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




 
 EXAMINING LOCAL EFFORTS TO ADDRESS THE CONTINUING FORECLOSURE CRISIS: 
                    PERSPECTIVES FROM CLEVELAND, OH

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON DOMESTIC POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 7, 2009

                               __________

                           Serial No. 111-130

                               __________

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 December 7, 2009.................................     1
Statement of:
    Foley, Mike, Ohio State Representative, 14th Legislative 
      District; Tim Grendell, Ohio State Senator, 18th 
      Legislative District; Michael Dudley, Sr., council member, 
      Garfield Heights Ward One; Daryl Rush, Director of 
      Community Development, city of Cleveland; Jim Rokakis, 
      treasurer, Cuyahoga County; and Phyllis Caldwell, chief 
      homeownership preservation officer, U.S. Department of 
      Treasury...................................................     7
        Caldwell, Phyllis........................................    48
        Dudley, Michael, Sr......................................    25
        Foley, Mike..............................................     7
        Grendell, Tim............................................    15
        Rokakis, Jim.............................................    42
        Rush, Daryl..............................................    28
    Seifert, Mark, executive director, Empowering and 
      Strengthening Ohio's People; Frank Ford, senior vice 
      president, Neighborhood Progress, Inc.; Robert Grossinger, 
      senior vice president for community affairs, Bank of 
      America; Claudia Coulton, co-director, Center on Urban 
      Poverty & Community Development, Case Western Reserve 
      University, Mandel School of Applied Social Sciences; and 
      Howard Goldberg, renewal administrator, city of Lorain.....    68
        Coulton, Claudia.........................................   100
        Ford, Frank..............................................    81
        Goldberg, Howard.........................................   115
        Grossinger, Robert.......................................    92
        Seifert, Mark............................................    68
Letters, statements, etc., submitted for the record by:
    Caldwell, Phyllis, chief homeownership preservation officer, 
      U.S. Department of Treasury, prepared statement of.........    50
    Coulton, Claudia, co-director, Center on Urban Poverty & 
      Community Development, Case Western Reserve University, 
      Mandel School of Applied Social Sciences, prepared 
      statement of...............................................   102
    Dudley, Michael, Sr., council member, Garfield Heights Ward 
      One, prepared statement of.................................    27
    Foley, Mike, Ohio State Representative, 14th Legislative 
      District, prepared statement of............................    10
    Ford, Frank, senior vice president, Neighborhood Progress, 
      Inc., prepared statement of................................    83
    Goldberg, Howard, renewal administrator, city of Lorain, 
      prepared statement of......................................   117
    Grendell, Tim, Ohio State Senator, 18th Legislative District, 
      prepared statement of......................................    18
    Grossinger, Robert, senior vice president for community 
      affairs, Bank of America, prepared statement of............    95
    Rokakis, Jim, treasurer, Cuyahoga County, prepared statement 
      of.........................................................    44
    Rush, Daryl, director of Community Development, city of 
      Cleveland, prepared statement of...........................    30
    Seifert, Mark, executive director, Empowering and 
      Strengthening Ohio's People, prepared statement of.........    71


 EXAMINING LOCAL EFFORTS TO ADDRESS THE CONTINUING FORECLOSURE CRISIS: 
                    PERSPECTIVES FROM CLEVELAND, OH

                              ----------                              


                        MONDAY, DECEMBER 7, 2009

                  House of Representatives,
                   Subcommittee on Domestic Policy,
              Committee on Oversight and Government Reform,
                                                     Cleveland, OH.
    The subcommittee met, pursuant to notice, at 10:14 a.m., at 
the Carl B. Stokes Federal Courthouse, 801 West Superior 
Avenue, Cleveland, OH, Hon. Dennis J. Kucinich (chairman of the 
subcommittee) presiding.
    Present: Representatives Jordan and LaTourette.
    Staff present: Jaron R. Bourke, staff director; Yonatan E. 
Zamir, counsel; Christopher Hixon, senior counsel; Joseph 
Benny, Office of Representative Kucinich; Laurie Rokakis, 
Office of Representative Kucinich; Martin Gelfand, Office of 
Representative Kucinich; Marian Carey, Office of Representative 
Kucinich; Morris Pettus, Office of Representative Kucinich; and 
Steve Inchak, Office of Representative Kucinich.
    Mr. Kucinich. Thank you for being here. This meeting is 
going to come to order.
    I want to begin by thanking my colleague, the ranking 
member from Ohio, Representative Jordan, for his work with me 
throughout the financial crisis. Mr. Jordan and I have worked 
together, he is a ranking member of our subcommittee on just a 
wide range of economic policy issues and I appreciate your 
presence here today.
    My partner in the Cleveland area longstanding has been 
Congressman Steve LaTourette. And Congressman LaTourette and I 
have worked together on every major economic issue that's 
affected the county, the State and the country, and I am very 
grateful for his presence here and without objection, 
Congressman LaTourette will be considered as a member of this 
subcommittee for the purposes of this hearing.
    The hearing today is entitled ``Examining Local Efforts to 
Address the Continuing Foreclosure Crisis: Perspectives from 
Cleveland, OH.'' Our first panel, we are going to hear from 
State Representative Mike Foley; State Senator Tim Grendell; 
Councilman Michael Dudley of Garfield Heights; Daryl Rush, the 
Director of Community Development, city of Cleveland; Treasurer 
of Cuyahoga County, Jim Rokakis; and Ms. Phyllis Caldwell who 
is the chief of home ownership preservation and the officer for 
the Department of Treasury.
    Today's field hearing is part two of a series of hearings 
intended to examine the local characteristics of the ongoing 
residential foreclosure crisis.
    Without objection, the Chair and ranking member will have 2 
minutes to make an opening statement, followed by opening 
statements not to exceed 2 minutes by any other Member who 
receives recognition and without objection, Members and 
witnesses may have 5 legislative days to submit a written 
statement or extraneous materials for the record.
    The economic recession that has hit the U.S. economy and 
the residential foreclosure crisis that has accompanied it have 
devastated communities across the nation. Nationally, the 
foreclosure rate is four times the historical average and 
predictions are that 10 to 12 million homes will be foreclosed 
on before this crisis subsides. For some time, the crisis was 
synonymous with the predatory subprime mortgage loans, which 
were given disproportionately to African-Americans and other 
minorities. But now the crisis has spread. Foreclosures are 
occurring on homes financed with prime loans in communities and 
neighborhoods that have previously viewed home foreclosure a 
strange aberration. Now what is fueling this crisis is 
unemployment. Nationwide joblessness is at a 25-year high. 
Today one in eight Americans and one in four children rely on 
food stamps.
    For the people of the Cleveland metropolitan area, the 
crisis has been particularly acute because depressed housing 
prices and widespread unemployment have not been limited to the 
past 2 or 3 years. The Cleveland metropolitan area was passed 
over by the housing boom of the earlier part of this decade, 
experiencing high rates of foreclosures as early as the year 
2000. Yet, northeast Ohio still suffered from a wave of 
predatory lending and lax regulatory action that characterized 
the housing boom elsewhere. According to economist George 
Zeller, Cuyahoga County alone has lost nearly 110,000 jobs 
since 2000. The result, unsurprisingly, has been that wave 
after wave of foreclosures have left nearly 11,500 vacant homes 
in Cleveland alone.
    When this subcommittee began holding hearings on 
foreclosure in March 2007, Cleveland was the epicenter of the 
crisis and the window onto the future troubles that would 
rapidly overtake the entire nation. Today we return to 
Cleveland to find out what local officials, advocates and 
organizers of this region have done to address the phenomenon. 
What more can be done and what role must the Federal Government 
play? Today we hope to learn the answer to these questions and 
start to build a record that we hope will shape policy and how 
to most effectively address the devastating effects the 
foreclosure crisis has had on these neighborhoods.
    Among the excellent witnesses we will have at today's 
hearing we will hear from the Federal Government: An official 
from the Treasury Department will discuss the Federal response 
to the overwhelming number of foreclosures. The Treasury 
administers the administration's primary response to the crisis 
known as the Home Affordable Modification Program. This 
program, which was unveiled in March of this year, has been far 
too slow in accomplishing its stated goal: Giving loan 
servicers a monetary incentive to modify as many home mortgage 
loans as possible so that millions of more people do not end up 
in foreclosure. The simple fact is that nationally the pace of 
foreclosures continues to outpace the rate of mortgage 
modifications and the same is true for this region.
    Treasury will no doubt tell us that their latest initiative 
announced last week will finally change this scenario for the 
better. But there are millions of Americans who are unemployed 
or underemployed, whose incomes are vastly reduced and whose 
homes are worth less than the mortgage they owe. For many 
Americans things are not expected to change anytime soon. The 
question is: What must government do to reverse the cycle of 
borrower default, foreclosure, vacant and abandoned housing, 
and even more depressed housing values.
    The subcommittee has come to Cleveland today to bear 
witness to the turmoil caused by the housing foreclosure crisis 
and resulting economic devastation to its communities. The 
subcommittee is working to shape the reform of the existing 
regulatory structure that allowed this crisis to envelope our 
nation. And we also intend to ensure that this administration 
upholds its promises to provide relief to distressed homeowners 
and hold banks and their loan servicers accountable requiring 
them to do everything in their power to keep homeowners in 
their homes.
    We look forward to the important testimony we are going to 
hear today. At this time I recognize the distinguished ranking 
member of this subcommittee, Mr. Jordan of Ohio. You may 
proceed.
    Mr. Jordan. Thank you, Mr. Chairman. I appreciate the 
chairman's comments. We do have--when chairman talked about our 
working relationship, he wasn't just talking like a politician; 
it's true. And I appreciate the passion he brings to this 
process and the many issues you had a chance to work on this 
past year. It's also great to have our colleague, Mr. 
LaTourette, who does a great job for our State as a member of 
the Appropriations Committee as part of this hearing today as 
well.
    Mr. Chairman, thank you for calling today's hearing. It's 
important for our committee to hear from people across the 
country suffering this recession, including the fine people of 
Ohio. Across the Nation and in the Cleveland area, more 
families are losing their home to foreclosure than at any other 
time in history. The national foreclosure rate more than 
tripled from 2005 to 2008 and only six States were hit harder 
than the State of Ohio in the year 2008.
    The Federal Government is a primary culprit in this 
national nightmare, in my judgment. Federal laws push banks to 
make unsound loans. Fannie Mae and Freddie Mac starting in 2004 
bought $1.6 trillion worth of risky mortgage loans which 
provided artificial demand. House prices collapsed, 
foreclosures soared and families are suffering because of the 
well-intentioned but misguided Federal intervention into the 
marketplace. The Federal Government can't run the economy and 
we cause disasters when we try.
    The administration is trying to fight the foreclosure wave 
with the same demanding control philosophy that caused it. We 
spent $75 billion to modify mortgage loans. The 
administration's program applies a one-size-fit-all net present 
value calculation to every family anywhere in this country who 
applies for a modification. The Treasury Department has kept 
its net present value calculation model a secret. The public 
doesn't know when a modification will be offered and when it 
won't. Other Federal agencies who run mortgage modification 
programs have published their net present value tests, but 
Treasury continues to resist transparency and accountability.
    This committee has learned a large truth. Despite the 
intent of the program, these efforts are failing. While the 
administration promised the American people that the program 
would be resolved in 3 to 4 million modified loans, we've 
recently learned from the congressional oversight panel that 
the program has accomplished fewer than 2,000 permanent 
mortgage modifications. This isn't the first time the 
government mortgage modification program has completely 
flopped.
    The HOPE for Homeowners refinancing program which started 
in 2008 was supposed to help 400,000 families, but when the 
congressional oversight panel examined the program this fall, 
HOPE for Homeowners had closed only 94 loans, 94 loans.
    The only true solution for the families who are in danger 
of losing their homes is a broad-based economic recovery. 
Economic recovery is the only solution that will work for 
everybody, not just a narrow slice of families who pass the 
Treasury Department's net present value test. Economic recovery 
is the only solution that won't just postpone the hardship that 
many homeowners are feeling. An economic recovery will not come 
from government efforts that spend billions of dollars and pour 
them into a one-size-fits-all program that simply doesn't work. 
Instead, Mr. Chairman, economic recovery will only come when 
government gets out of the way of job creation.
    Thank you again for calling today's hearing and I look 
forward to hearing from the witnesses and asking questions.
    Mr. Kucinich. I thank the gentleman for his statement.
    The Chair recognizes Congressman LaTourette of Ohio. You 
may proceed.
    Mr. LaTourette. Chairman Kucinich, thank you very much for, 
one, letting me participate in this hearing and thank you also 
for having this hearing. And I just echo the comments that you 
made. I'm entering my 15th year in Congress and you came in a 
little bit after I did, but I have enjoyed working with you and 
I think that, as the country cries out for bipartisanship and 
wonders why it is people fight all the time rather than getting 
solutions done, I think our partnership has been a good one, 
and so much so that we've even been able to bicycle together.
    Mr. Jordan. And that's quite significant.
    Mr. LaTourette. And I would just also indicate that this is 
one of the few times that I'll be on your left during the 
course of our moving forward.
    I also want to welcome Jim Jordan to Cleveland. Jim 
represents the West Side of our State and a newer Member of the 
U.S. Congress. And Congressman Jordan has already made his 
mark, and to be a ranking member of the subcommittee so early 
in your career, that's a wonderful accomplishment and you 
deserve it.
    Less than a month ago, the Mortgage Broker's Association 
issued a report on where foreclosures were and what's been 
going on and the news is not good. It says that one out of 
every six Ohio homeowners finds themselves in foreclosure, the 
national average is one in seven. And so we are behind the 
national average.
    And the landscape is changing and I think both of my 
colleagues are correct. This is no longer a situation where 
people bought houses for greater than they could afford, it's 
no longer a situation where people were just looking at 
subprime loans, where people were taken advantage of by 
predatory lending. Things are now growing with homeowners who 
have good, low-rate home loans. The report also indicates that 
the foreclosure rate probably won't peak until the end of 2010 
at the earliest, and while so much emphasis has been placed by 
the Federal response on subprime people that have been under 
water, we now have, when you put on top of it, the fact that we 
have 5\1/2\ million people who have lost their jobs in this 
year, you have people that can't make their mortgage payments. 
And my grandmother used to call it ``bass ackwards.''
    Some of the programs that have been crafted in Washington 
will come in and assist the homeowner who is under water and 
who has been delinquent for 3 months or more, but there is no 
small part of the calls that I get from my office, and I'm sure 
it's the same for you, Dennis and Jim, are from people who want 
to pay their mortgage but the breadwinner has lost their job. 
They are not behind yet 3 months and so there's no program to 
give them a hand. And we just had a couple call the office the 
other day, an elderly couple, and they are struggling to make 
their mortgage. And when they called the bank and the Federal 
arm, they said you got to be behind 3 months.
    Now, you know it would be a strange piece of advice for any 
of us as Congress-people to advise their constituents not to 
pay their mortgage for the next 2 months so they can become 
eligible for one of the Federal programs. So, clearly, we not 
only have to continue the response and deal with the subprime 
mess and predatory lending, but we also have to deal with those 
people that are now hit with this savage unemployment that is 
going through the economy.
    And I'd just like to throw out one germ of an idea that's 
certainly perking around my head and when we get back to 
Washington later today or tomorrow, I think I'm going to draft 
a piece of legislation. And it seems to me that something like 
the student loan program would be in order in this situation in 
that in the student loan program, you have the ability to defer 
the principle. If you pay your interest, and Rokakis will be 
happy to pay your taxes still, but you could defer the 
principle. And unlike some of the other ideas like moratoriums 
and stopping things and everything else, the bank isn't a loser 
because you just extended the term on the loan, you still have 
to pay for the house that you live in, but getting relief until 
you get a job and your financial situation improves might be 
one way that we can help everybody, rather than those that just 
find themselves in the subprime mess.
    So I look forward to this hearing. I look forward to 
hearing from our elected officials and others. I want to thank 
you for letting me participate.
    And just as a parochial note, I really think that, I was on 
the radio this morning, and they said ``give me some good 
news.'' I think the good news here, at least some of the good 
news in Cleveland, is for the first time we had Glenville and 
Chagrin Falls in the State football championships. And although 
that didn't work out, we are all proud of both the city of 
Cleveland School and the school from out where I'm from. And I 
thank you.
    Mr. Kucinich. Thank you very much, Congressman LaTourette. 
There is also good news in the LaTourette household. 
Congressman and Mrs. LaTourette have just had the blessing of 
their second child, so congratulations, Congressman.
    And I look forward to working with you on any of the 
proposals that can bring relief to people who are trying to 
save their homes.
    Before I swear in our witnesses, I want to acknowledge the 
presence of City Councilman Anthony Brancatelli. You have 
really done tremendous work at the ward level in trying to do 
everything you can to help the people in the Slavic Village 
area, an area that I was privileged to represent one time in 
the city council. So I want to thank you very much for your 
presence here and the work that you've done.
    We are going to move now to the witnesses and I want to 
start by introducing our witnesses. Representative Mike Foley 
has been representing constituents in Brookpark, Parma Heights 
and Cleveland Wards 19, 20 and 21 since 2006. He is formerly 
the executive director of the Cleveland Tenants Organization 
and now in the Ohio Legislature, he continues to focus on 
housing issues, the environment and consumer rights, among 
other important issues.
    Representative, or the Honorable Senator Tim Grendell has 
been a State senator from Ohio's 18th District since 2004, 
representing constituents in Lake and Geauga Counties, as well 
as Cuyahoga County communities of Gates Mills, Mayfield 
Heights, Mayfield Village and Highland Heights. He serves as 
chair of the Judiciary Criminal Justice Committee and his 
legislative focus has been on such issues as sex offender 
registration laws and comprehensive eminent domain reform.
    Councilman Michael Dudley Senior is council member for ward 
one of the city of Garfield Heights and has been serving since 
2007. He also served as a staff sergeant in the U.S. Army from 
1978 to 2007.
    Mr. Daryl Rush is the director of community development of 
the city of Cleveland under the administration of Mayor 
Jackson. His department administers Federal funding from the 
Department of Housing and Urban Development, provides financing 
and assistance for housing development and offers housing 
services to residents.
    Jim Rokakis has served as Cuyahoga County treasurer since 
1997 and under his leadership, the office took an early role in 
combating the foreclosure crisis, particularly in regard to 
abandoned parties and the creation of the county land bank. He 
helped to create and oversee the County's ``Don't Borrow 
Trouble'' mortgage foreclosure prevention program. And I have 
to say that more than any county official in America, you 
really have been on top of this, Mr. Treasurer, and I just want 
to thank you for the leadership that you've shown.
    Ms. Phyllis Caldwell was recently named the chief of the 
Homeownership Preservation Program for the U.S. Department of 
Treasury where she implements administration policies designed 
to address the needs of homeowners. Prior to this appointment, 
Ms. Caldwell was president of the Washington Area Women's 
Foundation and also headed community development banking at 
Bank of America. Thank you for being here.
    It's the policy of the Committee on Oversight and 
Government Reform to swear in all witnesses before they 
testify. I would like to ask the witnesses, if you please rise 
and raise your right hands.
    [Witnesses sworn.]
    Mr. Kucinich. Let the record reflect that the witnesses 
answered in the affirmative.
    I ask that each of the witnesses now give a brief summary 
of your testimony. I would like you to keep the summary to 5 
minutes in duration. Your entire written statement will be 
included in the record of the hearing so try to help us out and 
hold to that.
    I'm going to call on Mr. Foley and thank him for the many 
different programs that we worked on together and for your 
advocacy for people, which has always been very strong, and I'm 
grateful that you are here, and you may begin with your 
testimony.

