[Senate Hearing 111-10]
[From the U.S. Government Publishing Office]
S. Hrg. 111-10
COPING WITH THE FORECLOSURE CRISIS: STATE
AND LOCAL EFFORTS TO COMBAT FORECLOSURES
IN PRINCE GEORGE'S COUNTY, MARYLAND
=======================================================================
HEARING
before the
CONGRESSIONAL OVERSIGHT PANEL
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
----------
FEBRUARY 27, 2009
----------
Printed for the use of the Congressional Oversight Panel
S. Hrg. 111-10
COPING WITH THE FORECLOSURE CRISIS: STATE
AND LOCAL EFFORTS TO COMBAT FORECLOSURES
IN PRINCE GEORGE'S COUNTY, MARYLAND
=======================================================================
HEARING
before the
CONGRESSIONAL OVERSIGHT PANEL
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 27, 2009
__________
Printed for the use of the Congressional Oversight Panel
-------
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48-444 WASHINGTON : 2009
----------------------------------------------------------------------
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C O N T E N T S
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Page
Opening Statement of Elizabeth Warren, Chair, Leo Gottlieb
Professor of Law, Harvard University........................... 1
Statement of Damon Silvers, Associate General Counsel, AFL-CIO... 8
Statement of Richard Neiman, Superintendent of Banks for the
State of New York.............................................. 13
Statement of Hon. Chris Van Hollen, U.S. Representative from
Maryland....................................................... 14
Statement of Lloyd Baskin, Homeownership Center, Prince George's
County Department of Housing and Community Development......... 16
Statement of Hon. Donna Edwards, U.S. Representative from
Maryland....................................................... 19
Statement of Tracy Robison, Resident of Prince George's County
and Distressed Homeowner....................................... 21
Statement of John Mitchell, Resident of Prince George's County
and Distressed Homeowner....................................... 22
Statement of Teresa Smith, Resident of Prince George's County and
Distressed Homeowner........................................... 24
Statement of Anne Balcer Norton, Director of Foreclosure
Prevention, St. Ambrose Housing Aid Center..................... 29
Statement of Lisa McDougal, Co-Chair, Coalition for Homeownership
Preservation in Prince George's County, and Executive Director,
Sowing Empowerment and Economic Development (SEED)............. 36
Statement of Hon. Thomas E. Perez, Secretary, Maryland Department
of Labor, Licensing and Regulation............................. 41
Statement of Phillip Robinson, Executive Director, Civil Justice,
Inc............................................................ 55
COPING WITH THE FORECLOSURE CRISIS: STATE AND LOCAL EFFORTS TO COMBAT
FORECLOSURES IN PRINCE GEORGE'S COUNTY, MARYLAND
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FRIDAY, FEBRUARY 27, 2009
U.S. Congress,
Congressional Oversight Panel,
Largo, MD
The panel met, pursuant to notice, at 9:40 a.m. in
Community Room B, Largo Student Center, Prince George's
Community College, Elizabeth Warren, chair of the panel,
presiding.
Attendance: Professor Elizabeth Warren (presiding), Senator
John Sununu, Mr. Damon Silvers, Mr. Richard Neiman.
OPENING STATEMENT OF ELIZABETH WARREN, CHAIR, LEO GOTTLIEB
PROFESSOR OF LAW, HARVARD UNIVERSITY
Ms. Warren. This hearing of the Congressional Oversight
Panel will come to order.
I want to start by welcoming everyone. This hearing is
entitled ``Coping with the Foreclosure Crisis: State and Local
Efforts to Combat Foreclosures in Prince George's County,
Maryland.''
I'd like to start out by thanking Prince George's Community
College Provost Charlene Dukes--Provost Dukes, you're here, I
saw you earlier. She's standing up in the back of the room.
Thank you for graciously hosting this hearing. We very much
appreciate the cooperation of the college.
I also want to thank Congresswoman Donna Edwards,
Congressman Chris Van Hollen, who's sitting right down here in
front, and Lloyd Baskin, of the Prince George's County
Department of Housing and Community Development, for their
participation here today. They will give remarks to us this
morning before we hear from our witnesses.
I also would like to thank Senators Ben Cardin and Barbara
Mikulski, Congressman Steny Hoyer, Governor Martin O'Malley,
and County Executive Jack Johnson, all for helping make this
hearing possible. These hearings are very much a joint effort
of many hands.
I'm Elizabeth Warren. I'm the chair of the Congressional
Oversight Panel. This oversight panel was created as part of
the Emergency Economic Stabilization Act in order to oversee
TARP and, principally, to try to stabilize our economy. Our
mandate is to assess the effectiveness of foreclosure
mitigation efforts. We are in Prince George's County to gain a
better understanding of the foreclosure crisis and to learn
from your experiences.
This is our second field hearing on mortgages and
foreclosures. We had a field hearing in December, in Clark
County, Nevada, another area that has been hard hit by
declining home values and an epidemic of foreclosures.
Since our first hearing, there is a new leadership. We have
an announcement of the Obama Homeowner Affordability and
Stabilization Plan to help homeowners at risk of foreclosure
get mortgage loan re-financings and modifications.
Our report for March will focus on the mortgage crisis, on
barriers to loan modifications and refinancing, and on the key
characteristics of a successful program. We're here in Prince
George's County today because it is the foreclosure capital of
the State, and because both the State and the county have been
creative and active in searching for means to combat the
foreclosure crisis.
In preparing to come here, like all good academics, you
have to have a little research and understand what the numbers
are. It turns out--you may already know these numbers, but it's
worth making sure that they're entered in the record--that,
although income in this area has remained relatively stable
since 2000, inflation-adjusted housing prices from 2000 to 2007
increased by 124 percent in this area. Housing prices more than
doubled. This is a bubble that had to burst.
In 2008, Maryland reported 32,338 foreclosure filings. That
is a 71-percent increase from 2007, and, more critically, a
945-percent increase since 2006. Prince George's County had the
State's top foreclosure rate, and the crisis seems to be
getting worse.
Maryland has aggressively confronted this crisis, and this
is a large part of what we are here for today: to learn about
your experiences through the crisis; and to learn about your
experiences in how to try to cope with those crises; and third,
to learn about where the needs are that the Federal Government
may be able to help with, the extent to which changes in rules,
as well as financial support, may be relevant in trying to
solve this problem.
So, I'm going to skip the rest of my comments and try to
save time to hear from you, because I think that's what we're
here for, most importantly. But, I want to say one other thing
about a field hearing. We are here to hear from you, but this
is not the only way in which we can hear from you. From the
first day that we began our work in a public way, we set up a
Web site. And it's www.COP--that's Congressional Oversight
Panel, COP--.Senate.gov. We hope, through that Web site, not
only that you will download the information that we have
available, our reports and our videos and our work, but we hope
that you will use this Web site in order to let us hear from
you. We're here today to do it in person, but we're there all
the time on the Web. So, send us your stories, encourage your
neighbors to send us their stories. We want to be able to hear
from the American people on these issues. We, in turn, take
those stories and make them a part of our work, and make sure
that others in Washington see them and hear them. So, please
let this be the start of a two-way street between us.
Now that I've made this part clear, I also want to make
clear that we have other people available here today. We have
housing caseworkers from Congresswoman Edwards' and Congressman
Van Hollen's offices, as well as representatives of local
counseling agencies, to help any homeowners who are in need of
assistance, so we can use this in a small way, at least as our
contribution to trying to solve this problem.
I'm joined here by--there will soon be three other members
of our panel; right now, I have two of them in place--Damon
Silvers, Associate General Counsel of the AFL-CIO and Richard
Neiman, Superintendent of Banks for the State of New York.
I now will yield to my colleagues for any opening remarks.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Silvers.
STATEMENT OF DAMON SILVERS, MEMBER OF THE CONGRESSIONAL
OVERSIGHT PANEL
Mr. Silvers. Thank you, Madam Chair.
