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




 
  FORECLOSURES CONTINUE: WHAT NEEDS TO CHANGE IN THE ADMINISTRATION'S 
                                RESPONSE

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON DOMESTIC POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 25, 2010

                               __________

                           Serial No. 111-134

                               __________

Printed for the use of the Committee on Oversight and Government 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             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
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

                    Subcommittee on Domestic Policy

                   DENNIS J. KUCINICH, Ohio, Chairman
ELIJAH E. CUMMINGS, Maryland         JIM JORDAN, Ohio
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
DIANE E. WATSON, California          DAN BURTON, Indiana
JIM COOPER, Tennessee                MICHAEL R. TURNER, Ohio
PATRICK J. KENNEDY, Rhode Island     JEFF FORTENBERRY, Nebraska
PETER WELCH, Vermont                 AARON SCHOCK, Illinois
BILL FOSTER, Illinois
MARCY KAPTUR, Ohio
                    Jaron R. Bourke, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 25, 2010................................     1
Statement of:
    Berenbaum, David, chief program officer, National Community 
      Reinvestment Coalition; Julia Gordon, senior policy 
      counsel, Center for Responsible Lending; Ronald M. Faris, 
      president, OCWEN Financial Corp.; and Edward J. Pinto, real 
      estate financial services consultant and former chief 
      credit officer of Fannie Mae (1987-1989)...................   149
        Berenbaum, David.........................................   149
        Faris, Ronald M..........................................   211
        Gordon, Julia............................................   185
        Pinto, Edward J..........................................   229
    Caldwell, Phyllis, Chief Homeownership Preservation Officer, 
      U.S. Department of Treasury................................    91
    Sheil, Bill, investigative reporter, WJW-TV8, Cleveland, OH; 
      Jim Rokakis, treasurer, Cuyahoga County, OH; and Patricia 
      Stringfield, homeowner, Washington, DC.....................   128
        Rokakis, Jim.............................................   129
        Sheil, Bill..............................................   128
        Stringfield, Patricia....................................   136
Letters, statements, etc., submitted for the record by:
    Berenbaum, David, chief program officer, National Community 
      Reinvestment Coalition, prepared statement of..............   152
    Caldwell, Phyllis, Chief Homeownership Preservation Officer, 
      U.S. Department of Treasury, prepared statement of.........    94
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    31
    Faris, Ronald M., president, OCWEN Financial Corp., prepared 
      statement of...............................................   213
    Gordon, Julia, senior policy counsel, Center for Responsible 
      Lending, prepared statement of.............................   187
    Jordan, Hon. Jim, a Representative in Congress from the State 
      of Ohio, prepared statement of.............................     8
    Kaptur, Hon. Marcy, a Representative in Congress from the 
      State of Ohio, prepared statement of.......................   245
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio:
        Letter dated February 25, 2010...........................   108
        Prepared statement of....................................     4
    Pinto, Edward J., real estate financial services consultant 
      and former chief credit officer of Fannie Mae (1987-1989), 
      prepared statement of......................................   231
    Rokakis, Jim, treasurer, Cuyahoga County, OH, prepared 
      statement of...............................................   132
    Stringfield, Patricia, homeowner, Washington, DC, prepared 
      statement of...............................................   139
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio, Follow-up Report and Policy 
      Considerations.............................................    38


  FORECLOSURES CONTINUE: WHAT NEEDS TO CHANGE IN THE ADMINISTRATION'S 
                                RESPONSE

                              ----------                              


                      THURSDAY, FEBRUARY 25, 2010

                  House of Representatives,
                   Subcommittee on Domestic Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2154, Rayburn House Office Building, Hon. Dennis J. 
Kucinich (chairman of the subcommittee) presiding.
    Present: Representatives Kucinich, Issa, Turner and Jordan.
    Staff present: Jaron R. Bourke, staff director; Yonatan 
Zamir, counsel; Jean Gosa, clerk; Charisma Williams, staff 
assistant; Leneal Scott, IT specialist, full committee; John 
Cuaderes, minority deputy staff director; Adam Fromm, minority 
chief clerk and Member liaison; Kurt Bardella, minority press 
secretary; Hudson Hollister, minority counsel; and Brien 
Beattie and Mark Marin, minority professional staff members.
    Mr. Kucinich. Thank you very much for being here. Good 
afternoon, I'm Dennis Kucinich, Chairman of the Domestic Policy 
Subcommittee of the Committee on Oversight and Government 
Reform. Welcome to today's hearing, ``Foreclosures Continue: 
What Needs to Change in the Administration's Response.''
    Today's hearing is a continuation of the subcommittee's 
series of hearings examining the characteristics of the ongoing 
residential foreclosure crisis and the impact of the 
administration's response.
    Now, without objection, the Chair and the ranking minority 
member will have 5 minutes to make opening statements, followed 
by opening statements not to exceed 3 minutes by any other 
Member who seeks recognition. And without objection, Members 
and witnesses may have 5 legislative days to submit a written 
statement or extraneous materials for the record.
    I want to acknowledge the presence of my colleague from 
Ohio Congressman Turner from the Dayton area. Welcome. I 
appreciate you being here. I know that you have another hearing 
to go to. And we're going to move through the opening 
statements and give you a chance to be heard from as well.
    This subcommittee began holding hearings on the subject of 
the foreclosure crisis and solutions to it 3 years ago. Since 
that time we've met nine times on the subject. It's not 
hyperbole to say that this is the worst economic crisis to hit 
America since the Great Depression. The fallout from the crash 
in the housing market and the recession that has overtaken our 
country has left no community in the country untouched. Nearly 
every level of economic activity has been affected negatively. 
Nationally the unemployment rate is approximately 10 percent, 
and in some States it's nearly 15 percent. Foreclosures 
continue; 2.9 million borrowers received foreclosure notices in 
2009, and it's predicted nearly 2\1/2\ million more borrowers 
will lose their homes--will lose their homes to foreclosure 
this year.
    According to the most recent data, more than 15 percent, 
one in six, of all mortgages are in trouble; 2.6 million 
borrowers have missed at least three payments on their 
mortgages, making them seriously delinquent. This is double the 
level of 1 year ago and is the highest number of delinquencies 
on record since 1972, according to the Mortgage Bankers 
Association.
    Now, let's be clear, this foreclosure crisis started well 
before the current administration came into office, but like 
the Great Depression, the administration that inherited the 
crisis will be judged for how they respond, and that judgment 
can be as harsh as if they had created the crisis themselves.
    The American people expect and the American people deserve 
bold initiatives from their government to help as many people 
as possible. Unfortunately, in my opinion, much time has been 
wasted by relying on lenders and investors to choose to modify 
loans to keep people in their homes. Indeed, even as this 
administration quickly created a program that the previous one 
wouldn't even consider, the Making Home Affordable program, it 
continued to rely on the charitable impulses of the industry 
that has nearly bankrupted the Nation. But the industry that 
received a trillion-dollar bailout has been unwilling to absorb 
the losses, to write down bad debts, and their recalcitrance is 
holding up the resolution of the foreclosure crisis.
    Thus, the administration's centerpiece loan modification 
program, known as the Home Affordable Modification Program 
[HAMP], has not lived up to its high expectations. The Treasury 
points out that 75 percent of the 1 million or so borrowers who 
have been offered modifications under the program are making 
their payments, and it's just a matter of borrowers getting all 
their documents to lenders. And certainly for a program that is 
just under a year since its creation, the efforts to publicize 
it and encourage participation are laudable, but it's also 
severely flawed. It doesn't address one of the key problems 
facing borrowers, the problem of negative equity of a house 
that is worth less than the mortgage. It is marred by 
geographical disparities. And its affordability objectives rely 
upon stretching out the payments, an approach that can saddle 
the borrower with more debt, not less, and which makes sense 
only on the assumption that home values are eventually going to 
go right back up.
    Now, on Friday this administration announced a pilot 
initiative to distribute $1.5 billion in TARP money to five 
States. That list did not include Ohio or other States that 
were hit harder and earlier by the foreclosure crisis. Even if 
Ohio had been included in that list, it would not have been 
enough to make a meaningful headway in a crisis. In fact, the 
State set a record for foreclosures last year, the 14th year in 
a row of increases. But as we will hear today, no matter how 
grim the statistics are, there are still plenty of people in 
Ohio and in many other States that are hoping and waiting for 
some relief.
    Americans will be able to tell if Washington is faking it. 
Millions of people will have personal knowledge of whether or 
not the government gave them real help which for many borrowers 
must necessarily include principal reduction. There is still 
time in Ohio and in communities across America to create a 
positive and fruitful legacy of this administration's response 
to the foreclosure crisis. My hope is that this administration 
feels the urgency and the need to make this decisive 
difference.
    I want to--in addition to acknowledging our first witness 
Ms. Caldwell, I also want to acknowledge the presence in the 
audience of the treasurer of Cuyahoga County, OH, Jim Rokakis, 
who has been a stalwart in not just examining this, this matter 
of the impact of foreclosures, but has really been a leader 
nationally in suggesting solutions and a way forward.
    So, Treasurer Rokakis, I appreciate your presence here 
today.
    We also have a local TV reporter, Bill Sheil, who actually 
did an investigation that we're going to give this committee a 
quick glimpse of in the same panel a little bit later that Mr. 
Rokakis is on. So welcome to Washington.
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

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    Mr. Kucinich. I'm going to proceed right now to the opening 
statement from our ranking member, Congressman Jordan of Ohio. 
You may proceed.
    Mr. Jordan. Thank you, Mr. Chairman.
    Let me, too, thank Mr. Rokakis for being with us, and Ms. 
Caldwell. I know they were both there in Cleveland when we had 
the field hearing a few months back.
    Mr. Chairman, we do appreciate this hearing today. 
Homeowners across the country are suffering. Just last week the 
Mortgage Bankers Association reported that the combination of 
loans in foreclosure and one payment behind in their mortgage 
was over 15 percent, the highest in the history of the survey. 
Meanwhile home prices keep falling, U.S. banks are posting 
their sharpest declines in earning since 1942.
    At the recent field hearings of this subcommittee in 
Atlanta and Cleveland, we have received overwhelming evidence 
of the failure of the administration's policies and programs to 
stem the tide of mortgage defaults and foreclosures. In 
addition to trade organizations, think tanks and government 
accountability groups have produced reams of reports that 
demonstrate how the administration's most active program, HAMP, 
has not only failed to accomplish the administration's promise 
of assisting 3 to 4 million American homeowners, but is 
actually harming homeowners in the broader economy.
    This harm, Mr. Chairman, can be measured in several ways. 
First, the administration's mortgage modification efforts are 
costing taxpayers as much as $75 billion. Since the President 
took office, he has told the American people time and again 
that the answer to our economic problems is more government 
spending and new government programs. And time again this 
administration has told the American people that they should 
expect a return on their investments through bailouts and 
stimulus spending. And they have been told that they will be 
able to track this return through an unprecedented level of 
transparency and accountability. But once again, the 
administration is breaking these promises to the American 
people in the face of widespread bipartisan criticism of HAMP. 
For example, the Treasury Department has retreated into secrecy 
by halting the dissemination of information on the program's 
Web site that would allow the public to track the program's 
success rate.
    The public is also harmed when the government spends their 
money on failed programs. It is doubly harmed when the 
government tries to disguise its failures by hiding information 
from the American people.
    We've also learned that many of the people who have 
received temporary assistance through the administration's 
programs are now discovering they're ineligible for the long-
term mortgage modification. As the New York Times has recently 
reported, this means that many Americans are throwing their 
money into homes that they believe the government would help 
them keep only to find out thousands of dollars later that they 
will face foreclosure anyway.
    Delaying foreclosure, Mr. Chairman, does not help the many 
Americans who are fighting to keep their jobs or find new ones. 
Delayed foreclosures only serve to prolong the economic 
hardship, drain them of much-needed resources, and defraud them 
the opportunities to find more affordable housing options.
    In fact, it seems that the only good thing that the 
administration's efforts have accomplished is to reinforce in 
the minds of the American people the reality that technocratic 
tinkering is not an effective solution to our economic 
problems. The only viable, long-term solution is to keep more 
Americans in their homes and in their jobs. For that matter it 
is a broad-based economic recovery built on the foundation of 
free markets, fiscal responsibility and limited government that 
has made our Nation strong and prosperous for more than 200 
years.
    Mr. Chairman, I would also ask unanimous consent to enter 
into the record a staff report that was released this morning 
along with ranking member of the full committee Mr. Issa, the 
title of which is ``Treasury Department's Mortgage Modification 
Programs: A Failure Prolonging the Economic Crisis.''
    Mr. Kucinich. So ordered.
    Mr. Jordan. Thank you.
    Mr. Kucinich. Without objection.
    [The prepared statement of Hon. Jim Jordan follows:]

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    Mr. Jordan. Yield back.
    Mr. Kucinich. The Chair recognizes Mr. Cummings from 
Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. 
Chairman, I thank you for holding this hearing. In my 14 years 
in Congress, I've devoted more energy to addressing the current 
foreclosure crisis than almost any other issue facing our 
Nation. Because of that I thank you for holding this hearing, 
as well as the field hearings in Atlanta and Cleveland, for 
using the Domestic Policy Subcommittee to shine a light on this 
very tragic problem.
    I also thank all of today's witnesses for joining us. Your 
input is crucial to our developing real solutions for real 
people who are suffering real problems.
    More than a year ago I decided that we were not doing 
enough to address foreclosures in my district in Baltimore, so 
I hired someone in my district office to work only on helping 
our constituents keep their houses. Most of us only have 20 
employees. That's between Washington and the District. And I 
then soon discovered I needed another one. So literally 10 
percent of my staff only deal with foreclosures keeping people 
in their houses.
    After I hired the first one, I decided that there was still 
more that we could do. We figured out that the most common 
barriers to mortgage modifications were lost paperwork, 
understaffed lender call centers, and lender and servicer 
denials without any explanation. And another one was just the 
idea that sometimes when they got ahold of the lender, the 
lender just simply did not take the time to work with the 
borrower. And I want to say that it was not always in a good-
faith manner, but I won't go that far.
    But one thing that we did discover is that once my staff 
member would sit down a lot of times and go over the paperwork 
with the borrower, we discovered that, say, about 80 percent of 
those cases, they were able to get a modification.
    So this past Saturday we held our third foreclosure 
prevention workshop in Baltimore. Over the last year these 
events have brought together some 3,000 people from my 
district, and, by the way, from all over the country. We had 
over 25 lenders, and created the opportunity to keep hundreds, 
if not thousands, of families in their homes. We discovered 
something as simple as a face-to-face meeting--this is not 
rocket scientist stuff--a face-to-face meeting does not seem 
that important, but for the men and women who approached me on 
Saturday literally in tears after negotiating a modification, 
it meant everything. But they are just for whom the options are 
severely limited; they are unemployed.
    We can do a lot of good with President Obama's mortgage 
modification infrastructure. I watched it happen on Saturday in 
Baltimore. But the blight of 14.8 million unemployed Americans 
demand that we do even more, and more is these three things. 
First, we need mortgage assistance; we need mortgage assistance 
whether through grants or loans for unemployed persons while 
they continue to look for work. We managed to get $3 billion 
into the Wall Street Reform and Consumer Protection Act, but 
that funding is far from a done deal.
    I was pleased that the President's recently announced 4HM 
program, Help for the Hardest-Hit Housing Markets, will include 
assistance to the unemployed, as well as those who are 
underwater in their mortgages. While I would have hoped to see 
the program implemented in more than just the five hardest-hit 
housing markets, we have to start somewhere.
    The second thing we need to do is we need a real jobs 
package. The Senate's package yesterday of the $15 billion so-
called jobs bill is better than nothing, but it is not nearly 
enough, and it's anticipated we will move on that in the House 
this week.
    Finally, we need job-training programs that allow workers 
to adapt and improve. As CBO Director Douglas Elmendorf said on 
Tuesday to another committee which I sit on, the Joint Economic 
Committee, so many of the lost jobs simply are not coming back. 
New jobs will come from new firms who embrace new technology 
and innovation. Worker training, whether through community 
college career centers or traditional 4-year schools, must be 
part of a long-term solution.
    Clearly we need a comprehensive strategy to help the 
unemployed, one that should include the elements I just 
mentioned, but today's task, foreclosure prevention, is the 
first and biggest element of that solution. And so, Mr. 
Chairman, I look forward to the testimony. I want to thank the 
witnesses. And with that I yield back.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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    Mr. Kucinich. The Chair recognizes Mr. Turner of Ohio.
    Mr. Turner. Thank you, Chairman Kucinich. I want to thank 
you for your leadership and efforts in the areas of the 
mortgage foreclosure crisis, and also the issues of how you've 
looked to protect families who are in Ohio as we struggle with 
how to address the issue of the mortgage foreclosure crisis and 
its effects on our neighborhoods. I want to thank you and the 
ranking member for holding this hearing today to focus on the 
effectiveness of the administration's Home Affordable 
Modification Program in helping struggling families facing 
foreclosure stay in their homes.
    My congressional district, as well as the entire State of 
Ohio, has been significantly impacted by the current 
foreclosure crisis. In the counties located within Ohio's Third 
Congressional District, there have been over 6,000 housing 
foreclosures reported in 2008 alone.
    While Congress has made attempts to address the root causes 
of the housing crisis, we need to continue to improve Federal 
housing policies in order to find new solutions to address 
these challenges. We must conduct a comprehensive reevaluation 
of our Federal, State and local housing policies in order to 
stabilize the housing market, keep people in their homes and 
help displaced families return to their homes.
    To better understand how the greater Dayton area has been 
particularly affected by the current housing crisis, in August 
I convened a forum in coordination with the Northeast-Midwest 
Institute consisting of two panels to examine the impact of the 
housing crisis in our community and to discuss the Federal 
response. The Northeast-Midwest Institute is a Washington, DC-
based nonprofit, nonpartisan research organization dedicated to 
economic vitality, environmental quality and regional quality 
for Northeast and Midwest States.
    The first panel was composed of Miami Valley leaders who 
discussed the effects of the housing crisis in the region. We 
have in attendance today Jim McCarthy, who is in the back of 
the room, from the Miami Valley Fair Housing Center, who has 
previously testified before this committee on the issues of the 
effects in Miami Valley. The second panel was composed of 
Federal policy experts who discussed the Federal response to 
this crisis. Both panels highlighted recent successes and 
identified some of the serious challenges we face as we 
continue to determine the appropriate role of Federal 
Government addressing the housing issues in our region.
    The panelists also provided considerations that address the 
current legal and regulatory framework governing the housing 
and mortgage-lending markets; the prevalence of fraudulent 
mortgage-lending practices; the effectiveness of certain 
housing tax credits, grants and programs; as well as providing 
a complete reevaluation of Federal housing policies and their 
impact on communities across the Nation.
    Today I present the report that summarizes a number of the 
policy considerations based on the individual testimonies of 
discussions held at the housing forum that may assist us in 
helping families stay in their homes and stabilize our 
neighborhoods. The report, entitled, ``The Impact of the 
Housing Crisis on Local Communities and Federal Response,'' 
discusses preventing predatory lending by increasing financial 
product transparency and preventing the issuance of 
inappropriate loan products, streamlining the mortgage-
servicing industry, standardizing housing counseling and loan-
modification regulations, improving the neighborhood 
stabilization program, and building local organizational 
capacity in distressed communities, and rethinking the impact 
of low-income housing tax credits on older cities.
    The report also provides Congress, government officials and 
housing industry with a thorough understanding of the 
implications of Federal housing policy's effects on cities like 
Dayton.
    With that, I would like to offer the report, without 
objection, for the record.
    Mr. Kucinich. Without objection, so ordered.
    Mr. Turner. Mr. Chairman I thank you your support for that, 
and I also thank you for your advocacy on behalf of Ohio within 
this programs that's the subject matter of this hearing. Thank 
you.
    [The information referred to follows:]