   STATEMENTS OF MIKE FOLEY, OHIO STATE REPRESENTATIVE, 14TH 
 LEGISLATIVE DISTRICT; TIM GRENDELL, OHIO STATE SENATOR, 18TH 
  LEGISLATIVE DISTRICT; MICHAEL DUDLEY, SR., COUNCIL MEMBER, 
 GARFIELD HEIGHTS WARD ONE; DARYL RUSH, DIRECTOR OF COMMUNITY 
    DEVELOPMENT, CITY OF CLEVELAND; JIM ROKAKIS, TREASURER, 
  CUYAHOGA COUNTY; AND PHYLLIS CALDWELL, CHIEF HOMEOWNERSHIP 
       PRESERVATION OFFICER, U.S. DEPARTMENT OF TREASURY

                    STATEMENT OF MIKE FOLEY

    Mr. Foley. Thank you, Chairman Kucinich, and I appreciate 
the opportunity to, for the last 10 or 15 years, be able to 
work with you as an advocate on affordable housing issues and 
now as a State Representative.
    Good morning, Chairman, members of Domestic Policy 
Subcommittee of the House Oversight and Government Reform 
Committee. I would like to thank Congressman Kucinich for 
allowing me to provide testimony on the foreclosure crisis in 
Ohio.
    As a State Representative and chairman of the Ohio House 
Housing and Urban Revitalization Committee, I have had the 
opportunity to see and hear firsthand the effect that this 
crisis has had on Ohioans, while also working on legislation 
that hopes to prevent both foreclosures and the negative 
consequences they have on homeowners, neighborhoods and cities. 
From my experience, I can tell you this: The Ohio House of 
Representatives has taken this crisis seriously. Today I would 
like to touch on a few of the bills that we are working on as 
they wind their way through the legislative process, the 
statehouse or have already been enacted. Foreclosure in Ohio 
follows a judicial, not an administrative, process and 
depending on the circumstance, can take anywhere from 4 to 12 
months. The bills introduced at the State level seek to address 
the foreclosure issue at several stages along the process and 
are best discussed as they take place within this process. Our 
goal is to first do what we can to help keep homeowners in 
their homes, and if that is not possible, to move them through 
the process as fast and with as much transparency as possible 
while minimizing the effect vacant, foreclosed properties have 
on neighbors and the communities.
    In February 2009, State Representative Denise Driehaus and 
I introduced House Bill 3, the Foreclosure Prevention Act, 
which is a fairly comprehensive act. In addition to keeping 
borrowers in their homes, it helps to protect the loss of 
investment dollars by maintaining home values, encouraging 
payment workouts that guarantee greater returns than sheriff 
sales. Many of the provisions in this bill are temporary and 
are intended to provide flexibility during an extraordinary 
time when inactions have allowed many thousands of homes to 
fall into foreclosure displacing countless Ohioans and washing 
away the property value of their communities.
    This bill has four primary components: A conditional, 6-
month moratorium on certain foreclosure judgments, a licensing 
on regulation package for mortgage servicers, an information 
package which includes a mortgage servicing data base, 
foreclosure notification requirements and transparency 
requirements during foreclosure proceedings, and a foreclosure 
filing fee that would provide funding for data base 
administration, community redevelopment, financial education 
and, I think most importantly, credit and foreclosure 
counseling. House Bill 3 passed out of the House in May 2009 
and is currently awaiting its first hearing in the Ohio Senate.
    While the relationship between homeowners and lenders is 
well discussed, renters are too often direct and unnecessary 
victims of foreclosure crisis. House Bill 9 is a bill that 
Representative Ted Celeste and I introduced and passed out of 
the House in May 2009 also. It would basically protect tenants 
in the foreclosure process, give them more time and notice that 
the foreclosure is occurring and allow them to become month-to-
month tenants at the end of their tenancy, at the end of the 
foreclosure process.
    Recently we've been seeing problems that happen after the 
foreclosure judgment occurs. In 2007 and 2008, Representative 
Lou Blessing from Cincinnati and I passed House Bill 138 which 
required sheriffs to file foreclosure deeds after a foreclosure 
had occurred. In all too many circumstances, foreclosures were 
occurring, deeds were being prepared by the sheriff, given to 
the lenders but not being filed so we didn't know who owned 
property. This bill passed in House in 2008 and we think it's 
been fairly effective at the back end of the foreclosure 
process.
    That back end has now moved up, however, and Representative 
Dennis Murray is bringing or brought a bill that basically 
would force lenders to use their judgments after a foreclosure 
judgment or lose it. Right now we are seeing that lenders are 
getting foreclosure judgments, but are not filing to go to 
sheriff sales, so they've moved up this kind of process of not 
marking their title or not filing the title. Representative 
Murray has been working diligently with a number of the folks 
in this room to make sure that we are able to figure out who 
owns property and that lenders aren't engaging in our 
foreclosure process but not using--going through the full 
fruition of what they should be doing.
    Last, we think that one of the most important things that 
Ohio needs to do is develop a comprehensive land bank system. 
Last year Cuyahoga County was able to develop a land bank 
process that Treasurer Rokakis has been very good at 
implementing. Every other city and county in the State wants 
this, for the most part, the larger cities in the county want 
this ability to do land banking, to be able to take the vacant 
properties that are sitting foul and affecting the property 
values of every other property in their system, to bring it 
back in and reuse those properties in a more logical, rational 
way.
    Representative Kucinich, I appreciate your having these 
hearings. It's very important, it's very timely and it's stuff 
that we think that needs to happen at both the State and the 
Federal level. Especially I just want to say that servicers who 
are in the middle of this kind of whole process, this 
bureaucracy of the foreclosure process, really need regulation 
and really need Federal regulation. We look to the Federal 
Government to engage in that. Thank you.
    [The prepared statement of Mr. Foley follows:]

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    Mr. Kucinich. All right. Thank you, Gentlemen.
    Senator Grendell, thanks for being here. You worked with 
Congressman LaTourette and I on some major matters relating to 
city hospitals and steel mills. You've really been a champion 
of the people and I just want to thank you for making the kind 
of bipartisan cooperation that we know is a possible reality. 
So thank you for being here and you may proceed for 5 minutes.

                   STATEMENT OF TIM GRENDELL

    Mr. Grendell. Good morning, Chairman Kucinich, ranking 
member of the former Ohio Senate and colleague Congressman 
Jordan and my Congressman, Congressman LaTourette. And I want 
to thank you, Chairman Kucinich, for bringing Congress to 
Cleveland and for providing me with this opportunity to address 
the foreclosure and finance issues that now contribute to our 
State's and country's financial problems.
    While currently I have the privilege of serving in the Ohio 
Senate, I have also over 22 years of legal experience 
representing home buyers, home builders and developers and have 
negotiated numerous real estate financing transactions from 
simple home loans to multi-million dollar development homes. I 
have also represented the parties in foreclosure lawsuits. As a 
State legislator, I have been actively involved in the passage 
of land banking legislation, to which I applaud Jim Rokakis, 
and consumer protection legislation.
    While the national foreclosure crisis is generally dating 
to the beginning of the late 2006, early 2007, the seeds for 
that crisis were planted in 2000 when Federal law changes 
invited the broadening of access to home purchase financing, 
which, in turn, contributed to the loan crisis.
    Because of the scope and personal nature of the current 
foreclosure situation and its contribution to the decline of 
national and State financial institutions, there is a tendency 
to paint these issues with a broad brush or to seek more 
government intrusion into the free market lending process. The 
loosening of the home loan process promoted by Federal 
intervention may have been motivated by the admirable policy 
goals of increasing individual homeownership. However, 
admirable policy cannot override reasonable economic 
principles. If someone cannot afford to buy a home, a home 
should not be purchased. Traditionally, individuals were 
required to make attempt at a 10 to 20 percent down payment. 
Those individuals saved their money and made a substantial 
equity investment when they purchased their home, usually with 
a 15 to 30-year fixed rate mortgage.
    This millennium, individuals were able to purchase homes 
with little or no equity and with a variety of variable rate 
loans. In Cleveland, some speculators were able to borrow 
excess dollars based on friendly or inflated appraisals and 
actually profit from their home purchase. Often these 
properties were then rented out.
    While some foreclosures resulted from involuntary events 
such as the unexpected job loss, others resulted from the 
abandonment of overinflated valued buildings purchased on non-
recourse terms or by insolvent buyers. To the extent more job 
losses contributed to the foreclosure problem, focus should be 
on reducing taxes and regulatory burdens on business to promote 
economic development and new job creation.
    There are several factors that invited and fueled this 
unfortunate situation. These include Federal encouragement of 
high-risk home financing, overly aggressive lending fueled by 
the subprime loan investment market, failed regulatory 
oversight and a lack of personal responsibility by borrowers 
who were encouraged to borrow beyond their means.
    A strong argument can be made that the last factor is the 
most important because no one can be forced to borrow money, 
especially if such a loan is beyond the borrower's economic 
ability. Simply put, an individual who enters into a contract 
to borrow money is and must be expected to be bound by the 
contract. To hold otherwise, threatens the sanctity of private 
contracts, which forms the foundation of our free market 
economic system.
    Especially because of the scope and the publicity involved 
with the current foreclosure situation, there is a tendency to 
pursue further government intervention; however, prudence is 
warranted. No action should be taken that interferes with 
private contract rights. For example, forced restructuring of 
private loan agreement terms, or private contract enforcement 
rights, for example, delay or moratorium of foreclosures. The 
idea that private contracts can be rewritten or suspended by 
government in times of crisis is dangerous and potentially 
destructive to America's democratic free enterprise economic 
system.
    Moreover, it's important that the Federal Government should 
comply with the 10th amendment to the U.S. Constitution and 
refrain from interfering with the peoples' right to real 
property ownership and the banks' right to foreclosure.
    I respectfully submit that the current foreclosure and 
financial crisis results from a deviation from fundamental free 
market principles and that a return to free market principles, 
not more governmental intervention would be the appropriate way 
to work our way out of this crisis.
    To the extent Federal policies encouraged or pushed lenders 
into making bad loans or that the resulting access to easy 
money encouraged borrowers to enter into bad loans, government 
intervention exacerbates the process. More government 
intervention will only further degrade the situation.
    With this in mind, I respectfully make the following 
suggestions: One, the Federal Government should immediately 
cease and repeal any policies that encourage lending to 
unqualified buyers as determined by sound financial practices. 
Two, the Federal Government should resist the impulse to pass 
legislation that jeopardizes the enforceability of private 
contracts. Three, the Federal Government should recognize and 
honor the 10th amendment to the U.S. Constitution taking no 
action that interferes with the rights of the States to enact 
their own respective real property laws and foreclosure 
procedures as spelled out by Representative Foley. Four, return 
to free market principles which recognize that property values 
are based on what a willing buyer is willing to pay a willing 
seller and loan decisions should be made by a prudent lender to 
a qualified borrower based on sound economics and the 
borrower's likely ability to perform its contractual repayment 
obligation.
    At the end of the day, the goal should be a return to a 
free market system with minimum reasonable regulatory 
oversight. Lenders and borrowers must both act responsibly and 
the individuals must appreciate that they will be held 
responsible for meeting their contractual obligations. Neither 
Congress nor State Legislature should absolve those folks from 
those obligations no matter the scope or publicity or political 
benefit such legislation intervention may generate.
    President Dwight D. Eisenhower said it best, ``without free 
enterprise, there can be no democracy.'' The solution is more 
jobs, not more government. Thank you for the opportunity to 
address the Congress today.
    [The prepared statement of Mr. Grendell follows:]