Good morning, and thank you, to Elizabeth and to the panel
staff, for putting this very important hearing together.
And I also want to express my deep gratitude to the good
people of Prince George's Community College for accommodating
us, and particularly on such short notice.
Finally, I would like to acknowledge the presence of my
congressman, Chris Van Hollen--and hopefully we will be joined
shortly by Congresswoman Donna Edwards--both for their
leadership on this and so many other issues, and for taking the
time to be with us today. We are very grateful.
This hearing is about the foreclosure crisis. We are
rightfully here, just a few miles from Capitol Hill and K
Street, to learn about the details of what is happening in our
country's neighborhoods, and to make some simple points.
The foreclosure epidemic is not a regional phenomenon, it's
not confined to some corner--some far-distant corner of our
country, and it is not under control. And here in Prince
George's County, home to the people who make our nation's
capital work, the foreclosure epidemic is running wild,
accounting for over a third of all foreclosure events in the
State of Maryland in the last quarter of 2008. The
Congressional Oversight Panel is here today because our job is
to ensure that the Emergency Economic Stabilization Act of 2008
achieves its purpose of getting the foreclosure epidemic under
control. Our next monthly report will focus on foreclosure
mitigation.
To do our job, we need to understand what has happened here
in Prince George's County, where, in the last quarter of 2008,
there were over 3500 foreclosure events, a 30-percent increase
over the third quarter of 2008, and a 45-percent increase over
the same period in 2007.
Mass foreclosures were supposed to be the nightmare of our
grandparents' youth, a memory out of faded newsreels. The fact
that a lender can throw a family out of their home is a
necessary part of a system of housing finance, but it is also
an act of emotional violence and economic destruction.
Foreclosed homes typically yield less than 40 cents on the
dollar to lenders, while destabilizing neighborhoods and
driving down real estate values. Foreclosures should be the
last option, after all else has failed.
But, it is impossible to look at the numbers nationwide--
millions of foreclosures, but only thousands of loan
modifications--and not conclude that foreclosure is not just
the first option lenders and services offer to homeowners in
trouble, it is effectively the only option.
The foreclosure epidemic should teach policymakers
something that policy elites are always in danger of
forgetting: we are one country and, increasingly, one world,
our fate bound together. The family put on the street here in
PG County is not simply a regrettable personal tragedy for that
family, it is the beginning of a chain of events that leads to
falling property values, collapsed megabanks, trillion-dollar
government bailouts, frozen credit markets, 401(k) meltdowns,
political crises in foreign countries, closed factories and
lost jobs, from here to China and back.
Many people find the financial-markets crisis a complete
mystery, but really it's very simple. Mortgages on terms
families can't afford aren't worth the face value of those
mortgages. Banks that hold those mortgages don't have enough
real assets to fund their liabilities, and foreclosing on homes
makes the problem for both homeowner and bank worse.
So, in a very real sense, the crisis in our financial
system begins here in the American home and in the suffering of
American families. And so, this hearing is not just about our
foreclosure mandate, but our mandate to understand whether the
$700 billion Congress appropriated to address the financial
crisis is being used effectively.
Foreclosures and sick banks are two sides of the same coin.
We have been on a path of denial, the path that assumes that
buying time will, itself, be a solution. We pretend houses are
worth more than they ever will be, that families with stagnant
incomes will somehow pay exploitative mortgages, that banks
that are underwater are actually healthy. This has been the
strategy for too long, and we cannot afford to play ``Let's
Pretend'' any longer.
Home foreclosures and zombie banks are dragging down our
housing markets and our economy. Buying time is making the
problem worse, not better. We need to revive both our
communities and our banks, and that means that both banks and
mortgages must be restructured.
This hearing, finally, is so timely because we are at a
moment when action is finally on the table. The President has
proposed spending real money to help homeowners in trouble,
building on the leadership shown in this area by the FDIC. Here
in Maryland, there are models for action in the efforts of the
State government, under the leadership of Governor Martin
O'Malley, to encourage solutions other than foreclosure when
homeowners get in trouble.
Maryland's efforts, like those of other States, like New
York, ably represented here at the table, have outpaced Federal
efforts, up until now. As President Obama details his mortgage
relief plan, I believe Maryland's experience can help guide our
efforts at the Federal level, so I am very pleased the leaders
of the Maryland State initiatives are here with us today.
I hope, today, we will hear more about these solutions and
that testimony will help us answer key questions about
addressing the foreclosure crisis. What are the obstacles to
mortgage restructurings? Do we need to encourage principal
write-downs, or will interest-rate reductions be enough for
most homeowners in trouble? What carrots and sticks work to
encourage loan restructurings? In particular, what should we
ask of recipients of TARP money in this area? Looking at
Federal, State, and private-sector efforts to address
foreclosures over the last 2 years, what, if anything, has
worked? And finally, and quite importantly, how can government
communicate effectively with borrowers, who are in trouble and
who may not trust what they get in the mail, to help those
people get help?
I look forward to hearing what our distinguished panels of
witnesses have to say on all these issues, and thank you.
[The prepared statement of Mr. Silvers follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Warren: Thank you, Mr. Silvers. Mr. Neiman.
STATEMENT OF RICHARD NEIMAN, MEMBER OF THE CONGRESSIONAL
OVERSIGHT PANEL
Mr. Neiman. Thank you.
As our Chair pointed out, in my day job I am Superintendent
of Banks in New York, but I really think that my presence on
this committee has probably more to do with the role that I've
played in foreclosure prevention and mitigation in the State of
New York. I serve as the Governor's chair of an interagency
task force that we call HALT, Halt Abusive Lending
Transactions, and it is really addressing the whole compendium,
the continuum, of the foreclosure crisis, from initiation to
foreclosure, to the impact that foreclosed properties have on
destabilizing neighborhoods.
We have addressed this from--as your State has, and as many
States--from bringing borrowers directly together with lenders,
to modify mortgages and to prevent filings of foreclosures, to
providing multi-million-dollar grants to the not-for-profits,
who are so necessary in providing the counseling, to imposing
legislation to assure that a crisis like this never happens
again, and that banks impose and utilize sound underwriting
standards to assure that borrowers have the ability and the
wherewithal to pay and put that burden and duty of care on the
lender, and also to bring serious and effective enforcement for
mortgage fraud, and to assure that mortgage originators,
mortgage brokers, are licensed--properly licensed in this
country.
But, the only way for us to effectively do this is to
actually interact with the people who are impacted by this, and
that's why, for the last 2 years, since I've been in this role,
I have made it a serious attempt to walk the streets of the
communities that are being impacted by foreclosures.
Fortunately, New York has not been impacted to the same
extent as communities like Maryland. However, New York is being
disproportionately impacted in some areas--there are areas in
Brooklyn and Queens that comprise almost 30 percent of all the
foreclosure filings. And when you walk those streets of
Jamaica, Queens, or Bensonhurst, Brooklyn, or even Buffalo and
Rochester, and you see the destabilizing impact that foreclosed
properties, not only have on the families who were displaced,
but on the neighbor--every neighbor of those homes; you see the
impact that this is having on our cities, on our counties, on
our States, our Federal Government, and our economy.
So, that's why I am so excited that we have this
opportunity to be out here, to hear from the borrowers, to hear
from the not-for-profits, and to hear from the government
officials who are working, day in, day out, to address this
problem. When we hear from you as to what are those
impediments--and as Damon and Elizabeth mentioned, our next
report will focus on the impediments and the obstacles to
bringing about successful mitigation efforts. But, only by
understanding the impediments, whether they be at the servicer
level, the bank level, or at the financial level, can we really
recommend to Congress, to the Federal Government, appropriate
modification efforts.
So, I am very anxious to hear from you all today, and thank
you for coming.
