 
program and make sure it is better and working. But I think it 
is important to remember that our friends on the other side of 
the aisle are the same ones that stood by and allowed for no or 
loose regulation that created the subprime mortgage bubble in 
the first place, and to a person they opposed helping anybody 
who was under water or threatened with foreclosure, including 
in Ohio. Not one person in America would have been helped if 
their vote had actually been the majority vote when we looked 
at the Recovery and Reinvestment Act.
    So when we are looking at the subject and we are looking at 
imperfect models----
    Mr. Turner. Will the gentleman yield?
    Mr. Connolly. I will not yield--that are not succeeding to 
the fullest extent. Lets's remember that there are some among 
us who it would have helped not at all.
    Thank you, Mr. Chairman. I yield back.
    Mr. McHenry. Mr. Chairman.
    Chairman Towns. The gentleman from North Carolina has 1 
minute.
    Mr. McHenry. I would just say to the chairman that my 
colleague on the left is flat wrong. What he is saying is 
actually not the case. We want a workable program that will 
actually help homeowners, not a failed program that is 
expensive to the taxpayers and doesn't actually help 
homeowners. It has been an absolute failure.
    GAO report after report, if we talk to folks in our 
communities and our districts, they will tell you it is not 
working. And I have been front and center on this issue trying 
to help homeowners at home and here in Washington with 
policies, and it was the party over there that would do nothing 
about Fannie Mae and Freddie Mac, which really added fuel to 
the fire of subprime and this mortgage crisis that we are 
inheriting and that we are trying to work through right now.
    So rather than this guy blaming Bush, let's move forward. 
Let's try to do something reasonable for homeowners. They are 
sick and tired of this kind of petty politics. We want to fix 
this problem, not simply throw some money at it. We want a 
workable solution, not some empty rhetoric.
    So, with that, I would be happy to yield back.
    Chairman Towns. The gentleman's time has expired.
    Let me just say to all of the members of the committee, 
there is enough blame to go around. I want you to know that. We 
just have sort of put things in the proper context.
    We have had the Treasury Department, GAO and the SIGTARP to 
testify at our first hearing on this issue. Treasury was 
questioned by the committee for more than 3 hours on the 
performance of HAMP at the first hearing. Now it is the banks' 
turn, and we are going to hear from them today.
    But more importantly, let me state, HAMP is not the only 
way to address the foreclosure problem. HAMP is just a part of 
the solution, but not the whole solution. We need the 
wholehearted cooperation of everybody across the board, even 
this committee.
    On that note, I see no recognition. We have a minute left 
on this side. Yes, 1 minute to the gentlewoman from California, 
Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    I think the American homeowners who are grieving right now 
and pleading for some kind of modification don't care if it is 
HAMP or something organized by the bank. They just want some 
relief. And I think it is shameful that my colleagues feel 
compelled to point fingers one way or the other.
    The one issue that is really critical that we have to look 
at is the conflict of interest that exists where there is a 
mortgage and a second mortgage and the servicer has an interest 
in the second mortgage and therefore will not negotiate a 
modification with the first mortgage. That is a really serious 
issue and one we should address here today.
    I yield back.
    Chairman Towns. All time has now expired. We will turn to 
our panel of witnesses.
    It is committee policy that all witnesses are sworn in. If 
you would stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that all witnesses 
answered in the affirmative.
    Mr. Das is the chief executive officer of CitiMortgage, 
Inc. Welcome, Mr. Das.
    Ms. Barbara Desoer is the president of Bank of America Home 
Loans, which is the Nation's largest home mortgage servicer.
    Thank you, Ms. Desoer.
    Mr. David Friedman is the president and chief executive 
officer of American Home Mortgage Servicing, which is the 
Nation's largest independent non-prime servicer.
    Welcome, Mr. Friedman.
    Mr. Michael Heid is the co-president of Wells Fargo Home 
Mortgage, which services one out of every six mortgage loans in 
the Nation.
    Welcome, Mr. Heid.
    Mr. David Lowman is the chief executive officer of Chase 
Home Finance.
    Welcome, Mr. Lowman.
    Mr. Edward Pinto is a real estate financial services 
consultant.
    Welcome. We are delighted to have you here as well.
    At this time I would ask the witnesses to deliver their 
statement. Let me just explain, just in case you don't know how 
it works. There is a light that comes on and it is green, and 
then after 4 minutes it becomes caution, and then it turns red. 
Now, red means stop. I just want to sort of remind you how it 
works so we have that straight.
    Mr. Das, why don't we start with you and come right down 
the line. This will allow us an opportunity to raise questions.

 STATEMENTS OF SANJIV DAS, CEO, CITIMORTGAGE, INC.; BARBARA J. 
 DESOER, PRESIDENT, BANK OF AMERICA HOME LOAN; DAVID FRIEDMAN, 
  PRESIDENT AND CEO, AMERICAN HOME MORTGAGE SERVICING, INC.; 
MICHAEL J. HEID, CO-PRESIDENT, WELLS FARGO HOME MORTGAGE, WELLS 
   FARGO & CO.; DAVID LOWMAN, CEO, CHASE HOME FINANCE, INC., 
JPMORGAN CHASE BANK; AND EDWARD J. PINTO, REAL ESTATE FINANCIAL 
                      SERVICES CONSULTANT

                    STATEMENT OF SANJIV DAS

    Mr. Das. Thank you. Chairman Towns, Ranking Member Issa, 
and members of the committee, thank you for the opportunity to 
discuss Citi's efforts to help families stay in their homes and 
describe our progress in implementing the Home Affordable 
Modification Program [HAMP]. I am Sanjiv Das, CEO of 
CitiMortgage, and I am honored to be speaking with you today.
    As Citi CEO Vikram Pandit has said, we owe a debt of 
gratitude to the American taxpayer and our government for 
providing Citi with TARP funds. We believe it is our 
responsibility to help American families in financial distress, 
and in particular to help families stay in their homes. As one 
recent example, just last week Citi became the first major 
lender to announce a 90-day moratorium on mortgage foreclosures 
in the Gulf Coast region. Our goal is to help families who have 
been hard hit by the devastating oil spill to remain in their 
homes.
    At Citi, we are focused on two key priorities: Working hard 
to make the HAMP program as successful as possible; and 
providing solutions for distressed borrowers that do not 
qualify for, or have fallen out of, the HAMP process. Our focus 
has produced significant results. Citi is consistently ranked 
among the top performing servicers, and since 2007 we have 
assisted more than 900,000 families in their efforts to avoid 
foreclosure.
    We know that the HAMP process can be somewhat complicated, 
so we strive to make it easier for our customers. We have hired 
special staffers to focus solely on the HAMP process and given 
them detailed training. In addition, we have added more than 
1,400 new employees to support our foreclosure prevention 
efforts.
    We have invested in our HAMP processing systems so that 
HAMP applicants can now view their application status and 
documents online. Customers are also notified electronically 
when they meet key milestones in the application process.
    We have learned that borrowers can be reluctant to work 
directly with servicers, so we increasingly work with third 
parties in local communities on mortgage modification outreach. 
We have also partnered with HOPE NOW to conduct document 
collection events in face-to-face meetings with borrowers who 
need help. Our goal is to give every, every distressed borrower 
the opportunity to reach us for assistance.
    We have designed and implemented procedures to ensure the 
fair application of HAMP standards for all applicants.
    Despite these initiatives, challenges remain. For example, 
HAMP has been revised multiple times since March 2009. With 
each change additional training and systems are required, which 
in turn impact program efficiencies.
    Further, factors beyond our control often prohibit 
customers from moving from a trial modification to a permanent 
HAMP modification. In the majority of these cases, the required 
documents are not submitted, required trial payments are not 
made, or the borrower is ineligible for the program.
    Since the HAMP program does not fit every distressed 
borrower's needs, Citi is providing solutions that helps 
borrowers who do not qualify for the HAMP process or who have 
not achieved HAMP modifications. As part of this effort, we 
offer a number of supplemental modification programs that are 
designed to address customer needs on a case-by-case basis. 
These solutions are tailored to homeowners' unique 
circumstances and deliver an outcome that is affordable and 
lasting.
    Citi's own proprietary programs assist customers with a 
variety of solutions, addressing challenges such as 
unemployment and imminent risk of default and utilizing a 
variety of strategies to solve for affordability of payments. 
These solutions are described in the appendix attached to this 
testimony in more detail.
    We believe the issue of affordability is the most important 
consideration in modifications. We do not believe there is one-
size-fits-all approach to affordability. The proof of this is 
in our low default rate, which continues to be significantly 
below industry averages.
    For those borrowers who face severe hardship, Citi 
introduced dedicated Short Sale and Deed in Lieu teams in 2009, 
which offer a number of customized solutions. Further, we are 
participating in HAFA and will participate in the Second Lien 
Modification Program when it becomes available this summer. 
These programs enable borrowers to avoid foreclosure and allow 
for a dignified transition to the next phase of their lives.
    I understand there is much more work to be done. Citi 
remains focused in achieving affordability, and we support the 
Treasury's programs to help consumers.
    Thank you for the opportunity to speak before this 
committee. I would be happy to answer any questions you might 
have, sir.
    [The prepared statement of Mr. Das follows:]

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    Chairman Towns. Thank you very much.
    Ms. Desoer.

                 STATEMENT OF BARBARA J. DESOER

    Ms. Desoer. Chairman Towns, Ranking Member Issa, and 
members of the committee, thank you for holding a hearing on 
this very important issue.
    Since January 2008, Bank of America has completed more than 
630,000 loan modifications. We continue to innovate, first with 
our own proprietary loan modification programs, and more 
recently with the adoption of 2MP and our own principal 
forgiveness program.
    With the acquisition of Countrywide in July 2008, Bank of 
America's servicing portfolio changed dramatically, both in 
loan type and in volume, more than tripling to nearly 14 
million customer loans.
    We have undertaken a massive retooling of the servicing 
organization to address the needs of distressed homeowners. We 
have built a new default management capability, new processes, 
new technology, and a 60 percent increase in staffing to more 
than 18,000.
    Bank of America has participated in more than 360 community 
outreach events, opened assistance centers for in-person 
counseling, and gone door-to-door to help customers understand 
their options. We are also participating in the HOPE NOW loan 
portal so housing counselors can directly submit completed 
customer applications.
    There have definitely been rough spots and customers have 
experienced service that is very inconsistent with our 
standards. We continue to learn and improve as we work through 
these difficult times, never losing sight of the impact that 
foreclosure has on the individual or the community.
    Since HAMP launched in March 2009, Bank of America has 
built momentum in the program. For the past 3 months, we have 
led servicers in the number of completed modifications. Bank of 
America also became the first major loan servicer to begin 
implementing the Treasury's second lien program on April 1st. 
We took this step to provide customers a more affordable 
combined monthly mortgage payment.
    This March, we announced an industry leading principal 
reduction program for qualifying customers who owe 
significantly more than their homes are worth. We began mailing 
offers May 17th to provide immediate relief to those in the 
most imminent danger of foreclosure. Treasury also announced a 
similar principal reduction program that will be effective 
later this year, and we are working to align our own program 
with theirs.
    As we execute and evaluate programs that can expand HAMP's 
reach, it is vital to understand the current eligibility of 
delinquent customers. Many customers do not and will not 
qualify for HAMP. Within Bank of America's servicing portfolio, 
1.4 million first mortgage customers are more than 60 days 
delinquent on their mortgage payment. Of those customers, 
Treasury estimates that about 478,000 are potentially eligible 
for a modification through HAMP.
    As of the end of May, Bank of America has mailed more than 
1 million solicitations, made trial offers to over 400,000 
customers, started active trials with more than 300,000 
customers, and we have 70,000 permanent modifications under 
HAMP.
    As our results demonstrate, HAMP has been largely 
successful in making offers to customers. However, getting 
customers to accept the offers and complete the requirements to 
obtain a permanent modification has been a challenge.
    In April, Bank of America began HAMP process changes that 
will require income and other documentation up front before the 
trial period is started, and we believe these changes will 
improve the trial to permanent conversion rate.
    Still, given the depth and length of the recession, a 
considerable number of customers will not be able to afford to 
stay in their home. In these cases, we invite customers to 
consider short sales or deeds in lieu programs to support a 
dignified transition from homeownership to alternative housing. 
We inform customers about these options as part of the HAMP 
decline process. For customers who have not met the 
requirements of the trial period, they receive letters that 
clearly state the reason for ineligibility. More than 40 
percent of the declines we have mailed are because of missed 
payments in the trial period.
    Bank of America provides a dedicated toll-free number for 
customers to appeal the decision, provide updated financial 
information or discuss other options. We will not complete a 
foreclosure sale until the appeal period has expired.
    Innovative solutions have been created to help customers 
sustain homeownership, and Bank of America is committed to 
executing those programs well. All of us at Bank of America, 
including the thousands of associates who work on these issues 
every day, take seriously our role in helping customers through 
this difficult cycle.
    Thank you, and I will be pleased to take questions.
    [The prepared statement of Ms. Desoer follows:]

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    Chairman Towns. Thank you very much.
    Mr. Friedman.