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    Mr. Kucinich. Thank you very much, Senator Grendell.
    The Chair recognizes Councilman Dudley of Garfield Heights. 
We appreciate your presence here. You may proceed for 5 
minutes.

                STATEMENT OF MICHAEL DUDLEY, SR.

    Mr. Dudley. Well, thank you, Mr. Chairman. I'd like to 
thank the Committee of Oversight and also Government Reform.
    I honestly would like to be able to say that you never know 
what the feeling is until you get an opportunity to feel it 
firsthand what it is to have your house go in foreclosure. I 
got that opportunity to know how it was several years ago. When 
I was first elected, my second job didn't materialize as I had 
to leave my State job because the city of Garfield, OH 
councilman position is a part-time position. You do everything 
that a full-time representative will have to do. One, not being 
able to be able to work in the second job, it didn't 
materialize, I found myself in foreclosure, me and my wife and 
my family.
    We can sit here and we can talk about rules and regulations 
and how government shouldn't get involved, but I'm going to 
tell you that's not true. You need the government at some point 
to be getting involved in helping people. When you can walk 
around in the neighborhoods and you can see how many people are 
going to lose their home or how many people say--a good example 
is modification. Modification is OK to a certain extent, but we 
also lack the education to the people. That's the main concern. 
People are not being educated about the modifications. You can 
go into a modification in the month of March and don't know 
what your circumstances are going to become the month of 
August. Say the month of August you lose your job or you lose 
the second job you didn't actually acquire. Now you cannot go 
back and get a modification, they put you into what they call a 
forbearance plan. The word ``bear'' in that plan explains 
itself. You are not going to be able to bear to make those 
payments. So you are surely being lined up to lose your 
property or give your home, once again, turn it back in to the 
lender.
    I don't think enough is being done. I think we need to find 
some programs out there, we need to get something to educate 
these people. Nothing is being done about that. I think when we 
turn around and we actually give billions of dollars to these 
lenders and we don't put no stipulations on there as to how the 
money will be spent, but they have to be fair.
    Let's say the lender gives $3\1/2\ billion. They go and 
they put it into the Federal Reserve on Friday, from working 
with a company called Brink's, Inc., I know they are going to 
make some big interest on that money on that weekend. But when 
it comes time to get a loan to an individual such as myself and 
others who are out there living in the community, they want to 
give us 6.7. They want to give us 8.
    I had a senior, she is about 67 years old. Her modification 
says she will get 4.25 percent for 4 years. At the end of the 
4-years, she is going to more than 8\1/2\ percent on that loan. 
In 4 years she's going to lose her home. She can barely make 
the payment that they got her now at 700-something dollars, 
what's she going to do when that 8\1/2\ is due? She is gone.
    There's a lot of people. My community such as I live in 
ward one area, we got more homes what they call the grass 
cutting, than the entire six other wards put together. I have 
seen people say they were just tired of going through, should I 
say, the so-called modifications or not being dealt with what I 
say good faith by some of the lenders and a lot of them are 
just walking away from their homes. Some of them just can't 
take the pressure no more.
    Some of these cities, like when I say Cleveland, Garfield 
is basically right there on the border of Cleveland, so we feel 
the same pain that they're feeling in Cleveland. We are turning 
there cities and the suburban areas that surround Cleveland 
almost into ghost towns.
    A lot of them say, ``Mike, now our home is not even worth 
the value that the lenders are charging us for it.'' The 
lenders turn around in a particular modification plan and they 
tell you don't send no money until your modification is due. 
That's 6, 7, sometimes 8 months down the road. At the same 
time, you are being penalized and they are not educating the 
people once again, telling the people you're going to pay a 
penalty for not sending no money in. By the time that $600 a 
month and 8 months later, you don't owe them $3,000 or whatever 
it takes and they bill $3,200 whatever, you end up owing 7,000 
or more. So now that payment that you couldn't afford at $700 
before is now a $900 payment. So tell me how can a homeowner 
who couldn't pay 600 is going to be able to pay 900. They are 
setting us up for failure. It's not helping us.
    And I would like to say that we do need some more 
government funding. Some funding has been given to 
organizations, our communities shares, ESOPs and other 
organizations out there. The key is not you don't have to keep 
bailing the people out, but you have to educate the people, let 
them know what they are getting into. They are fighting for 
modification, they don't have no attorneys to go pay and take 
them to. It should be somewhere that they can take this at no 
cost to them, have somebody to review it and give them an 
opportunity to let them know do they want to go through with it 
because most of them is just signing so they can buy time and 
have a place to live. And that's what it's really about.
    We can sit up here and we can read a bunch of statements 
and stuff, but when you go back to the community where people 
are hurting the most, they are the ones without jobs. They are 
the ones without medical benefits, paying out of their pockets 
to go to the doctor today. In the process of paying to go to 
the doctor and buy food, sometimes they can't make the house 
payment. And you see most of them, the people who end up on the 
street, the shelters can't keep the families together no more.
    So I'm asking that somehow, some way to find some money to 
put into a program that can educate and help these people so 
they don't keep losing their homes. We need to do something. 
These are the same people who elected us to office, we do not 
elect ourselves. We are there to represent them and we have to 
look out for their best interests. And I thank you.
    [The prepared statement of Mr. Dudley follows:]

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    Mr. Kucinich. Thank you very much for your communication to 
us. We appreciate that very much.
    Mr. Rush, you are representing the city of Cleveland. 
Please let Mayor Jackson know that we are grateful for your 
attendance and we are grateful for your service as the director 
of community development. You may proceed for 5 minutes.

                    STATEMENT OF DARYL RUSH

    Mr. Rush. Thank you, Mr. Chairman. And good morning, Mr. 
Chairman and representatives of the committee, fellow panel 
members and members of the audience. I'm honored to be before 
you to represent the city of Cleveland and its mayor, Mayor 
Frank G. Jackson for today's hearing on the ongoing residential 
crisis.
    Let me first point out that yes, while Cleveland has been 
known as being at the epicenter of the crisis, what is not as 
well-known is that the city, under the leadership of the mayor, 
has taken an aggressive posture in responding to the 
challenges. And the subject today is about the ongoing 
foreclosure crisis. But it is imperative that we locally look, 
not as a crisis of foreclosure, but as a collapse of the 
housing market and the housing structure. And our approaches, 
as you will hear from some of our partners today, are 
comprehensive and multifaceted. In order for us to dig out of 
the hole locally, we have to address all of the weakness in the 
entire housing system.
    Cleveland battled the exploitation of the housing market as 
it changed from flipping to predatory lending to foreclosure to 
dumping. It is imperative to acknowledge that the tricks 
deployed for profiteering evolve. Our response locally has to 
evolve as the impact on the market changes because of the 
actors and the approaches that they take.
    My comments that I'll make this morning are more detailed 
than my written comments, but will I describe not only the 
impact on the local market, but also the approaches that we are 
taking and some of challenges that we face. It is important to 
note that, as the city of Cleveland has tried to battle the 
foreclosures and the impact of the foreclosure crisis, it was 
during the period where our revenue from HUD and other programs 
was declining. So the impact on our budget is two-fold. One, we 
have increased funding for nuisance abatement by a factor of 
two between 1995 and last year. We spent $890,000 just on 
nuisance abatement. That's board-ups, that's debris removal. We 
have also increased our funding for demolition from 1.8 million 
in 2004 to, with the assistance of NSP, to 15 million this 
year. This is not enough, even with those funds.
    We conducted a survey of vacant, distressed properties last 
year and we have 8,009 throughout the city of Cleveland. That 
is less than the vacant properties that are largely the result 
of foreclosure, but those are the ones that are screaming to 
have action, either to be put back on line or to be demolished. 
We are updating that survey. It will be done by the end of the 
year.
    But we have to come up with approaches that will fit within 
the budgetary constraints that the city has. The decline in 
property tax and revenue as a result of the foreclosures 
further impedes the resources, the effective use of the 
resources that we have available to us.
    What we have done locally is to buildupon the strength of 
our local infrastructure to design approaches that will not 
only address and prevent the foreclosure itself, but also the 
aftermath. What do we do with the house, whether it's 
demolished or whether it's rehabbed and put back on line, how 
to get people to be in a position to buy the house or to rent 
the house. The entire delivery system has to be addressed in 
order for us to have effective resolution of the problem 
locally.
    We have a lot of partners within the delivery systems 
locally. The county, we have strength in our relationship with 
the county. City council. We have a non-profit infrastructure 
and a neighborhood infrastructure of non-profit organizations 
referred to as CDCs. It's an all-hands-on-deck approach that we 
have taken locally to be able to respond to the crisis.
    We have created, using NSP funds, an operation prevent 
program for the department of urban housing to be more 
aggressive with going after illicit and illegal dumping of 
properties locally. We have increased our data management so 
that we can have a better sense of the extent of the problems, 
what is the impact on the market and how we can identify the 
people who own properties, the people that are flipping and 
dumping property. We worked with Case Western Reserve 
University in their NEO CANDO system in order to get a better 
handle on our data.
    Our strategies are based on a neighborhood typology which 
allows us to look at the relative market strengths of each 
neighborhood at a block group level. What is important is there 
have been several comments about intervention. Government 
intervention is necessary in working with the people to stay in 
their houses and throughout the rest of the process.
    As we continue to fight the impact of foreclosure locally, 
we will continue to be creative in how we come up with 
responses and continue to work with our partners to be 
effective. Thank you.
    [The prepared statement of Mr. Rush follows:]

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    Mr. Kucinich. Thank you very much, Mr. Rush.
    Mr. Rokakis, you may proceed for 5 minutes. And I'm very 
grateful for your presence here. Please continue.