Ms. Warren. Thank you, Mr. Neiman.
The Chair now recognizes Congressman Chris Van Hollen for
some opening remarks.
STATEMENT OF HON. CHRIS VAN HOLLEN, U.S. REPRESENTATIVE FROM
MARYLAND
Representative Van Hollen. Thank you. Thank you, Professor
Warren. Thank you for chairing the Congressional Oversight
Panel. And thank your other members for joining you--Mr.
Silvers, Mr. Neiman. Thank you for the work that you're doing.
We all look forward to your report, not just Members of
Congress, but the people of Prince George's County and people
of our country, as we look for a way forward and a way out of
what is clearly a crisis.
I'm very pleased to be here today with Lloyd Baskin, and I
know we're going to be joined shortly by my colleague in
Congress, Donna Edwards, and we have been working to try and
address this problem as expeditiously as possible.
I also want to thank Prince George's County Community
College and Charlene Dukes for hosting us today, and to say to
our State and local officials here in Maryland, as you have
said, that they have been taking aggressive steps to try and
stem the tide of foreclosure. But there are, of course, limits
to what you can do at the local and State level, and that's why
it's essential that we take very firm and strong action at the
Federal level, which, in late fall of last year, I think, was
very piecemeal; I think, now it is accelerating; and we're
going to be really rolling up our sleeves and getting to it
with the new administration and the election of President
Obama.
I'm not going to recite the statistics for Prince George's
County; I think you all did a very good job of laying out the
problem. It's bad, and it's getting worse. It's already been at
a pretty rapid decline, and that curve is getting steeper.
There is a perception, I believe, that there's sort of a bubble
around the nation's capital area that has not been bursting, as
Mr. Silvers said, and others have said. That just isn't so. And
Prince George's County is a vivid example that, right in the
backyard of our nation's capital, the foreclosure crisis is
here, and growing.
You're going to hear the testimony from some witnesses
later, and, I think, as you've said, it's important to get
that--the stories, right from the ground.
I would like to underscore the point that Mr. Silvers made
with respect to the sense that we have gotten in our office
with respect to trying to deal with some of the lenders or the
servicers. It has been very frustrating. We have had some
success stories, and we're always pleased when we're able to
have a success story. But, we've also had many cases where we
have not been able to make progress, which is why it's
essential that we move forward more aggressively on that front.
I just want to relate a story from one constituent who
could not be here today. This is a letter we received from the
constituent, ``On Christmas Eve, we received a letter from a
lawyer representing HomeEq Servicing Company, informing us that
they had started the foreclosure process. We have been given 45
days to either pay everything we owe them or challenge their
claim of us being delinquent since September 1st. In reality,
we paid them the September and October payment, but they
credited them to a missed payment in May, and my husband tried
to make a partial payment in November, which they refused. He
also tried to pay them in December, which they refused.
``I am very frustrated, because I feel that we have done
everything that was suggested in the,'' quote, `` `Prevent
Foreclosure' package that was sent to me by your office.
Unfortunately, our loan servicing company doesn't seem too
interested in trying to help us stay in our home. I feel like
we have been very honest with our lender, and have acted in
good faith, but I feel we have been treated unfairly. I feel
like they have knowingly and willingly put us further behind in
our payments, and now added additional legal fees which has
made it nearly impossible to pay what we owe.
``I hope someday legislation will be passed to protect
people like us. To send us the notice on Christmas Eve was like
adding salt to the wound. The very least, I would appreciate
your letting Representative Van Hollen know what we have dealt
with, because I feel it has been unfair, to say the least.
``We had no control over the housing crash, and couldn't
sell our home. We have resigned ourselves to the fact that we
will now have to go forward with a bankruptcy plan and hope,
someday, to be able to regroup and rebuild.''
Since that constituent sent us the letter, they filed for
bankruptcy. HomeEq then filed papers to lift the stay of
bankruptcy protection so that they could go ahead with their
foreclosure. Our constituent since had a heart attack and a
stroke, and is now in intensive care at Washington Hospital.
These are the kind of stories you're hearing in Prince
George's County in Maryland and around the country.
Last week, President Obama announced his housing plan to
help 7 to 9 million American families restructure or refinance
their mortgages to avoid foreclosure. We all need to get behind
that plan.
Yesterday, the House of Representatives began debate on
legislation entitled ``Helping Families Save Their Homes Act.''
It has a number of provisions in it. I'm not going to go
through all those provisions. I do want to mention one, with
respect to the option to go into bankruptcy and have a
bankruptcy court readjust your mortgage. I think we all know
that people with second homes, people with yachts, real estate
speculators and others can currently go into bankruptcy court
and have a judge consider all the factors, all the individual
factors that a blanket rule cannot, and make a judgment
tailored to the individual circumstances of that person, going
forward. And one of the provisions in the bill the House is
taking up will allow people who are currently undergoing
foreclosure to seek some relief in bankruptcy. I think it's an
important hammer, and it's even effective in the cases where
they don't eventually have to go into bankruptcy, because it
provides a much greater incentive to lenders to negotiate and
renegotiate these arrangements.
Hopefully, the more aggressive approach that's being taken
now will make a real difference in people's lives. As I said,
we get lots of constituent cases; we try and deal with them,
one on one. Sometimes we're successful; sometimes, very
unfortunately, we're not, which is why we need to supplement
the efforts at the local and State level by dramatic Federal
action.
I really thank you, again, for the work that you're doing,
and we look forward to your report as a way forward in getting
us out of this crisis so we don't have to hear the kind of
stories I just related to you.
Thank you very much for being here.
Ms. Warren. Congressman Van Hollen, Chris, thank you very
much for coming here today. And thank you for participating in
this hearing, but thank you for the work that you're doing in
Washington, and particularly on the very important bill
yesterday.
Representative Van Hollen. Thank you very much.
Ms. Warren. Thank you.
Representative Van Hollen. We hope to get it done----
Ms. Warren. Godspeed.
Representative Van Hollen [continuing]. In the next week.
Ms. Warren. I now want to recognize Mr. Lloyd Baskin, who
is the manager of the Homeownership Center in the Prince
George's County Department of Housing and Community
Development.
Welcome, Mr. Baskin, and would you make your opening
statement, please.
STATEMENT OF LLOYD BASKIN, MANAGER, HOMEOWNERSHIP CENTER,
PRINCE GEORGE'S COUNTY DEPARTMENT OF HOUSING AND COMMUNITY
DEVELOPMENT
Mr. Baskin. Well, thank you, Madam Chair. Good morning,
Madam Chair Elizabeth Warren, members of the panel--Mr. Damon
Silvers, Mr. Richard Neiman, and Chris Van Hollen. I am Lloyd
Baskin, and I manage the Homeownership Center for Prince
George's County. Thank you for inviting me to talk about
foreclosure and its effects on homeowners who have tried to
refinance or obtain loan modifications. It's really a struggle
for folks to have to go through.
It's fitting that this august panel has decided to take up
the most important issue facing America, which is foreclosure
and the questions surrounding reviewing the current state of
financial markets and the regulatory system.
Our jurisdiction appreciates the fact that your panel,
which has oversight of foreclosure mitigation, has come to
listen and assess the impacts the current bank credit crisis
has demonstrated on several homeowners facing foreclosure
proceedings. The broad outline of my remarks today will do two
things; first is to provide a cursory snapshot of the state of
foreclosures in the county, the second will be to offer
recommendations for your panel to consider in addressing the
impediments that thousands of homeowners are facing in their
efforts to refinance or execute a loan modification.