                  STATEMENT OF DAVID FRIEDMAN

    Mr. Friedman. Chairman Towns, Ranking Member Issa, and 
members of the committee, we at American Home appreciate the 
committee's consideration of the complex issues surroundings 
the efforts of servicers to implement HAMP.
    American Home Mortgage Servicing is a non-prime residential 
loan servicer that does not own, originate nor have any 
interest in any of the loans that we service. Our focus is on 
keeping borrowers in their homes while balancing our obligation 
to provide continued cash-flows to investors.
    Contrary to popular opinion, servicers do not make money on 
foreclosures. They benefit no one and are undertaken only as a 
last resort when other foreclosure solutions are not available.
    We aggressively pursue any reasonable modification 
opportunity in the best interest of the investor through early 
intervention. All troubled loans are routinely reviewed for 
HAMP or other loss mitigation workout consideration. Although 
we already have made thorough solicitation efforts of our 
portfolio, we are again in the process of resoliciting every 
borrower that has potential for HAMP eligibility.
    To assist borrowers in avoiding foreclosure, we have, among 
other things, established a dedicated team of housing 
counselors and trained our call center associates as to loss 
mitigation opportunities. We have invested in the development 
of improved proprietary information systems, built 
relationships with housing agencies, counseling agencies and 
housing alliances, participated extensively in outreach events, 
considered borrowers for proprietary modifications in 
situations where we are unable to offer a HAMP modification, 
and we have offered other foreclosure alternative solutions 
whenever a modification is not appropriate.
    Several barriers remain, despite significant progress by 
the industry in the implementation of HAMP. Even with relaxed 
standards, the required underwriting documents are too 
burdensome. Many borrowers are unable to provide these 
documents or simply choose not to do so.
    Servicers such as AHMSI who experience redefault rates that 
are significantly less than industry averages should be allowed 
to rely upon a proven, less stringent underwriting requirement. 
Many borrowers delay in responding to standard HAMP 
solicitations and others are confused by program enhancements 
that are prematurely announced.
    Frequent program changes have overtaxed servicer systems 
and processes, and the newly announced HAMP principal reduction 
program has increased the number of so-called strategic 
defaulters, otherwise able borrowers who purposely stop paying 
on their mortgages to seek HAMP assistance. By failing to 
emphasize the necessity of a valid hardship, HAMP has not 
discouraged this type of behavior.
    The HAMP program has experienced significant issues in 
converting trial period plans to permanent modifications. Many 
borrowers fail to make the required trial payments and now are 
permanently ineligible for HAMP. Many others failed to timely 
return executed modification agreements, despite our extensive 
efforts to collect those documents. Deficiencies in and 
complexities of the HAMP reporting system, IR2, have made it 
difficult to officially report many permanent modifications.
    Not all borrowers qualify for HAMP modification. The top 
three factors for denial are the property is not the borrower's 
primary residence, the applicable securitization servicing 
documents restrict or prohibit modifications, and the borrower 
failed to provide a complete underwriting package.
    AHMSI has established an appeal process for HAMP denials 
and an independent team reviews and confirms denials. Borrowers 
that do not qualify for HAMP mod are reviewed to determine if 
other proprietary home retention options will prevent 
foreclosure.
    We maintain a robust complaint tracking and resolution 
process that is dedicated to handling all borrower complaints. 
We take our responsibilities under the HAMP program seriously. 
We have been audited by MHA compliance twice. Each time there 
were no major findings or enforcement actions.
    HAMP compliance often imposes unnecessarily complex burdens 
on servicers that divert resources away from more productive 
customer facing activities. While performance is improving, 
challenges persist even as the program matures.
    In conclusion, AHMSI is firmly committed to HAMP and to its 
goals and standards. We are anxious to see the program succeed 
and look forward to working with the Treasury and Congress to 
implement any needed improvements.
    Thank you for your time.
    [The prepared statement of Mr. Friedman follows:]

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    Chairman Towns. Thank you very much.
    Mr. Heid.

                  STATEMENT OF MICHAEL J. HEID

    Mr. Heid. Chairman Towns, Ranking Member Issa, and members 
of the committee, I am Mike Heid, co-president of Wells Fargo 
Home Mortgage. Thank you for the opportunity to share the 
results Wells Fargo has achieved in assisting homeowners across 
America.
    Because of the product choices we have made, our 
disciplined underwriting and the manner in which we approach 
foreclosure prevention, our delinquency and foreclosure rates 
in the first quarter of 2010 were three-fourths of the industry 
average, and on an annual basis, less than 2 percent of our 
owner occupied servicing portfolio has gone to foreclosure 
sale.
    To begin with, just a few examples of the actions we have 
undertaken to achieve these results. Since January 2009 through 
May 2010, we have helped more than 2.2 million homeowners with 
new low rate loans either to purchase a home or refinance their 
existing mortgage. We have assisted about half a million loan 
customers with trial or completed modifications, about one-
fifth of which are through the HAMP program.
    We have assisted more than 100,000 unemployed customers 
with short-term modifications. Starting in January 2009, 
several months before the creation of HAMP, we led the industry 
by permanently forgiving more than $3 billion in principal for 
more than 55,000 customers, which amounts to more than $50,000 
per loan. We have begun offering home payment relief to 
customers affected by the oil spill in the Gulf Coast.
    With respect to our loan modification efforts, while very 
difficult to achieve, we believe we must continue to balance 
the needs and interests of homeowners in financial distress 
with those who have remained diligent in making their mortgage 
payments. While much focus deservedly is directed to those 
consumers behind on their payments, we cannot lose sight of the 
fact that about 92 percent of Wells Fargo's mortgage customers 
are current in their home payments as of the first quarter of 
2010.
    HAMP is a good option for people who meet certain criteria, 
but it is only parts of the home retention story. By the 
Treasury Department's own April 2010 estimates for Wells Fargo, 
only 3 of every 10 customers 60 or more days past due on their 
home payments are potential candidates for HAMP. As a result, 
servicers and investors have additional programs for the vast 
number of customers who are not eligible or likely will not 
qualify for HAMP. Taking all of these programs into account, 
about two-thirds of Wells Fargo's customers more than 60 days 
behind on their home payments are provided an option to prevent 
foreclosure.
    Finally, with the benefit of hindsight, it is clear the 
industry was not prepared for the significant number of 
customers that would face financial hardships as the economy 
continued to become more challenging.
    Wells Fargo is not always consistent in providing the level 
of service we expect to deliver to our customers, but over the 
past year we have committed tremendous resources and believe we 
have come a long way in providing and improving our service. 
For example, we have hired more than 10,000 people, for a total 
of 17,800 U.S.-based home preservation jobs.
    By the end of this month, we will complete the process of 
assigning one person to manage one loan modification from 
beginning to end. In other words, our customers will know 
exactly who they are working with from start to finish.
    We continue our work with other industry participants to 
accelerate the credit decision process setting a 5-day decision 
target once all documents are in hand as compared to the HAMP 
standard of 30 days. We have invested in improvements in 
workflow systems and document imaging. We have participated in 
more than 300 home preservation events, including 10 large 
scale events solely for our customers, and established 27 home 
preservation centers in six States where we have concentrations 
of at-risk customers.
    We now give Wells Fargo home mortgage loan customers a 
short sale decision in 5 to 15 days and we continue to have a 
dedicated phone line for your staff to use in the event one of 
your constituents, our customer, has an issue that needs 
resolution.
    In conclusion, Wells Fargo will continue to lead the 
industry in further improving methods and programs to assist 
homeowners. We believe very strongly and feel very deeply about 
our responsibility to help homeowners in a balanced and fair 
way, and we believe our actions demonstrate our commitment to 
achieving this goal.
    Thank you for your time today.
    [The prepared statement of Mr. Heid follows:]

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    Chairman Towns. Thank you very much, Mr. Heid.
    Mr. Lowman.

                   STATEMENT OF DAVID LOWMAN

    Mr. Lowman. Chairman Towns, Ranking Member Issa, and 
members of the committee, thank you for the opportunity to 
appear before you today. My name is Dave Lowman, and I am the 
chief executive officer of home lending at JPMorgan Chase.
    JPMorgan Chase shares your commitment to helping home 
owners and stabilizing our Nation's housing market. At Chase, 
we are working hard to help families meet their mortgage 
obligations and keep them in their homes by making their 
payments affordable.
    To date, we have helped prevent hundreds of thousands of 
foreclosures through our own proprietary modification programs, 
HAMP, and other agency programs. In addition, we have 
refinanced nearly $21 billion of loans under HARP.
    HAMP modification performance has been strong. At Chase, we 
are now completing more than 10,000 permanent modifications per 
month. On average, homeowners are seeing their monthly payments 
reduced by more than $530, an average payment reduction of 28 
percent.
    We are also adopting and implementing the Federal 
Government's Foreclosure Alternative Program and Second Lien 
Modification Program to help more borrowers. We actively use 
temporary forbearance agreements for unemployed borrowers, 
similar to the program recently announced by the 
administration.
    You have asked us to focus our testimony on how we can make 
foreclosure prevention initiatives, including HAMP, more 
effective for borrowers.
    From the beginning of 2009 through the end of May 2010, 
Chase offered almost 850,000 modifications to struggling 
homeowners and made 172,000 of these modifications permanent 
under HAMP and other programs. HAMP is one of the tools we use 
to help these borrowers. Chase has offered HAMP trials to 
nearly 260,000 borrowers. Of these, 88,000 are in active HAMP 
trials and 48,000 have converted to permanent modifications.
    Our experience has demonstrated that HAMP loans with a 
meaningful reduction in monthly payment perform very well. In 
particular, once borrowers have successfully completed the 3-
month trial period, the loans redefault less frequently than we 
or Treasury predicted, even where the loan was previously 
delinquent or has a high loan-to-value ratio.
    We conduct extensive outreach and have made significant 
investments in people, technology, and infrastructure. In 
response to our customers' needs, we have developed more 
creative approaches to reach borrowers in ways that work for 
them. We have opened 51 Chase Homeownership Centers in 15 
States and the District of Columbia where 88,000 borrowers have 
met face-to-face with our trained counselors.
    On top of these efforts, we have also launched a national 
outreach tour of the nine cities where our customers need the 
most help. Events on the tour last 4 to 5 days and are staffed 
over the weekend, 12 hours a day, where we can help borrowers 
find solutions to the full range of challenges they face with 
their mortgages. The customer response to these events has been 
very positive.
    In total, nearly half of our entire staff at Chase are 
dedicated to helping homeowners. 7,600 of them are loan 
counselors who deal only with loan modifications for borrowers 
in financial difficulty.
    There are several challenges in implementing HAMP. The 
biggest challenge is that HAMP was designed to help a specific 
population of borrowers. As illustrated in the Department of 
Treasury's recent report, only one-third of borrowers who are 
60 days or more past due are expected to be eligible for HAMP.
    Now that income and other documentation are required up 
front and we are no longer relying on stated income, we expect 
the conversion rate from trial to permanent mod to increase 
substantially. Going forward, failure to make its required 
payment should be the primary reason that someone does not 
convert from a trial plan to a permanent modification.
    Another challenge has been HAMP's continuing evolution. 
There are good reasons for the number of changes, but 
nonetheless, we have had to adjust our systems and retrain our 
people as the program evolves. The evolution of the program has 
expanded the opportunities to keep people in their homes. We do 
not want to miss an opportunity to help a borrower stay in 
their home, so we individually review each case and will extend 
the trial period in cases where we think the borrower is likely 
to qualify for a permanent modification.
    It is also important to note that where borrowers are 
making their payments in HAMP trial modifications, but may not 
ultimately qualify for a permanent HAMP modification, we 
believe we are able to qualify those borrowers for other 
modification programs.
    Let me touch on fair lending. Similar to our loan 
origination business, Chase is committed to full compliance 
with the letter and spirit of all fair lending laws and seeks 
to make available foreclosure prevention solutions to all 
borrowers, regardless of race, national origin, religion, age, 
gender, or any other prohibitive bias.
    We are pleased to have this opportunity to share our 
progress with you. We look forward to continuing to work with 
Members of Congress, the administration, our banking 
regulators, and our community leaders in implementing these 
initiatives to help families and to stabilize neighborhoods and 
the U.S. economy.
    Thank you.
    [The prepared statement of Mr. Lowman follows:]

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    Chairman Towns. Thank you very much, Mr. Lowman.
    Mr. Pinto.