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    Mr. Kucinich. I thank the gentleman, and I thank you for 
the opportunity to work with you on this, and also my other 
colleagues on this committee.
    We are now going to hear testimony from the witnesses. The 
subcommittee is going to receive testimony from a witness on 
the first panel. Ms. Phyllis Caldwell is the Chief of the 
Office of Homeownership Preservation at the U.S. Department of 
Treasury. Ms. Caldwell oversees management of the Obama 
administration's Making Home Affordable program. Previously Ms. 
Caldwell was president of the Washington Area Women's 
Foundation, a public foundation solely focused on improving the 
lives of women and girls by fostering philanthropic giving in 
the Washington metropolitan area.
    Ms. Caldwell, I want to thank you for being before this 
subcommittee. It is the policy of the Committee on Oversight 
and Government Reform to swear in all witnesses before they 
testify, and I would ask that you please rise and raise your 
hand.
    [Witness sworn.]
    Mr. Kucinich. Let the record reflect that the witness 
answered in the affirmative.
    Ms. Caldwell, I ask that you give a brief summary of your 
testimony. Please try to keep that summary under 5 minutes in 
duration. Your complete written statement will be included in 
the hearing record, and I ask that you proceed.

STATEMENT OF PHYLLIS CALDWELL, CHIEF HOMEOWNERSHIP PRESERVATION 
              OFFICER, U.S. DEPARTMENT OF TREASURY

    Ms. Caldwell. Well, Chairman Kucinich, Ranking Member 
Jordan, thank you for the opportunity to testify today about 
the Treasury Department's comprehensive initiatives to 
stabilize the U.S. housing market.
    It has been 1 year since the launch of Making Home 
Affordable of which the Home Affordable Modification Program 
[HAMP], is a key component. Today HAMP is making significant 
progress with over 1 million trial modifications started, yet 
we recognize the challenges remaining. We continue to monitor 
and update program guidelines, to improve implementation and 
help more homeowners.
    At the end of January, nearly 1 million homeowners were in 
active trial or permanent modifications. More than 116,000 
homeowners now have permanent modifications, nearly doubling 
the number from December. An additional 76,000 permanent 
modifications have been offered and are waiting only for the 
borrowers' signature.
    Homeowners in modifications are achieving significant 
savings on their mortgage payments, over $500 per month on 
average. And HAMP has proven that it is helping homeowners who 
have faced real financial hardship. Nearly 60 percent of 
borrowers in permanent modifications have faced a reduction in 
income, including loss of wages or hours, or unemployment of a 
spouse.
    But it's important to remember that HAMP is just one part 
of the administration's broader effort to stabilize the housing 
market. Together the Treasury and the Federal Reserve have 
purchased over $1 trillion in agency mortgage-backed 
securities, helping to keep interest rates at historic lows. 
Millions of Americans have been able to refinance their 
mortgages into lower-rate 30-year, fixed-rate mortgages, saving 
an average of $1,500 per year on a refinance. And thanks to the 
recently extended first-time homebuyer tax credit, more 
Americans are now able to reenter the housing market and stem 
the slide in home values.
    Through HUD's Neighborhood Stabilization Program, hundreds 
of communities across the country are taking important steps to 
restore and maintain properties in neighborhoods that have been 
hardest hit by concentrated foreclosures and home price 
declines.
    Finally, the administration last Friday announced that it 
will allocate $1.5 billion to work with State housing finance 
agencies to help address the foreclosure problems in the five 
States that have been the hardest hit by the aftermath of the 
burst of the housing bubble as measured by housing prices. 
Eligible housing finance agencies means the funding on a number 
of homeowner support programs, including programs for 
unemployed borrowers, for reducing the burden of negative 
equity or for addressing challenges that arise from second 
liens. And while there is still significant risks, we are 
seeing some signs of emerging stability. Housing inventories 
continue to fall. House prices measured on a year-over-year 
basis are declining less rapidly, with some house price 
measures posting increases in recent months. Data released by 
the Mortgage Bankers Association on February 19th showed that 
the 30-day delinquency rates on one to four-unit residential 
mortgages fell in the first quarter along with the number of 
new foreclosures started.
    Going forward, we recognize that there are still a number 
of challenges ahead. The permanent modification conversion 
campaign in December and January yielded valuable insights for 
program improvements. We have made a number of program changes 
to improve implementation. For example, at the end of January, 
Treasury released guidance which requires greater income 
documentation prior to beginning a trial modification. A simple 
and standard package of documents will be required prior to the 
servicer's evaluation of the borrower for a trial modification. 
We took these steps to speed up the process of conversions from 
trial to permanent modifications in the future. This new 
upfront documentation will be required for all new HAMP 
modifications that become effective after June 1st, although 
mortgage servicers may implement it sooner.
    And we continue to make more changes to improve 
implementation. One important improvement we are working on now 
is protections for homeowners to ensure that the modification 
process treats borrowers fairly. Treasury anticipates releasing 
guidance soon which will include a set of improved protections 
for homeowners in the HAMP mortgage modification program. 
Notably the package will standardize outreach for homeowners 
who fall behind in their mortgages, and make an offer to 
include them in HAMP if they qualify.
    Additionally, we recognize that the foreclosure process is 
often confusing to homeowners already in distress, and we have 
been regularly reviewing guidelines around the process as part 
of our ongoing commitment to ensuring transparency and 
maximizing program effectiveness.
    HAMP has made great progress in its first year. We look 
forward to working with you to enhance the program's 
performance and to help keep American families in their homes. 
Thank you.
    Mr. Kucinich. Thank you very much, Ms. Caldwell, for your 
testimony.
    [The prepared statement of Ms. Caldwell follows:]

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    Mr. Kucinich. Last week the administration announced a $1.5 
billion program to help five States deal with the foreclosure 
crisis. But in designing that program, you excluded a number of 
hard-hit, long-suffering States such as Ohio, Pennsylvania, 
Texas, to name just a few.
    I have here a letter from a dozen members of the Ohio 
delegation. It's a letter that is circulated by myself and 
Congressman LaTourette, signed by Democrats and Republicans 
alike, demanding to know how you could possibly justify the 
exclusion of Ohio from any foreclosure initiative. And I ask 
for your answer now before this subcommittee.
    [The information referred to follows:]