                    STATEMENT OF JIM ROKAKIS

    Mr. Rokakis. Mr. Chairman, members of the committee, thanks 
for the opportunity to address you today about the impacts of 
the foreclosure crisis on this county, Cuyahoga County, where I 
serve as treasurer.
    This is, I believe, the fourth time I've had the honor to 
appear before a congressional committee.
    It's sad to say that this State and this county have never 
been in worse shape, never. Worse yet is the fact that things 
will worsen and that we have not bottomed out. People talk 
about endless wars these days in Congress. Mr. Chairman and 
members of the committee, this is an endless war. We've been in 
the middle of a foreclosure crisis here since the late 1990's. 
We are losing that war.
    Consider these facts: Serious delinquencies, not 
foreclosures, but properties that are delinquent 90 days and 
beyond, are at an all-time high. If you look at this chart, you 
can see from the graph loans that are at least 90 days late, 90 
days in arrears, we call them zombie loans, we talked about 
zombie bankers, zombie loans as well, loans that aren't curing 
and will never cure. Banks have simply stopped filing 
foreclosures on these properties. They don't want them, they 
refuse to compromise on these loans either guaranteeing they 
get into that category of 90-day-late loans.
    This growing number of 90-day plus delinquencies hides the 
sad truth. Supreme Court statistics in Ohio show that 
foreclosures in the State are up 1\1/2\ percent over last year, 
but if you include these delinquencies in the foreclosure 
filings, it would push Ohio's filings to over 100,000. And it's 
right there on the chart.
    If you take a look at where we are today, that's more than 
twice the number we saw back in 2000. I believe there's another 
chart, Steve, and Paul you got to get up. You have the other 
chart there. Take a look at that, look at the 90-day plus that 
are foreclosure filings in the State of Ohio. It's more than 
twice the number we had in 2000, the first year Ohio led the 
court file on foreclosure filings, more than twice the number 
in 2001 and 2002.
    This is no longer a city problem. More and more this 
foreclosure crisis is a suburban problem. I'd like to show in 
the next graph which will show you that filings now in the 
suburbs far outstrip filings in the city of Cleveland.
    The increase in unemployment in this region has led to a 
historic increase in foreclosures and delinquencies, as you 
said, Mr. Chairman, now on prime rate loans. The historic cure 
rate on delinquent prime loans, those are prime loan borrowers 
that catch up on their delinquencies, have fallen from 45 
percent in 2000 to 2006. Again, that's the percentage of people 
who are in foreclosure back on prime rate loans, 45 percent of 
those folks who cure fall into just 6.6 percent in the August 
study by Fitch Rating Services.
    To complete the perfect storm, we are now in the situation 
where declining home values have trapped thousands of our 
county homeowners in upside down mortgages where the value of 
the home is less than the value left on the mortgage. These 
people are effectively tied to the land, not very different 
from serfs under the feudal economic system. People who have to 
sell their homes for a new job or transfer are simply out of 
luck. The same is true for people who lose their homes, people 
who lose their jobs or have their hours cut back as the 
councilman stated.
    Three of Ohio's metropolitan areas are ranked in the top 50 
for cities with mortgages under water. The Home Affordable 
Modification Program [HAMP], has failed here in Ohio. You will 
hear details from others, but suffice it to say, the program 
here has flopped with the fourth worst loan modification rate 
in the country right here in Ohio. Why do we continue in 
government to tout failed programs like HAMP? Why? Why don't we 
just admit that the program is a failure and start over with a 
program that actually works?
    What does actually work, Mr. Chairman, is foreclosure 
counseling, not 800 numbers, but a sit-down, face-to-face 
counseling session where a trained counselor helps troubled 
homeowners navigate muddled foreclosure waters. We know that 
counseling works. For 3 years we have had our own local 
prevention efforts here monitored by the Center for Community 
Planning and Development at Cleveland State. We've had hard 
data to back up that assertion. When delinquent homeowners work 
with counseling agencies here in Cuyahoga County, 53 percent of 
the time foreclosures can be averted. This is a remarkable 
success rate, but the number of needful homeowners still far 
exceeds the capacity of our local non-profit groups that serve 
them. Counseling is a long and hard slog. It's not easy, fast, 
but it's effective and relatively inexpensive, especially when 
weighed against the staggering costs to our communities. When a 
foreclosure proceeds to judgment sale, we know what the cost is 
to the community. We need to make the investment in solutions 
that experience demonstrates actually works and stop relying on 
the lending industry to solve the problem that they helped to 
create in the first place.
    The National Foreclosure Mitigation Counseling Program 
funding for Ohio is being slashed from five million to $2\1/2\ 
million statewide, with some of that money coming in to Ohio 
going to legal services leaving less than $1.2 million for 
State counseling. We need that amount here in Cuyahoga County 
alone. Please, if you do nothing else, please help us at that 
level of funding.
    I saw a report, members of the committee, last week that 
Chairman Geithner, Treasurer Geithner makes calls on a daily 
basis to folks on Wall Street, five or six bankers, he touches 
base to see how the economy is doing. I passed my card out to 
Ms. Caldwell. I think the Treasury Secretary needs to call 
people in the counseling programs here in this room. He needs 
to make calls just once in a while to ask how the programs are 
doing and I think he'll get the sad truth that they are not 
working here in northeast Ohio. Thank you.
    [The prepared statement of Mr. Rokakis follows:]

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    Mr. Kucinich. Thank you, Mr. Rokakis. Excellent suggestion.
    I want to thank Ms. Caldwell for being here to represent 
the Treasury Department, talk about the HAMP program. I look 
forward to your testimony. You may begin.

                 STATEMENT OF PHYLLIS CALDWELL

    Ms. Caldwell. Chairman Kucinich, Ranking Member Jordan, 
Councilman LaTourette, thank you for the opportunity to testify 
about the Treasury Department's comprehensive initiatives to 
stabilize the U.S. housing market and support homeowners.
    The administration has made strong progress in ramping up 
the Making Home Affordable programs. Although the number of 
homeowners being helped continues to grow, we recognize that 
Making Home Affordable a success faces challenges in converting 
borrowers to permanent mortgage modifications and fostering 
effective communication between the servicers and borrowers. We 
can all do better in ensuring that these programs are a 
success.
    I'd like to briefly address four issues that we are very 
focused on with the Making Home Affordable program. First is 
conversion from trial to permanent modification; second, 
foreclosures; third, the transparency; and fourth, 
unemployment. On conversion, our most immediate critical 
challenge is converting Home Affordable Modification or HAMP 
trial modifications to permanent modifications. Servicers 
report that about 375,000 trial modifications will be more than 
3 months old and eligible to convert to permanent prior to 
December 31st. The Treasury is implementing an aggressive 
campaign to increase the number of permanent modifications. We 
have required conversion plans from the seven largest servicers 
which account for 85 percent of the market. Treasury and Fannie 
Mae account liaisons are assigned to these servicers and 
followup daily to monitor progress. We have engaged 81 HUD 
field offices and thousands of State and local governments in 
this effort. We are using our Web site to simplify the 
modification process through instructional videos, downloadable 
forms and an income verification checklist. This week we hold 
our 20th formal event connecting servicers, housing counselors 
and homeowners.
    We understand that foreclosures are a growing concern. In 
HAMP, any pending foreclosure sale must be suspended and no new 
foreclosure proceedings may be initiated during the trial 
period. Foreclosure proceedings may not be initiated or 
restarted until the borrower has failed the trial period and 
has been considered and found ineligible for other foreclosure 
prevention options. We are working with stakeholders to review 
and develop improvements to the communication between servicers 
and borrowers and to existing rules so no borrower being 
evaluated for HAMP is subject to foreclosure.
    On transparency, beginning in August, we publicly reported 
servicer specific results. October's report contained trial 
modification data by State. The November report scheduled to be 
released this Thursday will contain permanent modification data 
by servicer. And beginning in January, reports will include a 
matrix for selecting servicer performing in categories such as 
response time for completed applications.
    In addition, we are requiring servicers to send borrowers 
notices that clearly explain to borrowers why they did not 
qualify for HAMP modification. Borrowers are also able to ask 
for a second look on their application.
    Regarding the transparency of the net present value model, 
a key component of the eligibility test, we are increasing 
public access to the net present value white paper, which 
explains the methodology used in the models. We are also 
working to increase transparency of the model so that there can 
be a wider understanding of how it works among housing 
counselors and borrowers.
    Regarding unemployment, HAMP is designed to allow 
unemployed borrowers to participate. Borrowers with nine or 
more months of unemployment insurance remaining are eligible to 
include unemployment insurance in their income for 
consideration in the modification request. We recognize, 
however, that some unemployed borrowers will have trouble 
qualifying, impacting markets facing high unemployment. The 
Treasury is aware of a number of policy proposals that have 
been advocated to further assist unemployed borrowers. While 
our focus is helping as many borrowers as quickly as possible 
under the current program, Treasury is actively reviewing 
various ideas to improve program effectiveness in this area.
    While we acknowledge those concerns, HAMP is on track to 
provide a second chance for up to three to four million 
borrowers by the end of 2012. Based on a recent survey of 
servicers, we estimate that, as of the beginning of November, 
up to 1\1/2\ million homeowners were both 60 days delinquent 
and likely to meet the HAMP requirements. This puts the 
approximately 650,000 borrowers who had begun trial 
modifications as of the beginning of November in complete 
context.
    As of November 17th, over 680,000 borrowers are in active 
trial modification. Servicers report that over 900,000 
borrowers have received offers to begin trial modifications. On 
average, borrowers in trial modifications have had their 
payments reduced by over $550 a month, for a reduction of 
roughly 35 percent from their prior payment.
    Over 230,000 adjustable rate mortgages and nearly 450,000 
fixed rate mortgages have been modified on a trial basis to 
sustainable levels. HAMP has made great strides in less than a 
year and we look forward to working with you to enhance the 
program's performance and help keep Americans in their homes. 
Thank you.
    [The prepared statement of Ms. Caldwell follows:]