I'll start with--the subprime mortgage market experienced
tremendous growth between 2001 and 2006. The county believes
that this was facilitated by the development of private-label
mortgage-based securities. Investors in search of higher yields
kept increasing the demands for these private-label mortgage-
backed securities, which also led to sharp increases in the
subprime share of the mortgage market--it went up from 8
percent in 2001 to 20 percent in 2006--and in the securitized
share of the subprime mortgage market, which increased from 54
percent in 2001 to 75 percent in 2006. In Prince George's
County, our experience shows that as the subprime market grew
dramatically, mortgage loan underwriting standards were
deteriorating just as dramatically. Rapid appreciation of
housing prices hid the true riskiness of these subprime loans;
and when housing prices stopped climbing, the risk in the
market was apparent.
We now know that the subprime market experienced a classic
lending boom-bust scenario, with rapid market growth, loosening
underwriting standards, and deteriorating loan performance,
which decreased risk premiums.
In addition to rising default and foreclosure rates
throughout Maryland, the Homeownership Preservation Task Force
was established to develop an action plan to address escalating
foreclosure rates and identify effective ways to preserve
homeownership. The task force examined the capacity of the
housing counseling agencies to address foreclosure prevention.
The Homeownership Coalitions in Prince George's County and in
Baltimore recommended that homeowners be provided with
financial literacy information about the importance of their
credit and understanding the loan terms in order to make good
choices in the mortgage products. In Prince George's County,
this took the form of group financial literacy education and
one-on-one counseling for those who have missed one or more
mortgage payments.
``Under a Shadow,'' which is a weekly series of foreclosure
prevention workshops that are put on by the Prince George's
County Coalition, are held every Thursday at various locations
throughout the State. This 2-hour workshop basically gives
people information on the foreclosure process, as well as their
mortgage rights and responsibilities. Participants are taught
to order a credit report, develop a budget, and complete a
hardship letter to describe what caused the delinquency and
what they are prepared to do to resolve it.
The goal is to provide families information on repayment,
loan modification, and refinancing programs to prevent the loss
of their homes. Approximately 6500 people have attended these
weekly workshops since September of 2007.
And we get a lot of our foreclosure information from Realty
Track and also from the State of Maryland. And they've been
studying and tracking foreclosure statistics throughout the
nation. And Realty Track reported that 10,030 property
foreclosure filing events were filed during the fourth quarter
in Maryland.
Now, let me describe what a foreclosure event is. A
foreclosure event is a notice of sale, a notice of default, or
an actual purchase of a foreclosed home. Now, in Prince
George's County, we're accounting for about 36 percent of those
in the State of Maryland, or 3,621 notices of default; notices
of sale, about 570 in the fourth quarter; and purchases were
592. So, a lot of folks are in trouble.
Now, the State of Maryland has also gone out and identified
hotspot communities, where foreclosure has impacted those
communities greater than the State average. And in our area,
three areas that are very hard hit are Fort Washington, Upper
Marlboro, and Capitol Heights.
And you may ask, What is the county doing? Well, the county
is focusing our efforts on sustaining homeownership through
financial literacy education, community outreach, and one-on-
one counseling. We work closely with the State of Maryland and
Mr. Skinner's office. We also work with the Coalition for
Homeownership Preservation in Prince George's County.
We believe pre- and post-purchase education, along with
effective outreach to the community are the best tools to
assist families to become successful homeowners; at the same
time, preparing them to analyze and act on repayment problems,
should they occur.
Financial assistance is available through the Bridge to
Hope Program, which is called--help for Prince George's
families in danger of losing their homes. This program provides
temporary relief to county homeowners facing foreclosure
difficulty caused by an adjustable rate or a subprime mortgage.
Eligible homeowners are able to borrow up to 15,000, payable as
a zero-interest preferred--I mean, zero-percent deferred loan,
to be repaid when the house is sold, refinanced, or the title
is transferred. The borrowers can use these funds to bring
their mortgage current in order to qualify for a fixed-rate CDA
loan or an FHA loan, loan product. You must contact a nonprofit
housing counseling agency in order to get this assistance. If
you need more information on it, you can call 1-877-462-7555--
that's the State's line--or you can go to the Web,
www.mdhope.org.
Okay, what actions does the county think will help the
situation? Really, we'd like the whole process to be
streamlined. The problem right now is, many folks are asked to
call their lender, but when they call their lender, they are
met with someone in the collections department who takes them
through a whole series of questions and answers to try and gain
information. The banks, on the other hand, say they have to
take a long time to hire someone and train them so that they
can handle that information. So, what you have is people
rushing to the nonprofit counseling agencies; there's long
lines there for assistance. And then, when they get their
information together, they have to contact the bank, and then
there's more lines for assistance.
Many of the people in the banking community are telling
these borrowers, ``We can't do anything for you until you are
at least 90 days behind.'' Well, by the time most folks are 90
days behind, their time to do anything is really reduced, so
they don't have a--they don't have much of a choice. So, we'd--
asking for this process to be streamlined.
Now, we would suggest that the homeowner counseling
agencies themselves be given these funds, something like what
HUD does with their SuperNOFA program; just let the counseling
agencies apply directly to HUD or the FDIC or another entity,
and then the counseling agencies can provide these funds to
homeowners in an emergency basis. We think that would help--we
think that would help tremendously.
Also, we'd like more options for the homeowners. We have
the Bridge to Hope, we have FHA Secure, we have Help for
Homeowners, we have many different programs, but all of them
have various rules. If we could streamline that whole process,
make one standard process for the counseling agencies to go
through, for the borrowers to go through, we think it would
help people tremendously.
Finally, we'd like the banks to follow the IndyMac Federal
Bank loan modification model proposed by Sheila Bair, from the
FDIC. The FDIC systematically reviews its mortgage portfolios
to modify troubled residential loans for delinquent or at-risk
borrowers. That's a much more proactive approach than your
statistical modeling. FDIC uses statistical modeling software
to review their loan portfolio. Then they send a letter, where
it makes sense, to those borrowers that are at risk or in
trouble. With that kind of process, that can be done with
little or no cost, that could be done without training a lot of
people on the bank side, that could be done without all these
long lines and this long wait for assistance that most
counseling agencies and homeowners are going through.
Finally, the FDIC expects that future defaults will be
reduced, the value of the mortgages will improve, and servicing
costs will be cut. This streamlined process has the greatest
potential to assist the most people in the shortest amount of
time. At the same time, any troubled borrowers will remain in
their homes.
I look forward to your panel's report after today's
testimony. Thank you, again, for the invitation to appear
today. I hope my testimony has been useful, and I'll be happy
to address any questions.
Ms. Warren. Thank you, Mr. Baskin. Appreciate it.
And I want to welcome Representative Donna Edwards here.
Congresswoman Edwards, I've followed your career for some
time, and particularly in your ability to link up the issues in
bankruptcy law and what's happened in the housing crisis very
early on. And so, I want to welcome you here today and invite
you to make some opening remarks.
STATEMENT OF HON. DONNA F. EDWARDS, U.S. REPRESENTATIVE FROM
MARYLAND
Representative Edwards. Thank you, Madam Chairwoman. And,
of course, I have followed you, too.
Let me just say this. First of all, welcome to Prince
George's County and to the 4th Congressional District in
Maryland. I appreciate that you are here, because here in
Prince George's County we really are at the center of the storm
in our State.
I live in Fort Washington, Maryland. And as you have
already heard from earlier testimony, it is one of the
jurisdictions in Prince George's County that is more severely
hit than almost anyplace else in the State.
Three years ago, I drove both through my neighborhood and
my community, and I actually began to see, at that point, what
was happening. It was slow, at first. And now it is a cascade.
In my own neighborhood in Fort Washington, just driving
through my small neighborhood, I would estimate that about 10
percent of the homes in that small neighborhood are in some
state of foreclosure. The impact is really devastating on
communities like mine and across the State.
Our office in the 4th District has held two foreclosure
mitigation forums in the last few months. We brought together
legal services providers, home counselors, our Federal, State,
and county agencies, and our utilities. Utilities are another
small piece of the pie, in terms of what homeowners need to try
to mitigate. This is not enough. The programs that are in
existence actually are geared toward people who are already in
a state of trouble, and not looking ahead.