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    Ms. Caldwell. Well, first let me say having testified in 
your district in Cleveland a few months ago, we really 
understand that there are residents suffering in the State of 
Ohio and in Cleveland in particular. And I think it's important 
to also set the context that HAMP and the programs announced 
last week are just one part of a broader administration's--the 
broader administration's efforts to stabilize housing. And Ohio 
was the recipient of over $145 million in neighborhood 
stabilization grants, including $40 million in Cuyahoga County, 
to deal with the very real foreclosure processes that were in 
place before HAMP was even started.
    But I think stepping back to the announcement last week, as 
Representative Cummings said, negative equity is a severe 
problem, and we had to start somewhere. And so we looked at 
those markets that had price declines of over 20 percent based 
on the peak to trough, and those markets are the markets that 
are going to be the target of this particular program.
    Mr. Kucinich. I noted that in looking at the States that 
you chose, all but one of the States in that new initiative are 
so-called Sun States. I know they've been hit hard, but they 
don't have a monopoly on the pain caused by the foreclosure 
crisis and predatory lending.
    What assurance can you give this committee that future 
administration initiatives will not similarly focus primarily 
on the Sun States to the exclusion of the hard-hit Midwestern 
States like Ohio?
    Ms. Caldwell. Mr. Chairman, I think it's very important to 
understand that we have a broad array of initiatives, and while 
this particular one was focused on those States that had very 
high rapid price declines on purchased homes, every day we are 
studying the problems facing homeownership in American families 
and continue to iterate our programs to address those needs.
    Mr. Kucinich. When you make a major public unveiling of 
this kind of initiative in Ohio where we, particularly in the 
Cleveland area, are acutely aware of the kind of help that 
other areas are getting, and we're standing there with massive 
amounts of--massive areas that have been foreclosed, some of 
which, unfortunately, have been abandoned, your explanation, 
well, that's your explanation, is not really acceptable, 
because when you have these initiatives, you're still setting 
priorities.
    That's the message you're sending out. And you're going to 
have to do better. You're going to have to be able to come back 
to those of us who are in the Midwest and come up with some 
specific programs, not--you know, we appreciate the 
neighborhood stabilization, that's fine, I just won $145 
million. You're talking about a $1.5 billion program you 
announced. We know the difference. And Ohio, you know--and our 
area is the epicenter of the subprime meltdown. That's not the 
only problem.
    I'm going to--I have one more question here. Banks and 
investors are holding millions of mortgages that are not worth 
anything near their paper value. The value of the houses that 
secure this debt has fallen to just a fraction. These bankers 
and investors have no hope to ever recoup their investment. But 
even after they get a taxpayers' bailout, these bankers and 
investors refuse to write down the losses. So far the 
government hasn't seemed willing to ask the bankers and 
investors to pay their fair share. HAMP hasn't resulted in many 
principal reductions.
    Now, the American people are wondering, is it the political 
influence of the very banks and investors that taxpayers bailed 
out that is causing you to avoid taking the necessary step of 
promoting principal reduction in the Federal response to the 
foreclosure crisis, and when is the administration going to 
roll out a real program for getting principal reduction?
    Ms. Caldwell.
    Ms. Caldwell. Mr. Chairman, we continue to speak about 
principal reduction and the challenge facing real American 
families who wake up every day and realize that the value of 
the largest asset that they have is below what they owe on the 
house. So we have continued to study how we can make negative 
equity and principal reduction work better for HAMP.
    Currently the program allows lenders to take principal 
reduction at any point in time in the modification. But one of 
the things that we've learned is most of the people who are 
underwater on their mortgage default after they've had an 
employment shock or income shock. And so this program was 
designed to target that affordability payment and keep them in 
their homes, recognizing that we continue to put pressure on 
the financial institutions to sign up for our second lien 
program so that we can have more principal write-down on the 
second liens and continue to have more on the first.
    Mr. Kucinich. I'm going to ask the committee to just 
indulge me in a quick followup.
    So what's stopping Treasury from writing down the principal 
of those loans and thereby giving the borrower a more 
affordable mortgage?
    Ms. Caldwell. I think as we step back and look at HAMP, I 
think it's important to remember that when this program was 
started, we were looking at a crisis of epic proportion and a 
mortgage industry and a program that was largely voluntary 
where there were mortgages, there were servicers, there were 
investors, and there were banks. And while many people look at 
the place where they write their checks, and they see the name 
of the bank, and they think that's where their mortgage is, 
when their mortgage, in fact, has been sold to an investor. And 
one of the things that this program has done over the last year 
is brought together banks, borrowers, servicers and investors 
to reshape a mortgage modification industry that last year was 
just about collecting payments. This is about keeping people in 
their homes with affordable payments. And I think the next 
stage is to look at how we can enhance the program to continue 
to address the challenges that go forward.
    Mr. Kucinich. Thank you, Ms. Caldwell.
    The Chair recognizes Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    And, Ms. Caldwell, thank you again for being with us a 
second time.
    In your testimony you say in 1 year HAMP has made 
significant progress. The numbers we have as of the end of last 
month, January 31, 2010, HAMP had achieved just over 116,000 
permanent mortgage modifications, again, the stated goal being 
3 to 4 million. So I guess my question is is that really 
significant progress?
    Ms. Caldwell. Member Jordan, I think it's important as we 
step back and look at the program goals, the program was set 
out to provide an opportunity for 3 to 4 million homeowners to 
have a chance at a mortgage modification from program 
inception, which was a year ago, through the end of 2012. In 
its first year we have 1 million homeowners in trial 
modifications, and in those trial modifications, they are 
realizing close to 40 percent reduction in their monthly 
payment.
    Mr. Jordan. Let me ask you this: Do you expect by 2012 to 
have 3 to 4 million homeowners in a permanent status? A trial 
is one thing. I mean, that's your term, ``trial modification,'' 
so trial is not there, it's trial. So do you expect it to get 
to the goal, stated goal, right from the outset, 3 to 4 
million--do you expect to get to that number in 2 years based 
on the fact only 116,000 are there today after 1 year?
    Ms. Caldwell. Well, again, just to reclarify the goal, I 
think--first let me just say we have never seen a mortgage 
crisis of this proportion, so it's too soon 1 year in the 
program to talk about what will happen 2 years out. But the 
program is designed to offer 3 to 4 million homeowners an 
opportunity for a mortgage modification, not a permanent 
modification, an opportunity. And 1 year in we have 1 million 
homeowners saving $500 a month in modification.
    Mr. Jordan. I'm sure you're working hard, and I just 
question this whole idea that the big Federal Government can do 
these kind of things. They come out with a promise, we're going 
to do--I mean, we're going to do a stimulus plan, it's going to 
keep unemployment at 8 percent; we're going to do a home 
modification program, we're going to help 3 or 4 million 
people, and we've done 116,000 in 1 year; but we're going to 
get to 4 million, we promise, promise, promise by 2012. I mean, 
do you, yes or no, do you think by 2012, 2 years from today, 
you will have 3 to 4 million people in a permanent modification 
plan?
    Ms. Caldwell. I'll just say, again, we're 1 year into a 
mortgage modification program that is at a scale that has never 
been done in history, and it's really too soon to predict what 
will happen in 2012.
    Mr. Jordan. OK. Let me move to a second one. Let's go to 
the transparency issue, if I could, Mr. Chairman, and if I run 
out of time, I will wait until the second round. Let's go to--
can we put up slide 1, I think?
    This is the number of requests. And I guess my question is 
going to go to--they're going to be hard to see. Let me just 
cut right to the chase. Why did you decide to quit--if I 
understand, in July of last year, August, September, October, 
November, every month on your Web site you were putting up the 
number of requests for financial information. And here the last 
2 months you've decided not to display that number. Is there a 
reason why you decided not to put that number up? And if you 
had continued the practice you started with, what would the 
number be today?
    Ms. Caldwell. Well, first of all, let me just emphasize 
that since its inception the HAMP program has been focused on 
affordability, stability and transparency. And so we are very 
committed to transparency of the program.
    Mr. Jordan. But you admit you're no longer putting that 
piece of information up.
    Ms. Caldwell. Correct. The number you're referencing there 
was removed because it was confusing to the public. Just to 
clarify, the number is the number of requests for information 
that lenders send or servicers send to their entire portfolio 
of 60-day delinquent borrowers. It's not a measure that has 
anything to do with applications to HAMP or the Making Home 
Affordable program. That's just a measure of solicitations or 
inquiries on any modification. And many people were confusing 
it with HAMP, and so we removed it because it was causing 
confusion in the report.
    Mr. Jordan. Well, I mean, you've heard from taxpayers, 
you've hear from American citizens that was confusing, or you 
just decided that it was confusing?
    Ms. Caldwell. We heard from a number of people on 
conference calls, on Hill visits and press visits. But if it's 
an important number to the public, we'll put it back in.
    To your question on what would it be today, it's about 3.5 
million.
    Mr. Jordan. So it's up. So you'll make a commitment to put 
that number back up there.
    Ms. Caldwell. We will, but with more clarity that it 
relates to overall solicitations, not just HAMP.
    Mr. Jordan. I think that's a good thing. Transparency is 
transparency. The American people are smart people. They put 
Kucinich and Jordan in Congress. No, I'm kidding. They can 
figure it out, so I think that's something that should be up 
there.
    Thank you, Mr. Chairman. I yield back.
    Mr. Kucinich. I thank the gentleman.
    The Chair recognizes the gentleman from Maryland. Mr. 
Cummings, you may proceed.
    Mr. Cummings. Thank you very much, Ms. Caldwell.
    What does the average trial modification--what's the 
savings for the borrower in a trial modification, and is that 
different than the savings in the permanent?
    Ms. Caldwell. In terms of the data collection, we don't 
have exact data on the savings in a trial modification, but if 
there's been no change in the borrower's income, it should be 
the same. And so our population has a median savings of just 
over $500 per month.
    Mr. Cummings. So in other words, when they negotiate the 
trial, if they don't--if their income doesn't change when they 
move to that date that would make them permanent, then you 
would assume it's pretty much the same, right?
    Ms. Caldwell. Right. Because it's based on affordability, 
on 31 percent debt to income.
    Mr. Cummings. It was reported in the press on Monday that 
Treasury plans to implement changes to HAMP, including a 
prohibition against lenders filing foreclosures while a 
borrower is in the modification process. Are you familiar with 
that, right?
    Ms. Caldwell. I am familiar, yes.
    Mr. Cummings. And I'm very pleased about that because I 
cannot tell you how many people in my event on Saturday and the 
two previous events that we had said that their lender went 
ahead with filing foreclosure while they were in the process.
    If you could please run down other changes in HAMP that are 
being considered? Are there other things that are being 
considered?
    Ms. Caldwell. Well, let me just first back up to the 
changes that you reference that were mentioned in the paper 
earlier this week. Those have not been confirmed or approved; 
those are changes under discussion. And as a program that has 
multiple stakeholders, those were changes that are being 
recommended, considered and were being vetted with 
stakeholders, and that were leaked to the press in advance of 
approval. And I think everyone in this room has experienced an 
advance leak. So that certainly is along the lines of what is 
being considered, but it is not yet finalized. In terms of----
    Mr. Cummings. Let me just ask you real quick. And what 
would be the process for finalizing those things that have been 
leaked to the press?
    Ms. Caldwell. Full approval within Treasury.
    Mr. Cummings. And----
    Ms. Caldwell. But let me go on to say just in terms of 
future iterations to the program, every single day my office is 
looking at the homeowner experience in this program and what we 
can do to make it better. And so we have continually made 
adaptations, and we will continue to iterate until we are doing 
the service that we need to have to American homeowners.
    Mr. Cummings. Is there a--tell me about the sense of 
urgency with regard to the one change that we just talked about 
with regard to not putting people out while they are trying to 
modify.
    Ms. Caldwell. Well, let me just be clear at the front. The 
HAMP current guidelines prohibit a home from going to 
foreclosure sale while the homeowner is in HAMP trial 
modification. And so these changes are not--these changes are 
designed to enhance the communications so that homeowners have 
a clear understanding of their rights, and that they know that 
their home cannot go to sale while they are in a HAMP 
modification. That has been the case since the program was 
started.
    Mr. Cummings. And how important is it that you have 
cooperation of the lender or servicer in the HAMP program?
    Ms. Caldwell. It's very important. HAMP is a voluntary 
program, but I think it's important once a servicer signs up 
for HAMP, they are under contract with U.S. Treasury, and they 
must perform. When the program was launched a year ago, folks 
said, you'll never get servicers to sign up to modify 
mortgages. Within the first year we went from zero servicers to 
100 servicers, covering 90 percent of U.S. mortgages. And so 
while it is a voluntary program, once someone is in, they are 
under contract, and they must comply with the regulations.
    Mr. Cummings. And that leads me to the question, in my 
district, you heard what I said a little earlier. I mean, we 
work very hard to put lenders together with borrowers, and the 
No. 1 complaint is that the borrower can't get ahold of anybody 
in the lender's office. I don't care who it is. We dealt with 
25, we had them all in one place this weekend, past weekend, 
weekend before last.
    And so I'm trying to figure out where the problem is here. 
There's a disconnect. Are you following me? And I'm sure this 
is happening all over the country. And that's the No. 1 
complaint. And I can get 1,000 people out on a Saturday morning 
in the snow, I'm serious, but they can't get a lender--and the 
reason why they come to me--and they shouldn't have to have a 
Congressman to facilitate them. You know, so I'm just trying to 
figure out. I mean, you just said that you all were trying to 
make sure that you try to address all the issues because I know 
you want to be as effective and efficient as you can be, and 
I'm just wondering if there is anything that we're missing 
here.
    Ms. Caldwell. Well, let me first say that homeowner events 
like the one you held last weekend are very important. I was 
actually supposed to speak at the one when it was originally 
scheduled for the first part of February when we had the big 
snow, and so those are very important.
    I happened to be at a similar event that our office was 
hosting in Houston, Texas, and that opportunity for face-to-
face connection with the servicer is important. But I think it 
is important to remember a year ago servicers were just in the 
business of collecting checks, making phone calls and 
foreclosing. And as part of this crisis, they have had to 
fundamentally reshape their operations to handle homeowners in 
crisis, to follow the rules of a government program, to shift 
modifications from those that used to increase a homeowner's 
payment to those that are long-term and sustainable. And so as 
they have ramped up, there have been some implementation 
challenges. Some signed up before they were ready; some are 
doing better than others. And part of our commitment to 
transparency is publishing a monthly servicer performance 
report so that we can judge who is getting the job done and who 
is not.
    Mr. Kucinich. Thank you.
    The gentleman's time is expired.
    The Chair recognizes Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman, for holding these 
hearings.
    Welcome, Ms. Caldwell.
    Could you please for the record state at which institution 
you first began as a mortgage loan officer?
    Ms. Caldwell. I have never been a mortgage loan officer.
    Ms. Kaptur. Thank you.
    Have you ever in your prior positions handled the assets 
and liabilities of a financial institution and how they 
actually account for the value of real estate?
    Ms. Caldwell. Yes, ma'am I, have.
    Ms. Kaptur. OK. And for which institution was that?
    Ms. Caldwell. With Bank of America.
    Ms. Kaptur. Bank of America.
    Have you ever been a part of the resolution of an 
institution or any instrumentality of Bank of America as they 
tried to work out on the books of that institution troubled 
real estate loans?
    Ms. Caldwell. Yes.
    Ms. Kaptur. And have you marked, been a part of an effort 
to mark, the value of those assets to market for those 
institutions on their own books?
    Ms. Caldwell. Certain asset classes are required to mark to 
market, and some aren't, so it really depends on the accounting 
rules with the various assets that I've been a part of.
    Ms. Kaptur. I am trying to understand. Now, you're over at 
the Treasury Building, right?
    Ms. Caldwell. Correct.
    Ms. Kaptur. I have found this whole approach to dealing 
with the housing market foreign to anything I have ever known. 
And in a way I think you have a job that's doomed to failure. 
And I don't understand why the last administration and this 
administration are using these means to deal with the real 
estate implosion in this country.
    So some of my questions--and I asked Secretary Geithner 
yesterday to come and see the people over in the administration 
who are involved in these programs, because I can't figure out 
if Treasury has been selected to try to dig out of this 
avalanche of troubled loans because the system can't find the 
loans on the books of the institutions that originated them and 
then sold them upstream, or if they're doing it for some other 
reason that I don't really understand.
    But what's been happening in communities like my own, 
foreclosures are going up and not down. Home values are going 
down, not up. Credit is frozen across this country because the 
banking system doesn't have confidence that the regulators or 
those in charge of regulating the financial institutions of 
this country have any consistency in what they are doing.
    And so this recent decision by TARP, TARP, the group that 
decided that Merrill Lynch would be merged but Lehman would go 
down, now the same instrumentality has decided that five States 
are going to get TARP money to deal with home foreclosures, but 
45 other States aren't. And I can tell you I represent a 
district where the unemployment rates in the four counties I 
represent are higher than the unemployment rates of the States 
of Nevada and California and Florida and the other States that 
were selected. So it's really I'm thinking, hmmmm. So Treasury 
now picked five, but it didn't pick troubled areas of the other 
four.
    It makes no sense to me. And I'm wondering why the FDIC and 
the SEC aren't being used to deal with home value in a normal 
manner so that the books are resolved at the institutions that 
have held these loans, but rather all this is being thrust at 
you, at Treasury, which is not a housing agency. It never has 
been. It's a bonding agency. It sells bonds, it collects taxes. 
That's what it does. The real housing knowledge is inside of 
HUD, it's inside of FDIC, because those lines are on the books 
of the institutions that made the loans, and it's over at the 
SEC.
    So we're not resolving the--in fact, what we're doing, 
what's happening is the approach is procyclical. What's being 
done to date is driving us into further recession, less lending 
and more delinquencies. And I can tell you--I mean, I'm not the 
only one up here--in the HAMP program it's not working. As hard 
as you try, they've given you an impossible job. And to resolve 
what's wrong with the housing market, I asked Secretary 
Geithner for a meeting, and I guess he's agreed to do it. He's 
not a houser, hasn't been involved in real estate.
    This is really complicated. We need to use the proper 
regulatory instruments, and we're not using them. And it's 
beyond me why, unless you can't find the loans, unless they're 
missing somewhere, and I don't believe that. I think that we 
can resolve them on the books.
    So I guess rather than giving you all the troubled real 
estate loans in the country, what I think should be happening 
is every single institution that made those loans, we should be 
resolving and taking those losses, writing down the principal 
on those assets and liabilities on the books of those banks. 
That's what bank examiners do. That's what the FDIC does. So my 
fundamental question is why aren't we doing that?
    Mr. Kucinich. The witness will have time to give a brief 
response.
    Ms. Caldwell. Let me just say for the HAMP program, which 
is what my team does every single day, when you look at the 
mortgage structure that we have today, over 90 percent of the 
mortgages in the United States are serviced by HAMP-eligible 
servicers. And that happened from within its first year of 
operations. We have 1 million homeowners that are saving 40 
percent a month on their mortgage payment. And this is only one 
piece of the administration's overall housing solution when you 
think about interest rates, you think about refinance, you 
think about the purchase of mortgage-backed securities, and you 
think about HUD neighborhood stabilization funds. There are a 
number of agencies working together to address what is the 
largest housing crisis of our time.
    Mr. Kucinich. We're going to go to Mr. Tierney of 
Massachusetts, then we're going to have one more round, Ms. 
Caldwell, because myself, Mr. Jordan and perhaps other Members 
have some additional questions.
    What about Ohio? Tell me what are you going to do, what are 
you going to do for Cleveland? You've got to do more. What are 
you going to do?
    Ms. Caldwell. Well, I think it's important to keep in mind 
that right now there are over 22,000 homeowners in trial 
modifications in the State of Ohio, and our job No. 1 is to get 
those homeowners into permanent modifications, and so we are 
focused on that every day.
    Mr. Kucinich. Don't you have about 19.4 percent of people 
in Ohio that are already underwater?
    Ms. Caldwell. I don't know the underwater statistics for 
Ohio, but we continue to look at everything we can do in Ohio 
and across the United States to keep homes--to keep those 
people in their homes.
    Mr. Kucinich. OK. That's not good enough. You're going to 
have to do more. We'll be in conversation about these things, 
but I'm not satisfied. Listen to what Mr. Rokakis has to say on 
the next panel, because he has some of the granular details 
about what's going on in Cleveland, Cuyahoga County.
    I'm sure you're doing your best, but this is a wake-up 
call, and consider it a friendly wake-up call. I'm concerned 
that you haven't done enough to pressure the loan servicers and 
investors, and all the effort put into this program will not 
make a meaningful difference for the large number of homeowners 
in America who need help. That is the underwater borrowers, the 
borrowers who do not get modifications because of conflict of 
interest by the lenders owning both the first and second 
mortgages. Four biggest banks control two-thirds of all loan 
servicing. What's Treasury doing to address this problem?
    Ms. Caldwell. We're doing a number of things. I think 
that--and transparency is key here. Beginning in November with 
our--actually our data published in December. We published by 
servicer, by servicer performance reports, and that is a big 
motivating tool in getting those modifications made and 
converted.
    In addition we've hired Making Home Affordable Compliance. 
It is a separate unit of Freddie Mac that goes in and inspects 
all the major servicers to make sure that they are 
appropriately soliciting homeowners that are eligible for HAMP 
modifications, and that they are doing it in the appropriate 
way.
    And third, we run a call center in partnership with HOPE 
NOW and NeighborWorks to make sure that we are providing 
homeowners across America an opportunity to get help on their 
loan and get referred to a counselor where needed.
    Mr. Kucinich. I've looked at your testimony, all of it, and 
it touts the accomplishments of the HAMP program, but it's hard 
not to conclude that the administration has created a system 
that's all carrot and no stick. All along we've heard reports 
of the poor treatment of borrowers by loan servicers. 
Counselors in foreclosure prevention programs across the 
country relayed their stories through the media. And we heard 
that one of the most common reasons loan servicers deny 
borrowers modifications is the alleged reason that the 
borrowers' hardship isn't permanent.
    What can you tell borrowers who are getting this kind of 
treatment from loan servicers?
    Ms. Caldwell. You know, our office and the call centers 
speak with borrowers every day on the phone. We have been out 
to 40 cities across the United States, or made a commitment to 
go to 40 cities--we've been to 22--to meet with homeowners in 
person. We regularly go out into the district offices because 
we want to hear about the experience that people are having. 
This program was designed with the borrower at the forefront, 
and every day this office takes seriously the experience of 
homeowners across America.
    Mr. Kucinich. How do people get ahold of you and--and 
indicate their experience? Do you have a Web site?
    Ms. Caldwell. We have a Web site, and we----
    Mr. Kucinich. What is that address?
    Ms. Caldwell. It is MakingHomeAffordable.gov, and we have a 
phone number which I'll have to provide to you, but I know the 
last four digits are H-E-L-P.
    Mr. Kucinich. We don't want that to be wrong. Well, we will 
make sure that we work with you in circulating that 