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    Mr. Kucinich. Thank you very much, Ms. Caldwell.
    The committee is now going to go to the period where we 
begin to question witnesses. Each one of us will have 5 
minutes, and I'm going to begin my 5 minutes right now. A 
question to Ms. Caldwell: The HAMP program, the Home Affordable 
Modification Program is strictly voluntary, is it not?
    Ms. Caldwell. It is voluntary to the servicers and we 
signed up over 71 servicers accounting for a large portion of 
the market.
    Mr. Kucinich. Investors have shown that they do not--do not 
want to voluntarily allow a reduction in loan principal. 
That's, in large part, a way to explain the failure of the Home 
Affordable Modification Program. Can you say to us today that 
we can continue to rely on voluntary efforts of loan servicers 
and expect to see different results?
    Ms. Caldwell. At this point in the program, the focus was 
really on getting people signed up for the program, which we 
did, and then it was focused on getting people into trials as 
quickly as possible. And we now have 650,000 people in a trial 
modification. Now is the point in the program that we need to 
focus on converting those trial modifications to permanent 
modifications.
    Mr. Kucinich. Mr. Rokakis, do you have a response to that 
as someone who has to deal with----
    Mr. Rokakis. Mr. Chairman, I would uphold because there are 
some really, really capable housing counselors back here who 
are going to be speaking at length about their experience with 
HAMP, and I think you need to speak with Mark Seifert and 
others----
    Mr. Kucinich. We'll get to that.
    Mr. Rokakis. Just from talking to them, Mr. Chairman, I get 
an entirely different----
    Mr. Kucinich. We'll have a chance to speak with them.
    Ms. Caldwell, the data shows that loan servicers have, 
through their voluntary efforts, made Ohio borrowers among the 
least likely to receive a loan modification under the program. 
Ohio ranks 48th out of 50. Why does this program treat Ohioans 
so unfavorably? What's the business justification? And what's 
going to change that calculation?
    Ms. Caldwell. The HAMP program has offered trial 
modifications to over 14,000 residents in Ohio, and while it is 
approximately 2 percent of the mortgage modifications in a 
trial period, the State of Ohio accounts for a little over 3 
percent of the 60-day plus delinquencies nationally.
    Mr. Kucinich. You are not justifying it, you are explaining 
it?
    Ms. Caldwell. I'm putting it in context. And then moving on 
to say that, again, the focus has been to get people in trials 
as fast as possible and it has not been on a geographically 
targeted basis. When we get through this conversion phase to 
see how many trials convert to permanent and begin to report 
the data on a State-by-State and MSA basis, we will have the 
ability to look at the program and understand the impact across 
different States.
    Mr. Kucinich. Thank you. Now, according to the Treasury 
Department's own data, about 25 percent of borrowers who have 
been helped under the administration's mortgage modification 
plan have already fallen behind on their new mortgage payments. 
It's been said that this program is targeted to the foreclosure 
crisis as it existed 6 months ago, not as it is today.
    Ms. Caldwell, is the Treasury Department ready to admit 
that the Home Modification Program has been a failure? Don't 
you think it's time to implement a program that reduces the 
principal that borrowers owe on their homes rather than just 
lowering the interest rate and pushing the payments down the 
road, Ms. Caldwell?
    Ms. Caldwell. The HAMP program was set up to provide 
affordable monthly payments for homeowners and it is on track 
to provide a second chance to three to four million homeowners 
by the end of 2012. While we do understand that foreclosures 
are a growing concern and we continue to explore ways that we 
can address the foreclosure crisis, and we have worked with our 
borrowers and servicers to improve communication in that 
manner, the program is on track to achieve what it has set out 
to do in terms of affordable monthly payment adjustments for 
homeowners.
    Mr. Kucinich. I have time for one more question. A witness 
on our second panel is Mr. Mark Seifert, the executive director 
of the ESOP, the statewide organization provides free 
foreclosure prevention counseling and assists borrowers with 
the paperwork necessary to request a modification. He has told 
us that all ESOP modification requests have the full and 
complete paperwork with them when they are submitted. Yet, as 
of 400 HAMP trial modification packages ESOP has submitted 
since the program started, they only have one that's been 
converted to a permanent modification. ESOP tells us by their 
calculations, they should have near 300 by now. So ESOP's 
modifications are waiting and waiting and waiting, then what 
about the folks who don't have dedicated counselors helping 
them? Do you have any comment on that?
    Ms. Caldwell. We have acknowledged the issues that 
servicers have had in ramping up the program to convert 
borrowers from trial to permanent modification. Part of the 
reason for the conversion campaign that was announced was to 
hold servicers accountable for those loans that they had in 
their office that had documentation and put a plan in place to 
get those loans through decision and to be held accountable for 
that. And we will see the results of that at the end of this 
month.
    Mr. Kucinich. Thank you. The Chair recognizes the ranking 
member, Mr. Jordan. You may proceed.
    Mr. Jordan. Thank you, Mr. Chairman. Let me also thank our 
panel for being here today and for your continued public 
service in your respective areas.
    Ms. Caldwell, I want to come back to you, and I think Mr. 
Rokakis said it right, that the program is a miserable failure, 
it doesn't work. In fact, let me just start with the basics. 
How much TARP money, how much taxpayer money has been allocated 
to be available for this program?
    Ms. Caldwell. The program allocation is $50 billion.
    Mr. Jordan. $50 billion. According to Treasury's most 
recent TARP transaction report, $27 billion of that has already 
been allocated; is that correct?
    Ms. Caldwell. That's correct.
    Mr. Jordan. Twenty-seven billion, and according to an 
October 9, 2009 congressional oversight panel, the panel 
created by the TARP legislation to oversee how taxpayer dollars 
were being used, the promise was that three to four million 
people will be helped in this program. You indicated in your 
testimony that there were like 600,000 in the trial 
modification, but according to the congressional oversight 
panel's report on October 9th of this year, only 1,711 people 
have actually had modifications, less than 2 percent; is that 
accurate?
    Ms. Caldwell. That's accurate. And the focus, you know, the 
conversion from trial to permanent has been a source of 
disappointment to the Treasury.
    Mr. Jordan. $27 billion of taxpayer money has already been 
out there, has already been allocated. Less than 2 percent are 
actually fully in the program, when the promise was some three 
to four million homeowners would be helped. Isn't it also true, 
and I'm looking at a story from this weekend, the Washington 
Post indicates that, of the people who actually make it into 
the final modification, 40 percent of those folks, as I think 
some of the other witnesses, by their testimony, would support, 
40 percent of those folks are going to redefault. They are not 
going to be able to even comply with the modifications that 
have been made, and 22 percent of those don't even make their 
first payment; is that accurate? This is a story in the 
Washington Post from this Saturday.
    Ms. Caldwell. I don't have the source of the data for the 
Washington Post.
    Mr. Jordan. What you have noticed is your redefault rate 
for the small number who are already in the program?
    Ms. Caldwell. The program has not been up long enough and 
we have not been reporting redefault rates. But let me go on to 
say that December is the first month that we have had a large 
number, a large enough number that have been in the program 
long enough to convert, and so while we have not been satisfied 
with the number of permanent modifications converted to date, 
by the end of December, because we've steady growth in the 
number of trial modifications through the fall, we have a point 
where we have 375,000 trial modifications that are reported 
being eligible for conversion.
    Mr. Jordan. What does your model suggest that the redefault 
rate might be? The model that, I mean, frankly, we would like 
to see from your model, and I noticed in your testimony, your 
written testimony, you said ``we are increasing public access 
to the net present value white paper which explains the present 
value used in the model. We are also working to increase 
transparency at the net present value model for new tools that 
counselors can use to assist distressed homeowners applying for 
modification.'' What does all that mean? Why can't you just let 
the world know what kind of model you are using to make these 
determinations?
    Ms. Caldwell. We're looking at ways to increase 
transparency for the net present value model. They are a lot 
of----
    Mr. Jordan. Why can't you just let us know what model you 
are using? Why the secrecy?
    Ms. Caldwell. We are looking at ways to increase the 
transparency. Right now it is not available publicly. We are 
looking at ways, we have put forth the net present value white 
paper that discusses the assumptions in the net present value 
model and we are developing a model that can be distributed to 
the public. The models are generally proprietary and we are 
committed to increasing transparency.
    Mr. Jordan. I'm running out of time, but let me just 
summarize if I could, Mr. Chairman. Here is what happened.
    Mr. Kucinich. Take your time to ask the question.
    Mr. Jordan. $50 billion of taxpayer money allocated for 
this program, $27 billion already spent, already out the door--
how it's been spent, we don't know, it's already out the door--
on a model we don't even know exactly, you know, how that 
determination is made, how it's going to work, with a projected 
redefault rate of 40 percent, to get a grand total of 1,711 
families helped. I mean, this is one more example of a big 
Federal Government program that doesn't work. I mean, we can go 
on and on and on, but when you start doing things at the 
Federal Government--and the answer is, as I think several of us 
have talked about, is we need to get our economy moving again. 
We don't need another big Federal Government program out there. 
Mr. Rokakis has talked about how this program doesn't work. 
That's the concern I have and the focus has to be on those 
policy changes that are going to actually help our economy grow 
so people don't lose their jobs, so they do have employment out 
there so they can continue to make their mortgage and those 
things that we want to see how they actually happen. And with 
that, Mr. Chairman, I would go back.
    Mr. Kucinich. Thank you, gentlemen, for those questions.
    The Chair recognizes Congressman Steven LaTourette. You may 
proceed, sir.
    Mr. LaTourette. Thank you very much, Mr. Chairman.
    Ms. Caldwell, I'm going to give you a break and I'm going 
to talk to somebody else for a couple of minutes.
    But, as you know, and also, in an attempt to be a 
bipartisan basher here, Congressman Jordan talked about the 
TARP program. The dumbest thing I ever saw in my life, and it 
started under former President Bush. And his Treasury secretary 
came to Capitol Hill and I was on Financial Services at the 
time and I remember he said, ``today is Monday, if you don't 
give us $700 billion by Friday, the world is going to come to 
an end.'' So they put the first $350 billion out the door.
    Obama's administration came in and thought it was such a 
good idea. Part of the problem, quite frankly, is that the new 
guys at the Treasury look a lot like the old guys at the 
Treasury. And Secretary Geithner is the former head of the New 
York fed, is at the helm on this thing. And the reason that 
it's not working is it's not working to get to the problem that 
Rokakis is talking about and the State legislatures are talking 
about.
    And I can remember when the first tranche of money went 
out, I wrote an amendment that said that if you are a bank and 
you get $5 billion and the purpose of that $5 billion is for 
you to put liquidity in the market and make money available so 
people can buy homes and/or stay in their homes, you should 
tell us what you spent it on. And the banks went nuts. They 
said we take your $5 billion and mix it with our $5 billion and 
we can't tell you what we did with it. Well, that's just crazy.
    And it seems to me that if we provide $5 billion of tax 
money to an institution, they should be able to say that, 
because they have to report this quarterly, they should be able 
to say this month we did $5 billion more in consumer lending. 
But, you know, at the end, we can talk about all these programs 
that we want, but what solves a lot of problems in the United 
States of America, whether it's healthcare or homeownership is 
a job.
    And so the multiplier effect of this spending is it's not 
like you and I had $700 billion in our mattress and we just 
pulled the money out and decided we were going to spend it. We 
borrowed it from people. We borrowed it from China. So you are 
going to see, not only the crisis cascade, we got to pay that 
money back. And anybody that doesn't think that there is going 
to be an inflationary effect on interest rates as we begin to 
work our way through it is just not thinking clearly.
    And what I found, and maybe you both have the same 
experience, when I go out and talk to people that are trying to 
employ people, trying to pay them a decent wage, trying to get 
them healthcare, and they go to the bank, and a lot of these 
banks have received TARP money, the banks aren't loaning them, 
they are pulling their lines of credit. And you say what's the 
matter with that?
    And then so what's happening, sadly, with Treasury, in my 
opinion, is the money is going out and the Wall Street guys are 
healthy and they are not going to pay some of the money back. 
But the whole purpose behind the program was for them to lend 
the money out so that people could have jobs and it's just not 
working.
    And so I do hope, I happen to think the President of United 
States is a very smart guy, and I do hope that some of these 
things are rethought.
    Treasurer Rokakis, one of the reasons you are my second 
favorite Democrat behind Kucinich is you tell it like it is. 
And I can remember at the end of the 1990's, Paul Gillmor, a 
former colleague who has since passed away, had the first 
meeting as he saw this thing coming and we had the bank that's 
run by the Polish guy, Third Federal.
    Mr. Rokakis. Stephanski.
    Mr. LaTourette. Stephanski.
    They came in and----
    Mr. Rokakis. Best run bank in Ohio.
    Mr. LaTourette. And that's what I'm getting to and it gets 
to your counseling point. We can throw them $27 billion to do 
this and take care of 1,700 families, but they were bragging on 
the lowest default rate because they actually sat down with 
people and he said they had the experience where some people 
said, you know what, today even though I'd love to have the 
dream of home ownership, today is not the day. I can't make 
that nut. And they went through the ARM and they said well 
today, I can make $700 with this interest rate, but when that 
thing adjusts 3 years from now, I can't make it. So I couldn't 
agree with you more. And it's that face-to-face thing that 
really gets it done and I give you credit for what you've done.
    I would just like to ask you as a guy in the front lines, 
and sort of felt that the sad thing is when I have time, I 
think of stuff, and this business about, I'm not so crazy about 
the moratoriums because I think that just kicks the can down 
the road. And so you can have a 6-month forbearance or a 6-
month moratorium on foreclosures, but at the end of the day, 
you still owe all the principal and the interest and whatever 
else is just built up.
    What if to help the folks that don't qualify for HAMP and 
haven't been behind for 3 months, we figure out a system that, 
as I suggested, that you pay the interest and taxes so you are 
taken care of, but that you don't pay the principal until you 
get a job again? What do you think?
    Mr. Rokakis. Mr. Chairman, Congressman LaTourette, not a 
bad idea. I think the chances of the servicers and the banks 
going along with that would be about as likely as they are to 
go along with a forbearance or a moratorium.
    Mr. LaTourette. And that's a great point, but you know 
what? Here's the skinny going back to TARP. I understand the 
importance of the banks. I'm a Republican, we like banks, we 
like business, but I'm going to tell you something, that if I 
gave you, Rokakis, $5 billion to get your butt out of trouble, 
I think I have the right to expect certain things from you. And 
so those that didn't participate, they don't have to follow the 
rules. But if you have taken some of the $700 billion that we 
put out on the street, I think you have an obligation. And I 
don't think it's unreasonable in that situation and that 
doesn't violate Grendell's principle that you shouldn't mess 
around with contracts because you are entering into a new 
contract. But if you want $5 billion, you've got to do 
something for that $5 billion. And I don't think it 
unreasonable to expect people to be part of the solution here.
    Last, if I could have your----
    Mr. Kucinich. Go ahead.
    Mr. LaTourette. To our State Representatives, and 
Representative Foley, listening to Senator Grendell, I don't 
think H.R. 3 has passed in the Senate.
    Mr. Grendell. That's fair.
    Mr. LaTourette. Just I picked up on that this morning.
    I'll tell you the thing that I hear and I know that you 
hear as you go out and you see your constituents, there's 
another thing besides TARP that's out there, it's stimulus. The 
stimulus bill has the same objective, it wasn't to keep people 
in their homes, but it was to create three million jobs. The 
report out of the White House said that, in my district which 
is, you know, we do OK, $100 million was spent of stimulus 
money to create or save 126 jobs. Now, I could do better than 
that and I'm not the brightest bulb on the tree, but if you 
gave me $100 million, I bet I could do better than that.
    What I'm hearing is that the money that's come down from 
the feds in the stimulus bill is stuck in Columbus, that it's 
stuck at the Ohio Department of Development, that you have men 
and women who want to create opportunities and employ people. A 
guy came up to me the other day, his natural gas or electric 
buses all over the trades, it's clean, it's green, and he wants 
to build a plant right here in Ohio to build these buses. He 
can't get people in Columbus to return his phone calls. Not you 
guys, I'm sure you call people back all the time. But the 
Department of Development.
    No, I know Lieutenant Governor Fisher is not there anymore, 
but who is in charge and why can't they get this money out to 
help people, put people back to work so people can stay in 
their homes and people can have healthcare? Grendell, what do 
you think.
    Mr. Grendell. Congressman LaTourette, I'm suffering the 
same experience you just described in my district dealing with 
the Department of Development. They seem to be overly cautious 
in the way they pursue potential projects. It strikes me they 
want to invest in projects that are already winners and those 
projects don't need the investment. I suffer the same 
frustration. I cannot give you a better answer than we've lost 
several projects in our mutual district because of the 
inability to get development to put the money out.
    Mr. LaTourette. Representative Foley, what do you think?
    Mr. Foley. Congressman, I think that the department started 
giving money late summer. I think they are doing the best they 
can, considering they don't have all the staff that they should 
have to make sure all projects get out in as thorough and 
efficient time as possible. I do know that I've had contractors 
in my district who have benefited from this already, they've 
got jobs and they are working. So I don't think it's perfect 
but it shows the imagination. I know that there's dollars that 
still need to be allocated and given out. I know that we just 
had a clean energy job, a press conference with the Governor 
last week where at least the Cleveland area is going to receive 
7 to 10 projects that are going to be run, advanced energy 
projects in the Cleveland area. So I think that it's taking a 
little bit of time and it's complicated. But I think that 
there's folks trying to do the best they can. I think it's 
going to take a little bit of time.
    Mr. LaTourette. Listen, anything you two can go through to 
sort of goose them down in Columbus, I would appreciate very 
much because, you know, you talk about contractors, I had a 
contractor--unemployment out in Ashtabula County is 13 
percent--and a contractor calls me and says we got a job ready 
to go waiting for the stimulus money, but ODOT won't let us 
start the job until we've had this big ass ugly green sign up 
for 2 weeks saying that it's paid for. So the sign makers made 
a lot of money and then they had full employment out in 
Ashtabula County, but the people that are actually going to 
build the roads do not. So I thank you.
    Mr. Grendell. Mr. Congressman, if I can address that for 1 
second. Congressman LaTourette, I agree with you on the sign 
issue and the fact there's legislation to prohibit the State 
from wasting the over a million dollars they've already wasted 
on those signs. Thank you, Mr. Chairman.
    Mr. Kucinich. All right. I want to thank my colleagues, Mr. 
Jordan, Mr. LaTourette for their participation in this panel.
    Two things have occurred to me based on the questions that 
have been asked here. First of all, you are looking at probably 
the only congressional panel you'll see where every member of 
the panel voted against the TARP program bailouts.
    Now, one of the things that you may be aware of, Mr. Jordan 
and Mr. LaTourette, is that when the administration, the Bush 
administration was coming in with the TARP program, there were 
also people in the incoming--well, at that point the Obama 
administration was hoping to come in. And the incoming 
administration actually was arguing against loan modification, 
so you had an agreement on the part of both the previous 
president and the incoming president that there would be no 
loan modification. I mean, that's something to think about in 
terms of where we are at today and something to think about in 
terms of continuing to justify the position that those of us 
took in total opposition to the bailouts.
    I want to thank the members of this first panel. You have 
all made a contribution to our understanding of the issue and 
to some of the philosophical issues that we are faced with and 
some of the practical applications of laws that we have to deal 
with. Cleveland is the epicenter and how you do in Cleveland is 
really going to tell if your program ever can hope to work.
    And I hope that Ms. Caldwell here will take some of the 
testimony back to Mr. Geithner and that the treasurer will take 
heart about the experience that the people are having in our 
community with this program.
    I want to thank you for being here. Thank you to the 
members of the panel.
    We are going to start our second panel, if members of the 
second panel will come forward. First panel is dismissed. 
Second panel come forward and we are going to move forward with 
the second panel when they are seated.
    [Recess.]
    Mr. Kucinich. Thank you very much. If you are not 
participating in the second part, I would ask you to kindly 
leave the room.
    I want to introduce our second panel of witnesses. Mr. Mark 
Seifert is the executive director of ESOP, which is the 
Empowering and Strengthening Ohio's People Organization, which 
is a nationally recognized organization fighting predatory 
lending and providing foreclosure prevention counseling 
throughout the State of Ohio.
    Mr. Robert Grossinger, the senior vice president of Bank of 
America's Community Affairs Department, he is responsible for 
coordinating the bank's real estate owned sales process with 
the cities, counties and States that receive funds under the 
HUD neighborhood stabilization program.
    Claudia Coulton is the Lillian F. Harris professor of urban 
social research, Mandel School of Applied Social Sciences, as 
well as the co-director of the Center on Urban Poverty and 
Community Development at Case Western Reserve University. She 
has conducted a series of studies on the foreclosure crisis in 
Cleveland and is a nationally recognized expert on using 
property data systems to understand the pattern and magnitude 
of the program.
    Mr. Howard Goldberg is renewal administrator in the 
Department of Community Development, city of Lorain, OH under 
the leadership of Mayor Tony Krasienko. He has been working in 
community development for that community for nearly two 
decades.
    And Mr. Frank Ford is the senior vice president for 
research and development at Neighborhood Progress, Inc. Where 
he directs a land assembly vacant property reform and 
foreclosure prevention initiative. Mr. Ford's been working in 
the field of community development for 33 years.
    This is a very important panel. I want to thank each and 
every one of you for your presence, your willingness to 
testify.
    It is the policy of the Committee on Oversight Government 
Reform to swear in all witnesses before they testify. I would 
ask that you rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Kucinich. Let the record reflect that each of the 
witnesses has answered in the affirmative.
    As with the first panel, we ask that each witness give a 
summary of his or her testimony. Please keep this summary to 5 
minutes in duration. Your complete written statement will be 
included in the record of the hearing. We know how important it 
is and Members read these carefully because they relate to what 
we know we need to do to try to address the issues that you are 
raising.
    At this point I would like to ask Mr. Seifert if he would 
proceed.