While, even in this county, the crisis may have begun with
subprime loans (some of them that were made to people who could
have had prime loans and long-term fixed-rate loans), now the
crisis is hitting in a different way. That is because there are
folks who are stretched because their hours have been cut back
or they have lost a job. So, we have a cascading problem here
in this congressional district and around the country.
For some time I had called for the Troubled Asset Relief
Program funds to be used to mitigate foreclosures. We did not
do that with the first tranche of money, quite frankly. And now
I think that we are in a different place.
I am looking forward to hearing more about President
Obama's plan and the Treasury's plan to use about $75 billion
of the other $350 billion to try to mitigate foreclosures.
We will, in the House of Representatives, very shortly, be
considering a provision that would allow for some homeowners to
have their homes considered in the context of bankruptcy. I
believe that this strategy should have happened a long time
ago, because, for some homeowners, and for bankers and lenders,
that prospect of bankruptcy actually might initiate
modifications that might not happen otherwise, and then, for
those who are in their hardest-hit moment and for whom
bankruptcy is a last resort, they will do that, but at least
they can have their single largest asset considered in the
context of that bankruptcy.
We need to tackle this problem with multiple prongs. There
is no one single fix to the problem. As I look throughout our
county and at the forums that we held, we had hundreds of
people coming out to get help. We could not help all of them.
Even in the best of all possible worlds, we will not be able to
help all of them, but we will be able to mitigate the cascading
rate of foreclosures that are happening through our community
and across the country.
I appreciate your being here in Prince George's County and
in the 4th Congressional District. We are looking, also, that
accountability is in the program. What are we doing to really
help homeowners and to make a difference in opening up credit
markets so that people will be able to refinance, and so that
their small businesses are not placed in jeopardy when their
homes are in foreclosure?
I have been working closely with my colleague Chris Van
Hollen from the 8th Congressional District, and the entire
Maryland delegation, to figure out how we can try to stave this
program off for Maryland and for communities around the
country.
I appreciate, again, your being here, look forward to any
questions that you have, particularly about the forums we have
been hosting, because they have been instructive, in terms of
the kind of help that we need to offer to our homeowners.
Again, thank you very much for being here in Prince George's
County.
Ms. Warren. Thank you.
Thank you, Congresswoman. Thank you, Congressman. Thank
you, Mr. Baskin, for being with us.
I also want to note that Senator Sununu has now joined us.
We will, today, have two panels. We're going to have a
panel, first, of homeowners from Prince George's County who
have faced, or are facing, the threat of foreclosure. And then,
second, we will have a panel of those who are working on the
foreclosure mitigation efforts, both to hear about the creative
and successful efforts that are occurring, but also to hear
where the impediments are, where the problems are, and where we
need greater assistance and can make some changes.
So, with that, I say thank you very much, and I ask for the
first panel to come up. Thank you.
[Pause.]
Ms. Warren. I want to thank you all.
So that we can be respectful of everyone's time and have an
opportunity to hear from as many people as possible, we're
going to ask that you hold your comments to 5 minutes; but,
anything that you wish to put in the record--we will hold the
record open, and you're certainly welcome to add other remarks,
if you would like to.
We also, just to help us stay on time--we actually have
someone who will just give us some little signals on time. I'm
sure I'm the only person in the room who sometimes gets so
carried away with the content of what we're talking about, but
I do want to make sure we keep things moving on time.
We have three people with us here today to talk about their
experiences. Tracy Robison, is from Hyattsville.
Ms. Robison. Yes, ma'am.
Ms. Warren. Is that right?
Mr. Mitchell--John Mitchell, is from Forestville.
Mr. Mitchell. That's right.
Ms. Warren. And we have Teresa Smith, from Palmer Park. Is
that right?
So, if you would, I'd just like to hear from each of you,
for up to 5 minutes, if you could.
Ms. Robison.
STATEMENT OF TRACY ROBISON, RESIDENT OF PRINCE GEORGE'S COUNTY
AND DISTRESSED HOMEOWNER
Ms. Robison. Good morning. My husband and I had been in
foreclosure for 2 years, and we recently have gotten our
modification from our lender, Chase Bank. And that would not
have happened without Ann Humphries, from Congressman Chris Van
Hollen's office.
The thing that I really want to point out, that I think
people need to know, is that there needs to be more action
taken, not only against predatory lending, but against
companies that pretend to be able to help you with your
modification.
During the last 2 years, my husband--my husband and I have
been in the home--he had the home for about 16 years. We got
married. I brought in my family. Our family expanded, but our
house didn't, so we had to renovate; we had to add on. So, we
refinanced. And we were okay. But my husband got ill, and he
wasn't working, so that cut our income. That started our
financial woes.
During the course of the last 2 years, we found ourselves
in foreclosure because we had to refinance again. We weren't
really explained by our lender what happens when you take out a
second mortgage, a home equity line of credit. That got us in
trouble. And, of course, having less finances, we weren't able
to pay our bills. We tried filing a Chapter 13 bankruptcy, but
then the trustee payment was so high, we couldn't keep up with
that, either.
We tried every avenue. Once we realized that we were going
to lose our home, we tried methods, like going to this place,
The Money Store. And although we weren't victims of them,
because we got out when we realized that this was not right, we
were saved. But, that was a couple of months tied up with them.
We fell further behind in our mortgage payments.
We went to another place to try to get a modification--and
that was recently--Home Alliance USA--where they said, ``We can
get you a modification,'' and we believed them. We paid them
$500 of the $2,000 they were asking us to pay.
At the same time, Congressman Van Hollen's office got
involved. I called them. And basically, at the same time I
reached out to this company that wasn't very ethical is when I
heard from my congressman. They put me in contact with Chase
Bank at the executive resolution branch. I never knew about the
executive resolution branch. There's a branch at our lender
that will respond to the congressman, but I could never get
through to them. I had to go through loss mitigation for 2
years, trying to work out a deal that was affordable to my
family. They wanted a huge downpayment. They wanted me to enter
into a forbearance agreement, and I couldn't. I did not have
$7,500 or $8,000 to pay them on a forbearance agreement, but I
could pay my mortgage.
So, essentially, what ended up happening was, they gave us
our modification with a downpayment that we could afford, and
they also lowered my monthly payment.
I am not understanding why we had to go through this
rigmarole of talking to people in loss mitigation who weren't
really able to help us, when the bottom line was, eventually
they came through for us. But, the hoops we had to jump through
in getting help was ridiculous. When you call your lender, you
talk to one person; and then when you call them back, you have
to speak to another person. It reminds me of that game, where
you have a nut under a shell, and they move them and you never
know who you're going to talk to, you never know what's going
to be under that shell, if you're going to get somebody or
you're not going to get somebody. And I played that game with
my lender for months and months and months. And it's not fair.
And even worse than them, like I said, was these companies
that pretend they're going to help you with your modification.
They need to be shut down.
Thank you.
Ms. Warren. Thank you. We appreciate it, Ms. Robison.
Mr. Mitchell.
STATEMENT OF JOHN MITCHELL, RESIDENT OF PRINCE GEORGE'S COUNTY
AND DISTRESSED HOMEOWNER
Mr. Mitchell. Yes. Good morning, Ms. Chair and Senator and
other colleagues.
My name is John Mitchell, and I have a similar, but more
successful, situation than my neighbor, here.
Mine started back in 2005. I got married in--my wife's
going to kill me--1996. And actually, the home we had wasn't
big enough for the family, so I fell behind in my taxes and
things, and I said, ``Well, what I'll do is have the house
refinanced to pay the taxes and redo the home.''
Well, that part was fine, and I talked to mortgage brokers
everywhere. And they were saying that we couldn't get a
refinancing because of my wife's credit. This was in 2005.