information.
    Now, one big complaint among borrower advocates is that 
loan servicers can proceed with a foreclosure while the 
borrower is still being evaluated for and is in a trial period 
for a loan modification. What are you doing to change that?
    Ms. Caldwell. Well, again, as I said earlier, I think it is 
important to understand that HAMP guidelines have always said 
that a home may not be sold, go to foreclosure sale while a 
borrower is in HAMP. Foreclosure laws do differ across States, 
and so there are some States where there may be borrowers or 
homeowners in a foreclosure process, albeit not a sale, while 
undergoing HAMP. And so one of the things that we are very 
committed to doing is making sure that homeowners understand 
that process, that servicers understand their responsibility in 
the process, and that there are no situations where a homeowner 
goes through an avoidable foreclosure.
    Mr. Kucinich. My time--thank you. My time has expired, but 
I am going to ask you to be open to submissions by members of 
this subcommittee of followup questions that we may have. I 
have a followup question about underperforming services, but I 
will put it in writing.
    We're going to move along with this and get to the second 
panel after other Members have had a chance to ask a second 
round of questions.
    The Chair recognizes Mr. Jordan. You may proceed for 5 
minutes. Thank you.
    Mr. Jordan. Thank you, Mr. Chairman.
    Ms. Caldwell, let me get back to the transparency concern 
of--for the $75 billion--potentially $75 billion program. The 
Special Inspector General for TARP has made a recommendation 
that Treasury should require the servicer to compare the 
income--I mean, it is straight out of the book--compare the 
income reported on the mortgage modification application with 
the income reported on the original loan. They list in their 
latest report that this recommendation has not been 
implemented. Why hasn't it? I mean, that seems to me, looking 
at potential fraud, just a good government type of thing that 
could happen. Why haven't you done that? Why haven't you 
required that?
    Ms. Caldwell. The HAMP program is a modification program, 
not an origination program, and so this program is designed to 
prevent avoidable foreclosure. So the focus is on what is the 
homeowner's current hardship and the documentation of the 
income that they have today----
    Mr. Jordan. But don't----
    Ms. Caldwell [continuing]. And keeping affordable payments.
    Mr. Jordan. Ms. Caldwell, don't you think in light of all 
that took place a few years ago when we talked about some of 
these loans that were made, and there was maybe no 
documentation, not--there was potential fraud, don't you think 
it makes sense--you as a professional who serves in this 
industry, don't you think it makes sense to look at that? And 
the guy who is supposed to inspect, the inspector general of 
the program, is supposed to watch out for the billions of 
taxpayer dollars potentially at risk. I mean, why wouldn't you 
do it? The inspector general is telling you to do it. It makes 
sense. It was part of what started us in this mess to begin 
with a few years back. It seems to me that would be something, 
oh, yeah, no-brainer, let's do it.
    Ms. Caldwell. Our focus right now in the HAMP program is 
getting the documentation in from the borrowers currently in 
trial modifications on their income and the hardships that they 
are facing today so that they----
    Mr. Jordan. Do you----
    Ms. Caldwell [continuing]. Converted to permanent 
modifications, not on whatever documentation----
    Mr. Jordan. Do you intend to at any point over the next 2 
years, as you are trying to get to this goal of 3 million, 4 
million, and you have only done 116,000, do you intend at any 
point over the next 2 years to do what the inspector general 
has asked you to do?
    Ms. Caldwell. We're always looking at ways to iterate and 
improve the program to provide a better experience for the 
borrower and for the taxpayer. Right now we're focused on the 
conversion from trial modifications to permanent modifications, 
but will continue to look at the program.
    Mr. Jordan. Is that a no? You're not going to do what the 
inspector general suggests you do?
    Ms. Caldwell. It is a--I can't say today 1 year into the 
program what we're going to do between now and 2012, but I can 
commit that we will continue to review it.
    Mr. Jordan. What's the qualification rate? One million 
people have--have applied and are in trial modification. What--
116--do you know the percentage of folks--- do you anticipate 
those who are still in trial modification, what percentage of 
those will make it into permanent modification of their loan? 
Are the vast majority going to continue to be rejected? Is that 
your--that's the history. You anticipate that being the case as 
we move forward?
    Ms. Caldwell. In terms of a conversion ratio, it is too 
early to predict what the long-term conversion ratio can be. 
The one prediction that I would be prepared to say is that when 
documentation is required up front, the conversion ratio will 
be higher, because the documentation collection has been a 
challenge.
    I do think it is important to just again emphasize that the 
program is designed to provide 3 to 4 million in opportunity 
for modification, not a commitment to modify 3 or 4 million 
mortgages.
    Mr. Jordan. OK. Well, let me ask, it looks like a high 
number are going to be in trial and not make it to the 
permanent. With that fact in mind, if homeowners who get trial 
modifications but don't qualify for permanent ones end up 
defaulting on their mortgages, wouldn't it have been better for 
them to pursue some other type of approach, some other type of 
remedy for the difficult economic situation they are in?
    Ms. Caldwell. I think it's important to remember that HAMP 
is a pay-for-success program, so incentives do not get paid to 
the servicer until the loan becomes permanent. And then there 
are incentive payments as the loan stays current over a 5-year 
period. So to the extent that a loan does redefault, taxpayer 
money is not paid to support that loan.
    In terms of keeping homeowners in their home and avoiding 
foreclosure for a longer period of time, I think that is a good 
outcome.
    Mr. Jordan. Let me ask one final question, if I could, Mr. 
Chairman.
    This is from a week or two ago, a Wall Street Journal piece 
on a program, the date February 9th. Former head of Freddie Mac 
David Moffett said--he and others warned administration 
officials that the loan modification goals were unrealistic, 
that borrowers whose homes weren't worth what they owed were 
unlikely to take part, and that many participants would be 
likely to redefault within months. They didn't want our views, 
Mr. Moffett says.
    It looks like he was somewhat, you know, visionary or 
prophetic on his statement there.
    Is that statement accurate in your mind, Ms. Caldwell? And 
were, in fact, you--those of you at Treasury, I don't know if 
you were there quite yet, but do you know if folks at Treasury 
were warned about, you know, got this warning that Mr. Moffett 
states in the article?
    Ms. Caldwell. You're--you're correct, I joined Treasury in 
November 2009, so I can't speak to what people were thinking at 
Treasury, but what I can say is that in the program today we 
have over two-thirds of the homeowners current on their 
mortgage, and that is--we've never had anything at this scale, 
so we don't have historical data to fall back on, but what we 
do know in loss mitigation prior to this crisis, close to 45 to 
50 percent redefaulted. So we are outperforming in terms of 
prior history.
    Mr. Jordan. Mr. Chairman, if I could, you know, if you have 
another hearing, I don't know if you're going to, but if you 
do, we may want to get Mr. Moffett.
    Mr. Kucinich. I have the feeling we're about to become good 
friends here.
    Mr. Jordan. Mr. Moffett may be someone we want in front of 
the committee. Thank you.
    Mr. Kucinich. Thank you very much.
    The Chair recognizes Mr. Cummings.
    Mr. Cummings. I thought Mr. Tierney was----
    Mr. Kucinich. Mr. Tierney waived that in the last round, 
but I would be happy to begin with Mr. Tierney.
    Mr. Cummings. No, I'll yield to Mr. Tierney.
    Mr. Kucinich. OK. Mr. Tierney.
    Mr. Tierney. Thank you. Thank you.
    I apologize for missing your remarks and the early part of 
the questioning, so some might be repetitive, I'm sure it 
probably is, but as long as we're here, can you tell me why the 
administration hasn't considered any sort of principal 
reduction program or whether it might do that in the future, 
and what it would look like if it did?
    Ms. Caldwell. Right now HAMP currently allows for principal 
write-down at any point in time in the mortgage modification. I 
will also say that----
    Mr. Tierney. It allows for it, but it doesn't naturally 
move in that direction.
    Ms. Caldwell. It doesn't require it. And the administration 
has been studying ways to look at principal write-down as part 
of the mortgage modification, but one of the things that we 
have learned is that the bulk of the people who are underwater 
in their mortgage are currently paying, and so we're always 
examining that in the lens of cost to the taxpayer, moral 
hazard and keeping the program running. And so with that in 
mind, this program was designed for affordability to make sure 
that people could stay in their homes with a payment they could 
afford.
    Mr. Tierney. Now, when you're looking at this new plan to 
divert about $1\1/2\ billion in TARP funds to just five States, 
will there be a change in attitude with respect to that since 
there is TARP money in a lot of those banks that may be 
involved, actually took taxpayer money, will be requiring a 
little bit more from them in terms of principal forgiveness?
    Ms. Caldwell. Right now we're looking at this program 
announced last week. We're trying to get it up and launched and 
learn from what the local housing finance agencies are doing. 
And like with everything else we have done with this kind of 
crisis, that is something we've never seen before in our 
history. We want to take the lessons that we learn from this 
and all of our other housing initiatives and try to make our 
program better.
    Mr. Tierney. So that's a no, right?
    Ms. Caldwell. It's a--it's a too early to tell. We're all 
learning through this together as we go along.
    Mr. Tierney. Well, you have not done it in the past. There 
was nothing to learn from the past about doing it because you 
haven't done it, so I am asking you whether or not you are 
going to take some consideration and maybe emphasis on trying 
something new, particularly where some of the banks involved 
have already taken the taxpayers' money, and now say, in some 
instances where appropriate we are going to make a conscious 
effort to aggressively go and get principal reduction, see if 
we can get these people to stay in their homes and have these 
banks do something responsible? Is that not something you're 
going to go aggressively after?
    Ms. Caldwell. Our office has been aggressively considering 
proposals from--on all areas that we can do to address the 
foreclosure crisis in this country and prevent affordable 
foreclosures. But as I said earlier, we have to do that with 
the lens of affordability, stability and transparency, and we 
have to think about it with the taxpayer dollars.
    Mr. Tierney. All right. It seems to the me you have an 
aversion to that, but we'll see how it develops.
    Yield back to Mr. Cummings.
    Mr. Kucinich. Mr. Cummings.
    Mr. Cummings. Just one quick question. He just yielded back 
to me, Mr. Chairman.
    One of the disturbing things that you said that upsets me 
tremendously, and I just checked with my office to make sure, 
there are people--I don't care whether it is in law or not, 
there are people who are being foreclosed upon, whether it is 
in the law or not. And we can give you name, dates, and serial 
numbers. And some kind of way we have to get to that. I mean, 
apparently there is no enforcement mechanism, that's No. 1.
    No. 2--in the HAMP program, by the way. No. 2, I was--you 
seem to make a big deal out of this thing of listing the 
servicers and how many--what they did. I'm trying to figure out 
how do you see that as an incentive? The--is there any data 
that shows that they get--I mean, they get overjoyed or 
something when they see their name listed, and there are a lot 
of--you know, they have a lot of--they have done a lot of these 
modifications, because it doesn't seem to be working.
    Ms. Caldwell. You know, public pressure and transparency is 
one tool, but I think it is also important to remember that 
HAMP is a pay-for-success program. So modifications don't 
convert, servicers don't get paid. And so you get paid for 
success.
    In addition, if there are modifications that have not been 
done appropriately, then under the contract Treasury can go 
back and take back that incentive.
    Mr. Cummings. So if we have situations where people are 
doing that, the thing about with the foreclosures while they 
are working out the HAMP program, we should get that 
information to you?
    Ms. Caldwell. Absolutely. If there are cases where you have 
servicers in your market that have violated the guidelines 
under HAMP, we want to know about that.
    Mr. Cummings. And what will you do?
    Ms. Caldwell. We then turn that to our compliance agent. We 
have a compliance committee. They review it, they determine the 
facts, and then there is a recommendation made about remedies.
    Mr. Cummings. Thank you, Mr. Chairman.
    I yield back.
    Mr. Kucinich. I thank the gentleman.
    The Chair recognizes the ranking member of the full 
committee Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Ranking Member Jordan had asked you about transparency 
pursuant to the special IG for the TARP, and I don't think he 
got a satisfactory answer.
    Do you believe that the American people deserve 100 percent 
transparency on your actions and your progress?
    Ms. Caldwell. I do. As we said, this program has been 
designed to look at affordability, stability and transparency.
    Mr. Issa. OK. Well, going to the transparency, since you've 
only done 116,000 permanent loan modifications, or 3 percent of 
your goal, and we are well into your time horizon, how can we 
see in a transparent way your progress so that we can determine 
whether or not you have any hope of, in a qualified way, in an 
effective way, achieving anywhere close to your original goal? 
Or if you're not to take back a substantial portion of the 75 
billion--because ultimately if you're not going to get close to 
3 to 4 million in permanent loan modifications, shouldn't we 
encourage the President to reallocate that money?
    Mr. Caldwell. Let me answer, I think, your first question 
was about the 3 to 4 million, and it's important to again 
stress as I did for Member Jordan that it was not designed to 
provide a commitment of modifications to 3 to 4 million people, 
but rather 3 to 4 million homeowners an opportunity for a 
permanent modification. So if you come in the first year----
    Mr. Issa. Well, let's go back through. How much of the 75 
billion have you used with 116,000 permanent loan 
modifications?
    Ms. Caldwell. I don't have the exact answer to that, but it 
is important to remember that----
    Mr. Issa. OK. If we're going--ma'am, if we're going to have 
transparency, then where can I go and find out how much you 
spent in somewhere close to real time? This committee wants 
transparency; we demand it. We're demanding it of the banks. We 
are demanding it of all kinds of institutions we didn't before. 
If you don't have--if you come before the Congress in a 
scheduled hearing, and you don't have the answer to a question 
of how much you've spent, then I would like for the record a 
place where my staff can go on a daily basis from here forward, 
click on a public site, or, if there is a reason for it not to 
be public, then a less than public site, and get that answer. 
Can you make that commitment to me today that you will bring us 
back that answer?
    Ms. Caldwell. I can bring you back an answer on the amount 
spent, yes. But I will again say because the--because the 
program only pays for permanent modifications, it has not spent 
much.
    Mr. Issa. OK. Do you, by the way, receive a tally on a 
daily basis or as requested immediately of how much has been 
spent? Is that a question you ask and get answered 
periodically?
    Ms. Caldwell. It's a question asked periodically, but not 
daily.
    Mr. Issa. When you ask it, how long before you get an 
answer usually?
    Ms. Caldwell. It is hard to say.
    Mr. Issa. Well, just give me a--one example, that would be 
fine. A day, a week, a month, an hour?
    Ms. Caldwell. Within the time requested, but it is 
published.
    Mr. Issa. You're telling me that this is published, and my 
staff could go during this meeting and get that information?
    Ms. Caldwell. From the TARP funds, yes. There is financial 
statements for the TARP.
    Mr. Issa. The special IG basically said, no, there isn't. 
That's one of the problems is the accountability and 
transparency in his report, which is rather lengthy, it comes 
up with a not so good. You know, this is not a B-plus exercise, 
this is a D-minus exercise in many of the things that he said.
    Well, let me move on to just maybe one or two other 
questions.
    You're now well enough into it with 116,000 modifications. 
Let me go to a question that was asked before maybe to set a 
stage. How many banks did we give money to in the TARP? Not in 
your program, in the TARP overall. Did we give money to 
anybody, or did we loan money to them?
    Ms. Caldwell. In the TARP?
    Mr. Issa. Yes. We loaned money to the banks, right? And 
they paid back with interest, and most have exited, the largest 
banks have exited.
    Ms. Caldwell. Most, yes.
    Mr. Issa. When you're going to the banks and asking them to 
do loan modifications to basically forgive, in some cases, 
substantial portions of principal, you haven't given them any 
money; the only money is the money that you, in fact, are 
standing there out of your 75 billion? Isn't that correct that 
their inducement is whatever you bring in with your $75 billion 
in funds; is that right.
    Ms. Caldwell. And enforcement under a contract that they 
have signed.
    Mr. Issa. If they choose to participate with you.
    Ms. Caldwell. Of which over 100 servicers have covering 90 
percent of the mortgages. And the TARP banks servicers have all 
signed up.
    Mr. Issa. But those are those who chose. I just wanted to 
make clear that the gentleman on the other side was implying we 
gave money and therefore had an obligation. But the only people 
who have an obligation are those who signed up for this program 
and you are giving them money from the 75 billion; is that 
right?
    Ms. Caldwell. For their performance under the contract, 
correct.
    Mr. Issa. Very good.
    Thank you, Mr. Chairman.
    Mr. Kucinich. The gentleman's time has expired.
    The gentleman recognizes Ms. Kaptur.
    Ms. Kaptur. Thank you.
    Mr. Chairman, I want--I would appreciate it if Ms. Caldwell 
would answer do you possess a degree in finance, or banking, or 
accounting?
    Ms. Caldwell. Finance.
    Ms. Kaptur. Accounting science?
    Ms. Caldwell. No.
    Ms. Kaptur. Your degree is in science.
    Ms. Caldwell. The degree is in finance.
    Ms. Kaptur. Finance. Thank you very much.
    According to the information that I have, in Ohio in the 
past year, 2,529 homeowners got what are called permanent 
modifications. That doesn't mean that anything actually 
happened, it just means they went through some process that got 
them to some point. Of the programs that you have 
responsibility for the HAMP program, what percent of those 
individuals that have come to the Government of the United 
States through your programs have actually been resolved? All 
those servicers you said that signed up for your program, what 
percent? Is it 5 percent, 3 percent? What's the number for the 
country?
    Ms. Caldwell. I'm sorry, can you ask the percentage of 
what--I didn't understand your question.
    Ms. Kaptur. Of the home loans that have actually been 
refinanced and resolved where the people were able to stay in 
their homes either through principal reduction, reworking of 
the mortgage loan, whatever, what percent in your program?
    Ms. Caldwell. In our program we at this point in time, 
because we have homeowners in a temporary review, at the end of 
December we put homeowners in a trial modification to do one 
more review so that we could make sure that those--that they 
understand what documents needed to be in and that they had a 
chance to become current. So therefore, we have not had very 
many people declined in order to--so that's not a number we can 
give you. Everyone that's still in a trial, unless their 
property is ineligible for HAMP or they have withdrawn from 
HAMP, they have not been able to be declined.
    Ms. Kaptur. Well, according to the numbers I have, Ohio had 
about 90,000 homeowners who were foreclosed on in the last 
year, and of that number we have 2,529, a very small 
percentage, who got permanent modification to their mortgage. 
But when you really probe beneath that surface, that permanent 
modification doesn't necessarily mean that they remained in 
their home, because something can change, because it's in the 
program, and something else can happen to it. So my point is 
it's a very, very small number of people who have gotten any 
home security out of this program after 1 year in Ohio. Maybe 
it is different in other States, I don't really know, but 
certainly in Ohio we don't see any kind of real bounce from 
this program.
    If it is all right, I would like to state some of the 
difficulties that we are having in Ohio. The servicers really 
aren't serious. Participation is voluntary; they can fiddle 
around with a loan for months. There is no strong arm of FDIC 
in there or the SEC working with the institutions, which goes 
back to my original question. It is very curious to me that 
these mortgage loans are being worked out at Treasury. That's 
never been a housing--Treasury certainly doesn't do servicing. 
I mean, it's just an odd place in the Government of the United 
States to conduct these activities.
    But let me just state for the record a couple of real 
problems here. The 31 percent threshold that is used in the 
program that you manage is unrealistic in regions that have 
traditional affordable housing stock like Ohio. We didn't have 
the big bump-up like Arizona. I'm sort of offended, California, 
you know, Arizona, all of places that have hyperinflation, they 
get attention. And yet, you know, the heartland gets run over 
with a Mack truck because the people in our area were paying 
less than 31 percent of their income for their mortgage. And 
the modification process actually increases their payment and 
exceeds the 31 percent threshold, so, again, it is just 
another--it becomes a procyclical means of denying people the 
ability to work out their mortgage.
    As you know, there is huge lack of coordination between the 
legal, the loss mitigation, the collection, and the 
homeownership offices of lenders or servicers, total confusion, 
loss of documents. And I will tell you one of the worst 
companies is Bank of America. We get so many complaints about 
Bank of America, your former firm, and documents are constantly 
being lost. And I just wonder what you think----
    Mr. Issa. I would ask unanimous consent that the gentlelady 
have an additional minute.
    Mr. Kucinich. The gentlelady's time is expired. There's a 
unanimous consent to give her another minute. You can ask--if 
you could ask a question, we'll ask Ms. Caldwell to respond.
    Ms. Kaptur. I thank the chairman, and I thank the ranking 
member.
    I want to know what you can do to get the servicers to 
really do their job.
    Ms. Caldwell. Now, I think it's--again, as I stated 
earlier, this program went from startup to 1 million homeowners 
in trial in a year and zero to 100 servicers in the first year. 
And we have acknowledged there have been implementation 
challenges as this industry fundamentally restructured. And so 
we continue every day to learn from what's happened in the 
prior month to make improvements.
    Now when you talk about permanent modifications, we started 
the month of December with 31,000 modifications. Back when I 
testified for the chairman and the ranking member a few months 
ago, we had 31,000 modifications. Through daily efforts with 
the servicers, setting goals, improving processes, we now have 
116,000 modifications, that's in 2 months, with another 76,000 
out the door awaiting signatures.
    Ms. Kaptur. Can you define what ``modification'' really 
means?
    Ms. Caldwell. The permanent modifications where a homeowner 
has been through trial and converted to permanent modification. 
So that's been a doubling of pace in the last 60 days, and 
that's a result of just growing into the system and learning 
from the startup process.
    Ms. Kaptur. If there is a third round, Mr. Chairman, I will 
continue my questioning.
    Mr. Kucinich. The gentlelady's time has expired. This is 
the end of the second round of questions.
    We've got three panels, and we're going to need to move on. 
To my colleague Congresswoman Kaptur, Ms. Caldwell has 
consented to answering any questions that can be put in 
writing.
    Ms. Kaptur. OK.
    Mr. Kucinich. And we'll make those, if we get a timely 
response, part of this.
    As has been pointed out by my colleague, SIGTARP has said 
that the American people deserve better. Ms. Caldwell, I hope 
that you will agree. Thank you very much for being here,
    Mr. Kucinich. We're going to ask our second panel to come 
up. I want to thank all my colleagues, Mr. Tierney, Mr. 
Cummings, Ms. Kaptur, Mr. Jordan, Mr. Turner, Mr. Issa, for 
being here.
    The second panel, will you step forward, and we will move 
to swear in the witnesses. While you're coming forward, I will 
do some introductions.
    Second panel consists of Mr. Bill Sheil. Mr. Sheil is a 
journalist and investigative reporter for WJW FOX channel 8 in 
Cleveland, OH, where he's won numerous regional Emmys, as well 
as the Edward R. Murrow award for his reporting.
    Mr. Jim Rokakis has served as the Cuyahoga County treasurer 
since 1997. Under his leadership the office took an early role 
in combating the foreclosure crisis, particularly with regard 
to abandoned properties and the creation of a county land bank. 
He helped create and oversee the county's Don't Borrow Trouble 
mortgage foreclosure prevention program.
    Finally, Ms. Patricia Stringfield is a resident of 
Washington, DC, and has lived here all her life. She has been a 
homeowner since 1988 and has sought a modification of her home 
mortgage under the HAMP program.
    So I'm going to ask the witnesses to stand.
    It is the policy of the our committee to swear in all 
witnesses, and I would ask if you would rise and raise your 
right hands.
    [Witnesses sworn.]
    Mr. Kucinich. Let the record reflect that each of the 
witnesses have answered in the affirmative.
    Now I am going to ask that each of witnesses give a brief 
summary of their testimony. Please keep in mind that your 
testimony should be no more than 5 minutes in duration. Your 
complete written statements will be included in the hearing 
record.
    Mr. Sheil's our first witness, and his testimony is in the 
form of an excerpt from an investigative report he produced for 
FOX Cleveland's I-team. If we can play the video, and if you 
have any comment over the video, that would be fine, Mr. Sheil.
    Can we--staff, do you want to--you're working on it?
    [Video played.]