                  STATEMENT OF EDWARD J. PINTO

    Mr. Pinto. Chairman Towns and Ranking Member Issa, thank 
you for the opportunity to testify today.
    In discussing HAMP, it is useful to recall its original 
goals. Those were to help as many as 3 to 4 million financially 
struggling homeowners avoid foreclosure by modifying loans to a 
level that is affordable for borrowers now and sustainable over 
the long term.
    Second, to provide clear, consistent loan modification 
guidelines.
    Third, to determine a borrower's eligibility up front.
    Last February, I testified before the Domestic Policy 
Subcommittee of this committee and advised that rather than 
avoiding 3 to 4 million foreclosures, HAMP at that juncture 
would likely help just 250,000 homeowners stay in their homes 
without default. As I will explain, it appears that my estimate 
from February was pretty close to the mark.
    The success rate is so low due to government initiatives 
mandating looser underwriting standards dating back to the 
early 1990's. It is this legacy of government mandates for weak 
loans that makes it so difficult to achieve successful 
modifications. A high default rate also works to keep HAMP's 
total successful modifications low. I expect that 40 percent of 
permanent modifications will redefault.
    Treasury promised clear and consistent loan modification 
guidelines. There are only two words to describe HAMP's 
guidelines, ``numbing complexity.'' At last count, HAMP had 800 
requirements, and servicers are expected to certify compliance.
    Treasury also promised that a borrower's eligibility would 
be determined up front. As was recently observed in the Wall 
Street Journal, ``Eager for results, the Obama administration 
last year prodded banks to start people on trials without first 
obtaining documents proving they were eligible. That has led to 
many crushed hopes.'' Instead of a quick yes or no, homeowners 
were placed in trial modification limbo.
    Back in February, I indicated that HAMP's January pipeline 
would likely yield only 250,000 homeowners who would ultimately 
avoid foreclosure under HAMP, only about 6 to 8 percent of the 
announced goal. HAMP activity has slowed markedly in the last 
few months, with the number of new trial modifications 
declining by two-thirds between December 2009 and May 2010. The 
number of new permanent modifications last months was 30 
percent below April's.
    As of May 31, 2010, there were 340,000 active permanent 
modifications. Assuming a 40 percent default rate, only 200,000 
of these permanent modifications will likely be successful over 
the long term.
    There are another 468,000 active trial modifications. Of 
these, perhaps only 75,000 will become successful long-term 
permanent modifications. Discounting all the spin, the current 
HAMP pipeline will yield about 275,000 successful long-term 
permanent modifications, with perhaps another 100,000 successes 
resulting from future trial modifications.
    Treasury's many missteps with HAMP has had other 
repercussions. It encouraged strategic defaults, homeowners who 
are willing to default when the value of their mortgage exceeds 
the value of their home, even if they can afford to pay off 
their mortgage.
    Researchers at the University of Chicago and Northwestern 
University found that the percentage of foreclosures that were 
perceived to be strategic was 31 percent in March 2010, and 
that is up dramatically from the 22 percent in March 2009 when 
HAMP started. With more and more borrowers believing that 
lenders are failing to pursue those who default on their 
mortgages, there is a risk that a growing number of borrowers 
will walk away from their homes, even if they can afford the 
monthly payment.
    HAMP has slowed down the foreclosure process, pushing the 
period of heightened foreclosure activity out to 2013 or 2014 
and likely extending the time until the market corrects. But 
perhaps HAMP's greatest shortcoming is that it derailed 
burgeoning efforts of the private sector to effectively modify 
loans.
    The facts are in the Office of Comptroller of the Currency 
Mortgage Metrics Report that is produced quarterly. There are 
three charts.
    Chart one demonstrates that the private sector had been 
rapidly ramping up its modification efforts in 2008 and 2009, 
and it was when HAMP started that those efforts were derailed.
    Chart two indicates that the private sector was having 
greater and greater success in reducing the redefault rate on 
loans that were being done outside the HAMP program.
    Chart three demonstrates the slowdown and effective wind-
down of the HAMP program as new trial modifications have fallen 
off precipitously, and now the number of permanent mods has 
also started dropping.
    The committee should ask the Treasury Department, where are 
the modifications that, but for HAMP, the private sector was on 
track to produce? This committee and the American people 
deserve an honest assessment as to HAMP's future.
    Thank you, and I would be happy to answer questions at the 
appropriate time.
    [The prepared statement of Mr. Pinto follows:]