So, I kept going and kept going, and one day a mortgage
company called Oak Crest called me. And the mortgage lender
then was--I think his name was Talley. And we went back and
forth, back and forth, and he assured me that he could save me
from bankruptcy or foreclosure, and he could get me a loan.
Well, naturally, as most Americans do, you've got somebody
that can help you, you go along with it. And at that time, I
was paying, like, $1100 a month, which I could handle. When he
got through--I don't know where the money went or where the
money came from or how he did it--my mortgage loan had gone up
to 2104.
And I told him, point blank, ``There's no way I can afford
this. Come on, I can't afford--from 1100, you then doubled my
mortgage payment. How in the world am I going to do this? And
where's the money?''
He says, ``Well, what we're going to do is pay your back
taxes off and this, to save your home, and this''--and I didn't
get any money.
So, then it went on and on and on, and I was struggling to
make the 2104, which was almost impossible.
So, in 2007 I met another mortgage person, and he said that
he could lower my mortgage payments and he could stop the
foreclosure on the house. And I said, ``Well, what do I have to
do?'' He said, ``Well, how much can you afford to pay?'' I
said, ``Well, you're the mortgage man. I would like to pay my
$1100 I was paying before.'' He says, ``Well, no, we can't do
that.'' He said, ``But, if you can give me 1345 a month, I can
save your house.''
So, I was paying him 1345 a month for 2006, 2007, I got
sick in 2007. And I was making these payments monthly. Come to
find out there was a foreclosure on my home that I didn't know
anything about. And he was handling all the paperwork, because
he told me that if anyone asked, refer them to him, which I
did. If any mortgage people called, refer them to him, and he
would take care of all of the things, as long as I paid my
mortgage. So, I did.
And I thought I was going along good. I got sick, and I had
to have a heart operation, and I was in the hospital for 6
weeks one time, and I was in the hospital another time. My wife
had a heart attack. I mean, we had all kind of medical bills
come in. But, some kind of way, I kept paying him the 1345.
One day in 2008--I'll never forget that, as long as I
live--my wife called me, and she said, ``Mitch, the sheriff's
department is here.'' ``The sheriff's department there for
what?'' ``He said they come to set us out.'' I said, ``No way.
Put the guy on the phone.''
So, the sergeant got on the phone, and he said, ``Mr.
Mitchell, why are you still there?'' I said, ``Because I live
there.'' He says, ``Well, I have the eviction notice to set you
out today.''
But, there was a postponement, because he got there 2 hours
after the men that come to put your stuff on the street, so he
said there would be a postponement and he would let me know
when the postponement would be, but I would have to leave the
house, because they were going to put my furniture on the
street.
So, I talked to my pastor and my overseer, and they
contacted Ms. Alisa Hall from NCRC. And she went to work for us
on saving the house. And she talked to all the lawyers at
Griesen, Berman & Ward. Those were the people that had the
mortgage on the house, because the fellow, while I was in the
hospital, sold my home. And I didn't know none of this until
the sheriff's department came to put us out.
So, then Ms. Hall went to work for us, and I asked her,
point-blank, ``Ms. Hall, will you be able to save my home?''
She says, ``Mr. Mitchell, I assure you that we will be able to
save your home.''
So, fortunately, she was able to get the lawyers, because
when we went down to Upper Marlboro and went through the
records and things, the fellow had sold my house without my
knowledge. I never went to a hearing, I never did anything. He
did it all.
So, then I guess the lawyers felt guilty, or whatever, and
they made an agreement, through NCRC, with me, that if I could
make six payments of $1400 a month, and--which will be the 15th
of May--that then we would sit down and the house would be
deeded back to me at a interest rate of 3.9.
So, come May 15th, hopefully, the house will be mine,
because I can make $1400 a month.
So, that's my success story. I'd just like to catch up with
the villain that shammed me, though. [Laughter.]
Ms. Warren. Thank you. Thank you, Mr. Mitchell.
Mr. Mitchell. You're welcome.
Ms. Warren [continuing]. For sharing your story. We really
appreciate it.
Ms. Smith.
STATEMENT OF TERESA SMITH, RESIDENT OF PRINCE GEORGE'S COUNTY
AND DISTRESSED HOMEOWNER; ACCOMPANIED BY JOHN HARRISON
Ms. Smith. My name is Teresa Smith. I work at P.G. College
on weekends, and I work for public school, Monday through
Friday. And I have a learning disability.
My real estate lady, she took advantage of me on both
homes. My first home, she took advantage of. The second home,
she took advantage of. She took money, putting a high house
note I can't afford.
Ms. Warren. Can you move your mike just a little bit
closer? I know it's hard, but we want to be sure we're hearing
you.
Ms. Smith. And she knew my disability. She knew I couldn't
read. She knew I couldn't count that well.
And I trusted her for a whole year. In 2 years, the second
year, that's when she really took advantage of me.
Mr. Harrison. Madam Chair, I'm Attorney John Harrison, and
I represent Teresa Smith. She asked that I be up here today.
She's here for my emotional support.
She was the victim of fraud. Her case is distinct in the
wide spectrum of people that are suffering right now. The
Metropolitan Money Store was probably the most notorious
criminal enterprise in Maryland history, when it comes to
equity-stripping schemes.
Ms. Smith is also a victim of that kind of fraud, although
it's a different type. We are preparing a civil case to help
her with that issue.
The problem, though, is, as Teresa indicated, she's
currently taking classes to learn how to read. She has two
jobs. I have one. She works here on the weekends, and she works
at Prince George County Schools as a janitor. She's a hard
worker. She deserves to have a home.
And at no point in time did anyone look after her best
interests when she was approached. She cannot read. At no point
in time did anyone look after her best interest.
Phillip Robinson will be speaking in a moment, from Civil
Justice, and he'll talk more about that kind of victim and, the
spectrum of people that need help. But what kind of criteria
are we going to use to help the folks that are actual fraud
victims, versus folks that maybe are in a difficult loan? It's
a different category.
And I would also like to just thank you for being here.
It's heartwarming to see our government here on a such a
grassroots level. I am a Prince George's County resident. I
live in Upper Marlboro, Maryland. And it's just wonderful that
you're here doing what you're doing for people like my client.
Thank you.
Ms. Warren. Thank you.
Thank you for being with us, Ms. Smith. Did you want to say
something more?
Ms. Smith. Yes. I thank you all for listening to me,
because I waited for this for a long time, because at the time
when I did want help, people just turned away from me. And I
finally got in touch with my lawyer, found a nice lawyer, and
the people working with him.
I went to different people to get help. They turned me
away, like I didn't know what I was talking about. So, I
finally found someone, to stand by me and look out for me, for
my situation. And I thank God for him, and I thank God for you
all.
Thank you.
Mr. Harrison. If I might say one more thing also----
Ms. Warren. Please.
Mr. Harrison [continuing]. I'd like to really thank
Secretary Perez, from DLLR; again, Phillip Robinson, with Civil
Justice; also April Richardson and Doyle Neiman, over at the
State's Attorney's Office. These are the people that help
attorneys like me, who, at a grassroots level, are trying to
help victims of fraud. They're giving me the tools and
information I need on--I have a limited amount of time--the
ability to help folks that are in this position. Teresa is
struggling just to pay for the bus to get to work. She is
struggling to p ay her bills, but she's still a capable
homeowner, and this should not have happened to her.
Thank you.
Ms. Smith. I would like to----
Mr. Harrison. Go ahead.
Ms. Smith [continuing]. To say I--when I walk up to my
house, I'm afraid somebody is going to come out there and put
me out. When I come home at night, I'm afraid there will be a
lock on my door and I can't get in. And now I thank God for
looking out for me right now, because I may be happy on the
outside, but inside, I'm torn up. And I just need help. And I
don't want to lose my home, because I came a long way to where
I'm at today.