STATEMENTS OF MARK SEIFERT, EXECUTIVE DIRECTOR, EMPOWERING AND 
STRENGTHENING OHIO'S PEOPLE; FRANK FORD, SENIOR VICE PRESIDENT, 
  NEIGHBORHOOD PROGRESS, INC.; ROBERT GROSSINGER, SENIOR VICE 
   PRESIDENT FOR COMMUNITY AFFAIRS, BANK OF AMERICA; CLAUDIA 
   COULTON, CO-DIRECTOR, CENTER ON URBAN POVERTY & COMMUNITY 
DEVELOPMENT, CASE WESTERN RESERVE UNIVERSITY, MANDEL SCHOOL OF 
     APPLIED SOCIAL SCIENCES; AND HOWARD GOLDBERG, RENEWAL 
                 ADMINISTRATOR, CITY OF LORAIN

                   STATEMENT OF MARK SEIFERT

    Mr. Seifert. Good morning, Chairman and members of the 
committee. Thank you for the opportunity to address you today 
on the ongoing foreclosure crisis in Ohio.
    I am Mark Seifert, the executive director of ESOP, 
Empowering and Strengthening Ohio's People. We are a HUD 
certified counseling, foreclosure prevention counseling agency 
with 11 offices throughout Ohio serving communities large and 
small, urban and rural. ESOP, formerly known as the East Side 
Organizing Project, started as a neighborhood based organizing 
group working on safety and educational issues, much of it in 
Chairman Kucinich's neighborhood.
    Over the last 18 months, our organization has grown from a 
staff of three in Cleveland to more than 60 statewide, a direct 
result of Federal funding recognizing the need for foreclosure 
prevention counseling in Ohio. We have been on the front lines 
of Ohio's foreclosure epidemic since 1999. During the last 5 
years, we have helped more than 13,000 families save their 
homes. Almost 8,000 of those families have walked through our 
doors in the last year alone. We know all too well the toll 
this crisis continues to exact on struggling families.
    That is the focus of my testimony today, the unending state 
of the foreclosure crisis, the failure of Federal programs 
meant to reverse course and the possible extinction of 
foreclosure counseling services in Ohio and around the country.
    Let me start by saying this hearing could not come at a 
more important time. The foreclosure crisis is far from over. 
Last month the Mortgage Bankers Association announced record-
breaking third quarter foreclosure filings and delinquency 
rates in Ohio. Fifteen percent of loans serviced in Ohio are in 
foreclosure or past due. Two years since the foreclosure crisis 
first rocked this country, all signs point to an ever growing 
problem of foreclosures that won't even peak until late 2010, 
according to Rich Sharga, a top executive at the real estate 
firm, Realty Track.
    In this landscape, ESOP's foreclosure prevention and 
counseling services have emerged as a lifeline for homeowners 
who don't know where to turn or get lost in the process when 
they do respond to notices from their lender or servicer. This 
year alone, ESOP will welcome 8,000 families facing foreclosure 
through 11 statewide offices. We expect to help 6,500 of them 
receive affordable loan modifications, a success rate of over 
80 percent has made ESOP a leader in the State.
    All this has been achieved through an annual budget of just 
$1.8 million, 70 percent of which is money channeled through 
the National Foreclosure Mitigation Counseling [NFMC] Program, 
via the Ohio Housing Finance Agency [OHFA], who has been a key 
partner in our response to this crisis.
    Let me be clear, the documented impact of foreclosure 
prevention counseling on Ohio's ongoing foreclosure crisis is 
under attack, and without congressional action, will vanish in 
the first quarter of 2010. To date, NFMC funding has been 
immediate and effective. It has also been the sole source of 
Federal dollars for foreclosure prevention counseling. However, 
in the next funding cycle for the year 2010, NFMC funding for 
Ohio will be cut by more than half.
    I assure you these cuts will severely cripple ESOP's 
ability to continue to serve the thousands of people who we 
serve each year. And it costs about $200 per home, it's 
definitely money well invested. Instead of serving 8,000 
families next year, ESOP's cuts will result in only being able 
to serve approximately 4,000 families.
    As you may well know, Ohio's Save the Dream Program, a 
multi-agency State effort that funds hotline operators, 
marketing and outreach, as well as a Web site, has been 
recognized as one of the best in the nation. Save the Dream 
operators refer callers to counseling agencies and also to 
their respective lenders and servicers.
    Approximately 65 percent of our caseload comes from Save 
the Dream referrals. Without future NFMC funding, however, Save 
the Dream will have few to zero agencies left for homeowner 
referrals.
    That brings me to the Federal program to assist homeowners 
in the foreclosure, the Obama administration's Making Home 
Affordable Program [HAMP]. I save my remarks on HAMP for last 
as HAMP not only holds great promise, but has also wreaked 
great havoc. Since mid June when HAMP finally sprung into 
action, about 55 percent of ESOP's caseload turned into 
potential HAMP modifications.
    Homeowners who finally end up at ESOP come with horror 
stories. Communications from lenders trying to offer HAMP 
modifications often only provide 800 numbers, sending borrowers 
into automated loops. When they do gather the paperwork and 
send it in, it's routinely lost in a maze of disorganization 
and bureaucracy that constitutes the loan modification arms of 
most banks.
    The sad truth is that experienced counselors at ESOP are 
also having trouble working with lenders and HAMP. Take Wells 
Fargo, for example, it leaves a lot to be desired. For example, 
conference calls go nowhere, we ask a question, they say ``let 
me check on it.'' We never hear back from them. Other banks 
such as J.P. Morgan/Chase are similar.
    There has been much in the news recently about HAMP 
modifications that have not been converted into permanent 
workouts. At the end of June through the end of October, ESOP 
has done more than 400 HAMP trial modifications. By now at 
least 275 should have been converted to permanent mods, yet we 
have one example of that at this point.
    HAMP has a lot of promise, though. We think HAMP could 
work. ESOP does the heavy lifting for the lenders. We provide 
all the paperwork, we give them the complete packages, we 
provide counseling and as a result of our work, the rate of 
redefaults dropped significantly. However, without NFMC 
funding, we won't be able to continue to do that. Thank you.
    [The prepared statement of Mr. Seifert follows:]

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    Mr. Kucinich. Thank you, Mr. Seifert.
    The Chair recognizes Mr. Ford. You may proceed for 5 
minutes. Thank you.

                    STATEMENT OF FRANK FORD

    Mr. Ford. Thank you, Mr. Chairman, members of the 
committee. I do have a short video, 2\1/2\ minutes. Can we dim 
the lights just slightly, I think? And I can control it from 
here.
    Mr. Kucinich. What's the video about?
    Mr. Ford. It's a vacant house. It's a walk-through. A 
picture says a hundred words, a video says a thousand.
    This is a house in the St. Clair, Superior neighborhood of 
Cleveland.
    [Videotape being played.]
    [The following are statements made on videotape.]
    Mr. Ford. My name is Frank Ford. I'm executive director of 
Cleveland Housing Renewal Project, a subsidiary of Neighborhood 
in Progress, Inc.
    I'm standing out here in front of 1232 Addison in the St. 
Clair, Superior neighborhood in the city of Cleveland. It is 
May 8th, approximately 12:30 p.m. This is a house owned by 
Wells Fargo. And when I was out here last Saturday, it was wide 
open and vacant. It's serviced by Home Eq. There's some 
stickers on the window from Home Eq. And when I was out here 
before, the side window, side door was wide open and there was 
water rushing in the basement. The side door is still wide 
open. And that's a Burger King bag.
    I think I'm going to go inside. Anybody here? I think you 
can hear the water rushing in the basement, the basement door. 
Probably not enough light to see. I'm holding the camera over 
the basement stairs. And I think that's it. I don't think I 
want to be here too much longer.
    I'm going to take a look at the back of the house here. So, 
anyway, this is a house owned by Wells Fargo, wide open, 
clearly a danger to anybody who lives near this house, anybody 
who's got children certainly. That's it.
    [Videotape ends.]
    Mr. Ford. Thank you. Now I've limited myself to a minute 
and 50 seconds so I'm going to have to talk very fast, but I 
thought that a walk through the inside of a property brings 
home the stark reality of what is happening.
    It was said earlier by a witness that it would be dangerous 
to consider loan modifications. That's dangerous (indicating) 
for the people who have to live near it if they have children.
    I think we have two major problems still facing us, one is 
we have to find out how to stop the continual pipeline of 
foreclosures, and it's not working as other people have 
testified. We have a great foreclosure prevention system in 
Cleveland, stops 50 percent of the foreclosures of people who 
get into that system, but only 20 percent of the people are 
getting into the system. We really do need stronger action, 
either--now, maybe a moratorium is not palatable to people, but 
then some other pressure, whether it's regulatory pressure, 
certainly the idea of using the TARP or any bailout money 
connecting that to greater willingness to do loan modification, 
that's the first problem.
    The second problem we have is the damage being done by the 
veritable tsunami of vacant property that's flooding our 
neighborhoods. And this is stemming from three--stemming from 
irresponsible behavior on the part of the lenders. It really 
comes from three things. First of all, they are not maintaining 
these properties up to code, they are not complying with city 
laws. Second, they're dumping these properties irresponsibly to 
flippers and speculators from out of State; and third, the 
latest thing is they're walking away. They are filing the 
litigation, pursuing it to judgment, but then not taking it to 
sheriff's sale, which means they can avoid liability and 
responsibility for the physical condition. We need to have some 
way of holding lenders accountable for the condition of these 
properties at the minute they file a foreclosure.
    And I see I have 3 seconds left, so I'm probably going to 
stop. I could continue, but I won't. Your pleasure.
    [The prepared statement of Mr. Ford follows:]

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    Mr. Kucinich. I appreciate that you brought the video here 
and I can say that, Mr. Rokakis, we have unfortunately seen a 
lot worse. You know, Slavic Village, I don't know if Mr. 
Brancatelli is still here, we went on a tour last year, it's 
incredible. But I appreciate you being able to bring a video 
here and point out how just simple things like securing a 
property are not happening and we all know what the 
implications are from that lack.
    Mr. Grossinger, you may proceed for 5 minutes. Thank you.

                 STATEMENT OF ROBERT GROSSINGER

    Mr. Grossinger. Thank you, Chairman Kucinich and Ranking 
Member Jordan. Thank you for giving me the opportunity to speak 
today. My name is Rob Grossinger. I'm the Senior Vice President 
of Bank of America. I do, as a sort of full-time job, 
coordinate the bank's REO work with cities, counties and States 
that receive money under the stabilization program. I also have 
worked on a number of pilot projects dealing with some of the 
subjects we've talked to today with respect to loan 
modification, customer outreach and again on the vacant 
building problem.
    I do want to quickly update you on the bank's loan 
modification efforts. I will say that, though I'm going to give 
you some statistics and our support for the HAMP program, I 
would be remiss without saying that we all do not feel it's a 
total success right now and are hoping for better days ahead in 
terms of its success.
    We do support Make Homes Affordable. We do voluntarily 
comply. We have, to date since January 2008, modified 600,000 
customers, only 150,000 of those have been under HAMP, the 
other 450,000 were under our own programs. The 150,000 I 
referred to with respect to HAMP are in trial modification. We 
are now increasing our efforts to pull people through.
    I think the discussion in the first panel around the, what 
everyone would agree was the dismal performance of moving 
people into permanent. Last week alone we sent out 50,000 
pieces of mail to 50,000 of our customers asking them, with 
specific statements about which documents we still needed to 
pull them through, asking them to get those documents in so we 
could move them into permanent modification.
    With respect to customer outreach, we are also 
participating in a number of efforts nationally. We are a 
sponsor and helped form the Alliance for Stabilizing 
Communities, which is a partnership with the National Counsel 
of LaRaza, the National Urban League and the National Coalition 
for Asian Pacific American Community. We will be holding 40 
housing rescue fairs with that alliance over the next year-and-
a-half in 24 communities. We have done 215 community outreach 
events in 30 different States.
    I would like to turn the remainder of my time to some of 
the pilot efforts we are doing because, quite frankly, this is 
new to a servicer. This issue has blossomed to the point where 
any creative thinking is necessary at this point. So, for 
example, in Chicago we have piloted in four zip codes an 
outreach effort working with two community organizations. We 
have turned over the names under, of course, anonymous 
disclosure agreement, with 1,500 of our customers who are 60 
days delinquent and beyond. The community organizations are 
door knocking those customers and will continue to door knock 
until those customers hopefully respond in some way. Those that 
seek help will receive actual counseling. We have created the 
dedicated staff to work with those counselors so that documents 
won't be lost, documents won't go into cyberspace. It will be a 
direct relationship between our staff and these counselors.
    But finally, and actually in reference to Congressman 
Jordan's comments from the first panel, we are going to be 
doing an analysis of every declination. The NPV model is a bit 
of a mystery to everybody, especially when it comes to inner 
city communities. And so we want to see with our community 
partners what effect it has by having to use statewide 
averages, for example, on the REO discount provision of the NPV 
model. If we were to look at actual census tract data or city 
data versus statewide, would the NPV decision come out 
differently? We don't know the answer to that, we want to 
partner with these organizations to learn that and will be 
using this pilot as a learning laboratory on that question.
    The second piece of this pilot is homeowners who we can't 
help under any scenario. Could we consider renting back to 
those homeowners while we market the property? We are going to 
be looking at that with these groups. We feel those homeowners 
will need counseling. The groups have agreed to provide the 
counseling.
    Another opportunity which we are looking at in Detroit is 
possibly selling those homes to not-for-profit organizations 
who could then enter into lease to purchase with the 
homeowners. There are a lot of creative potential solutions out 
there that require an honest assessment without prejudging 
results, and the bank is looking at every opportunity to do 
that because again, as I stated before, we are all learning at 
this. This is a massive issue. We are a servicer, we are not a 
social service organization, so we have to partner with those 
that are to reach the conclusions that we all hope to reach.
    Finally, I want to talk about neighborhood stabilization. 
We talked about, in some of the statements earlier, about let 
servicers not finishing the foreclosure process--we are working 
in Chicago, we are voluntarily providing an Excel spreadsheet 
of every vacant property, whether we foreclosed on it or not, 
to the city. We are registering everything we can under the 
MERS system. And I would highly encourage every city to adopt 
MERS as a registration for vacant property. But because the 
city requires us to have property insurance on properties in 
order to register with their system and we can't have property 
insurance on something we don't own, we are voluntarily giving 
them a spreadsheet of everything, whether we foreclosed or not, 
we are taking responsibility for maintaining them, for 
stabilizing them.
    And most importantly, we ventured into a property 
preservation contract with a local organization that does job 
training and they are doing the property preservation for us 
and doing a phenomenal job so far. So we are going to expand 
their work into the rest of the parts of the city. We believe 
that that sort of property preservation has to happen on the 
ground, using local groups who have a belief that the 
community, that that's an asset to the community that can be 
saved, if the property can be saved.
    And I've met with Mayor Daley twice in the last month. If 
it's a frame house, he grew up in brick bungalows, if it's a 
frame house that presents a danger, he wants us to demolish it, 
and if it's to that extent, we will. We will actually pay for 
the demolition.
    So that's some of the things that we are looking at doing 
on a creative basis, we have to continue that and we hope to 
get that support from local community groups as well.
    [The prepared statement of Mr. Grossinger follows:]

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    Mr. Kucinich. Thank you.
    Professor Coulton, you may proceed for 5 minutes.