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    Chairman Towns. Thank you very much. Let me begin by 
thanking all of you for your testimony.
    I guess the question is, why haven't there been more 
permanent mortgage modifications? What is the problem? Just 
quickly right down the line, start with you, Mr. Das. Why do 
you think there hasn't been more? Is it a lack of money? What 
is the problem?
    Mr. Das. Chairman Towns, as we all collectively mentioned, 
we have put an enormous amount of resources to make sure that 
we opened this up to as many trial modifications as possible 
based on stated income, as opposed to verified income. So we 
really opened the door to as many people as we could. We----
    Chairman Towns. How long should it take for the trial 
modification?
    Mr. Das. I'm sorry?
    Chairman Towns. How long should that take? Trial 
modification, how long should it take?
    Mr. Das. It takes Citi about 4 months, which happens to be 
amongst the fastest in the industry. But I don't believe--we 
have three trial payments, and then that converts to a 
modification, a permanent modification, after that.
    But to answer your question, Chairman, I believe that the 
reason the permanent mods are not as high as we would expect 
them to be is because, in many cases, the documents that 
actually come in don't match with what was stated at the time 
of the trial modification, and many borrowers were not able to 
make the trial payments. Those have been, I would say, the two 
principal reasons for the fallout.
    Chairman Towns. Ms. Desoer.
    Ms. Desoer. Under the HAMP program, the primary reason is 
40 percent of the borrowers who have been in a trial 
modification have failed to make a payment. And I think that is 
reflective of the ongoing stress of the economy on those 
borrowers.
    And I think it is important to look at the number of 
permanent modifications holistically. And when you look at our 
number, HAMP is a small number of a much larger total of the 
630,000 modifications, to understand that it's one of many 
tools that we use for borrowers.
    Chairman Towns. Mr. Friedman, same question to you.
    Mr. Friedman. In our particular situation, we service a lot 
of loans that just don't qualify under the HAMP guidelines, 
such as a conforming loan or nonconforming loans. We may have 
certain restrictions under servicer guidelines.
    But the vast majority of the real issue is really that we 
are still limited under this 31 percent debt-to-income test and 
the fact that, in our particular book of business, the borrower 
must occupy the property as their principal place of residence.
    And then, also, the documentation issue. Now, we initially 
up front had done always verification and requested documents 
up front. So once we've got a borrower into a plan, we have a 
very high conversion rate. But, again, a lot of this is on the 
borrower side, as well, or the complexities of the program 
itself.
    Mr. Heid. What I would like to add is, I think context is 
important here. When you think about the half a million mods 
Wells Fargo has done, about 80 percent of those are outside of 
the HAMP program, and the vast majority of those are permanent 
mods already or on their way to becoming permanent mods.
    Inside the HAMP program, inside the 20 percent, the primary 
factors in terms of converting from trial to permanent are the 
same Treasury quoted in their report: lack of documentation 
because of the stated income programs of last summer. That has 
since changed. Once documents are received, customers are not 
eligible for the program and, therefore, go through a 
cancellation phase, and you typically get a modification 
outside of the HAMP program. And then, finally, customers that 
just don't make the three trial payments within the HAMP 
program itself are the three primary HAMP factors.
    But I would encourage you to continue to keep focus on the 
fact that the vast majority of mods getting done are happening 
outside of the HAMP program itself.
    Chairman Towns. Mr. Lowman, real quick.
    Mr. Lowman. Just echoing the same thing that my compatriots 
here have spoken about. Missed payments and no documents 
returned from borrowers are the major reasons why modifications 
don't get completed. About a third of those that do give us 
documents and do, in fact, make the payments, a third of the 
total population ultimately end up in a mod.
    Chairman Towns. When you say you don't get the documents, I 
mean, is it a lack of communication? Because a person----
    Mr. Lowman. We've made extensive refinements in our 
process, including communicating with borrowers and, you know, 
writing letters and knocking on doors and what have you. That 
process, obviously, has evolved over time. I would say at the 
beginning of the program that may have been the case, but I 
would say now we are equipped to adequately communicate with 
borrowers.
    Chairman Towns. Is communication a problem here? Just very 
quickly, yea, nay, could you sort of tell me?
    Mr. Das. Mr. Chairman, I believe that the issue is 
actually, as you sort of analyzed the contact rates, it seems 
to us that at late a stage of delinquency a lot of customers 
have a very low contact rate, primarily because they may have 
checked out from the process. So this means early intervention 
is really critical.
    Chairman Towns. Yeah. Is there anything that we need to do? 
Because, you know, people are losing their homes, and I just 
can't see, if a person is losing his or her house, that they 
are not going to cooperate in terms of documentation. Because, 
I mean, they are asking for help. And that is the part I don't 
quite understand.
    Mr. Heid. Maybe a couple of examples might help.
    I think there is a lot going on when a customer is in fear 
of losing their home. And we are doing everything we possibly 
can to make sure that doesn't happen. A couple of the documents 
that are troublesome is that the HAMP program does require a 
tax return. I think that conjures up fears, you know, will that 
trigger an IRS audit? Those kinds of things are very real in 
people's minds.
    The HAMP modification agreement itself is a very 
intimidating-looking piece of paper. It's five pages, single-
spaced, very intimidating, very scary kind of process, that I 
think people are reluctant or fearful to--you know, what else 
might happen here?
    So I don't think it's the communication between servicer 
and homeowner that is at issue here. I don't think there are 
additional things that you should and can do. I think this is 
really now a matter of working very diligently and very hard 
with every single customer to make sure that foreclosure does 
not happen.
    Chairman Towns. I now yield 5 minutes to the gentleman from 
Ohio, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    HAMP, I think, has not only failed to help people, it has 
actually harmed families, I think in two ways. One is the 
comments that the Wall Street Journal had and I related to in 
my opening statement: the false hope it gave people who were in 
the temporary or trial modification program, were never 
qualified, and the financial implications of going through that 
process or part of that process. I also think, second, the 
point Mr. Pinto raised; I think his quote was, ``It derailed 
private-sector efforts to help.''
    So I think in two ways it's been, not just a failure to 
help, but also potentially cause harm to the very families who 
were trying to get the help and who we are trying to provide 
help to.
    The numbers you all gave, I have 900,000 for Citi; 600,000 
for Bank of America; 135,000 for Home Mortgage Service, Inc.; 
500,000 for Wells Fargo; and 846,000 for JPMorgan. Of those 
numbers, I'm going to go down the list, 900,000 modifications 
you have made. What number of those are HAMP modifications? I 
took that as being all, the big number.
    Mr. Das. Yes. Since 2007, we have helped 900,000 
homeowners----
    Mr. Jordan. Right. What percentage have been HAMP, or 
what's the number for HAMP?
    Mr. Das. Well, recently, we offered HAMP mods to 150,000 
customers, and, out of that, about 30-odd-thousand have taken 
HAMP.
    Mr. Jordan. Thirty-eight?
    Mr. Das. 30,000, 35,000.
    Mr. Jordan. Small percentage.
    Mr. Das. Yes.
    Mr. Jordan. Go to Bank of America.
    Ms. Desoer. 630,000 in permanent modifications since 2008; 
70,000 of them are HAMP.
    Mr. Friedman. We have reported out about 8,800, and we have 
about 16,000 currently in trial periods.
    Mr. Jordan. And permanent?
    Mr. Friedman. For permanent--the 88 is reported out as 
permanent, 8,800.
    Mr. Jordan. 8,000 out of 135,000 modifications.
    Wells Fargo?
    Mr. Heid. We've got 500,000 mods, trials and permanents. 
Twenty percent of them are inside of HAMP. And inside of HAMP, 
there are probably 45,000 in trial yet, probably 40,000, 45,000 
or so in permanent, so a total of about----
    Mr. Jordan. Less than 10 percent; 10 percent has kind of 
been the norm.
    Go ahead.
    Mr. Lowman. 257,000 in HAMP, of our 846,000.
    Mr. Jordan. How many are permanent?
    Mr. Lowman. Permanent, 47,000.
    Mr. Jordan. So, again, very small number. We're talking 
less than 10 percent.
    Here is the question. I think we'll just cut to the chase. 
The people who qualified for HAMP went through this cumbersome 
process, 800 different rules, 15 sets of guidelines, all this 
stuff they had to go through. Mr. Heid just described the 
intimidating process they had to go through.
    Of the folks in the HAMP, the 47,000, the small number that 
you--how many of those--or let's ask it this way. The people 
who qualified for HAMP, were any of those not qualified for 
your own modification program?
    Mr. Das. Let's put it this way. For the people that fell 
out of HAMP, we were able to save about 15 percent more.
    Mr. Jordan. So the ones who wouldn't qualify for HAMP you 
were able to help?
    Mr. Das. Yes.
    Mr. Jordan. And it's working.
    Mr. Das. And it's working.
    Mr. Jordan. All right.
    Ms. Desoer. I can't tell an exact number, but the potential 
does exist because of the Treasury incentives, that it enabled 
it to make more sense for the investor to be a HAMP 
modification. But I think many of them would have qualified.
    Mr. Jordan. Many?
    Ms. Desoer. Many. But I don't know the exact number.
    Mr. Jordan. Mr. Friedman.
    Mr. Friedman. About two-thirds would qualify for 
proprietary mod.
    Mr. Jordan. Two-thirds of the permanent--I mean, what's the 
number.
    Mr. Friedman. The question, I believe, was, of the HAMP 
participants, how many would have qualified under a proprietary 
modification program? And about two-thirds of those would have.
    Mr. Jordan. Let me ask it more specifically. Of those in 
HAMP who got into permanent status in HAMP, would any of those 
not have gotten into permanent status with one of your 
programs.
    Mr. Friedman. Only those who would be limited by certain 
investor concerns under our pooling and servicing agreement. So 
it would be a small amount.
    Mr. Heid. I think a timestamp on this is important. If the 
issue is right now, I think right now, with all the programs 
available, the majority of customers that get a HAMP would 
probably get a non-HAMP. I don't have an exact number.
    To the other point about customers that are canceling out 
of HAMP, Treasury provided some statistics on that earlier in 
the week. In Wells Fargo's case, somewhere between 70 and 80 
percent of the HAMP cancelations are resulting in some other 
form of saving the home or avoiding foreclosure.
    Mr. Jordan. Mr. Lowman.
    Mr. Lowman. Most would qualify for the proprietary program.
    Mr. Jordan. So, I mean, here we are. We got a program that 
has promised $75 billion, 3 to 4 million folks it was going to 
help. It has helped 346,000, to date, to get into permanent. 
And yet, the vast majority of those who made it into the 
permanent would have made it in one of your own modification 
programs without putting taxpayer money--without this big 
government hassle and mess. And then those who got kicked out, 
we are also finding out the majority of them you could have 
helped.
    Mr. Pinto, I know you want to weight in on this. We've got 
30 seconds. Go ahead.
    Mr. Pinto. I will just add one fact. About 60 percent of 
all HAMP mods are Fannie/Freddie. So this issue of--yes, there 
are some investors outside of that, but Fannie and Freddie is 
the majority of it. And, of course, they don't need to be paid 
an incentive to do what they need to do.
    Mr. Jordan. Great point.
    Mr. Chairman, I think this points out--well, I think it is 
obvious what it points out.
    I yield back.
    Mr. Cummings [presiding]. The gentleman's time has expired.
    Let me just go to--Ms. Speier, when she was here, she said 
something that I agree with. You know, HAMP is fine, but my 
constituents want to have some kind of relief. And so, whatever 
it takes to accomplish that, that is what we are trying to do.
    In my district, we hold what we call foreclosure prevention 
conferences. We have done 15 of them--four of them so far. We 
just did one about a week ago. And as I listened to your 
testimony, I understand better now why we are able to save at 
least two-thirds of people's houses.
    And a lot of it goes to, when you talk about documents, 
what we found in our office is that, a lot of times, it is an 
intimidating process with regard to these applications. And we 
have two people on our staff and basically what they do almost 
full-time is help people with foreclosure because it is a 
difficult--it is not the easiest of processes.
    So I want to go to you all and just ask the question--you 
say that one of the reasons why it's so difficult and people 
stay in the temporary phase is because they are not getting the 
proper documents in and they are not turning in the way they 
are supposed to. Well, what we have found is that, be it HAMP 
or anything else, that a lot of times the mortgage companies 
are understaffed. I mean, and I can tell you that for a fact. 
Now, it has gotten better.
    And so, when people would call in, first of all, they 
couldn't get anybody on the phone. Then, if they got somebody 
on the phone, they got the runaround. And then, if they got 
somebody and was able to avoid the runaround, then the 
paperwork got all mixed up. And I have seen instances where 
paperwork has been sent to the mortgage company four or five 
times, and then the mortgage companies, some of the same 
companies sitting here now, have said to my people--and I know 
this for a fact--that they never got it. And we have actually 
sent paperwork from our office.
    So I want to know what you all have done with regard to 
staffing--that is, training staff. It's one thing to have 
staff; it's another thing to have staff that is properly 
trained. And what have you done with regard--it seems like 
you're saying that, in order for people to move from a 
temporary to a permanent, it seems like paperwork is one of the 
main things that is holding them up.
    And I heard, I think you, Ms. Desoer, say that some of 
these people are not making payments during the temporary 
stage. I think was it you who said 40 percent? See, we don't 
find that to be the case. We find people that want to make the 
payments. And we have actually found a lot of people who have 
made payments and then the mortgage company told them they 
didn't make payments. And, literally, my staff would have the 
copy of the check or the money order in their hand. So, you 
know, there is a disconnect here.
    So the question is--I'll start with you, Mr. Heid, since 
I'm kind of familiar with Wells Fargo. Why don't you tell us 
what you all are doing with regard to that staffing? And have 
you found that to be something of significance? And if you did 
staff up, how did it affect the operation and your results?
    Mr. Heid. Sure. I think your criticism is very fair a year 
ago. We were not where we should have been a year ago. We have 
made a lot of progress in the course of the last year. We have 
attended your events, we have created our own events as ways to 
gather the documents.
    And I think, most importantly, what we have implemented--