Thank you.
Ms. Warren. Thank you.
This is why we are here, and I am grateful to all of you
for coming and sharing these stories with us.
Do we have questions? Can we excuse this panel? Did you
have a question you wanted----
Mr. Neiman. I just wanted to make----
Ms. Warren [continuing]. To ask, Mr. Neiman?
Mr. Neiman [continuing]. One comment. And it's really not a
question. But, again, thanking you for sharing your personal
experiences, as difficult as they are.
But, what I think they all have done, what you all have
contributed here, is so significant, because all of you have
highlighted, I think, all of the significant issues that have
to be addressed at the national level. You highlighted that
voluntary efforts by lenders and servicers are not working. You
highlighted that disclosure, when you opened up your mortgages,
is insufficient; nobody can understand the disclosures that are
presented to you. You highlighted the abusive practices of the
mortgage brokers. You particularly--and I appreciate Ms.
Robison highlighting these foreclosure rescue scams. I think
that is the worst result of this, because now you have people
who are capitalizing on the misery of individuals. You've
highlighted the question ``why should you have to rely on a
congressman or another executive to get what you really deserve
in loan modifications''?
So, I think you highlighted and you've provided as critical
a basis for this hearing that we could have asked for, so I
thank you all very, very much.
Ms. Warren. Thank you.
[Applause.]
Ms. Warren. Thank you.
Mr. Neiman. Thank you.
Ms. Warren. Mr. Silvers, any comments?
Thank you, Mr. Neiman.
Mr. Silvers. Well, like my colleagues, I want to express my
gratitude to each of you for coming here today.
It is difficult and I know it's difficult to come out in
public here with TV cameras and discuss these matters and so I
just want to express my gratitude and my appreciation for your
courage in what you have done.
I have a question for you all, if you wish to say anything
more. I think you know that part of our responsibility is to
look at whether our government, your and my government, is
doing everything we can to put an end to the foreclosure crisis
and to see that people, such as yourselves, are treated fairly,
and a second part of what we are supposed to do is to oversee
and look into what all of our taxpayer dollars are doing when
they are provided to banks and financial services companies in
order to try to repair the crisis in our economy.
Some people have pointed out that there's a connection
between mortgages and what's gone wrong with banks. I'm curious
if you have any thoughts, based on your experiences with your
lenders, as to what your government ought to ask of the
financial institutions in the mortgage markets. Do you have
any--and in particular, if you can think of anything that would
have been helpful as you were dealing with these experiences,
being tied up all this time, as you've described it, anything
you think would be helpful, would have been helpful to you or
would be helpful to your neighbors in similar situations, any
tools, any kind of--anything your government might be able to
do to make the process of keeping folks in their homes quicker
and easier?
Ms. Warren. Ms. Robison.
Ms. Robison. Yes, ma'am. We refinanced our home twice and I
will be the first to admit that we did not exercise probably
great judgment in some of the financial decisions that we made.
It is not all the fault of our lender. We probably would have
fared better had my husband and I not gotten ill. Life happens.
But one of the things that I found to be almost bizarre was
that when we were called by the company that gave us our second
mortgage, we never had to go into their office, we never had to
make appearances. We didn't know really who Wits they were.
Everything was done via telephone and fax machine. They made it
very, very, very easy for us to take that great big old piece
of pie because we had a need.
I mean, we had a need and they had an offer and that whole
dealing, it didn't seem right and I had that feeling that it
didn't seem right, but I wanted to stay in my home. I needed
their money.
I feel as though if they had been made to be more
accountable, more reputable, it probably would have made it a
little more difficult for us to get that loan, but in the long
run, I wish we didn't ever refinance. We could have probably
made it out a better way. We took the easy route and they made
it really, really easy for us because you can get a lot done on
a telephone and a fax machine without ever having to really
appear before somebody or meet somebody. It wasn't done
locally.
Ms. Warren. Thank you. Mr. Mitchell.
Mr. Mitchell. Yes, I have the same opinion that she does
because when I refinanced, it was the same way. I talked to
someone way in Indiana. I never seen them, I never visited
there. It was all done by fax machine, through telephones. Even
when they paid my taxes, instead of the money coming to me, it
went to P.G. County and they paid the taxes. I filed the
paperwork saying that it was paid and all of this, but it
wasn't like when I first bought the home.
I first bought the home from Virginia Mortgage and someone
came to my home, sat down, talked to me. I could ask questions
back and forth, but when they did it, somewhere $35,000 got
lost. I don't know if it went in the agent's pocket or whoever,
but it never got to me, and I said, you know, I think I've been
scammed. I think I've been scammed, but at the time, all I knew
was that I wanted to save my home. I had my home. Now how do I
make this person pay me?
When I realized I couldn't, that's when things went haywire
and then you try to go in, get more people to refinance and
they tell you they can't do this for you and they can't do that
for you. The loan, they should never have made you the loan and
all that.
Well, as a resident of the state, I think there should be
some government in that because if there was a loan made to me
and they knew I couldn't pay it, why was it made to me? Why
didn't they leave me at the $1,100 I was paying and said, well,
you've got to make a loan to pay your taxes or rebuild your
house or whatever? But just to take people's money knowing that
you can't pay it and that sooner or later something's going to
happen, I would say the government fails on that because
everything through a house is through Federal Government.
Everybody know I couldn't pay that loan except me.
[Laughter.]
But yet still they did it, and two years later, I'm in the
hospital, then someone can take my home and just sell it and
how we find out is when the Sheriff's Department come to your
house to tell you you gotta go. Now, there's a big problem and
that's when good people go bad.
Ms. Warren. Thank you.
Mr. Mitchell. That's all I have to say.
Ms. Warren. Thank you. Thank you. Senator Sununu.
Senator Sununu. Thank you. Thank you all for being here. I
want to encourage you all to provide us with as much
information as you possibly can about your experiences. What
you've shared with us today is extremely helpful, but you may
have additional information that obviously doesn't fit into
five minutes. You may leave here, you may think of something
else that you wanted to add.
It's extremely helpful to provide that information because
we're responsible, as our name implies here, the Oversight
Panel, for looking at how this $700 billion that's been
allocated for the TARP is used and our President has just
announced a new initiative using some of those TARP funds to
help with mortgage modifications and foreclosures and so what
we want to do is look at what has been proposed and try to
determine whether it would have helped in your situation and
therefore will help people just like you in the future.
So any information you can provide for us will help us to
do our job in looking at all the new initiatives that the
Administration has put forward to try to deal with this and
then make an assessment of whether or not we think those ideas
can be improved even further to make them more effective and
ultimately to make sure that the taxpayer funds that are being
spent here really do what we all hope they'll do and that's
deal with this housing and foreclosure crisis and the bigger
credit crisis that it's caused.
So thank you.
Ms. Warren. Thank you again. We appreciate it. This panel
is excused.
[Applause.]
Ms. Warren. While we're settling in here, the Chair wants
to acknowledge that we have Secretary Skinner in the audience,
I believe. Secretary Skinner, thank you for being with us. The
Secretary of Housing for the State of Maryland.
Secretary Skinner. Housing and Community Development.
Ms. Warren. Housing and Community Development. So there are
many listening to the stories today. We appreciate you being
with us.
Also, for those of you who want a chance when we have
concluded this panel to add any comments for the Congressional
Oversight Panel, that's what the two microphones are here for.
If you got a slip earlier, it's not necessary to fill it out,
you're just welcome to come to one of the mics and we welcome
your comments, once we have concluded with this panel. So that
will be our third panel for the morning.
I want to start by welcoming our next panel, our second
panel. We have Lisa Butler McDougal, who is Co-Chair of the
Coalition for Homeownership Preservation in Prince George's
County and Executive Director of Sowing Empowerment and
Economic Development (SEED). I like that.