  STATEMENTS OF BILL SHEIL, INVESTIGATIVE REPORTER, WJW-TV8, 
CLEVELAND, OH; JIM ROKAKIS, TREASURER, CUYAHOGA COUNTY, OH; AND 
        PATRICIA STRINGFIELD, HOMEOWNER, WASHINGTON, DC

                    STATEMENT OF BILL SHEIL

    Mr. Sheil. So what we did here is these are some pictures 
in New Orleans, and these are some pictures in Cleveland 
interspersed, and we're asking you, can you tell the 
difference? That's part of Hurricane Katrina. Some of this 
video is Cleveland. They are interspersing with New Orleans. 
The point of the story was to be that you can't really tell 
which is which. That is Cleveland right there, those four homes 
in a row that are vacant.
    Tony Brancatelli is a councilman.
    That's Slavic Village and what it looked like about 30 
years ago, a middle-class neighborhood just south of the city. 
This is a sense of what Slavic Village looks like today. These 
are pipes inside a house that's more than a century old that 
had gas lamps in it, plumbing in the back.
    Obviously, another shot of Katrina as we go back to New 
Orleans.
    The Councilman Brancatelli showing us that it was the 
perfect storm in Cleveland that led to this housing crisis in 
many ways. These homes have outlasted their usefulness. The 
plumbing is in the back because they predate indoor plumbing, 
and the plumbing was attached later. They are often flipped and 
sold and paint slapped on them, and then they are resold. And 
we have the problem again and again and again, which is what 
I'm saying, hopefully better than you're hearing it from me 
now, right there. And the question is are there ways that we 
can, you know, improve the region, and are there ways that we 
can make things better?
    This is a pair of teachers. They are talking about the 
problems in their neighborhood, and how they want things to get 
better, and how they want to be part of the solution, and how 
they want to purchase this old, abandoned home. And they had 
some problems making the purchase; some problems, quite 
frankly, dealing with the governmental agency that I think have 
been resolved now.
    But this is on the west side of Cleveland; this is a 
totally separate area from Slavic Village. We are focusing only 
on one house here because it is next door to the new home that 
they invested in, and they are trying to make the city work 
just in their neighborhood, but it is very hard to do with that 
eyesore next to them; that they want to be part of the solution 
for bringing it down and putting a park, quite frankly, on that 
corner, which is not far from Lake Erie. It's a beautiful piece 
of property. And they are explaining that they are just 
frustrated by what's happened in the neighborhood that they've 
invested in, and that they want the neighborhood to get better, 
and they want the Government, however it should, to help them. 
That's their house on the right. That's the property that's on 
the corner. Behind them is a view of the lake.
    Councilman Brancatelli in Slavic Village indicating that, 
you know, the local officials need help making this happen; 
talking about all the different for sale areas around Slavic 
Village.
    We had a lot of copper stolen from all of these homes when 
copper prices were high. This is what some people think the 
solution is actually, which is to knock down these homes that 
no longer have value, give them to the neighboring homeowners, 
plant trees, do something other than having boarded-up drug 
houses in the areas.
    This is--that is--if you look up top there, that's where 
kerosene came in, predating electricity. This is where all the 
copper was stolen when copper prices were high from these 
abandoned homes, and the people sold them for money.
    The tragedy in these neighborhoods in part is a lot of 
older people still live in the area who can't leave. We're 
talking here, I think, about the infrastructure that still 
exists in these neighborhoods, banks, gas stations. The 
neighborhoods have not yet died. There still is the 
infrastructure that creates neighborhood there if something can 
be done about what you're seeing behind me here.
    And I want to say these are not isolated neighborhoods. You 
could go to 12 neighborhoods in Cleveland and get this.
    This is explaining a process where--how money flowed into a 
government account and how that was part of the problem. Again, 
I think that's been addressed. And I think that's the portion 
we're showing.
    Mr. Kucinich. I want to thank you, Mr. Sheil, for being 
here and for the investigative report. We're going to go to 
questions to you when we finish with the other witnesses, but 
thank you for that presentation.
    The Chair recognizes Mr. Rokakis. You may proceed for 5 
minutes.

                    STATEMENT OF JIM ROKAKIS

    Mr. Rokakis. Thank you, Mr. Chairman.
    I'm going to ask the gentleman from IT to have the slides 
ready, I hope they are up.
    I'm the treasurer of Cuyahoga County. While the collapse of 
the real estate market has shifted the focus away from Cuyahoga 
County, OH, it's important to note, as you pointed out, Mr. 
Chairman, that no other community has suffered the cumulative 
impact worse that Cuyahoga County, OH
    Cuyahoga County was first nationally from 2000 to 2006 when 
the real estate bubble burst at the end of 2006. When this 
dubious distinction, worst in the country, moved to other 
communities and places like California, Nevada, Arizona and 
Florida, this crisis did not go away in communities like 
Cleveland or in States like Ohio.
    In 2006, the last year Cuyahoga County led the country in 
foreclosures, we had 13,600 foreclosures. We had over 13--
14,000 in 2007, when we were no longer first; almost 14,000 in 
2008; 14,000 in 2009; and we're expecting a similar number in 
2010.
    A quick review of the county foreclosure maps. I don't know 
if you have them there. We have a glitch with ITMs. Every time 
I attempt to do this, Mr. Chairman, I botch it. But a quick 
review of these maps would show you that the foreclosures, 
while they have decreased just a bit in Cleveland, the core 
city, in part because there is nothing left, they have really 
picked up in the inner-ring and outer-ring suburbs. If you move 
the progression through to 2009, you'll see those shifting dark 
shades result--are density in foreclosures. They have moved 
from the core city, 2007, 2008, 2009 the last year, and as you 
see, this cancer has spread out.
    Even more troubling is evidence that tens of thousands of 
loans that could be foreclosed are backed up and are at least 
90 days late as evidenced by this next progression of slides. 
You will see, and these slides clearly demonstrate, that 
delinquent loans are backed up in the foreclosure queue. Look 
at the 90-day slide to the right. Just keep progressing 
forward. What you will see, that there are tens of thousands of 
loans in Ohio that are now 90 days late. They backed up in this 
foreclosure dam, and when they burst, and they will burst, it 
will add to the misery and despair we feel in our communities.
    This crisis has resulted in at least 35,000 vacant 
properties, 18,000--18,000 to 20,000 properties awaiting 
demolition in Cuyahoga County, and a population loss in 
Cuyahoga County that is second only to Orleans Parish in 
Louisiana, and we know why they are first. Cleveland, which had 
473,000 residents in the 2000 census, it has been estimated may 
drop to as few as 325,000 residents in the 2010 census, a 30 
percent loss of population in just 10 years.
    Property values have plummeted throughout the county. Half 
of all sales in Cleveland last year, Mr. Chairman and members 
of the committee, were sheriff sales. The consequences on 
governmental budgets, especially public schools which rely 
heavily on property taxes, will be felt for the next 
generation. In one recent study, if you could put that up, it's 
a study of negative equity, Ohio shows up as negative ninth in 
the country, but Congressman Kaptur made a very good point. We 
never experienced the run-up of real estate prices that many of 
the other States ahead of us on that list experienced, so our 
losses are more significant as they took away real value, not 
one driven by real estate speculation.
    We are talking here today about the disappointment with the 
HAMP program. Those reasons have been well reported. But HAMP 
has been especially ineffective in Ohio, as you see on that 
chart, members of the committee, as only three States have 
experienced a lower percentage of loan modifications than Ohio.
    For all these reasons we were stunned to see the roll-out 
of the plan last week by the Obama administration to use $1.5 
billion in TARP funds to assist California, Nevada, Florida, 
Arizona and Michigan. How can a State at the epicenter of this 
crisis for so long be ignored once again? How is that possible?
    The only effective remedy, in our experience, that works in 
this fight is foreclosure counseling. And to Congressman 
Cummings' port--point, I am not talking about the 1-800 call-in 
numbers to call-in centers. I'm talking about the intense, 
face-to-face, personal counseling where trained foreclosure 
counselors work with homeowners in distress and stay with them 
as they do loan modifications.
    A program we established in Cuyahoga County, our Don't 
Borrow Trouble campaign, is one of the most effective in the 
country. It takes people who call 2-1-1 and refers them to four 
trained counseling agencies where people sit down face to face 
again, not over a long-distance phone number. Homeowners are 
then assigned to foreclosure counselors who meet with them, 
gather financial information, assess the situation, and proceed 
to work on their loan modifications with the servicer.
    Our success rate in 2008 was 56 percent of those who came 
in and sat down with our counselors has the loans modified. 
Now, some of these mortgages are beyond repair, but our success 
rate when a homeowner calls us, again, as I said, we think is 
the best in the country.
    Which brings me for my major reason for being here today, 
which is to plead with you, Mr. Chairman and members of this 
committee, to restore funding to the National Foreclosure 
Mitigation Counseling Program [NFMC], which is an arm of 
NeighborWorks.
    Reduction at the Federal level to this program resulted in 
direct funding cuts to counseling agencies in Cuyahoga County 
and Ohio, organizations like ESOP, a nationally regarded 
community group that is, I think, the most effective housing 
counseling agency in Ohio. Last year ESOP received $1.7 million 
in funding through NFMC. Because of reductions in funding, 
their allocation this year is only $568,000. They are laying 
off counselors, housing counselors, beginning Monday. Other 
organizations throughout the State are doing the same. Last 
year ESOP counseled 8,000 family statewide; this year as a 
result of the cuts, they expect to only be able to counsel 
3,000 families.
    The chart I'd like to show you there, the last chart, 
graphically demonstrates Federal policy is moving in the wrong 
direction. Delinquencies are moving up, but foreclosure 
counseling dollars are moving down. This is incomprehensible, 
nonsensical and wrong. Time is running out. If only two-tenths 
of 1 percent of the amount allocated each of those States, 
assume an even split, $300 million, if two-tenths of 1 percent 
of the moneys allocated to those five states last Friday were 
allocated to these programs, we could keep these housing 
counselors on and continue what I think is the good fight and 
the only effective program that has worked thus far.
    Thank you, Congressman Kucinich and members of the 
committee, for listening to me today.
    [The prepared statement of Mr. Rokakis follows:]

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    Mr. Kucinich. Mr. Rokakis, your testimony is very 
important, and I have just had staff take a copy of it over to 
Ms. Caldwell, who, unlike most people who testify in front of 
our committees, actually stays to hear what other people have 
to say.
    I always appreciate that about you, Ms. Caldwell. But I--
make sure that Mr. Rokakis's testimony--if you look at the maps 
and see the progression, I think it would be helpful. And you 
understand why those of us in Cleveland, Cuyahoga County, and 
in the State are so concerned when we get a signal from the 
administration that perhaps it is not looking closely enough at 
what's happening in our communities.
    I also want you to know, Mr. Rokakis, that this afternoon 
we'll have a copy of your testimony sent over to the Treasury 
Secretary as well. We believe this is a very important message.
    Mr. Kucinich. Another important message about to be 
delivered to us from someone who lives in the neighborhoods of 
Washington, DC.
    Ms. Stringfield, would you proceed with your testimony and 
share with this subcommittee what your experience has been. I 
thank you.

               STATEMENT OF PATRICIA STRINGFIELD

    Ms. Stringfield. Good afternoon. My name is Patricia 
Stringfield. I am a resident of the District of Columbia, and I 
have come here today to tell you a story of my situation. I am 
a single mother who has worked my entire life to make sure that 
my son and I are taken care of and that he had a stable home 
environment. In 1988, I purchased my home from my mother. I did 
so because I had grown up in the neighborhood, and I knew it 
would provide me with a peace of mind. I purchased the home for 
$66,000. Over the years I refinanced a few times to cover 
expenses, take advantage of lower interest rates, and to do 
some repairs and cover college expenses for my son.
    When things seemed like they were under control, my mother 
developed a medical condition forcing her to no longer be able 
to work, and I had to take over paying her bills. My mother has 
now been diagnosed with dementia, and I am now her primary 
caretaker. She receives Social Security payments to cover her 
insurance and her medicine, but little is left to cover food 
and basic expenses. When I contacted my lender, they told me 
that they would happily refinance my loan again to help me 
cover the increased balance on my credit cards and to pay off 
my son's school expenses.
    They suggested that I go to another lender to get a second 
mortgage, as my home had plenty of equity, and it could help me 
pay the bills. I followed their advice and took out a second 
mortgage. This finally solidified my situation for a few years 
until the price of gas and utilities rose sharply. I depend on 
my car to get to work. Making ends meet became so difficult 
that I had to dip into my savings accounts until it was 
depleted. And at this point I turned to taking out loans on my 
401(k) until I no longer could be allowed to do so.
    Despite the financial stress, I was able to keep making 
mortgage payments for several months; however, I finally missed 
my first payment in September 2008. And as I ran out of ways to 
get extra income, I attempted to work with my lender several 
times, but was not given any option for resolutions. I had to 
turn to my neighbors to help pay for food for me and my mother. 
I missed a few payments, received warnings of foreclosure from 
my lender.
    When I finally was able to get in contact with National 
Community Reinvestment Coalition, NCRC, NCRC was able to 
arrange a workout only to find out that the lender on my first 
mortgage was unable to find an acceptable workout solution. 
This caused my lender on the second loan not to offer anything 
because the first was not modified.
    As the days passed and the foreclosure sale date 
approached, I decided to move out of my home because my 
mother's doctors didn't think she could handle being thrown out 
on the street. I began to move out on February 22, 2009, into a 
rental apartment with my mother. We awaited until NCRC got a 
resolution. The lender canceled the foreclosure sale, and I was 
put into a 3-month HAMP trial period.
    Because of the modification on the first loan, my second 
loan holder was able to reduce my monthly payments by $100. But 
this news--excuse me, with this news we returned to our home in 
April. The landlord, however, asked me for 6 months of rent, 
claiming I had broken the lease. NCRC then stepped in again and 
is engaged in negotiation with the landlord.
    When I received the first trial modification, I made two 
payments on it, but then sent--but then was sent another 
agreement to begin in June 2009 with a different payment 
amount. I made my payments for 5 months only to be told that it 
was denied because of missing information. This was not the 
case, as we had submitted all documents to them.
    NCRC tried several times to get them to reduce the amount I 
owed, but was not successful even though my house is worth less 
now than the amount currently owed. After they declined me 
again, my counselor at NCRC went back to the lender, asked them 
to review the file once more for the program.
    After several weeks of being told that I was in foreclosure 
again, I began to panic. I thought that we had already fixed 
everything back in April 2009, but we were still in a back and 
forth. I do not understand how this works and became frustrated 
to the point of crying almost every night.
    I have listened to everyone that has helped me, and through 
the hard work of so many people over at NCRC, I hope that this 
is the last modification that I received this week will be the 
final one and will be approved. I have had four HAMP trial 
modification loans.
    I hope that you can take my situation to heart and 
understand that these issues face real people, and the 
decisions that you make affect us all. I don't understand how I 
can be told 1 month that we are OK and everything is on track 
to be modified, begin the trial period, and have it turned down 
because it seems to be technicalities. It seems to me that if I 
owe more than what my house is worth, they could just reduce 
what I owe to the value of my home.
    Thank you again for your time. I hope you can provide some 
help to other homeowners like myself who are struggling to get 
by every day, but want to pay their bills and take pride in 
owning their homes. Thank you again.
    [The prepared statement of Ms. Stringfield follows:]