                  STATEMENT OF CLAUDIA COULTON

    Ms. Coulton. Chairman Kucinich and members of the 
subcommittee, it's an honor to appear before you today to 
present research on how the foreclosures crisis has played out 
here.
    The most visible side of the current foreclosure crisis is 
that foreclosures more than quadrupled in recent years, 
reaching a peak of more than 14,000 in 2007 and remain as high 
today. Since 2006 alone, one in five homes have foreclosed in 
the hardest hit areas of Cleveland, some more than once.
    But the seeds of the crisis were sewn in the preceding 
decade as independent mortgage companies began to dominate 
local mortgage markets in the city and some inner ring suburbs 
with subprime loan products. Our study that tracked mortgages 
from the point of origination found that, holding other factors 
constant like borrower income and loan-to-value, subprime loans 
were over eight times more likely to foreclose than prime 
loans. Many of these loans originated by unregulated 
independent mortgage brokers were destined to fail at the 
outset. We found the foreclosure rates peaked at the 12th and 
36th month after origination. Just a few companies dominated 
the market here. For example, one company out of California 
that is now defunct was a major player. Our studies showed that 
65 percent of what they originated here went into foreclosure 
in the first 24 months.
    Subprime lending and foreclosure did not fall evenly on 
everyone. In fact, the research shows that African-Americans 
compared with whites of similar income were four times more 
likely to get subprime loans. Racial disparities in subprime 
lending translate into the region's highest rate of foreclosure 
in predominantly African-American neighborhoods.
    The foreclosure process typically ends with homes being 
sold at foreclosure sale. In a typical market, there is a 
reasonable demand for these properties, but due to huge 
numbers, they now languish in REO for 12 to 18 months, sitting 
vacant and unattended often. Properties that get stuck in the 
foreclosure process itself can be even more problematic. For 
example, currently more than 5,000 properties have a decree of 
foreclosure, but more than 180 days have elapsed without a 
foreclosure sale. Referred to as possible bank walk-aways, the 
homeowner retains responsibility for the taxes and maintenance 
of the property but typically doesn't even know it.
    The glut of mortgage failures has ignited a downward spiral 
in the housing market causing enormous loss of equity and 
value. Properties sold out of REO in Cleveland are going for a 
mere 13 percent of their previous market value. More than $800 
million in equity has been lost so far on these foreclosed 
homes, and it's not over yet. And that does not count the 
negative spillover effects on the sales prices of other homes 
nearby.
    Even worse, a very recent trend is for REO properties to be 
sold off in bulk at extremely distressed prices, we define that 
as $10,000 or less, mainly to out-of-state corporations and 
individuals looking for bargains. Unheard of as late as 2005, 
the practice increased tenfold in just 3 years. On the East 
Side of Cleveland, it is now the norm. Nearly 80 percent of the 
REO properties were sold at these extremely low prices. Most of 
these transactions are coming from just a few big sellers. By 
and large the buyers are out-of-state corporations or investors 
who purchase them sight unseen. The properties become tax 
delinquent and are resold quickly in very poor condition or 
offered on land contract to unsuspecting home buyers.
    At every stage of this distraction, Clevelanders have 
fought back. Yet despite local efforts and recent help from the 
Federal Government, the enormity of the devastation is such 
that the region cannot recover without our assistance with 
clean-up and policies to stabilize the housing market and 
neighborhood.
    The research suggests more policy issues for your 
attention. One, implement stronger mechanisms to enforce 
responsibilities by lenders and servicers to modify loans and 
to protect properties. Two, strengthen consumer protections on 
loan products and extend fair lending mandates to more of the 
industry. Three, preserve affordable housing options including 
sustainable home ownership, rental opportunities and healthy 
homes. And four, provide longer-term support for neighborhood 
stabilization and land reutilization for highly impacted 
regions. Thank you.
    [The prepared statement of Ms. Coulton follows:]

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    Mr. Kucinich. Thank you very much, Professor Coulton.
    Mr. Goldberg, you may proceed for 5 minutes.

                  STATEMENT OF HOWARD GOLDBERG

    Mr. Goldberg. I would like to thank the honorable members 
of the subcommittee for allowing me to testify.
    We know that Ohio suffered from the worst mortgage 
origination in the country from 2002 to 2006. This portfolio of 
loans has yet to reach its peak of defaults. The number of 
vacant homes will continue to increase. In Lorain, OH, we have 
expended, designated or committed almost 70 percent of our 
acquisition rehab and demolition Neighborhood Stabilization 
Program funds. We will run out of funding very soon as an urban 
community that will enter into 2010 with no new funding source 
unless we receive NSP II funds. We are faced with the 
frustration of fighting this challenge in the trenches house by 
house. I guess Wall Street and lending institutions cannot 
possibly cut through the red tape fast enough at its call 
centers with its asset personnel, even trying to dispose of the 
normal foreclosed homes, let alone the problem properties that 
I now respectfully ask for more help from lenders and Congress.
    In my community are vacant homes everywhere where the 
owners have filed bankruptcy and abandoned the home. No one is 
getting a modification here. They are beyond repair, they have 
no value except to landlords and speculators. Typically, the 
lender, through their foreclosure law firms, has dismissed the 
action or they failed to initiate one. I have personally called 
foreclosure law firms about dismissed cases and the attorney 
typically provides me with a 1-800 customer service number for 
their client. In the meantime, the property sits vacant. I have 
no cooperation from the lender.
    The first request is a change in requirements placed on 
lenders as follows: If a vacant property has no value and the 
condition of it is such that its renovation cannot be 
justified, that the lender offer the local community or a 
designated local nonprofit with demonstrated capacity the 
option of an assignment of its mortgage. Let us perfect the 
foreclosure. The money the lender will save in legal fees, file 
management and staff time alone will make you a more profitable 
lender.
    I have a case right now, the owner filed bankruptcy. He 
would gladly quitclaim the deed to us, he abandoned it 2 years 
ago. I have called, e-mailed and begged the lender that holds 
the first mortgage. I obtained written release from the owner 
authorizing my entering the property, permitting me to contact 
the lender, permitting the lender to discuss the loan, the 
property, the condition of the home. I had the property 
appraised, inspected by the health department, and I literally 
begged the lender to do something about their mortgage. That 
bankruptcy and loan default is 3 years old. I begged them to 
assign the mortgage to the city, that we would take the job 
over. We could save them the fees. Instead, now that they've 
received the notice of intent to declare it a public nuisance, 
they have hired an outside servicing company which will run up 
the costs to the lender and only prolong this problem.
    Please find a way to compel lenders on properties that are 
valueless to assign us the mortgage, let us perfect the 
foreclosure and wash their hands of this problem the same way 
cities solve these problems, house by house. I have had some 
limited success doing it, but it shouldn't take months of calls 
and e-mails. Cities are financially strapped and have less 
staff to solve these problems than lenders.
    My second request is that Fannie Mae and all of their 
lenders, with the exception of HUD that is giving cities 
preferential treatment, contact the cities before homes are 
marketed, allow us to prove with evidence that a home cannot be 
renovated for basic quality of living for home ownership, that 
it be sold to the city for a dollar, taking into account the 
cost of demolition. Typically, we are competing with landlords 
to do the bare minimum to a home who will outbid the city. We 
are expending precious NSP funds in bidding wars to acquire 
properties for demolition and land banking. In the last 22 
homes that I have acquired that will be demolished, my average 
cost of acquisition is $9,000, the cost of demolition will be 
at least $8,000. The average loan default was $80,000. And I'm 
sorry for the lenders that made them; however, cities will run 
out of money to solve this problem.
    Every time I look at a property, whether it's a rehab or 
demolition, I'm thrown into a multiple-offer situation where we 
are forced to compete with investors, speculators and landlords 
and we are having to overpay for these properties. When we run 
of out NSP funds, and I pray that we don't, and we get more 
money, we are going to have very little to be able to solve 
this problem of the repossessed homes.
    In conclusion, I respectfully request consideration of four 
items. Compel lenders to assign us mortgages, compel lenders 
and Fannie Mae to not make us compete with landlords. If 
restructuring loans, please make them at market value so that 
homeowners don't have an incentive to walk. Please fund our NSP 
II application.
    And a famous phrase from the Talmud, ``The day is short, 
the work is much, the reward is great.'' Thank you.
    [The prepared statement of Mr. Goldberg follows:]