and by the end of the month, we will be done--is our one-to-one 
approach, where every single customer will know exactly who 
they are working with and everybody on our side knows exactly 
which customers they are accountable for in a one-to-one way. 
In order to get there, we have added more than 10,000 people 
over the course of the last year.
    Mr. Cummings. It's kind of expensive, huh?
    Mr. Heid. I'm sorry?
    Mr. Cummings. Kind of expensive.
    Mr. Heid. Yes, it is.
    Mr. Cummings. Would you all rather see somebody stay in a 
house than be foreclosed upon?
    Mr. Heid. Absolutely.
    Mr. Cummings. And why is that?
    Mr. Heid. I mean, foreclosure is the absolute last resort. 
I mean, a lot of reasons. I mean, one, it's the right thing to 
do. Beyond the right thing to do, economically, it is always in 
the investors' interest, our shareholders' interest, the 
community interest, customer interest, to do everything you 
possibly can to keep the customer in the home or find an 
alternative to foreclosure.
    I think every one of us sitting at the table would 
completely say to you, foreclosure is absolutely the last 
resort.
    Mr. Cummings. Chairman Towns and I sit on the conference 
committee for Wall Street reform, and there was an amendment 
yesterday to make sure that there was a revolving loan fund for 
$3 billion to help people who may have lost their jobs.
    Every single Republican voted against it--every single one 
of them. And I heard some of them say a little bit earlier that 
they were concerned that not enough was being done by Congress. 
Fortunately, it passed on the House side in the conference.
    But I see my time is up, and perhaps I can get some answers 
to whether you all believe such a thing is very important 
later.
    Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    Thank you for all being here, and thank you for being so 
helpful in your answers. Because, as you know, we are all 
struggling and trying to figure this out. And, as we are trying 
to figure it out, you have specific expertise, not just in your 
view of the government program, but in the issue of what is 
happening in the market, what is happening with homeowners, and 
what needs to be done. So I appreciate that you have been so 
forthcoming.
    As I said in my opening, you know, Treasury Secretary 
Geithner yesterday, when appearing before the congressional 
oversight panel, said about HAMP, ``This program was not 
designed to prevent foreclosures. It was not designed to 
sustain homeownership at a level that would be unacceptable, 
imprudent to try and do.''
    He was then asked about the homeownership rate level, what 
would it be, what would be a market-efficient number. Someone 
offered 65 percent, and he tended to agree that was an 
objective.
    Reuters relates his statement as, ``Geithner said he agreed 
with the assessment that housing will only stabilize as more 
homeowners become renters again.''
    Do you guys agree with that? Do you agree with our Treasury 
Secretary that our market will only stabilize as more 
homeowners become renters? Because that seems contrary to what 
our whole goal was here, in trying to stabilize homeowners in 
their home.
    Mr. Das, I will start with you.
    Mr. Das. Congressman, I'm not qualified to answer the 
Treasury Secretary's response.
    But I will say that, when we focused on HAMP as an 
industry, we wanted to create a great uniform baseline across 
the country. There was no baseline modification. There were all 
kinds of proprietary programs. So, in the last year, HAMP has 
done--we have done a great deal with respect to HAMP to get to 
a uniform baseline.
    However, there will be fallouts and there will be re-
defaults. And I believe that the issue needs to move--the focus 
needs to move beyond modifications to foreclosure prevention. 
And I believe that short sales and deeds in lieus are the 
programs that we should really focus on. And I believe that is 
where----
    Mr. Turner. Ms. Desoer, do you believe more people need to 
be renters?
    Ms. Desoer. The HAMP program and other modification 
programs are primarily built to ensure that the payment is 
affordable. And what HAMP has done is set a new standard for 
the industry at that 31 percent debt-to-income ratio of the 
mortgage, taxes, insurance, homeowners association, to income. 
And in that spirit, there are a large number of people who 
would not qualify.
    And I agree that, at some point, if they can't afford to 
sustain a mortgage payment at a level commensurate with their 
income, then they do need to move on to alternative kinds of 
housing. And that is what short sales and deed in lieu and 
other programs are attempting. And we are working hard to 
ensure that there is a dignified transition as an alternative 
to----
    Mr. Turner. The comment the Treasury Secretary made, which 
is why I'm asking the question--and I disagree with the 
Treasury Secretary--is that, it is not that he is talking about 
the individual decision of a homeowner as a borrower who finds 
himself in an untenable debt position and then must make the 
choice of leaving the home, surrendering it, going through, 
then, the process of becoming a renter. He is actually saying 
that, for housing prices to stabilize, that he personally 
believes that more homeowners should become renters, according 
to Reuters. And that seems contrary to this program.
    And, of course, he characterizes it here as, ``This program 
was not designed to prevent foreclosures,'' which I could have 
sworn that's what President Obama said it was supposed to do.
    Mr. Friedman, what do you think about more people becoming 
renters?
    Mr. Friedman. Well, again, you know, I wasn't around the 
Secretary when he made the comment, but, I mean, I do believe 
it is a fact that not all homeowners can afford their mortgage 
payment. And, as a result, like many of us, if you spend too 
much money on something, you have to cut something else out. 
And I think, you know, that could very well be what he meant.
    I think, as a general policy, I think homeownership is a 
great thing if people don't get greedy and they can then pay 
their mortgage and can afford all those things that go along 
with homeownership.
    Mr. Turner. Well, one other thing I want to add, because my 
time is expiring, is that, in listening to all of your 
testimonies about how you have been approaching homeowners, I 
can tell you that the anecdotal stories that we hear from 
realtors, from nonprofits that are trying to assist homeowners, 
is that the loan servicers are not responsive; that, in fact, 
it is an incredibly difficult process even when you have a 
social worker that is sitting, guiding someone through the 
process; that, in fact, you are making decisions that don't 
follow the market; that, when there are short sales that are 
offered, that, in fact, you allow the loans to go to 
foreclosure.
    And I wanted to say, Mr. Chairman, I think one thing that 
would be really helpful is to have, not a panel of loan 
servicers, but have loan servicers on one side of the room and 
have realtors and nonprofits that are helping people on one 
side of the room, and let these two people go at it. Because we 
are hearing a different story than you're telling us today.
    Mr. Cummings. The gentleman's time has expired.
    Mr. Kucinich.
    Mr. Kucinich. Thank you very much, Mr. Chairman.
    To the gentlemen and gentlelady at the table, each of you 
represents lenders or agents of lenders who would not exist in 
their current form but for the beneficence of the U.S. 
taxpayer. And I remind each of you that, without the continued 
support of the American taxpayer, there would be virtually zero 
residential housing market activity.
    The issue before us today is, why in the world aren't you 
giving loan modifications to more eligible borrowers? Why are 
you denying loan modifications to my constituents, in spite of 
the fact that we have a Federal program which pays you, the 
mortgage holders, an incentive to modify the terms of the 
mortgages and compensates you for many of your costs? I would 
like to hear some justification.
    Mr. Lowman, do you want to respond?
    Mr. Lowman. Yeah. We are helping all the people that come 
to us and that we contact. We have made extensive investments 
in people, systems, infrastructure.
    The folks that don't get a modification, it's generally for 
two reasons: Either they failed to pay us during the trial 
period or they don't qualify for the programs. Maybe their 
income isn't enough to afford a home, or they don't provide the 
required documents.
    Mr. Kucinich. OK. Well, let me just share this with you. At 
the end of May, my State of Ohio had 136,910 seriously 
delinquent loans, and only 12.95 percent of those loans have 
been modified. So here is Ohio, it is 42nd out of 51, including 
the District of Columbia, in the ratio of HAMP modifications to 
seriously delinquent loans.
    Now, in early May, I held an open meeting in my district 
with Treasury Assistant Secretary Allison. And in that meeting, 
I want you to know, Mr. Lowman, that in Cleveland, OH, I heard 
from numerous advocates and homeowners that your bank is the 
most difficult one to deal with, when it comes to loan 
modification. Over and over, I have heard that Chase has been 
especially slow to process paperwork. I have heard that Chase 
denies borrowers modifications without supplying a reason. I 
have heard that Chase leaves borrowers facing foreclosure in 
limbo.
    Now, of the four largest mortgage servicers, all of which 
are represented here today, why is the average length of trial 
modification for Chase mortgagers nearly 7\1/2\ months, Mr. 
Lowman?
    Mr. Lowman. As we have mentioned, all of us have mentioned, 
the resource needs for this program have outstripped our 
ability to have the right number of people in seats performing 
the functions. We have----
    Mr. Kucinich. So you're saying you don't have enough people 
to handle the program?
    Mr. Lowman. We have historically not had enough people to 
handle the demand for the program. We were one of the first out 
of the box when the HAMP program was announced, and we started 
accepting applications----
    Mr. Kucinich. Here's what I don't--excuse me, because I 
have limited time here. I'm sorry to interrupt you.
    The program has been going on for 19 months.
    Mr. Lowman. That's correct. And we----
    Mr. Kucinich. Now, it seems to me----
    Mr. Lowman [continuing]. Have hired thousands of people in 
those periods.
    Mr. Kucinich. I understand. It seems to me, you know the 
demand. Your performance is very weak. If you know there is a 
demand and you're getting incentivized anyhow from the 
taxpayers, see, I just wonder how hard you're really trying. 
That is the concern that I have.
    And when I get reports from my own constituents that you're 
denying modifications without supplying a reason and you're 
leaving borrowers facing foreclosure in limbo, your explanation 
doesn't cut it.
    Mr. Lowman. We have increased our staff. We have invested 
in our systems. We have, historically, had a backlog of loans 
that are in trial, and now we are literally looking at every 
loan that is in a trial, beyond its original trial period, 
looking at it loan by loan, making sure that we don't leave any 
stones unturned to give folks a modification. And----
    Mr. Kucinich. What do I tell my constituents when they tell 
me Chase won't work with them?
    Mr. Lowman. They should call the 1-800 number.
    Mr. Kucinich. Should I call the 1-800 number? Is there a 
number I can call you, Mr. Lowman?
    Mr. Lowman. Absolutely, there is.
    Mr. Kucinich. On behalf of my constituents?
    Mr. Lowman. Yes.
    Mr. Kucinich. OK. We will chat afterwards.
    Mr. Lowman. Yeah, absolutely. I'd be happy to do it.
    Mr. Kucinich. I want to help you do more and do better.
    Mr. Lowman. We have a number that I can put on the record, 
1-800-335-0123, for anybody who has constituent complaints. I'd 
be happy to personally deal with them.
    Mr. Kucinich. I just want to make sure, Mr. Chairman, it's 
not like those bumper stickers that say, ``You like my driving? 
Call 1-800--``
    Mr. Cummings. The gentleman's time has expired.
    Mr. Duncan.
    Mr. Duncan. Well, thank you, Mr. Chairman.
    We have a memo that says more borrowers have been kicked 
out of HAMP than have received permanent modifications. 
Cumulatively, HAMP has now placed 346,000 borrowers in 
permanent mortgage modifications, but this is overshadowed by 
the fact that 429,000 temporary modifications and 6,300 
permanent modifications have been canceled.
    But I'm now told also that the Fitch ratings service 
recently came out and said that they estimated that 75 percent 
of those permanent modifications will ultimately default. And 
then I'm also told that TARP set aside $75 billion for this 
program but only $30 million to $40 million has been paid out 
in the first year and a half.
    At that rate, it would take 200 years, roughly, I guess, to 
get all this money out, which it seems to me ridiculous that 
they have set aside that much money for what it now appears to 
be a failed or failing program. Because I just heard, in 
response to questions from Chairman Jordan, that only about 10 
to 20 percent of your loan modifications are under HAMP in the 
first place.
    And we were told before the hearing, and my understanding 
is now that has been confirmed here by most of you, that almost 
all of these modifications under HAMP you would have tried to 
work out through your own private modification programs.
    So I don't believe I have ever heard of a program that is 
doing less or working in a worse way, just about.
    And I'm wondering if any of you would dispute what Mr. 
Pinto said when he estimated that HAMP will ultimately need 
only 6 to 8 percent of its original goal. And he used the words 
``numbing complexity.'' Do any of you dispute that estimate, 
that very pessimistic estimate that he has presented here 
today? Or would any of you dispute his description of the 
requirements as being ``numbing complexity?''
    Mr. Das. Congressman, I'm not sure that I would use that 
phrase to describe HAMP. I believe that we all stood behind 
HAMP and created it together, along with the Treasury 
Department. We wanted to make sure that we had one uniform 
program, and we really focused on scale on that program. And I 
think it's important for us to understand that we all 
collectively got behind this problem and focused on scale. Last 
year, it wasn't the case.
    More importantly, we got the GSEs to come behind the 
program. And all our loss mitigators now had one program that 
they had to deal with, as opposed to nuanced proprietary 
programs. So I believe that HAMP worked and worked in scale 
when it needed to.
    However, I believe there is a part B to that, which is that 
this problem is moving. It's moving forward. And I believe that 
we now need to focus on the fallout from HAMP, we need to focus 
on re-defaults, and we really need to focus on a targeted 
foreclosure-prevention program.
    So HAMP needs to evolve, no question, but I think that it 
served its purpose when it did. And I want to applaud my 
colleagues for having tried as hard as they did, along with 
ourselves, in scaling what was an important response to 
homeowners at the time.
    Mr. Duncan. Any other comments?
    Ms. Desoer. If I may, I'd just add one other thing. That 
is, before HAMP, there was--I think one of the significant 
advantages of HAMP has been the establishment of standards. 
And, in particular, the debt-to-income ratio that was used even 
on our proprietary programs prior to HAMP was higher than the 
31 percent.
    And to establish that as a standard that is usual and 
customary, so that where we have the ability to work on behalf 
of investors we can do so, has enabled the results we do have 
with HAMP, but, equally importantly, the results that we do 
have in our proprietary programs, as well. So that is a 
significant advantage.
    Mr. Duncan. Of course, if it was working the way it should, 
your companies would stand to make a lot of money out of it and 
become government contractors, at least to the extent for this 
program.
    Thanks very much.