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    Mr. Kucinich. Ms. Stringfield, thank you very much for 
testifying in front of this subcommittee. And in a moment I'm 
going to ask some questions of you to try to bring out more 
about the plight that you and your family have experienced, 
which is really something that many Americans are experiencing.
    It's my time for questions. I have 5 minutes, I want to 
start with Mr. Sheil. You showed pictures of a neighborhood in 
Cleveland, but you get around the city a lot because that's 
your job. Would you say that the effects of the foreclosure 
crisis in Cleveland's residential neighborhoods is--just based 
on what you've seen, is it pretty evident as you get around?
    Mr. Sheil. You can't miss it. Cleveland, as you know----
    Mr. Kucinich. Make sure that mic is on. Would you try 
again?
    Mr. Sheil. Can you hear me now?
    Mr. Kucinich. Yeah.
    Mr. Sheil. You can't miss it. You could go into every 
neighborhood, you know. When we show pictures like this, one of 
things that we're concerned about is do people think we just 
went and took the one bad street in the neighborhood and took 
it? I could have pointed my camera in probably almost every 
neighborhood in Cleveland and found similar scenes. And as 
Treasurer Rokakis indicated, he has the statistics, ours is 
just visceral. When you go out to suburbs now, you can start to 
see this as well. It is just--it's rotting.
    And I think, Mr. Chairman, what is significant when we talk 
to local people there, they want to save these neighborhoods. 
They still have the infrastructure of neighborhoods in place, 
but in 5 years I don't think that infrastructure will be there.
    Mr. Kucinich. Well, thank you, Mr. Sheil, again for your 
testimony to this subcommittee.
    Mr. Rokakis, you made a case about instability in 
neighborhoods in Cuyahoga County. Can you talk about how 
principal reduction would make a meaningful difference? And 
what have loan servicers said about it?
    Mr. Rokakis. Chairman, I've been involved in this crisis 
now actually for about 9 years. We went to the Federal Reserve 
Bank of Cleveland back in the fall of 2000 with complaints 
about what was going on with loans and lending in northeast 
Ohio in the hopes that the Fed would step up under HOEPA and 
take some measures to slow the runaway train down. So I've been 
involved going back to late 2000, very intensely involved in 
the past, let's say, 5 years with banks and counselors and 
workouts, and I have to tell you I am exhausted.
    And I find that the tools that we really need--as long as 
these are all voluntary agreements, we are right where we were 
when we started this process years ago. As long as all we have 
is maybe a carrot but no stick, as long as all we--all we can 
do is rely on the goodwill of the banks, voluntary--the words 
``voluntary'' and the phrase ``bank loan modifications,'' bank 
loan modifications typically don't go together. And what we 
have found, I'm not surprised by the low percentage of 
workouts. We've experienced this for years, it is hand-to-hand 
combat.
    I think the one tool that we would like to have is the tool 
that you and other Members alluded to, Congressman Tierney. If 
we had the ability to force principal reductions of loans, I 
think we could--pick a number--triple, quadruple our success of 
loan modifications.
    Mr. Chairman, what I find stunning is that when they 
agree--when they refuse to modify those principal loan 
balances, typically the loan and the foreclosing, the family 
ends up leaving, the property ends up being vandalized, the 
home value is completely lost, as opposed to partially some of 
the value lost, and it destroys remaining value left in 
neighborhoods. If we had the ability to force principal loan 
modification write-downs, I think we could make a real impact 
on this problem, but we're losing hope, Mr. Chairman.
    Mr. Kucinich. Thank you very much for your testimony, Mr. 
Rokakis.
    I would like to go to Ms. Stringfield. I want to know a 
little bit more about your experience with the lending 
industry. You said that you've been able to refinance your home 
over the years, and since you bought your home in 1988, for 
about 20 years you managed just fine with your payments. Now--
can you tell us, were you marketed by your lenders?
    Ms. Stringfield. Yes, they contacted me.
    Mr. Kucinich. Did they try to get you to refinance?
    Ms. Stringfield. Yes. How are you doing? How is things 
going? Are you having any problems? Yeah, things are a little 
rough right now.
    Mr. Kucinich. What did they tell--what did they tell you 
about the--what kind of money you could get, what kind of loans 
you could get?
    Ms. Stringfield. They said that I could refinance my first 
mortgage.
    Mr. Kucinich. For how much?
    Ms. Stringfield. Depends on what I needed, like----
    Mr. Kucinich. Did they tell you your home was worth 
$420,000?
    Ms. Stringfield. Yeah, yeah. I mean, when I talked to them, 
I told them that I took the loan out for $66-, and when I 
refinanced with them, it was----
    Mr. Kucinich. You told them what?
    Ms. Stringfield. $66,000.
    Mr. Kucinich. And they wanted to refinance $420,000?
    Ms. Stringfield. Because that's what the guy came back that 
did the appraisal.
    Mr. Kucinich. So what happened?
    Ms. Stringfield. They came back--well, the first time they 
came back with the $420-, I said, I don't need that much. They 
says, well, you can get another $50,000 on your home, and that 
would pay your son's college, it would help you with your 
bills. OK. And it is not going to make your payment that much 
more.
    Mr. Kucinich. So they kept trying to get you to borrow more 
and more money on a house that wasn't worth----
    Ms. Stringfield. Yeah. When it turned out--when I came back 
to them and said, listen, I need to restructure my loan because 
my mom is really ill, I don't have any money, I need to get 
this restructured, I don't want to default. All I want you to 
do is restructure it and let me lower the interest and get it 
where I can handle it. And they says, well, we'll have to send 
somebody out and do the appraisal. This appraisal came out, and 
he valued the house at 325-.
    Mr. Kucinich. Wow. Now, when you told--you know, you're 
getting--this value of the house keep getting bigger as they 
want to loan you more money.
    Ms. Stringfield. Yeah.
    Mr. Kucinich. The question is, did you ever have a 
discussion with them about what happens if you get in trouble 
paying the loan back?
    Mr. Stringfield. Oh, yeah. I asked, I says, well, you know, 
right now I don't have this money. What if I don't get--oh, Ms. 
Stringfield, you'll be all right. You know, you can always work 
it out. We can help you.
    Mr. Kucinich. They'll work with you, right?
    Ms. Stringfield. There is not going to be any problem, 
we'll work with you.
    Mr. Kucinich. Did they work with you?
    Ms. Stringfield. No.
    Mr. Kucinich. What happened when you fell behind.
    Ms. Stringfield. When I got in trouble, you--the first 
thing I did was from the literature is call your mortgage 
company, let them know before you get in trouble. I called 
before I got in trouble. I was told, we can't do anything until 
you are 1 month late. Well, ma'am, I'm trying not to be 1 month 
late. The day of that call was May 3, 2008. And at that time 
they told me I would have to write a letter. May 15th that 
letter was in their office because I faxed it in along with a 
financial report of my earnings and what I had going on.
    They then had HOPE NOW contact me. The HOPE NOW 
representative said, Ms. Stringfield, you're overextended. You 
need to let your house go. I said, sir, I've been in this house 
since 1962. Why would I want to let go of my home? Well, you 
can't afford it. What you need to do is let go of the home and 
contact D.C. or Maryland and try to get into one of the welfare 
homes.
    Mr. Kucinich. Now, you did eventually get in touch, though, 
with the National Community Reinvestment Coalition?
    Ms. Stringfield. Right. A friend of mine told me about 
them.
    Mr. Kucinich. Did they help you?
    Ms. Stringfield. They have helped me.
    Mr. Kucinich. I want to thank you for your--your answer to 
the question, Ms. Stringfield.
    We're going to go now to Mr. Jordan of Ohio for any 
questions he may have.
    Mr. Jordan. Thank you, Mr. Chairman.
    To our witnesses, thank you for being here. And you all 
were here, I believe, when Ms. Caldwell gave her testimony. Do 
you think the HAMP program has demonstrated significant 
progress over its 1 year?
    Mr. Rokakis. I can't speak to the results in Arizona, 
California, Nevada. I saw the chart just like--I can only speak 
to the results in Ohio, and I can speak to the results in the 
community I represent. And the chart speaks for itself. We're 
third from the bottom.
    I spoke with a group of housing counselors who were on a 
conference call last week. I believe Mr. McCarthy was in on the 
call. And I thought it interesting that one of the comments 
made by folks on the phone is that they felt that servicers 
were more willing to work out a $500,000 mortgage in California 
than they were to work out seven $70,000 mortgages in Toledo or 
Cleveland or Dayton. And they felt that they had prioritized 
which mortgages were really worth their time and energy. They 
might bristle at that suggestion, but I heard it from too many 
people on that phone call and others.
    So I think that chart--you have to look at that chart that 
we posted up on those slides. We are third from the bottom.
    Mr. Jordan. Significant progress or not?
    Mr. Sheil. Pardon me?
    Mr. Jordan. Significant progress or not?
    Mr. Sheil. In my role I don't like--I'm not going to 
comment per se on government--I'm not going to comment on 
whether a government program is making progress or not. I will 
say this: Really just going around Cleveland and Dayton and 
Akron, you can see--you don't really--the charts prove it, but 
if you just tour the neighborhoods, I don't know whether it is 
this program or not, but there is an evident decline. I've been 
covering Cleveland for 20 years. The neighborhoods do not look 
like what they looked like two decades ago.
    Mr. Jordan. Mr. Rokakis, you talked a lot about the 
counseling program. This is a local counseling program, is my 
understanding, local people.
    Mr. Rokakis. There are four counseling agencies we work 
with. I mentioned ESOP because, at the request of the attorney 
general and the Governor, ESOP expanded statewide. They have 11 
offices around the State. They're very effective in doing what 
they do.
    Mr. Jordan. But there are people in Ohio helping Ohioans 
figure out what's at stake, what's involved, how they're going 
to do it.
    Mr. Rokakis. Face-to-face counseling, not a call-in number, 
face-to-face counseling, which, as Congressman Cummings pointed 
out, is the most effective.
    Mr. Jordan. I understand.
    In your professional judgment, years of experience with 
this, years of being in Cuyahoga County, years as the treasurer 
of that county, something as a conservative Republican I 
believe in is, don't you think you would be better off, instead 
of having this $75 billion program, 116,000 mortgage 
modifications done, 3 million the goal but only 116,000 done in 
1 year; might we be just a little better off if we said, 
instead of going with this crazy program, let's take a few of 
those dollars and let local people help local people, people 
like Ms. Stringfield, if she were in Ohio or, in the case of 
D.C., here, help them with some counseling, help them deal with 
it on a local level versus this concept that we have so 
embraced around this town over the last 1\1/2\ years, big 
Federal Government with regulations and spending taxpayer 
dollars and doing all the things they're doing? Do you think 
maybe that might be a little better approach?
    Mr. Rokakis. I have seen two programs now. One was a 
program under the prior administration. I've seen this program. 
And obviously, both have fallen short. The only thing I can 
tell you is nothing beats face-to-face counseling one on one, 
local people helping local folks.
    The difficulties faced by Ms. Stringfield, just multiply 
that by millions of homeowners like her who try to navigate 
these complicated documents, mortgages being sold once and 
twice and three times, servicers that aren't responsive. 
Nothing works better than a counselor.
    Mr. Jordan. I just want to make clear, big Federal 
Government programs administered by Republicans are no better 
than big Federal Government programs administered by Democrats; 
that's the problem. So something on the local level done with a 
lot less dollars would be much better for the folks who are in 
a tough situation and, frankly, much more respectful of the 
taxpayers across this country who are paying for the darn 
thing.
    Mr. Rokakis. I would love to avoid those layoffs on Monday. 
Unfortunately, there are a lot of people going to be looking 
for help in Cleveland and in Ohio on Monday. They are going to 
get a tape-recorded message sending them to an 800 calling 
number.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Kucinich. Thank you very much Mr. Jordan.
    The chair recognizes Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman, for holding this 
hearing.
    I'm really honored to join my Ohio colleagues, and I want 
to thank this panel for being here today. What's left of 
democracy in this country we are helping to move forward by 
your presence. And we are up against some pretty big forces.
    What's happened in Cleveland and in Washington and every 
place else is the largest transfer of wealth in American 
history. That has come from the equity, from the heart of 
America, and transferred to a group of people in some of the 
biggest banks in the world here in our country on Wall Street 
and down there in Charlotte, NC, who have no conscience for 
what they have done. In fact, their bonuses this year will be 
bigger than last year.
    Those banks are Bank of America, JP Morgan Chase, Wells 
Fargo, HSBC and Citigroup.
    I was going to ask you, Ms. Stringfield, and thank you very 
much for being here, which bank were you dealing with? Are you 
allowed to say?
    Ms. Stringfield. Wells Fargo.
    Ms. Kaptur. Thank you. So it's on the list.
    The whole conversation about servicers in a way is 
irrelevant because you can't get at them. They're cleverly 
sandwiched in between the big banks, who have all the power and 
are making all the money, despite the unemployment rate of this 
country and people losing their homes, and Main Street America. 
You just can't get them.
    And in fact, by the servicers extending the servicing 
period, they're making fees all the time, so they're making 
more money out of your grief, so they have no incentive. Even 
though it looks like HAMP gives them an incentive to try to 
settle, forget it, they're making more money through the Tax 
Code and through servicing fees by letting the agony continue.
    It's interesting we don't have a list of who the 100 or 110 
servicers are. I will ask Ms. Caldwell to provide that for the 
record. But we have to put the pieces of this puzzle together. 
What didn't come out at most of the hearings in Congress yet is 
the securitization process failed. The banking system has been 
changed to not provide accountability and responsibility for 
those who created the damage. It is a very clever system. It is 
so clever. You have to have masters degrees in order to create, 
probably Ph.D.'s, to create this kind of house of cards. But 
they have done it masterfully.
    We need to restore the mortgage loan process, so, Ms. 
Stringfield, you're not dealing with somebody way out there, 
but you've got a financial institution here in the Nation's 
Capital that you can deal with face-to-face and you don't have 
to go through some absentee counselor here and some group here, 
but in fact, that the prudent lending system of this country is 
restored.
    And that's the real fight, because the net yield of all of 
this over all, the crisis that the American people are facing 
right now is that the biggest banks caused this problem, five 
of them, now hold over 40 percent of the deposits in this 
country. It used to be 35, 33. They're going to get half. Five 
institutions are going to have that much power, and they have 
that much power.
    I was interested in what several of you recommended.
    Mr. Rokakis, you're a giant in my eyes. Thank you so much 
for what you're doing, and don't lose faith because this is the 
process that should restore America, or at least we have some 
hope of it happening, if we do our job right.
    And I want to thank our chairman. He's got the courage of 
his convictions, and he's trying to help us in a Congress 
that's really locked down and not holding the kinds of 
hearings.
    Ms. Stringfield, we should have a thousand of Americans 
like you testifying. But this Congress isn't meeting its 
responsibilities to the people, and our people are suffering 
all over this country. So your presence here today is very 
important because it's like water in a desert. And so you're 
doing what you must do on behalf of many that are not being 
invited to testify by the other committees that should be a 
part of this.
    The idea of principal loan modifications should be being 
done like that. And if the Securities and Exchange Commission 
and the Accounting Standards Board and the FDIC were doing its 
job, that would be happening, but they're not. They're not. And 
so what's happening is, the net yield is those that caused this 
have profited so handsomely, grossly, unethically are being 
rewarded.
    And the only way that this changes is if conscious people 
in the press, like Mr. Sheil, you keep doing your job.
    And Mr. Rokakis, don't lose hope, don't lose faith. You 
keep doing your job.
    And Ms. Stringfield, you work with the Community 
Reinvestment Group; they're wonderful.
    We have to keep doing our job and take this to America 
because the people are losing hope, and we haven't lost hope, 
so this process really does work.
    On the good news front, Secretary Geithner was before our 
Budget Committee yesterday, and I would like to suggest to the 
chairman--he offered that Ohio could meet with him--we take him 
up on that offer.
    In fact, I was going to call you, Mr. Rokakis, because I 
said I know an expert who is not in my district but in ESOP and 
many other groups. Through the chairman's efforts here, maybe 
we can structure a session with Mr. Geithner either directly by 
bringing people to Washington or through teleconferencing where 
we can get the Treasury, and they shouldn't be the only ones in 
the room--we should have the FDIC and the SEC and some bankers 
who really know how to resolve troubled loans on books--in that 
room and try to make it work for Ohio. And if we make it work 
for Ohio, it will work for the rest of the country.
    Mr. Kucinich. To respond to my colleague's question and 
suggestion, we, this subcommittee, in fact, and myself as 
chairman, we are in touch with Treasury and Mr. Geithner's 
office about this specific matter. And I'm glad that he 
responded to you, because I'm hopeful that he'll be similarly 
responsive to a meeting with Ohioans and the Congress that want 
to see what can be done to try to save all these homes that are 
being threatened.
    If nothing is done, we can come back here a year from now 
and all what we'll see is the kind of maps that Mr. Rokakis 
presented today, just widening. There won't be any open space 
at all. And we know there will be more people with Ms. 
Stringfield's story, and there will be more reporters who will 
be covering neighborhoods across America that are boarded up 
and abandoned.
    I have to tell you, we're going to dismiss this second 
panel right now, but when I saw, Mr. Sheil, your report and I 
saw the claw of that steam shovel going to the house, I 
actually could feel that.
    I come from a neighborhood like that. And I represent 
people in those neighborhoods. We all do. But I come from a 
neighborhood like that. Being from a Slavic Village, in my 
district, I know the people that lived in homes like that. I 
know how people put their entire life on the line to get that 
kind of a house, who worked day and night, who worked their 
fingers to the bone to be able to just have a little something, 
have a piece of that American dream that's called 
homeownership.
    And then you see the big claw just crushing it. It breaks 
your heart, it really does.
    Thank you all for being here with this testimony, and 
really much appreciated.
    We're going to go to the third panel.
    Thank you.
    While the panel is in transition, I'm going to make the 
introductions of the credits of the individuals who are going 
to be before us. They have quite a number of accomplishments, 
and I think that, by the time they're seated, I'll still be 
reading those accomplishments.
    Mr. David Berenbaum is the Chief Program Officer of the 
National Community Reinvestment Coalition. It's an association 
of 600 community-based organizations that promote access to 
basic banking services, including credit and savings, to create 
and sustain affordable housing and job development.
    Mr. Berenbaum is responsible for coordinating NCRC's fair 
housing and fair lending compliance initiatives, and he also 
manages NCRC's Housing Counseling Network, which, with its 
affiliates, is a HUD-certified housing counseling intermediary 
participating in the Neighborhood Works Foreclosure Mitigation 
Counseling Program.
    Ms. Julia Gordon is Senior Policy Counsel at the Center for 
Responsible Lending. It's a not-for-profit, nonpartisan 
research and policy organization dedicated to protecting 
homeownership and family wealth by working to eliminate abuse 
of financial practices. She specializes in legislative and 
regulatory policy issues relating to consumer lending, 
particularly in the area of mortgage lending.
    Mr. Ronald Faris is the President of Ocwen Financial Corp. 
and Ocwen Loan Servicing, LLC; served as Director of Ocwen 
since May 2003 and as President since 2001. Prior to serving as 
President of Ocwen, he has held numerous executive positions 
there and served as comptroller for a subsidiary of Ocwen. He's 
also served in the General Audit Department of Price Waterhouse 
Coopers LLP.
    Finally, Mr. Ed Pinto served as Executive Vice President 
and Chief Credit Officer for Fannie Mae in the late 1980's. 
Since then, he has worked as a consultant to the financial 
services industry, focusing on credit policy, marketing and 
product development, published research, commentary and views 
which are regularly cited by numerous major newspapers, 
magazines and think tanks.
    I would ask the witnesses to stand. It is the policy of our 
Committee on Oversight and Government Reform to swear in all 
witnesses before they testify.
    I ask that you raise your right hands.
    [Witnesses sworn.]
    Mr. Kucinich. Let the record reflect that each of the 
witnesses has answered in the affirmative. I ask that each of 
the witnesses give a brief summary of your testimony. Please 
keep this summary under 5 minutes in duration. I want you to 
know that your complete written statement will be included in 
the hearing record.
    Mr. Berenbaum, you're our first witness. Please proceed. 
Thank you.