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    Mr. Kucinich. Thank you very much, Mr. Goldberg.
    I'd like to acknowledge the presence in the room of 
representatives of four congressional offices, Senators 
Voinovich and Brown are represented here. I would like to thank 
you for your offices' presence. We also have Congresswoman 
Fudge and Congresswoman Sutton who are represented here as 
well. I appreciate the fact that each office has sent a 
representative and want to acknowledge that.
    I also want to acknowledge the fact that Ms. Caldwell of 
the Treasury Department has remained here to take notes. That's 
encouraging because often we have these ceremonies and people 
testify and it wasn't a most receptive audience. Sometimes they 
leave right away, but you stayed here and that's good and we 
appreciate that. I just want to note that.
    We are going to go to questions of this panel. I would like 
to start my 5 minutes with Mr. Seifert. Would you tell us what 
you think about the two or three things that Federal Government 
should do to stem the foreclosure crisis?
    Mr. Seifert. Thank you, Chairman Kucinich.
    No question funding is critical.
    Mr. Kucinich. Funding what?
    Mr. Seifert. Funding foreclosure prevention. The simple 
fact is it's not giving money, it's not giving the homeowner a 
service, it's not funding the community social service network, 
it's an investment. If we want these HAMP mods to work, we have 
to make sure that they are good HAMP mods going forward, up 
front as opposed to these trial mods and we need to collect 
these documents, maybe not, maybe look at other expense, maybe 
not. Counseling provides a good, cold hard look at what the 
owner can afford and will counsel them on hardships or maybe 
discretionary spending that needs to be readjusted. Counseling 
works. We know counseling helps. We estimate the redefault rate 
at about 25 percent, the national average is about 50 percent. 
Under HAMP, sir, I guarantee it's going to be 80 or 90 percent.
    Mr. Kucinich. I had talked to, in a previous panel, Ms. 
Caldwell about this. What do you think is the business 
justification for the fact that Ohioans rank 48th of 50 in 
likelihood to receive a loan modification through the HAMP 
program? What do you think is going on there?
    Mr. Seifert. Mr. Chairman, I think a house out in 
California has a mortgage of a half a million dollars and has a 
value of maybe of $250,000 costs the same amount to modify that 
mortgage as it does here in Ohio where the house might only be 
worth $25,000. I think the industry, frankly, is going where 
they are going to get the biggest bang for their buck. And you 
look at California, you look at Florida, you look at Texas. 
Yes, they are hurting, they're devastated, but their values 
have not tanked quite like Ohio.
    Mr. Kucinich. You know, that raises some interesting 
questions about equal protection of the law.
    Mr. Seifert. I agree.
    Mr. Kucinich. And our staff Attorney Marty Gelfand is here. 
I would like you to talk to Mr. Seifert after this meeting 
because I would like to pursue that.
    I thank you for raising that point.
    Finally, can we continue to rely upon the voluntary 
judgments of loan servicers as this Federal program currently 
does?
    Mr. Seifert. If we want the same results, we can. If we 
want them to actually start modifying loans, it's got to be 
mandated that they have to be required to do it. And that 
includes principal reduction, by the way, which they are not 
doing.
    Mr. Kucinich. Professor Coulton, what should the Federal 
response be to the tenfold increase in REO bank-owned property 
in Cuyahoga County?
    Ms. Coulton. It's a huge increase in REO and then the 
problems that are occurring after that, which is the 
deterioration of the property, the bulk selling of the property 
for very small amounts and the, what's now emerging as the 
failure to take the properties all the way to sale and move 
them forward.
    I think that we need, obviously, more policies that hold 
the parties responsible and put more of the burden on the 
parties that have to make these decisions. Some of these are 
State and local policies that need to change, but I think the 
Federal response is through the TARP, as you called it, a 
potential contract as far as those dollars.
    Mr. Kucinich. It is amazing, Mr. Jordan, that we can hear 
testimony such as we are hearing and yet you really still don't 
see that TARP is addressing it in a meaningful way, which is 
pretty shocking, actually.
    The HAMP program is one thing. Ms. Caldwell, I'm glad you 
are in Cleveland, but if you had a chance to just go around and 
just look at some of our neighborhoods here, I think that you 
would return to Washington with tremendous passion for the 
cause of our community and communities like it where people are 
just starving, communities are starving.
    So I want to ask Mr. Grossinger, you heard Mr. Goldberg who 
works for the city of Lorain, OH tell us that we need a 
mechanism to get lenders and servicers to cooperate and 
coordinate with municipalities and local governments so that 
the community does not have to bear the burden of a vacant and 
abandoned property. Mr. Grossinger, what can Bank of America's 
model teach us for encouraging lenders and servicers nationwide 
to act more responsibly?
    Mr. Grossinger. Well, Mr. Goldberg and I talked previously 
about the Neighborhood Stabilization Program. I think one of 
the things we, as an institution, need to do a little bit 
better, and we are moving in that direction, is the integration 
between the REO department over here and the group that's 
handling the loan toward foreclosure over here. When we talk 
about that set of properties that are preforeclosure, it's 
being willing to get in there to do an evaluation of its value 
and determining with the local government whether or not this 
property is a candidate for demolition. I would take some issue 
with some of his comments that every single property needs to 
be, in effect, first looked to the city. It really can't be 
that way. We are bound by our pooling and servicing agreement 
to sell these properties if there's some value. So, 
unfortunately, if an investor is willing to pay more than the 
city, we are not capable of making that distinction and saying 
sorry, we can't accept your higher bid because we have to sell 
it to the city over here.
    Mr. Kucinich. Mr. Goldberg, would you like to respond? You 
seem to be indicating an interest in doing so.
    Mr. Goldberg. The problem I have in the trenches is we get 
outbid all the time.
    Mr. Kucinich. By?
    Mr. Goldberg. By investors, in and out of State, by the 
landlords in the community whose names I'll save harmless, and 
they'll throw paint on the house, do a minimal fix-up and 
create something that has a three- to 5-year economic life and 
then we have to go in legally and knock it down anyway. We 
can't afford to pay a fortune to knock a home down. We are 
using Federal funds to do it already and lenders who aren't as 
forthcoming as Bank of America, specifically, are also getting 
the Federal money to hold onto these properties. So we are 
paying for it two or three times.
    Mr. Kucinich. Do you have a response, Mr. Grossinger?
    Mr. Grossinger. There are programs that we could develop. I 
think, unfortunately, we can't--as a servicer, we can't make a 
distinction in terms of who we are selling to and specifically 
we would get sued by our investors on a daily basis if we were 
to say no, we are going to accept a lesser bid for a social 
good. I wish we could do that, it's just not in the structure 
of what we do.
    On the other hand, one of the things that cities do and can 
do, I think Cleveland is doing a pretty good job at this, and I 
know Chicago is ramping up, using code enforcement and using 
those tools they have to mark it more in our interest as a 
servicer to work with them, whether that be toward a demolition 
or toward a different sale. We do have programs here. We are 
working with the REO Clearinghouse here in Cleveland on those 
properties where the fines and fees exceed the value of the 
house. Right now Cleveland is looking at nine different 
properties that we would donate to them because we have 
determined and the city has determined it's in both of our 
interests for us to do that as opposed to move toward 
foreclosure and then let it sit, or worst case scenario, not 
move toward foreclosure.
    Mr. Kucinich. Mr. Goldberg, I'm going to give you the final 
word on this exchange.
    Mr. Goldberg. Thank you.
    I think those are very laudable efforts. I think they are 
special. But two things: No. 1, Fannie Mae right now has us in 
bidding wars on more junk properties than any other lender.
    Mr. Kucinich. We would like a list of that. OK?
    Mr. Goldberg. We can put it together. It happens all the 
time.
    Mr. Kucinich. I know, but we are tracking what Fannie Mae 
is doing.
    Mr. Goldberg. Right. But the other thing is Congress can 
compel lenders if they are being given Federal funds through 
the bailout to have to sell to the cities.
    Mr. Kucinich. Thank you for that suggestion, and you know 
we will take that under advisement with members of the 
committee.
    We are going to now go to Mr. Jordan for his questions.
    Mr. Jordan. Thank you. Mr. Grossinger, we've had some 
experience, the chairman and I, with your company in front of 
our committee on, frankly, numerous occasions.
    And I want to talk to you about this: There seemed to be 
this attitude that somehow lenders aren't complying at all. I 
want to talk about any pressure that may be exerted on you and 
other lenders. Let me get the program straight. It's voluntary 
when you sign up someone on the HAMP program. It's voluntary 
when you sign up, but once you agree, and I think we heard 
testimony earlier, close to 70 or 80 percent of the market, of 
the servicers in the market are signed up for the program; is 
that right?
    Mr. Grossinger. Correct, as far as I know.
    Mr. Jordan. OK. Once you sign up and you begin to go 
through the modification trial or whatever, are there a set of 
rules you are then obligated to follow? If, for example, this 
homeowner comes to you and they qualify, whatever that means, 
we don't know, we haven't seen all the models and the other 
things that we talked about in today's hearing, once they 
qualify, are they then obligated to go forward?
    Mr. Grossinger. I'm going to answer this within--to the 
extent that I have the expertise, which we are skating on the 
edge of this because most of my focus is on the vacant property 
issue, but yes, if we follow the rules of the HAMP program and 
if somebody is qualified, they get a loan modification.
    I will say, and I want to say this publicly, that I'm very 
encouraged about Ms. Caldwell's appointment, not just because 
she is a former Bank of America person, but her reputation in 
community development and caring about communities is 
longstanding. We actually never overlap, so it's not as though 
I'm doing this for a friend.
    Mr. Jordan. So the blame can't--I mean, there's going to be 
blame for this dismal performance of this program, it's--I 
mean, you have to do it. Once the criteria is met, whatever 
that criteria happens to be, you have to move forward.
    Mr. Grossinger. That's correct. I'm not going to say that 
there isn't some blame that should go to servicers. I don't 
think Mark would let me walk out of here alive.
    Mr. Jordan. Let me ask you this: What kind of pressure--I 
was looking at a story from this summer. There was a meeting, 
and I'm going to read what the New York Times letter demanding 
that representatives from the top 25 mortgage servicers 
assemble in Washington on July 28th, it is likely to be every 
bit as--it's interesting--it is likely to be every bit as 
painful for them as the pulse of the meeting last October was 
with the banking CEOs, and we brought that hearing or that 
meeting up in previous committee hearings. Were you or someone 
from your company at that meeting on July 28th?
    Mr. Grossinger. I actually don't know, unfortunately.
    Mr. Jordan. You don't know if anyone from your bank was 
there?
    Mr. Grossinger. I would assume there was. Again, it's not 
where I focus. Unfortunately, I don't know. I would assume so.
    Mr. Jordan. Have you had folks from Treasury say you need 
to increase staffing, you need to increase call centers, you 
need to increase the rates you are doing, you have to improve? 
Have you had that kind of pressure come from the government?
    Mr. Grossinger. Well, you are characterizing it as 
pressure. I would say that certainly the Treasury has asked us 
to do better and do better in all sorts of ways. Whether that's 
pressure or not is in the eye of the beholder.
    Mr. Jordan. You guys have always been reluctant to use the 
term in hearings talking about the pressure that was exerted on 
the CEO to do the Merrill merger, he was reluctant to use that 
term as well.
    Mr. Grossinger. Certain terms are just better left unsaid.
    Mr. Jordan. I understand. I mean, you paid the money back 
then, you can be straightforward, you paid it all back last 
week, right?
    Mr. Grossinger. We announced we were paying it back. It was 
coming out of my account and I haven't yet transferred it. No. 
We have announced we are going to be doing it.
    Mr. Jordan. Are you at all troubled--frankly, by any of our 
witnesses. I understand what you expect to come from it and we 
are all trying to help the families who are in tough 
situations, but are you at all troubled by what I would 
characterize, and we will start with Mr. Grossinger and then we 
will let others jump in if they want, just this unbelievable 
involvement we now see of the Federal Government in the private 
market?
    We have TARP, we've got HARP, we've got HAMP, we've got 
stimulus, and I know I'm forgetting a lot, we've got the auto 
bailout, and now we've got Members of Congress talking about we 
need to bail out some of the folks in the press, some of the 
big newspapers. We've got the unbelievable, in my mind, 
situation now where we have the Federal Government pay czar in 
the United States of America telling private American citizens 
how much money they can make. All of that happening, all that 
spending happening at a time when we've got a $12 trillion 
national debt, as Mr. LaTourette referred to earlier in his 
comments. Does that begin to trouble you at all, Mr. 
Grossinger, what we are seeing happening right now?
    Mr. Grossinger. It's really irrelevant what I think 
personally. I will tell you, however, that there are some 
things, as with everything, there are some very good 
opportunities for us in the current environment if we put aside 
sort of the walls that have been created between the different 
aspects, government, private sector, the not-for-profit world. 
There are some opportunities to do some good things, but those 
walls have to come down. What I think about government 
involvement is irrelevant.
    Mr. Jordan. OK. Anyone else want to comment?
    Mr. Ford.
    Mr. Ford. What troubles me most is not so much the 
availability of the bailout money, is that there is no 
conditioning its receipt upon performance. I think there is 
sort of a status quo point of view at the financial 
institutions. And I have been on council with Mr. Grossinger, I 
respect him quite a bit, but when he said that the lenders 
simply can't let these the properties go for less money because 
they are servicing and pulling agreements from priors to be 
competitive, I've got a list that I can provide the committee 
of the last 2 years' REO sales. Ninety percent of them are 
below $10,000. Eighty percent are below $5,000. The average is 
only about $3,000.
    It's just ludicrous to assume that these properties have to 
somehow be going to speculators in Omaha. At those prices, they 
should be going to land banks, nonprofits, municipalities. 
There's no reason for that. The reality is that the prices are 
absurdly low and they are going to irresponsible hands.
    Mr. Jordan. Mr. Seifert.
    Mr. Seifert. When the government wasn't involved, we see 
what happened. When the government sort of got involved, we see 
what's happened under the HAMP stuff. For an example, we've 
done over 400 HAMP trials. We've had one that's been converted 
because the government is just not clamping down.
    Another point on that, though, is all 400 that we've done, 
we've given them all the paperwork. Ms. Caldwell testified that 
the whole notion of the trial mod was to give the homeowner an 
opportunity to turn in all the paperwork. Our mods are going in 
with good paperwork. We have the pay stubs, we've got the tax 
returns. That's the heavy lifting we do. Why, out of 400, do we 
have one that's been permanently modified? And that's because 
the government hasn't clamped down enough. So, I guess, I'm 
troubled by some of it, I'm not troubled by that instance.
    Mr. Goldberg. Lenders are paying somewhere between $1,500 
and $2,000 in real estate commissions for a house. They are 
paying private asset disposition entities and unless they have 
brought everything in the house, large amounts of money to try 
and maintain property and manage it, all these additional costs 
that these entities receive fed funds are not going back to the 
lender, they are not going back into the bottom line of the 
banks, they are just being wasted away. When these homes come 
to us anyway, all that extra money was wasted except we pay 
Federal funds for the services also. There needs to be a way to 
deal directly with us on the properties that are just not in 
condition to be sold anymore. It needs to be expressed. It will 
save the lenders a large amount of money and time.
    Mr. Jordan. Professor, do you want to add anything?
    Ms. Coulton. No. I think it's been said.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Kucinich. Thank you very much, Mr. Jordan. This hearing 
entitled ``Examining Local Efforts to Address the Continuing 
Foreclosure Crisis: Perspectives from Cleveland, OH'' has 
brought two panels who are very much involved in the day-to-day 
issues of foreclosures.
    In particular, Mark Seifert from ESOP has talked about 
foreclosure prevention programs that actually work and the need 
to make sure that they continue to be funded. But why 
Cleveland? Again, because we see that Cleveland has been the 
epicenter of the home foreclosures in the United States.
    There was a calculated effort on the part of certain 
lenders to go into minority communities in Cleveland and to 
sign people up without people really having full knowledge of 
what was going on, signing them up and then within 2 years to 3 
years, they were foreclosed. There was a deliberate effort to 
circumvent the Community Reinvestment Act where many 
institutions have an affirmative obligation to loan money into 
communities. They not only did not meet that obligation, but 
they came up with these subprime packages that resulted in 
devastating effects. And it wasn't only the people who lost 
their homes, it was the people who stayed in the neighborhoods 
whose property values tanked who lost 30, 40 percent of their 
property value because everything else around them was falling 
apart. This has not played out yet.
    The reason why we hold this hearing is that one of out 
every eight homes in the United States is still facing 
foreclosure, that we are seeing the rate of foreclosure 
actually start to pick up. This hasn't played out yet. That's 
why the work of our committee and our subcommittee is so 
important, because we see that, for whatever Congress thought 
it was doing in passing the bailouts, we didn't address the 
problem of what do you do about helping people save their 
homes. Did not address the problem. And while the 
administration is making an effort with the HAMP program, it's 
really trying to play catch-up for something that started years 
ago.
    When I look at my community in Cleveland and I hear the 
testimony of Professor Coulton how homes have been selling in 
Cleveland for 13 percent of their estimated market value, think 
of what that means to people who put their time and energy into 
those homes, who put a lifetime of work into their homes and 
invested their own sweat and their money into those homes, only 
to find that the value of them had been wiped out by these 
foreclosure schemes.
    I agree with Mr. Grendell when he was here about people 
have to take responsibility, you sign a contract, you have to 
take responsibility. But it's interesting to know that the 
foreclosure crisis started in this community where people had, 
let's say, a disadvantage because they weren't as familiar with 
the fine print. And I don't care who you are and what your 
education is, that fine print, you can have a college degree 
and that fine print can leave you with a foreclosed home if you 
are not careful.
    So we are, this subcommittee is going to continue to track 
this. Our community's on the line here. Our property values 
have been dropping. Our schools' funding has been dropping. The 
demand on local communities such as Cleveland and Lorain have 
been going up, more police protection, more housing code 
enforcement, more health and safety issues that abound in areas 
where there's foreclosed property. We are fighting for our 
communities' lives. So your testimony here is very helpful.
    Mr. Grossinger, I'm glad that Bank of America is stepping 
up. I appreciate what you've done in Chicago and hopefully some 
others in your industry will see that it's time for them to 
step up as well.
    This is the Domestic Policy Subcommittee of the U.S. 
Congress. I'm Congressman Dennis Kucinich of the Cleveland area 
and chairman of the committee. I want to thank all of you for 
being here. I thank the staff for its help in organizing this. 
I also want to thank the presiding judge of the Northern Ohio 
District Court, Judge James Carr for his indulgence in 
permitting us to have this room, and also Geri Smith, Clerk of 
Courts for assistance in all the staffing here.
    This committee stands adjourned.
    [Whereupon, at 1:31 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
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