    Mr. Issa. Would the gentleman yield?
    Mr. Duncan. Yes, yes, I'd yield.
    Mr. Issa. Following up on that, ma'am, if you, in fact, had 
the higher debt-to-income ratio, in other words, if Treasury 
had effectively set it at 45, 55, wouldn't you have more loans 
going out today?
    I will ask on my own time. I'm sorry. Go ahead.
    Mr. Cummings. The gentleman's time has expired.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I want to thank the witnesses for their willingness to come 
and help us.
    I have to ask, in my State we have seen the number of 
foreclosures double this past month, month of May 2010, 
compared to the month of May 2009. It has actually gone up 120 
percent.
    And, unlike when this housing crisis first struck and we 
saw a lot of subprime mortgages out there and poor product and 
maybe people who were in homes that they couldn't afford, now 
we see the greatest correlation is unemployment with people not 
being able to stay in their homes.
    And I'm wondering if this tool that we initially came up 
with, the HAMP program, is the right tool to deal with that 
type of problem. Because if someone is out of work and there is 
not the stream of income to support a mortgage, it doesn't 
matter how you design it or how you modify it, if there is no 
income to support that mortgage, it's going to end up in 
foreclosure.
    And so, I'm fearful--I see how this is all working out. I 
see all the attempts you're making. I also see about 440,000 
people who were kicked out of the HAMP program, the trial 
program, because you could not verify income. So what I'm 
afraid of was happening here, under TARP, which created the 
HAMP program, which I voted against because I did not approve 
of the bailout for the Wall Street banks, under this program, 
you're being paid an awful lot of money to process these 
attempted modifications, these trials.
    But after you do all this work, which you're being paid for 
by taxpayer money, I see 434,000 people kicked out of the 
program. So their foreclosures were delayed for a little bit. 
And it allowed you to be paid for that attempt. But, at the end 
of the day, the taxpayer money is spent by your firms because 
50 percent of the second-mortgage market is sitting at that 
table right there, 50 percent of the national second liens.
    So I just think this is, sort of, insult to injury. We are 
spending all this money on the program. It is accruing to your 
benefit in a significant way. The taxpayer is being hurt, and 
the homeowners are not being helped in a significant way. And I 
understand the dynamic that is out there now, it is just 
different, because we have all these people who are unemployed. 
And, in some cases, you can't modify that because there is 
nothing to support it, no income stream.
    But let me ask you straight up, do you think this program 
should be continued beyond October? We only have a few months 
left here. There have been very few people helped by this 
program. But, as the folks that are administering this and 
seeing how many people are being helped and how much money is 
being spent here, do you think this program should be extended 
come October, given the fact that we still have streams and 
streams of foreclosures coming down the pike?
    Mr. Das.
    Mr. Das. Yes, sir, I believe that the short answer is that 
I believe that this program should be continued. As I have said 
before, this program provided a great baseline and a uniform 
baseline. If we didn't have all of the GSEs and all of the 
banks participating in this program in a uniform way, there 
could be a lot of consumer confusion, as we saw in the 
beginning of last year.
    I would, however, submit that this program needs to be 
enhanced. As you rightly pointed out, Congressman, unemployment 
is a big issue. And not being able to have a sustainable income 
stream to make the payment will cost----
    Mr. Lynch. Mr. Das, I only have a little bit of time, and I 
just wanted to find out if you wanted the program to be 
continued.
    Mr. Das. Yes, sir.
    Mr. Lynch. Ms. Desoer.
    Ms. Desoer. If I could, just one clarification: We are only 
paid as a servicer at the time of the permanent modification, 
not during the trial period.
    And I do believe the program should be extended to allow 
the new components of the program, the second lien program, the 
Home Affordable Foreclosure Alternative short sale program, as 
well as the unemployment and principal forgiveness components 
of it, should be allowed to play out to determine if that can 
help more borrowers stay in their homes.
    Mr. Lynch. Thank you.
    Mr. Friedman.
    Mr. Friedman. Yeah, I think it should be continued now, 
especially in light that the program--now you're verifying 
items up front. So I think that will actually help see much 
more positive results out of the program.
    Mr. Lynch. Mr. Heid.
    Mr. Heid. And I would add, for the 80 percent of the mods 
that are happening outside the program, there is no government 
payment of any kind.
    As far as your question on the program itself, I would 
continue it. I would finish the enhancements already made. I 
would not expand it.
    Mr. Lynch. OK.
    Mr. Lowman.
    Mr. Lowman. Yes, it should continue.
    Mr. Lynch. Mr. Pinto.
    Mr. Pinto. I would not. And if you do continue it, I would 
ask Treasury to provide very clear information, which they 
promised many, many months ago, about re-default rates. They 
have published virtually no information about re-defaults.
    There is a benchmark for that, and I mentioned it in my 
testimony, the Mortgage Metrics Report. You need to know how 
this program is doing compared to the way OCC has been 
tracking, for 18 months, modifications.
    Mr. Lynch. Thank you, sir.
    Mr. Chairman, I yield back. Thank you.
    Chairman Towns [presiding]. I thank the gentleman.
    I now yield 5 minutes to the gentleman from California, the 
ranking member, Congressman Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    And before I begin, I think we have both heard enough to 
know that we need to have Treasury back here well before the 
October end, to talk about lessons learned and, if there is to 
be any modification extension, to get to us sooner rather than 
later. Wouldn't you agree?
    Chairman Towns. Well, you know, we have had Treasury in 
here. I mean, so it's not something that we have not done. You 
know, I think there are a lot of questions that should be 
raised even with people that are involved in terms of with the 
servicers. Because, you know, let's give you the classic 
example, and then I am going to let you regain your time. I 
will take this off of my time in some kind of way.
    You have people that were put into mortgages, I mean, by 
folks that are no longer, probably, working for the bank now. 
They are gone somewhere else. And then now they are coming in. 
You know, what happens to them?
    There are a lot of things that, you know--I think we need 
to spend time now talking with the servicers and people who 
have experienced these things. People probably got fired 
because they put people into mortgages that they knew that they 
shouldn't have gone into. I think these are some of the 
questions that we need to get answered before we even deal with 
anybody else.
    On that note, I want you to know I did not take it off of 
your time.
    Mr. Issa. I thank the gentleman. Thank you, Mr. Chairman. 
Thank you for giving us this opportunity today.
    Ms. Desoer, I had previously asked you about the fact that 
a new level of income to debt had been established. Prior to 
that time, well, certainly with stated income, often called 
``liar loans'' and so on, somebody could have 100 percent 
actual income to debt, but certainly many people, in your 
experience, had much higher ratios, 45, 50 percent, relying on 
two incomes at their highest level. Isn't that true?
    Ms. Desoer. That's correct. There were higher incomes in 
the origination side of the----
    Mr. Issa. So when we look at failures, and backward-
looking, an artificially high ability to make a loan, often to 
flip it to government programs, Freddie and Fannie and so on, 
but allowing a much higher ratio was part of the situation. 
Because if there was any hiccup in the income or if it didn't 
appreciate and they weren't able to pull money out, ultimately 
there was a problem we were heading toward, now that you have 
the opportunity to look back at what happened starting in, in 
the case of Mr. Kucinich's district, in 2006, but in the case 
of other districts, a little later.
    Isn't that right?
    Ms. Desoer. Yes. The programs are intended when there is a 
hardship, which means that income has been disrupted, to then 
revamp the mortgage payments to be more affordable tied to that 
income.
    Mr. Issa. Right. So at 31 percent, is this the right 
number, going forward? When I was a kid, it was lower. Twenty-
five percent would have been a stretch, in many cases.
    What would you say the right number is in order to have 
enough cushion for normal ups and downs of income and so on and 
still be able to stay in your home and meet your mortgage?
    Ms. Desoer. I believe the 31 percent ratio is appropriate 
but not for everyone. And, in particular, when you look at a 
low-income household, 31 percent probably is still high. So we 
have been recommending to Treasury that they consider lowering 
that for certain categories of borrowers. And, on a proprietary 
basis, we are looking at the same thing.
    Mr. Issa. OK. Well, I think that's certainly good judgment 
and something that I don't think is partisan here.
    Let me ask one question to all of you. If we had known 10 
years ago what we know now and if the borrowers had known 10 
years ago what they know now, wouldn't you assume that many of 
them would have bought less house than they are currently in, 
that you're trying to keep them in?
    What I'm really saying is, you're trying to keep people in 
homes that are right on the edge of their affording, even after 
you do modifications.
    Wouldn't it be true that, if they had chosen or were able 
to think again 10 years back and buy a home in a different 
price range, that they might be very good homeowners, while in 
many cases you have a hard time keeping them in the home they 
have?
    I will just go down the line, and as close to a ``yes'' or 
``no'' as you can.
    Mr. Das.
    Mr. Das. Based on what we know now, absolutely, 
Congressman. And it's one of the reasons why we stayed away 
from option ARMs to start with.
    Mr. Issa. Yes, ma'am?
    Ms. Desoer. Yes. It's the reason Bank of America exited the 
subprime business in the year 2000.
    Mr. Issa. Mr. Friedman.
    Mr. Friedman. I would like to comment. One other thing is I 
think, back to the debt-to-income ratio, it's our strong 
opinion that you really need to look at the whole totality of 
the borrower's situation. The debt-to-income ratio under HAMP 
only deals with the housing piece; it doesn't deal with the 
debtor's overall situation.
    Other than that, I would say also yes.
    Mr. Issa. Mr. Heid.
    Mr. Heid. You know, I think hindsight is a wonderful thing. 
I think the key is, we are here now. And the key right now is 
achieving affordability for homeowners that want to and have 
the willingness to stay in their home.
    Mr. Lowman. Yes.
    Mr. Issa. Mr. Pinto, I know you would say that we suckered 
people into too expensive a home.
    Mr. Pinto. Yes. And I would also add that the back ratio 
that was just referred to, the total debt ratio, is running 64 
percent. And it has actually been going up. And that means 
that's before food, clothing, anything.
    Mr. Issa. Right. So, my followup on this is, knowing what 
we know now from 10 years ago, whether it's HAMP or some of the 
loan modifications, in many, many, many cases, isn't our real 
goal to keep people in a house often keeping them in a house 
that is bigger and more expensive, even after reductions, than 
it would have been right-sized for them to begin with?
    And, as such, if the Federal Government is going to be 
trying to find affordable housing for people on the edge 
income-wise, and if we are lucky enough to have the Treasury 
back up here, and if they are looking at extending this 
program, isn't there a component missing from HAMP, and that is 
that it keeps people in the house they're in, rather than 
evaluating whether, in fact, there is a completely affordable 
non-renter situation that is eclipsed by the fact that they are 
in this house right now?
    And, you know, I know that is beyond your purview. You're 
not realtors, and you're not able to say, ``Look, get out of 
this house and get in this house,'' in most cases. But isn't 
that something that, as we are bringing Treasury up, if there 
is going to be an extension--and some of you did look at some 
continuation of this program between October--isn't that a 
component that is fundamentally missing, which is affordable 
housing starts not with the house you picked but with the house 
that was affordable?
    Mr. Das.
    Mr. Das. Congressman, I believe that you raise a very, very 
important and a very interesting point, and I would concur with 
you.
    Mr. Issa. Ms. Desoer.
    Ms. Desoer. Yes.
    Mr. Friedman. Yes.
    Mr. Heid. You know, I think the key to HAMP and the key to 
any mod program is to make sure it's affordable now, that the 
consumer can afford the home they are in with the payment they 
have right now.
    Mr. Issa. Mr. Lowman.
    Mr. Lowman. Yes.
    Mr. Pinto. Yes.
    Mr. Issa. OK, I'll settle for a yes. I can take it for an 
answer.
    Thank you, Mr. Chairman. I yield back.
    Chairman Towns. Thank you very much.
    I now yield to Mr. Connolly of Virginia, 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Lowman, you said that, despite some reports to the 
contrary, HAMP modification performance has been strong, 
helping hundreds of thousands of homeowners.
    Could you explain how HAMP augments your other mortgage 
modification programs?
    Mr. Lowman. Yeah, well, we offer--HAMP is top of the 
waterfall, so that is the first program that we offer. And, you 
know, it is the primary, you know, first point of defense in 
providing the modification.
    If a person for whatever reason doesn't qualify for HAMP, 
either it's a jumbo loan or it's a loan that was done past the 
date of the effective date of HAMP or for some reason it has 
fallen out of HAMP, then we use our proprietary program.
    Mr. Connolly. So one augments the other or complements the 
other?
    Mr. Lowman. Yes.
    Mr. Connolly. Mr. Heid, you stated that HAMP has 
facilitated the industry's ability to deliver more streamlined 
solutions than ever before.
    Could you elaborate on how HAMP has strengthened mortgage 
assistance beyond the programs offered by the private sector?
    Mr. Heid. I think what I meant by that and what I think is 
important is a timestamp. When you think about how and when 
HAMP was first created, it was the beginning of 2009. At that 
time, most of the loan modification programs that existed 
required an individual handling, an individual approval, from 
an investor. With the creation of HAMP, a more systematic 
program was created.
    I think HAMP did serve as a catalyst to get other programs 
going. I think it did serve as a bit of a mobilizing event to 
push servicers to take broader actions at a more rapid pace. I 
think it pushed other investors, including Fannie and Freddie, 
to move in a direction of programmatic home and loan 
modifications.
    That's what I meant by the fact that there was a broader 
effect from it.
    Mr. Connolly. So it actually leveraged other programs, 
private-sector programs. But for HAMP, maybe they wouldn't 
have--they would have been slower, smaller, maybe nonexistent?
    Mr. Heid. At the time. I mean, again, this was 2009. I 
think it certainly sped things along. We are at a different 
point in time right now.
    Mr. Connolly. Any estimate of what the number might be, in 
terms of what falls in the category of additional refinances or 
modifications that were leveraged because of HAMP?
    Mr. Heid. You know, I don't have a number for you. I think 
what I would say is that there were definitely loan 