STATEMENTS OF DAVID BERENBAUM, CHIEF PROGRAM OFFICER, NATIONAL 
 COMMUNITY REINVESTMENT COALITION; JULIA GORDON, SENIOR POLICY 
   COUNSEL, CENTER FOR RESPONSIBLE LENDING; RONALD M. FARIS, 
  PRESIDENT, OCWEN FINANCIAL CORP.; AND EDWARD J. PINTO, REAL 
 ESTATE FINANCIAL SERVICES CONSULTANT AND FORMER CHIEF CREDIT 
               OFFICER OF FANNIE MAE (1987-1989)

                  STATEMENT OF DAVID BERENBAUM

    Mr. Berenbaum. Thank you.
    Good afternoon, Chairman Kucinich, Ranking Member Jordan, 
and other distinguished members of this committee. We are 
honored to testify today before you regarding mortgage reform, 
mortgage foreclosure prevention and the activities currently 
under way to suggest improvement in this area.
    Solving the foreclosure crisis is critical for the economic 
health of this country. Since the onset of this crisis, $7 
trillion of household wealth has been lost. This loss of 
household wealth translates into reduced consumer spending, 
depressed business activity, lower gross national product, 
lower property tax receipts and higher local and State budget 
deficits.
    Foreclosures not only impact individual homeowners but 
entire neighborhoods through declining property values, 
increases in abandonment, decay, crime and vandalism. In short, 
the continued failure to adequately address this crisis 
multiplies the profound social, cultural and economic injury to 
our Nation.
    The foreclosure tsunami has been further compounded by the 
highest unemployment rates in the last quarter century. In a 
vicious cycle, the record rates of unemployment and reduction 
in wages are now feeding continued foreclosures.
    In the face of this great recession, the Bush 
administration encouraged the private sector to create the HOPE 
NOW Alliance. The HOPE NOW Alliance recorded 3.1 million loan 
workouts during 2007 and 2008. But two-thirds of these workouts 
deferred or rescheduled borrower payments without lowering 
monthly payments. Meanwhile the foreclosure crisis worsened.
    Subsequently, the Obama administration created two 
programs; the Home Affordable Modification Program and the Home 
Affordable Refinance Program. Unfortunately, as been noted 
already both by the chairman and the ranking minority member, 
these programs are not keeping pace with the foreclosures that 
we are seeing today.
    Our written testimony discusses in detail the origins of 
the crisis, problematic nonprime and nontraditional lending, 
compounded by regulatory failure, greed and malfeasance, little 
or no fair lending or consumer protection oversight, and 
serious safety and soundness lapses. An analysis of the public 
information that is available documenting the performance of 
each of the programs is in our written statement.
    The experiences of our Housing Counseling Network, 
qualified housing councils around the Nation, as well as the 
testimony of Mrs. Patricia Stringfield document the importance 
of HUD counselors in this process. However, the magnitude of 
the foreclosure and unemployment crisis calls for more 
proactive intervention, and that means a private partnership 
between both government officials as well as servicers, 
investors, securitizers and others.
    Despite the best of intentions, we are not seeing results 
in these programs because of their voluntary nature, and a more 
considered mandatory approach should be taken. Yesterday, the 
Mortgage Bankers Association announced a voluntary unemployment 
borrower bridge to HAMP modification programs. That will help a 
limited number of borrowers who experience temporary 
unemployment for a period of up to 9 months.
    It certainly will not address the preexisting problematic 
underwriting that occurred, overvaluation, or serve as a 
substitute for permanent principal reduction or other programs, 
such as NCRC's HELP Now model that we have suggested in our 
testimony. The HELP Now model originated in discussions with 
Wall Street. It uses Wall Street's own reverse auction process 
to in fact promote the sale of large groups of mortgages, 
mortgage-backed securities to Treasury or another agency. It 
could also be, for example, other departments; it could be HUD. 
But using the current market value of the homes and then 
passing those savings on to the homeowners, so they have 
principal reduction, and in turn selling those loans back as 
30-year, 40-year fixed rate loans to the private sector at 
little or no cost to the taxpayer.
    Authority for this program exists under the current TARP 
program. It exists under eminent domain, and frankly, it could 
be done with modest changes to the tax requirements if in fact 
Congress chose to act in that direction.
    As well, we want to see loan programs established for the 
unemployed, such as H.R. 4173 passed by the House, as well as 
more broad interpretation for principal reductions within the 
HAMP program. Substantial research documents that the most 
successful loans, the loans that are not falling out of 
permanent modifications are in fact loans that have had 
principal reduction. Last week the administration announced a 
$1.5 billion initiative to target five States.
    We agree with this committee that in fact a much more broad 
need is necessary. There is no reason to focus on volume or 
size of loans over the quantity of modifications that are 
currently needed across our Nation.
    In closing, let me say that we also suggest other 
improvements for HAMP. Those improvements include greater 
transparency in reporting of data. It includes also expanding 
areas of the law and judicial modification, as well as 
expanding and modernizing the Community Reinvestment Act. Thank 
you.
    [The prepared statement of Mr. Berenbaum follows:]

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    Mr. Kucinich. I thank you, Mr. Berenbaum, for your 
testimony.
    Ms. Gordon, you're recognized for 5 minutes. Thank you.

                   STATEMENT OF JULIA GORDON

    Ms. Gordon. Thank you.
    Good afternoon Chairman Kucinich, Ranking Member Jordan and 
members of the committee.
    Thank you so much for inviting me today to talk about the 
Government's response to the foreclosure crisis. We need a much 
more robust and effective plan to save homes and prevent 
unnecessary foreclosures. Over 6 million homeowners are now 
behind on their mortgages and at risk of foreclosure. More than 
2 million foreclosures have occurred in the past 2 years alone.
    By 2014, researchers predict that up to 13 million 
foreclosures may have taken place. This crisis has been 
particularly hard on African American and Latino communities, 
widening the already sizable wealth gap between whites and 
minorities and wiping out entire formerly middle class 
neighborhoods. The spill-over costs are massive, including lost 
property values, even for homes current on their mortgages; 
erosion of the tax base; and the increased burden on municipal 
services.
    Before I talk about the details of foreclosure prevention, 
I want to refer to the many people who will try to convince you 
that this crisis was caused by public policies aimed at 
expanding the American dream of homeownership to all 
communities. This claim is nothing short of outrageous and 
insulting. Every single bank regulatory agency has pronounced 
this allegation false, and there is no good data to back it up. 
This foreclosure crisis was caused by toxic loan products that 
were sold to people for profit purposes and that preyed 
particularly on the communities that I've mentioned above.
    Most borrowers could have qualified for cheaper mortgages 
with less risky terms, and the vast majority of these loans 
weren't even sold to first-time home buyers. These products 
were designed to become unaffordable within a couple of years 
so that mortgage brokers could refinance the same customers 
over and over again, like Ms. Stringfield, and receive a fee 
each time. Wall Street's appetite for risky loans was seemingly 
insatiable, and lenders scrambled to deliver more loans to keep 
the money coming.
    It's also not true that unemployment right now is the 
culprit rather than bad lending. Risky loans are approximately 
three times more likely to default no matter what the 
underlying economic conditions or where you live. In fact, 
during every other period of high unemployment in recent 
decades, foreclosure rates remained essentially flat because 
people had home equity that could cushion the blow.
    In responding to this crisis, the Government so far has 
given the most help to the people who need it the least. 
Programs to lower mortgage interest rates and the home buyer 
tax credits have helped support the housing market in the face 
of historic levels of default but haven't helped the people at 
highest risk of losing their homes.
    As we've discussed already, the centerpiece of the 
administration's foreclosure prevention effort, the Home 
Affordable Modification Program, has not reached its potential. 
A key obstacle impeding HAMP's success is that the private 
servicing industry has been either unable or unwilling to do 
the job they need to do. Originally, the HAMP program was meant 
to be coupled with other legislative changes that would have 
backstopped the program and provided other incentives for 
servicers to perform, but those legislative changes did not 
occur.
    As a result, HAMP is essentially a voluntary program where 
homeowners themselves still have no power or control over their 
situation. Participating servicers routinely violate the 
program's guidelines and fail to convert performing trial 
modifications into permanent ones in a timely way. Homeowners 
are given very little information about how their loan 
modification request was evaluated, and they have no 
independent appeals process if they believe their request was 
denied unfairly.
    In our written testimony, we've laid out a number of 
detailed suggestions for improving HAMP. What I want to focus 
on here is the importance of requiring servicers to reduce the 
principal balances for under water homeowners. Being under 
water is the most accurate predictor of default or redefault. 
And until mortgages are right sized on a routine basis, it is 
unlikely we will see the end to this cycle of redefault.
    We also need action outside of HAMP to make HAMP work. A 
law requiring that servicers evaluate all homeowners for loan 
modification prior to initiating foreclosure could give 
homeowners the right to fight their foreclosure if such an 
evaluation were not conducted.
    It's also crucial to permit judicial modifications of 
mortgages on primary residents. This solution costs nothing to 
the U.S. taxpayer. It's the only solution that cuts through the 
Gordian knot of second liens, securitizations, negative equity 
and back-end consumer debt.
    Finally, we need commonsense rules that prohibit lenders 
from making loans that borrowers can't afford, and we need an 
independent Consumer Financial Protection Agency. If there's 
nothing else that we've learned from this crisis it's that it's 
much easier and far less expensive to prevent problems than to 
clean up after them.
    Thank you so much for inviting me today, and I look forward 
to your questions.
    [The prepared statement of Ms. Gordon follows:]

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    Mr. Kucinich. Thank you for your testimony.
    The Chair recognizes Mr. Faris. You may proceed.

                  STATEMENT OF RONALD M. FARIS

    Mr. Faris. Thank you Chairman Kucinich, Ranking Member 
Jordan and distinguished members of the subcommittee for the 
opportunity to participate in today's hearing. My name is 
Ronald Faris, and I am the President of Ocwen Financial Corp. 
At Ocwen, we share your sense of urgency to find a lasting 
solution to our Nation's daunting foreclosure crisis, a crisis 
that threatens millions of families with the loss of their 
home.
    Ocwen is not a loan originator. We did not make the bad 
mortgages that are causing the problems. But as a loan 
servicer, we are doing everything we can to fix them. We were 
the first in the industry to adopt a comprehensive loan 
modification program, one that provides homeowners in distress 
lower mortgage payments that are both affordable and 
sustainable and result in greater cash-flow for investors than 
from foreclosure. We are proud to have saved well over 100,000 
homes from foreclosure since the onset of the mortgage crisis 
through loan modifications.
    Ocwen supports the administration's HAMP program. We 
believe it is a well designed response to the mortgage crisis. 
Even so, almost a year into HAMP, too many homeowners facing 
foreclosure are having difficulty getting their loans modified. 
In our view this is due mainly to a lack of sufficient capacity 
and expertise in the industry to handle the volume. Ocwen has 
invested over $100 million in R&D to build our own loan 
servicing technology. Our platform is both scaleable for high 
volumes and incorporates behavioral science research for 
effective customer communication.
    Using technology, we have been able to convert trial 
modifications to permanent modifications at a rate that is 10 
to 20 times higher than the big banks in the program. But the 
key metric for long-term success is the redefault rate. 
According to a recent industry report 3-month redefault rates 
on HAMP mods have ranged from 18 to 33 percent. Through our 
technology advantage we have kept our redefault rates to below 
5 percent.
    As part of Ocwen's continuing commitment to make HAMP a 
success we would like to share with the subcommittee some of 
our recommendations for program enhancements. First, the 
required debt-to-income ratio should be lower to below 31 
percent. One out of every four HAMP applications is rejected 
for failing to meet this standard. Usually these are families 
struggling with higher household expenses for food, clothing 
and education. HAMP should instead use a flexible residual 
income approach to determine a payment that the homeowner can 
actually afford. Alternatively, there should be either an 
across-the-board DTI of 28 percent or a sliding scale DTI that 
varies based on the number of dependents on the borrower's tax 
return.
    Second, principal reduction modifications are needed to 
overcome the negative equity problem. This is a primary driver 
of defaults on mortgages. In redefaults on modified mortgages, 
11.3 million mortgages in this country or 24 percent are 
currently under water, and these numbers will likely grow. In 
Ocwen's experience negative equity increases the chance of a 
redefault by 1.5 to 2 times. Accordingly, approximately 15 
percent of all of our loan modifications have involved some 
element of principal reduction.
    HAMP already addresses principal forbearance, but there is 
no provision for principal forgiveness. We believe step 
principal forgiveness is best; that is incremental principal 
reductions over time so as long as the loan remains current. 
Third, additional funding should be made available for housing 
counseling groups. Grass roots organizations like NCRC, who is 
here today; ESOP in Ohio; Home Free-USA; National Council of La 
Raza; and so many others around the country are providing much 
needed homeowner outreach and counseling. We urge financial 
support for any HUD-certified counseling organization assisting 
homeowners through a successful permanent modification under 
HAMP.
    Fourth and last, underperforming HAMP servicers should be 
required to outsource to performing servicers. Whether for lack 
of effort or just an inability to handle the volume, too many 
banks are not producing the results needed to achieve program 
goals. Treasury should be empowered to redirect servicing to 
those with a proven track record and available capacity to 
execute trial modifications and convert them to permanent 
solutions. Let me conclude by thanking you again for inviting 
me to testify today and asking that my full written statement 
be entered into the record. Thank you.
    [The prepared statement of Mr. Faris follows:]

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    Mr. Kucinich. It is so ordered. And thank you.
    Mr. Pinto, you may proceed for 5 minutes. Thank you.

                  STATEMENT OF EDWARD J. PINTO

    Mr. Pinto. Chairman Kucinich and Ranking Member Jordan, 
thank you for the opportunity to testify today. Let me first 
provide some background regarding the cause of the foreclosure 
crisis. I have a chart. Chart one demonstrates the loan-to-
value ratios and foreclosure rates that have been increasing in 
this country for decades. You will see that FHA has been 
leading the way for decades also in rising loan to values. FHA 
foreclosure start rate now stands at 32 times the level that it 
had in 1951. The collapse of the mortgage market had a single 
cause: the accumulation of an unprecedented number of weak 
loans. In 2008, approximately 50 percent----
    Mr. Kucinich. I'm going to ask the gentleman to suspend. 
We've got to make sure we can hear you. You need the mic, and 
speak into it. Thank you.
    Mr. Pinto. The collapse of the mortgage market had a single 
cause; the accumulation of an unprecedented number of weak 
mortgages. In 2008, approximately 50 percent of outstanding 
single-family mortgages were weak and prone to failure with 
two-thirds being the result of Federal programs. How did this 
happen?
    In 1995, the Federal Government issued its national 
homeownership strategy. It required the use of flexible and 
alternative lending in, quote, an unprecedented public-private 
partnership to increased homeownership to record high levels 
over the next 6 years. With this national policy in place, the 
lending equivalent of Gresham's law took place. Weak lending 
drove out good.
    Turning to the administration's Home Affordable 
Modification Program, I would like to recall HAMP's original 
goal that still is posted on their Web site. 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 a long term.
    The Treasury Department has consistently painted rosy 
scenarios regarding HAMP's progress. In an apparent desire to 
post big numbers early on, the concept of a trial modification 
was introduced. Borrowers were allowed to enter a trial without 
qualifying on the basis of income. This wasn't fair to 
borrowers who had no chance of qualifying. Many will be worse 
off than if they had been given a quick no and encouraged to 
find alternative housing.
    As a result, the HAMP pipeline became hopelessly clogged 
with a lion's share of the blame, in my opinion, falling on 
Treasury. The January 2010 HAMP report contains a statement 
that strains credulity. It noted, ``the program is on pace to 
meet its overall program goal of providing 3 to 4 million 
homeowners the opportunity to stay in their homes.'' That was 
not the goal.
    The truth is HAMP has been a spectacular failure when 
measured against that goal. In the first 11 months, there have 
been 116,000 homeowners who received permanent modification. 
Subtract expected redefaults and you might end up with 75,000 
homeowners who are safe from foreclosure, about 2 percent of 
the goal. I predict that ultimately HAMP will only meet a small 
percentage of its 3 to 4 million foreclosure goal.
    The same redefinition of program goals applies to HARP, the 
Treasury's refinance program. It was to help 4 to 5 million 
homeowners shut out from refinancing because their current loan 
to value was above 80 percent. Through December 2009, Fannie 
and Freddie have completed 190,000 HARP refinances, less than 5 
percent of their goal. Not a problem. Making Home Affordable 
2010, a January 2010 report, now takes credit for 4 million 
refinances of all type regardless of LTV.
    Treasury promised transparency. What we get are 
disingenuous progress reports when it comes to program goals. 
This committee and the American people deserve an honest 
assessment of what HAMP and HARP can do. Why is the problem so 
intractable? We're facing a more challenging situation than 
ever because credit standards were severely compromised by 
Federal policies prior to the onset of the current crisis.
    What delinquent borrowers in the housing market need is 
triage that provides quick answers and fast decisions. This 
will allow the shadow inventory of millions of defaulted loans 
that cannot benefit from modification to end up in the hands of 
qualified homeowners.
    Late last month Treasury announced changes to HAMP process 
which should help meet the goal of providing quick answers and 
fast decisions. It will hopefully put an end to no-doc trial 
modifications. Unfortunately, the changes do not take effect 
for three more months.
    One last note, in Ms. Caldwell's testimony, it's noted that 
$2 billion in savings have already been recognized by HAMP 
participants and administrative action has kept interest rates 
at historic lows.
    But I think we must be honest; there is no free lunch. Tens 
of millions of Americans, many pensioners living on their 
savings, many of your constituents, are suffering a real loss 
of income due to these low rates. Households in this country 
own $11 trillion in fixed assets. Many now earning about 2 
percent less than previously. That's over $100 to $200 billion 
a year in lost income and tens of billions of dollars in lost 
taxes. Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Pinto follows:]

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    Mr. Kucinich. Thank you, Mr. Pinto.
    There's no such thing as a free lunch but apparently, 
there's multi-billion dollars in bonuses for bankers who got 
TARP, so we have to figure out that squares with folk wisdom.
    I heard Ms. Gordon correctly talk about the root of the 
crisis. And I think we should be clear that this foreclosure 
crisis started well before the current administration came into 
office, and it is rooted in policy decisions that created the 
largest asset bubble in American history, an $8 trillion home 
mortgage bubble. So to call this crisis a prime crisis would 
miss the point.
    The bubble was created by Federal Reserve policies that 
kept interest rates low for the explicit purpose of allowing 
home prices to inflate, knowing and expecting and tacitly 
encouraging that homeowners would use their rising home values 
to supplement stagnant wage incomes using a house as an ATM. It 
wasn't a product of greedy and irresponsible homeowners, it was 
a product of a shrewd but ultimately disastrous government 
calculation and policy.
    And American workers have been the biggest losers in this 
crisis so far. They're the ones who have been thrown out of the 
work place in large numbers, had their hours reduced, their 
benefits cut, they're the ones who have been forced to give up 
their family homes and do a bankruptcy and the ignominy of 
public foreclosure proceedings, so labeling this crisis a 
subprime crisis would really be blaming the victims.
    The crisis was not caused by people who lost their homes 
and their life savings and their reputation, it was caused by 
people who perpetrated what I think is kind of a hoax. 
Responsibility for the crisis in repairing the damage falls on 
every person and every institution, including past and current 
Representatives of both Members--of Congress or both parties in 
Congress, rather, as well as the last administration, and this 
current administration now has the responsibility, who should 
have been and are responsible for assuring the ethical and 
financial integrity of our banking and monetary system.
    We're picking up the pieces here.
    Now, Mr. Berenbaum, you mentioned in your testimony the 
role of credit rating agencies and influencing loan servicer 
behavior making them to be more inclined to act on a delinquent 
loan first by foreclosing on it, then modifying it and only as 
a last resort cutting principal. Can you elaborate how credit 
rating agencies influence this process?
    Mr. Berenbaum. Certainly, Mr. Chairman.
    There's, unfortunately, more and more growing evidence now 
that the SEC failed to appropriately regulate or monitor the 
credit rating agencies in this Nation. And the way the system 
worked, in fact it worked toward incentivization of profit and 
simply affirming whatever paper was presented before those 
rating agencies.
    They actually even called themselves publishers of 
information rather than in fact reviewers of that information. 
This also led to significant fair lending issues because if you 
look at in fact many of the triple A ratings that those 
agencies gave, subprime, nontraditional, it was the companies 
such as Ameriquest, New Century and others which is impacted 
not only on Ohio, but frankly low- to moderate-income 
communities across the country.
    Mr. Kucinich. Thank you, Mr. Berenbaum.
    One final question, Ms. Gordon. Are there legal solutions 
to the obstacles that some might see in doing principal 
reduction for borrowers.
    Ms. Gordon. I'm not sure what you mean by legal solutions. 
But one of the obstacles right now is that a number of these 
loans held by investors have second liens on them; about half 
of all securitized loans have a second lien.
    Mr. Kucinich. So does Treasury have leverage to get around 
that?
    Ms. Gordon. Treasury has a program--Treasury unveiled a 
program in the spring of last year, the 2MP program, designed 
to try to attack the second lien program, but no servicers have 
used it. I had heard that Bank of America has now signed up for 
it. I don't exactly know what that means. But as far as I know 
no one has yet used the 2MP program in the HAMP program. It 
seems to us that Treasury should require servicers to use the 
2MP program to resolve these second liens, which are 
essentially worthless at this point in most cases.
    Mr. Kucinich. Thank you.
    Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Ms. Gordon, do you believe that HAMP is, do you believe 
HAMP is working at all? Do you think it's a pretty bad program? 
I mean, do you think like I do; do you think the track record 
of HAMP is terrible?
    Ms. Gordon. It's clearly underperforming what we need to do 
to get ahead of this crisis.
    Mr. Jordan. Here's how I'm a little confused. Because in 
your testimony, you said Federal policies had nothing to do 
with contributing to the mess that we got in. So the Government 
had nothing to do with contributing to the mess we got in, even 
though the track record of Government trying to fix is 
pathetic.
    Ms. Gordon. The Federal policies I'm referring to in that 
section are there's been a lot of talk about how the Community 
Reinvestment Act and other policies, in fact I think Mr. Pinto 
mentioned this earlier, are somehow responsible for the toxic 
loan products, when in fact, for the most part, the loans made 
under CRA were safer loans and ended up having a much better 
performance profile than the risky loans that were made outside 
of that system.
    Mr. Jordan. Mr. Pinto, is that an accurate statement, the 
loans, the one that Ms. Gordon just made relative to the 
Community Reinvestment Act?
    Mr. Pinto. The accurate part of the statement is most 
Community Reinvestment Act loans were fixed-rate, lower-
interest-rate loans. If you compare those loans to other fixed-
rate loans that had higher interest rates, my research shows 
that the default rates on the CRA loans are also high.
    I'll give you one example, ESOP, with Third Federal 
Savings, and ESOP has testified a number of times about the 
great job that Third Federal had done. What they haven't 
testified about is the performance of those loans. These were 
CRA loans, low interest rates. They were subsidized generally. 
They are running at 37 percent delinquency rate on a $300 
million portfolio. Third Federal has suspended the program 
because of its poor performance.
    Mr. Jordan. Do you agree with my statement that I made in 
my question to Ms. Gordon that Federal policies--I know you 
agree with this--Federal policies helped get us in this mess; 
how in the world are Federal programs going to help get us out 
of it? I come from this whole thing, big government spending, 
big government programs are going to get us out of this 
economic concern we have been in. Well, heck, we would have 
been out of it a long time ago, because that's all we've been 
doing for 2 years. We have seen things we never imagined we 
would see in the United States of America.
    And we can't even get, now, Treasury just to comply with--I 
mean, you were here for my earlier question of Ms. Caldwell--we 
can't even get them to comply with what the Inspector General 
wants them to do on the original no-doc loan, getting 
documentation. I mean, it just highlights and underscores, when 
you travel down this road, you end up making things worse. And 
when you attempt to solve it, what you do is put a lot of 
taxpayer money at risk, and not really help the people who, I 
agree with my colleague, who has passion. I mean, we all do. 
You don't really help the folks who, frankly, need some help, 
so comment on that and then I will yield back.
    Mr. Pinto. Let me just comment that in the first quarter of 
2009 the OCC, OTS puts out their mortgage metrics report, and 
there were 190,000 modifications that were done in that 
quarter. There are about 150,000 that were done in the second 
quarter. This is before HAMP got ramped up. And there was a 
growing tide of those, heavily growing tide into interest rate 
reduction, much like HAMP.
    Since then, the number of modifications reported has 
declined, and I believe we're going to end up seeing that the 
$190,000--excuse me, 190,000 loan number that existed in the 
first quarter won't be surpassed in 2009, so it's actually 
slowed down the process. And I think my suggestion is focus on 
Fannie and Freddie, which I think are 60 percent of HAMP, and 
let the private sector on their loans deal with them the way 
they were actually doing many things back in early 2009.
    Mr. Jordan. Homeowners would be better off financially. 
They would get some quicker remedy, you know, quicker action, 
whatever that would be, and we could focus on what the bigger 
problem is with Fannie and Freddie.
    Mr. Pinto. Right.
    Mr. Jordan. Great point, great point.
    Mr. Kucinich. I thank the gentleman.
    The Chair recognizes Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. This has been an 
outstanding panel. And I thank you very much for coming today 
and what you've placed on the record.
    Several witnesses today, including many of you, recommended 
principal write downs. Let me offer the observation that I 
don't think servicers can do principal write downs. Many 
servicers have business with the five biggest banks that caused 
this mess to begin with, coupled with the changes in the 
banking laws back through the 1990's that changed prudent 
lending to securitization, and local banks holding a portion of 
those loans, and we moved it to a bond. We changed a loan to a 
bond, and they sold it to everybody on the face of the earth.
    And so the collectability issue, Mr. Pinto, you used three 
words, collateral, credit and capacity. I always say character, 
collateral and collectability. There's no collectability. And 
so, how do you do the loan workout? How do you do the normal 
accounting changes, that's where I want to go, by using FDIC, 
SEC and those involved in that given loan? I don't think we can 
get it through the servicers. I think HAMP is proving that. We 
can't do it.
    So we need to be able to do what we did back in the 1980's. 
We need to be able to work out those loans, get the assets and 
liabilities to balance on those books, and there's going to 
have to be some real estate write downs. We're going to have to 
get down to some level within the banking system, and that is 
what is not happening.
    And I wanted you to comment on that. I wanted you to 
comment on two things for me. One is your view of servicers 
being able to solve this problem through HAMP, even as you ask 
for principal write downs. And if you were to recommend to the 
President how to rearrange what he's doing in order to get at 
this real estate crisis so we don't have millions of homes 
vacant across this country, who would you tell him to bring 
into his office, the Oval Office, all these agencies so we can 
get at the value of real estate and do loan workouts where we 
can get them done?
    So I want you to comment on the principal write down, who 
can actually do it? And I don't believe the servicers can. And 
then what would you say to the President to get to where you 
want to go and help us to move the housing market to a more 
positive position and keep people in their homes?
    Mr. Berenbaum. Ms. Kaptur, if I may jump in, I think that's 
an excellent question. And I will respond quickly to allow each 
of the panelists their opportunity. Right now, there's an 
overreliance in balloon payments by servicers across this 
country, so really there is no principal reduction.
    Frankly, what we are hearing from the investor community is 
that they are ready to begin some serious principal reductions, 
and to paraphrase, they are ready to take their share of the 
haircut that's necessary to correct the marketplace. But the 
system right now is loaded with conflicts. For example, you 
noted earlier that a majority of the seconds are held by the 
banks, the same banks that operate a majority of the servicers 
in this Nation, conflict No. 1.
    Conflict No. 2 is some of the accounting rules that we've 
been discussing in this presentation and before this hearing as 
well.
    Issue No. 3, we have to get beyond the blame game. Everyone 
is at fault. There is shared blame here. And if we are going to 
move ahead, we need to ensure a meaningful regulatory structure 
that embraces the Community Reinvestment Act for what it has 
done in responsible lending for community reinvestment. We need 
to embrace the strong Consumer Financial Protection Agency, and 
we need to work with responsible servicers and lenders who are 
willing to do business in the way that is required to bring 
trust back to the market that you spoke to earlier.
    We are not going to see global investors or pension funds 
or others buy in the secondary market until those minimum 
requirements are made.
    Last one more point that I would like to make is that we do 
need to focus on the HARP program as well. Ultimately, who owns 
that $400 billion of risk right now? It is not the private 
sector; it is the taxpayers. What a wonderful way to go about, 
in fact, reaching 70 percent of the outstanding mortgages by, 
in fact, reducing the risk associated to the taxpayer through 
principal reduction. We have the power to do that through 
eminent domain or through the power of Congress.
    Ms. Kaptur. Thank you.
    Ms. Gordon, did you want to say something there?
    Ms. Gordon. Well, I agree with most of what Mr. Berenbaum 
has said.
    I will note that servicers in serving accounts that are 
held in portfolio seem quite able to do principal reductions. 
There are principal reductions happening; they're just not 
happening for the securitized loans.
    Ms. Kaptur. And what percent are represented of the 
portfolio of securitized loans?
    Ms. Gordon. That depends on the servicer. But in terms of 
the troubled loans, quite a lot of them are securitized.
    The places where the portfolio loans are doing the most 
principal reductions is with respect to payment-option ARMs, 
which for the most part are so under water, not only because 
they're located in some of these highest price decline States, 
but also because they had negative amortizations built into the 
loans. These loans are poorly served by HAMP. HAMP can't really 
help them for a variety of structural reasons.
    So it's clear that the problem does have to do with these 
conflicts of interest. And I completely agree with you that not 
all of the banking and securities regulators that need to be at 
the table seem to be at the table rowing in the same direction 
with the Treasury's program. I know the folks at Treasury, and 
despite my concerns about the underperformance of the program, 
I know that they're trying their best, but there needs to be a 
team approach here, and we already know that the prudential 
regulators have not had a history of putting consumer interests 
at the top of their agenda. That's why it's so important to 
have an independent consumer protection agency.
    But most of all, this is why it's so important to do things 
like change the Bankruptcy Code. I mean, ultimately, you need 
someone to just--who has the power to cut through all of this, 
regardless of the various interests and conflicts involved. We 
already have a system set up in this country for that. The 
entire bankruptcy system does just this. Principal-residence 
mortgages are the only type of debt that can't be restructured. 
Your second home mortgage can be. Your yacht can be, but not 
the home that you live in and have made your life in.
    Mr. Kucinich. Thank you very much for your testimony.
    I want to thank all the witnesses.
    This is the Domestic Policy Subcommittee joined by my 
colleague, Congresswoman Kaptur, and we've had a full hearing 
today with many Members of Congress testifying--or rather 
participating.
    I'm Congressman Dennis Kucinich, Chair of Domestic Policy. 
We are going to continue our work on this issue, and we are 
going to continue to work for a serious program of principal 
reduction in order to help keep people in their homes.
    Thank you very much. Adjourned.
    [Whereupon, at 4:50 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Marcy Kaptur and additional 
information submitted for the hearing record follow:]

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