modifications attempts being made throughout. It is not as 
though customers weren't getting assistance.
    Mr. Connolly. Right.
    Mr. Heid. I think what happened is, the idea of HAMP was a 
national systematic program. And I think national standards, 
national programs are always useful.
    Mr. Connolly. Thank you.
    Ms. Desoer, Mr. Pinto seemed to imply that HAMP is just 
displacing private-sector mortgage modification programs, which 
seems to contradict your testimony and that of others on the 
panel that said HAMP complements the proprietary loan 
modification programs Bank of America and others have 
developed.
    Could you elaborate?
    Ms. Desoer. Yes. And it gets back to the point of which 
loans and which customers are eligible for HAMP. And, again, as 
I said, out of our 1.4 million customers who are delinquent 60 
days or more, there are about 478,000 that are eligible for 
HAMP. We lead with HAMP in the waterfall for those of options. 
And if they fail to meet the HAMP requirements, then we can 
offer other alternatives.
    For the rest of the customers in the portfolio, we are 
doing modifications, but, again, the advantages that HAMP 
provided that floor or that standard in terms of the debt-to-
income ratio and capability that we can leverage in those 
programs for customers who are not explicitly eligible for HAMP 
by its definition.
    Mr. Connolly. If I understand your testimony and that of 
Mr. Heid and Mr. Lowman, far from displacing the private 
sector, it actually provides a certain framework for you to 
buildupon and expand.
    Ms. Desoer. That's correct.
    Mr. Connolly. Thank you.
    Mr. Chairman, I yield back.
    Chairman Towns. I thank the gentleman for yielding.
    I now yield 5 minutes to the Congresswoman from California, 
Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    While I was not in the room, I was listening to the 
testimony. And I'm somewhat struck by the questioning that was 
offered by Mr. Lynch when he asked if you wanted to see the 
program continue and virtually every one of you said yes, 
although my colleagues on the other side of the aisle very much 
want to see the program disappear.
    So it would be helpful to us if you can, in a narrative, 
provide to the committee precisely why you think the program 
should continue.
    Now, Mr. Lowman, I think Congressman Kucinich said that he 
had great difficulties with your particular company. And I 
would like to just echo those. I have a number of cases here 
that are truly disturbing that are loans by Chase.
    This couple, retired school teacher, retired husband, Chase 
has lost four sets of applications. And this is a story we hear 
over and over again, where documentation is sent, documentation 
is lost. When a consumer sends it in four times, has 
documentation they send in four times, and you can't find it, 
that is your problem.
    And it reminds me a little bit of the issue with the 
Minerals Management Services, where, basically, if they didn't 
permit the Horizon Deepwater rig within 30 days, it was 
automatically considered approved. Now, in that particular 
situation, clearly, that shouldn't have been the case. But we 
might argue that, here, at some point, the lender has to take 
responsibility for not having the documentation, when it has 
been sent over and over again.
    Now, I have two people dedicated to doing only foreclosures 
and modifications in my office. That is a lot of staff. And I 
would bet that every Member on this panel would say the same 
thing.
    I would ask you to create a legislative liaison individual 
within each of your companies that we can call. And I would 
like for you to contemplate that. If you are going to do it, I 
would like for you to identify who that is and present it to 
the committee. If you're not going to do it, I want you to 
explain to the committee why you won't do it.
    If we are really going to get to the bottom of this and 
keep people in their homes, we've got to have more 
accountability everywhere.
    And I guess, Mr. Chairman, I really don't have a question. 
I just had a series of statements I wanted to make. Thank you.
    Chairman Towns. And it should not be an 800 number, right?
    Ms. Speier. No. No, it should not be an 800 number.
    Chairman Towns. Thank you.
    I now yield to the gentleman from Ohio--I'm sorry, just a 
moment. My staff is saying it's Mr. Davis. I apologize.
    Mr. Davis. Thank you very much, Mr. Chairman. And I will 
try to be brief so my colleague gets a chance to get his 
question in.
    Studies have demonstrated and suggested that minority 
communities, minority homeowners have been disproportionately 
affected by the crisis. And I think many people agree with 
that. Second, they suggest that some of the reasons have been 
targeting of subprime loans in these communities and 
neighborhoods and, of course, higher rates of unemployment.
    Are your companies doing anything, as you try and do loan 
modifications, to take those factors into account so that these 
individuals can experience modifications?
    Mr. Das. Yes, sir. At Citi, we have a program and 
individuals that are dedicated to working with communities on 
the ground. And we have the Office of Homeowner Protection. We 
actually send people to the sites, to work with communities and 
help people with the documentation process.
    And, as I said in my testimony, we also work very closely 
with HOPE NOW to make sure that we are on the ground working 
with the community. We are very, very closely aligned with the 
communities. I personally go down and----
    Mr. Davis. Anyone else?
    Ms. Desoer. This is Barbara Desoer, Bank of America.
    We take a similar approach, where we have dedicated teams. 
As I mentioned in my testimony, we did 360 community events. 
Those events tend to take the place in the communities where 
the need is the greatest, highest disruptions to income and 
that sort of thing.
    So we intentionally supplement our outreach reach via 
letters, via telephone calls, versus one on one, people we send 
out to homeowners, with community events that we participate in 
and nonprofits that we help fund to host those events.
    Mr. Davis. Mr. Chairman, could I just ask that each one of 
the witnesses would respond to that question in writing?
    And I will yield back my time so that there might be enough 
time for----
    Chairman Towns. I thank the gentleman.
    And, also, let me just add that, also, I would like for you 
to respond to Ms. Speier's question, too, in writing. I would 
like you to respond to both. And we will keep the record open, 
you know, for an additional 7 days to be able to ascertain that 
information.
    The gentleman from Ohio?
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    I'm sorry that my colleagues from the other side have left, 
because I wanted to refresh the memory especially of Mr. Jordan 
from Ohio because we served in the State legislature in Ohio 
together, and we did know about the problems 8 years ago 
because we did a very extensive study on subprime lending in 
the State of Ohio. And the Democrats pushed hard for 
legislation that would have cracked down on subprime lending. 
It was predatory lending legislation. And it was my Republican 
colleagues that held that up. And they held it up for years.
    And the same thing was happening in this very Congress. 
Stephanie Tubbs Jones, who has since passed away, in 2001 
introduced predatory lending legislation. It was done year 
after year after year after year.
    And I think the voters have to understand that the reason 
we are here today talking about loan modifications is because, 
not just of the economy today and the foreclosures, as Mr. 
Lynch described, due to unemployment, but because of all the 
poor underwriting and the securitization of the loans in the 
subprime market that could have been prevented had we addressed 
predatory lending legislation in this Congress, that could have 
been prevented had we passed predatory lending legislation in 
the States. But the Republicans repeatedly stood in the way of 
that.
    And now today, as the conference is meeting in Financial 
Services that might address the underlying problems of the lack 
of regulation in mortgage-backed securities and credit default 
swaps, my Republican colleagues are again standing in the way 
and trying to prevent any systemic changes to the system that 
got us here in the first place.
    So I think it's sad that we are here today talking about 
all of these loan modifications because I don't think many of 
these loans should have happened in the first place, because so 
many of them were in the subprime market. And while I 
appreciate that some of the financial institutions quit writing 
in the subprime market years ago, Ms. Desoer, I will remind you 
that Countrywide was very, very active in the subprime market 
and led to thousands of foreclosures in the State of Ohio.
    My question to you is this. I have gotten a lot of 
complaints back home, as we look at people who are trying to 
seek modifications, that the modifications, although the 
discussions have started--and these haven't been finalized, 
these modifications--the banks continue to proceed with 
foreclosure proceedings.
    This is sending mixed messages. And while I realize 
Treasury has sent out some directives on this recently, I'm 
very concerned that we are sending mixed messages to homeowners 
who are trying to seek modifications but, at the same time, 
hearing from the bank that they are foreclosing on their 
property.
    I would like to know what each of your financial 
institutions does in that case and whether or not we should 
stop the practice of proceeding on foreclosures if we are in 
negotiations on loan modifications, so that it doesn't lead to 
the homeowners backing out because they fear their house is 
going into foreclosure anyway.
    Mr. Das, we'll start with you.
    Mr. Das. Congressman, let me be very clear that foreclosure 
is absolutely the last and least preferred alternative for 
Citi. When we offer somebody a HAMP modification, if they fall 
out of HAMP, we immediately offer them a whole range of Citi 
supplemental modifications. In fact, we were able to double the 
number of modifications we offer as a result of our proprietary 
programs. If they fail that, we offer them short sales and deed 
in lieu programs aggressively so they can----
    Mr. Driehaus. If I can interrupt you, because we do have a 
vote, what I am trying to find out is when you begin the 
discussion with a homeowner on a loan modification, do you stop 
the foreclosure process, or do you allow it to continue until 
that modification is finalized?
    Mr. Das. We stop the process. In fact, in our trial 
modification process, we reached out to people who are in 
foreclosure and offered them trial modification.
    Mr. Driehaus. So as soon as trial modification is offered, 
you stop the foreclosure process?
    Mr. Das. Yes.
    Mr. Driehaus. Ms. Desoer.
    Ms. Desoer. We continue the process in parallel, but we are 
in compliance with the Treasury directives about how that 
should be handled, and we have significantly enhanced the 
communications to try to mitigate the concern of the borrower 
with the promise that we will not take that home to foreclosure 
sale while they are in the process of being considered for a 
modification.
    Mr. Driehaus. And I have a concern, because it sounds as if 
you are reaching out to the consumer, trying to work on a 
modification, but at the same time that hand is reaching out, 
you are about to slap it with a foreclosure, so mixed messages 
are, in fact, being sent.
    Wouldn't it be better for us to back off on the 
foreclosure, since we have all said that the foreclosure is the 
last thing in the world that you want anyway, allow the 
modification time to work, and if it doesn't work, then go 
ahead and proceed with the foreclosure process? But the fact we 
are on this dual track is very much sending mixed messages.
    Ms. Desoer. Again, what we are trying to balance is the 
interests of all the constituents, including that of the 
investor in the party, and if that does not go through, in some 
places to restart the foreclosure process is a very lengthy 
period of time. So we are trying to preserve that timeline. 
But, again, we have significantly enhanced communication, and 
we are in compliance with the Treasury's guidance.
    Mr. Driehaus. Mr. Friedman.
    Mr. Friedman. Our process is much the same as Bank of 
America's.
    Mr. Heid. I believe for the customer working with us, I 
believe we stop the foreclosure process. The other procedure we 
have in place is before a customer's loan goes to completion of 
foreclosure, we make sure to take a second look to make sure 
every opportunity has been exhausted.
    Mr. Lowman. We have a similar process. We do two quality 
checks, one before we commence the foreclosure, and then one 
right before sale, to make sure that we don't foreclose on 
someone that is in the process.
    Mr. Driehaus. Again, Madam Chair, I would remind the 
committee that there seems to be a broad differentiation 
between the financial institutions and the servicers in this 
case, and it really is a problem for borrowers who are getting 
mixed messages from the services, who are genuinely working and 
trying to save their homes, but fear that the bank is going to 
move forward anyway, and because they are hell-bent on having a 
foreclosure.
    So while we are all saying foreclosure is the last thing in 
the world we want to do, I think we are sending a very mixed 
message when we are proceeding with foreclosure actions while 
at the same time attempting to work on a modification.
    So I would leave it at that and yield back the balance of 
my time.
    Ms. Norton. The gentleman's time has expired.
    I am going to ask a question in the absence of the 
chairman. This program, HAMP, has been such a disappointment. 
Perhaps we had our hopes too high. But to the credit of the 
administration, it keeps trying. And here is a question about 
what would perhaps be the most difficult aspect of the program, 
where Treasury announced the Home Affordable Unemployment 
Program that provides 3 to 6 months forbearance to unemployed 
homeowners while they seek employment. We understand that some 
companies have provided such forbearance to unemployed 
borrowers before. I am sure that in the normal course of 
downturns, for example, that was not unusual.
    Let me ask all of you, have any of you, and tell me the 
extent to which any of you have participated in the forbearance 
program, beginning with you, Mr. Das?
    Mr. Das. We launched the program--we launched an 
unemployment assist program in March 2009, when unemployment 
was rising and there wasn't a denominator to calculate debt-to-
income ratios. But we kept it very simple.
    We support the Treasury's program, but we believe that the 
paperwork may have been a little more nuanced than one would 
have wanted. All we asked for in our program was an 
unemployment document of proof of unemployment, and if it was 
an owner-occupier, we just made it a simple payment of $500 a 
month for 3 months. We would have liked to extend it to 6 
months.
    What it did was it paused the whole foreclosure process and 
the whole people missing payments process, and it enabled 
people to get into HAMP, which was a very, very powerful 
outcome for that program.
    Ms. Norton. Was this on your own?
    Mr. Das. This was on our own.
    Ms. Norton. Are you continuing it with this 3- to 6-months 
forbearance?
    Mr. Das. Absolutely. We are extending it to the new 
Treasury program. But we didn't wait for that. We started it on 
our own. I am delighted to see that the Treasury program is 
actually based on some of the attributes of what we did.
    Ms. Norton. Ms. Desoer.
    Ms. Desoer. Yes, we have been doing forbearances for 
unemployed, and we will actively participate in the 
government's program, and we are looking at our own proprietary 
program that could potentially extend beyond the 6 months under 
certain circumstances, just because of the length of 
unemployment for some of our customers.
    Ms. Norton. Mr. Friedman.
    Mr. Friedman. We have always had a forbearance for that 
particular reason prior to HAMP and post-HAMP as well for 3 
months. I know that you are considering a longer situation. 
That becomes very expensive for us as a servicer going forward, 
because whether the borrower in our situation makes payments or 
not, we, the servicer, have to make those payments on behalf of 
the borrower to the investor. So anything longer than the 3-
month period becomes very expensive for us.
    Ms. Norton. Mr. Heid.
    Mr. Heid. We have done about 100,000 such customer cases 
before the HAMP modification was changed. The Treasury program 
is very similar to the one we were offering before. So we are 
in the process of converting over, and we will continue to help 
customers that don't qualify for HAMP as well.
    Ms. Norton. Mr. Lowman.
    Mr. Lowman. We have always offered forbearance to 
unemployed borrowers and will participate in the Treasury 
program.
    Ms. Norton. Mr. Pinto.
    Mr. Pinto. I have nothing to add.
    Ms. Norton. Could I ask that all of you provide to the 
chairman the number of homeowners starting with the beginning 
of this year to whom you have given forbearance?
    I understand that this, of course, is something that might 
have been routinely done before; you had a customer, it was the 
appropriate thing to do under the circumstances. Of course, 
these circumstances are very different because there are high 
levels of unemployment. So I would be interested in your candid 
view of how successful forbearance has been in avoiding 
foreclosure. Does it just spread the time out, or what is your 
view based on your own experience of whether this delay in 
foreclosure for an unemployed homeowner--what is your view of 
its success or its effect?
    Mr. Das.
    Mr. Das. Madam Congressman, I believe that the idea of 
delay is not as bad as it is made out to be. Sometimes, 
oftentimes, borrowers need a pause so that they can focus on 
getting the employment as opposed to also keeping their home at 
the same time. As I said to you before, the fact that 
Unemployment Assist has allowed people to get into an 
alternative program like HAMP was a very powerful outcome, and 
I believe that needs to be noted.
    Ms. Desoer. I believe it is very dependent on the situation 
of the customer and the length of unemployment.
    Ms. Norton. We recognize that. We recognize that there is a 
vastly different universe out there. But I am asking you a 
general question.
    Ms. Desoer. Certainly I would believe that temporary relief 
from the obligations that a customer has would enable them to 
more successfully bridge the economic hardship that they are 
experiencing, yes.
    Mr. Friedman. I would concur with her assessment as well.
    Mr. Heid. I agree. I think the design of the program where 
there is some amount of cash-flow every month is actually 
better for the customer so there is not such a great shock 3 or 
4 or 5 months down the line when income is restored.
    Mr. Lowman. I concur also.
    Mr. Pinto. If you are looking for quantitative information, 
you may want to again go to the OCC/OTS Mortgage Metrics and 
see if they have data that actually tracks the question you 
have asked. I have not seen any. I don't recall any.
    Ms. Norton. This is rather much of a perfect storm we have, 
where unemployment meets mortgage crisis. Normally unemployment 
doesn't meet that kind of crisis, exacerbating the situation of 
people who have all along kept up their mortgage payments.
    I recognize you all want to do the right thing, and to some 
extent you have been doing it. Would you care to offer 
suggestions as to this relatively new program, as to its 
structure and what might be done?
    For example, one of you, I am not sure if it was you, Mr. 
Friedman, indicated that--or maybe it was you, Mr. Heid--
indicated beyond 3 months. I am not sure any of you do it 
beyond 3 months, but it created issues beyond 3 months.
    Mr. Friedman. It was I that said since we are not part of a 
bank or have a deposit base, as the other folks around the 
table, other than maybe Mr. Pinto, unless he is wealthier than 
we all think, we--because we do a lot of securitizations, we 
don't own the loan outright. We have to make payments to the 
investors, month in, month out, whether the borrower makes 
payments to us.
    Ms. Norton. That is not the case for anybody else sitting 
at the table?
    Mr. Heid. No. The same requirements apply to everybody. But 
I think the idea of the 3 months allows multiple 3-month check-
ins, where the purpose for that is to make sure you can stay 
current with what is going on with the customer's life, what 
are the prospects for them to be able to get back to a level of 
employment where the home is affordable. That is kind of where 
the extensions of 3 months at a time comes into play.
    Ms. Norton. Ms. Desoer.
    Ms. Desoer. I would concur with that.
    Ms. Norton. The chair has asked me to recess the hearing 
for about a half-hour because there was at least one Member who 
did not get an opportunity to ask questions. So don't go 
anywhere. This hearing is recessed.
    [Recess.]
    Mr. Clay [presiding]. The committee will come to order. We 
will resume the 5-minute questioning.
    Let me begin with Mr. Heid.
    Mr. Heid, according to the research done by the National 
Community Reinvestment Fund, minority borrowers are less likely 
than other borrowers to receive trial and permanent 
modifications. Do you believe that this is an accurate 
assessment?
    Mr. Heid. It is hard to answer that question. On the 
surface, I would say only if the home is not affordable would 
that be the case. There is nothing in the modification process 
that would cause a difference between ethnic backgrounds or 
anything of the sort.
    Mr. Clay. Well, Mr. Heid, I asked the question because we 
know that prior to the modification phase, that African 
American borrowers with comparable income and other 
considerations were steered into subprime and predatory loans. 
They were disproportionately impacted by those policies. 
Instead of them getting a conventional mortgage, they were 
steered, and there is plenty of data to show that. So since 
they were disproportionately affected by being steered into 
these high-cost loans, I am just curious as to what is 
happening to these minority borrowers now who are in trouble, 
who are trying to get their loans modified? Do you think maybe 
they are disproportionately being affected still?
    Mr. Heid. Well, Congressman, as far as the statement on 
steering, I disagree. As far as the loan modification process 
and how that works----
    Mr. Clay. Oh, you disagree.
    Mr. Heid. We have the same process----
    Mr. Clay. What do you disagree about as far as steering? 
What do you find disagreeable about what I said?
    Mr. Heid. You are quoting a particular study typically, and 
I believe that study in particular does a comparison with 
partial information on public data----
    Mr. Clay. But the numbers speak volumes. The numbers speak 
volumes about how middle-income, upper-income African American 
families were steered into subprime and predatory loans. Now, 
you can sit here and deny that if you want, but it has 
happened.
    Let me say something else about Wells Fargo. You know, 
quite a few of my constituents have been impacted negatively by 
this whole mortgage meltdown. We have gone to Wells Fargo, my 
staff back in my district, asking for you to modify some of 
these loans, and we have heard every excuse, like, oh, we have 
taken TARP money, so it would be inappropriate to try to help 
these people.
    Now, what do you have to say about that? Have you used that 
excuse, that because you are a recipient of TARP, that you 
cannot help these average Americans trying to stay in their 
homes?
    Mr. Heid. No. Absolutely not. That is an absurd statement. 
Anyone in our shop that would have made a statement like that, 
that is absurd. What we are doing is this. Our data kind of 
speaks for the efforts we are putting forth.
    When you look at every customer, irrespective of ethnic 
background, every customer that has missed two or more payments 
in their mortgage status, two-thirds of the time we are finding 
a solution other than foreclosure.
    The loan modification process we have put forth, the people 
that are doing the work, most of them over the phone, have no 
ethnic information on the screens they are looking at, with the 
one exception of the HAMP program requires volunteer submission 
of ethnic information. But even in HAMP, every single customer 
going through a modification process has a very prescribed 
series of steps that one goes through to gather income 
information and get them into a loan modification they are able 
to afford.
    That is the way the HAMP program works. The non-HAMP 
programs are set up in a very similar way so that every 
customer goes through a similar process for loan modifications.
    Mr. Clay. I really find it incredulous that you don't think 
that African American borrowers were steered into these high-
price loans. I mean, I find it incredible.
    Let me ask the rest of the panel, do they agree with Mr. 
Heid, or do you think that these people are disproportionately 
impacted by racist policies?
    Let me start with you, Mr. Das. Have you seen any evidence 
that the people are disproportionately impacted based on their 
race?
    Mr. Das. Congressman Clay, I believe that you raise a very 
important point, and I believe that in economic downturns, that 
the hardship can be disproportionate in minority communities. 
And here is what I would say. We don't do anything actually 
that would distinguish between race, origin, sex or any of 
those factors.
    But here is what I would say: I think that HAMP needs to be 
enhanced for low- to moderate-income communities in a very 
different way to the way it has been established today. I 
believe some of my colleagues have taken a similar position.
    Mr. Clay. Thank you for that response.
    Ms. Desoer.
    Ms. Desoer. Thank you, Congressman Clay.
    Bank of America did not--we exited the subprime business in 
the year 2000. We acquired Countrywide in 2008. Shortly after 
the acquisition we entered into a settlement that we are 
executing with 44 States, which is our proprietary national 
home retention program, which was intentionally targeted at pay 
option ARMs, subprime hybrid ARMS, products that might have 
created the most stress in these economic times for borrowers. 
And we follow a very deliberate process, much of which is 
automated, treating equally the attempts to outreach to all of 
our customers as well as our response to customers who are 
calling us because they are under financial stress.
    Then intentionally we participated in 360 community events 
last year. Again, we have stepped up that number even more this 
year. We have invested in the Alliance for Stabilizing 
Communities, where disproportionately we go to and participate 
in events where the communities are the hardest hit so we can 
provide face-to-face counseling and acceptance of applications 
and modifications as well.
    Mr. Clay. And so you do--Bank of America has admitted that 
they are--that there has been steering, that you see 
disproportionate effects to that.
    You know, I believe in the adage that figures don't lie, 
but liars sure can figure, and this is a good example of that; 
that this segment of the population was disproportionately 
impacted because of the actions of the banking community, 
because you do have a human factor involved here. You do have 
loan officers that look at customers differently based on their 
skin color. That is all I am saying.
    But for people to come here and deny that I think is wrong, 
and the American people can see through that.
    Mr. Friedman.
    Mr. Friedman. Fortunately, we didn't originate any loans, 
so personally I am a little out of touch on that particular 
subject. But I do believe we, like Bank of America and others, 
do go to a lot of outreach programs.
    I think a good help for the community would possibly be to 
bring down the debt-to-income test to even lower than 31 
percent under HAMP, which maybe, you know, if there was some 
type of injustice done, maybe it could help that many more 
people. That is just as a suggestion.
    Mr. Clay. Have any of your institutions created programs 
that target particularly at-risk groups like racial minorities 
and the unemployed, who have been adversely impacted?
    Mr. Friedman. I don't know why you couldn't do such a 
program.
    Mr. Clay. Voluntarily.
    Mr. Friedman. We don't originate, so I can't really comment 
on that.
    Mr. Clay. Mr. Lowman, any comments?
    Mr. Lowman. I would just add that at Chase we have a 
culture of fair lending and have always had that culture of 
fair lending. We have done our own analysis based on the report 
that you referred to, the NCRC study, and our findings are not 
congruent with their findings.
    We have done over 700 outreach events throughout the 
country. We have 51 homeownership centers throughout the 
country in the most troubled of neighborhoods where we continue 
to do outreach and I think really are able to serve the 
underserved.
    Mr. Clay. OK. So, look, the facts speak for themselves. You 
go to a predominantly African American neighborhood where every 
third house is foreclosed on, I mean, doesn't that stand out 
and say something to you, that perhaps those communities had 
been targeted?
    Mr. Lowman. I can't speak to the facts. I can't speak to 
it.
    Mr. Clay. Mr. Pinto, anything to add?
    Mr. Pinto. Not being a lender, I really have no information 
to add.
    Mr. Clay. Just as an observer.
    Mr. Pinto. As an observer, and I think this blame is placed 
on both sides of the aisle here, so let me start with that.
    Lenders and Fannie and Freddie back in 1991 had very sound 
underwriting principles. Those underwriting principles were 
complained about by community groups. They went to Congress in 
1991 and petitioned Congress to change that. What they asked--
what they said was that lenders respond to the most 
conservative standards unless Fannie and Freddie become 
aggressive and convincing in their efforts to expand 
historically narrow underwriting, change their underwriting. 
That was before the U.S. Senate Banking, Housing and Urban 
Affairs Committee in 1991.
    In 1992, the Federal Housing Enterprises Safety and 
Soundness Act made that request into the law of the land, and 
from that point on, the underwriting standards of this country 
changed step by step by step. Eventually we went from having 
down payments on loans to having no down payments on loans. It 
was the result of a policy that Congress put in place, 
bipartisan policy that Congress put in place. That is where it 
started, and that is my view.
    Mr. Clay. But that wasn't totally the reasoning for this 
housing collapse. I mean, just Fannie and Freddie are to blame, 
not the people at every step of the way that made money off of 
these loans and these high-cost loans? We don't just stop with 
Fannie and Freddie, do we?
    Mr. Pinto. Remember what they were asking for. We want to 
break the lenders' view of having conservative underwriting, 
and the only way to do that was to get Fannie and Freddie to 
start having flexible underwriting, which they did starting in 
1993. And it just progressed, and it was a progression that 
occurred over 15 years.
    Mr. Clay. Like you say, there is enough blame to go around. 
I guess we probably should look at what the appraisers did, 
too, shouldn't we?
    Mr. Pinto. Don't get me started on appraisers.
    Mr. Clay. I thank you all for your responses. At this 
point, that concludes this hearing.
    Without objection, the record shall be left open for 7 days 
so that Members may submit information for the record.
    Finally, without objection, I will enter this binder of 
hearing documents and statements submitted by interested 
parties for the committee record.
    The committee stands adjourned.
    [Whereupon, at 12:58 p.m., the committee was adjourned.]
    [The prepared statements of Hon. Darrell E. Issa and Hon. 
Gerald E. Connolly and additional information submitted for the 
hearing record follow:]

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