We also have Mr. Phillip Robinson, Executive Director of
Civil Justice, Inc.
We have Anne Balcer Norton, Director of Foreclosure
Prevention at St. Ambrose Housing Aid Center. Welcome.
We have Secretary Thomas E. Perez, who's Secretary of the
Maryland Department of Labor, Licensing and Regulation.
Thank you all for being here today. We appreciate your
taking the time. We ask again if you could hold your comments
to five minutes and I think we have someone to help you see and
who will hold them up. He's probably outside your line of
vision and that may be a little more helpful in that direction
for you. But if we can hold our comments to five minutes but
the record will remain open. Your written statement will be
included in the record in its entirety.
Ms. Norton, welcome, and if we could start with you.
STATEMENT OF ANNE BALCER NORTON, DIRECTOR OF FORECLOSURE
PREVENTION, ST. AMBROSE HOUSING AID CENTER
Ms. Norton. Yes, thank you. Thank you, Chairperson Warren.
Thank you, Senator Sununu, Mr. Silvers, and Mr. Neiman, for the
opportunity to testify today.
My name's Anne Balcer Norton. I'm Director of Foreclosure
Prevention at St. Ambrose Housing Aid Center.
St. Ambrose is a 41-year-old non-profit housing
institution, located in Baltimore, Maryland, but we serve
residents across the state of Maryland.
Prior to joining St. Ambrose, my background was as general
counsel for a mortgage lender that was based in Baltimore but
with offices around the country.
I came to St. Ambrose in 2007 to run the Foreclosure
Prevention Division and the division combines direct legal
representation as well as housing counseling services for
homeowners that are facing foreclosure.
We work with about 3,000 families each year that are facing
foreclosure and they're in all stages of foreclosure from every
corner of the state of Maryland.
It's based on this experience that I wanted to share our
observations from the ground and particularly as they relate to
effective loss mitigation efforts and in particular what I
would refer to as institutional barriers to obtaining
successful loss mitigation relief and these are really based on
our direct observations.
You know, I provided my written testimony and I know I have
a brief amount of time, so I'm just going to focus on a few
points.
One area that I addressed is that what we are seeing now
are really what can be generally or generically categorized as
two different groups of homeowners that are seeking assistance
from St. Ambrose. Those are--the first are those that are just
ill-suited for the mortgage product that they were provided,
who probably otherwise could have afforded a mortgage, could
have afforded a property, but I think this was far more
eloquently covered by Ms. Robison, Mr. Mitchell and those on
the panel prior to me, so I will not get into this.
The others that we are seeing are those that are affected
by the downturn in the economy. These are people that have lost
their jobs, have in some cases quickly taken on a new job but
not healthcare but it pays less than the prior position that
they had.
So of these categories of homeowners, there are unique
challenges in each group. You know, they are complicated by
fraud, complicated by geographic variables, and in my written
testimony, I break these down into really six areas that we
have seen as barriers to obtaining, you know, sustainable loss
mitigation and those are affordability and re-default rates and
that's affordability with the loan modification when loss
mitigation is offered, the required length of delinquency as a
prerequisite to obtaining loss mitigation which has also been
addressed in the prior testimony of Congressman Van Hollen,
negative equity and junior liens, and I think Mr. Silvers had
mentioned whether interest rate reduction is sufficient or if
principal reductions are necessary and particularly when you
look at an area like Prince George's County, the interest rate
reduction alone is not making an affordable or long-term
sustainable loan modification without also reducing principal.
The other areas are capacity, capacity from the loan
servicer as well as for the non-profit housing counseling
agencies, access to credit and retail markets, and this is
something that was addressed as well as just the barriers when
dealing with loans that have been securitized.
In examining these barriers, the two areas that I just want
to quickly address are capacity and access to credit. The
others I cover in more detail in my written testimony, and as
far as capacity is concerned, the capacity of the mortgage loan
servicers, we face two barriers in this. Either they don't have
enough staff or they so quickly and artificially ramp up staff
that they have multiple data procedures, data collection
procedures, you know, contradictory points of entry, and
procedures for processing requests. So although they provide a
single point of entry for loan counselors, when you submit
documents, they're typically lost, misplaced or the knee-jerk
reaction of sending out these mass or blind mailings for loan
in modification offers to homeowners in default which are not
based on affordability, they're not based on income. They're
offers that are blanket offers in which the homeowner either
accepts or rejects.
When addressing capacity, obviously we have to look at the
capacity of housing and counseling agencies which is a concern
which again I cover in more detail in my written testimony.
The one point I just want to quickly make is, that I'm not
sure really was covered in any other testimony today, is about
the access to credit in the retail markets and this has become
an increasing problem for those homeowners who are current, not
necessarily in eminent risk of default but would benefit from a
reduced interest rate, you know, through a sound responsible
refinance product and when products through Fannie Mae, Freddie
Mac, or even FHA, what we're seeing is, you know, this infusion
of capital or the innovative products that are being announced
do not trickle down to the retail market.
There are restrictions on credit that's available for even
those who are sound credit candidates that have decent--you
know, very good credit histories, requiring considerable down
payments and just on the retail side, the warehouse lines of
credit that fund these loans are prohibiting a lot of the loans
that would otherwise fit Fannie Mae or Freddie Mac guidelines
to be held on the lines of credit.
I see that time is up and I can certainly cover this in
more detail and I mention it in more detail in my statement and
I know it's more complicated, you know, and I can be here all
day on this topic alone, but I do want to thank you again for
your time.
I do want to again stress that what we have seen is that
voluntary efforts to provide sustainable loss mitigation are
not working, more of what refer to as the character fixes
certainly are necessary, including our recommendations for the
Bankruptcy Code must be amended to permit cram-down for primary
residences in Bankruptcy.
So thank you, and I apologize for this abbreviated summary.
[The prepared statement of Ms. Norton follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Warren. Thank you. Thank you, Ms. Norton, but your
remarks are here. I was able to read them last night and they
will be made part of the public record.
Ms. Norton. Thank you.
Ms. Warren. Thank you very much.
Ms. McDougal.
STATEMENT OF LISA McDOUGAL, CO-CHAIR, COALITION FOR
HOMEOWNERSHIP PRESERVATION IN PRINCE GEORGE'S COUNTY, AND
EXECUTIVE DIRECTOR, SOWING EMPOWERMENT AND ECONOMIC DEVELOPMENT
(SEED)
Ms. McDougal. Good morning. I'm Lisa McDougal.
Ms. Warren. Could you pull the microphone a little closer
so that everyone can hear you?
Ms. McDougal. Better?
Ms. Warren. I think that's better.
Ms. McDougal. I hope so. I want to echo the sentiments of
everyone that's gone before me in welcoming you to Prince
George's County and thanking you for taking the time in coming
down.
Good morning. My name is Lisa Butler McDougal. I'm the
Executive Director of Sowing Empowerment and Economic
Development, also known as SEED. I'm also here today
representing as the Co-Chair of the Coalition for Homeownership
Preservation in Prince George's County.
In the spring of 2007, the Coalition was formed by the
public and private sector leaders to address the high number of
foreclosures occurring in the county. The goal of the Coalition
is to strengthen homeowner assets and neighborhood stability by
helping troubled borrowers and by increasing homeownership.
The Coalition mission is to preserve and strengthen
homeownership by increasing education and other resources that
foster good consumer borrowing choices while also working to
eliminate foreclosures and abusive real estate practices in
Prince George's County.
One way the Coalition is working to educate homeowners is
through the creation of the Under the Shadow Workshop that
Lloyd mentioned earlier. The workshop does travel throughout
the county and is held every week through 10 or more counseling
agencies, most of them HUD-approved counseling agencies. It's
offered in English and Spanish.
The goal is to inform clients who are unaware about their
mortgage situation. We have people who come to the workshop who
are not behind, who have what I call a kind of financial--
they're a financial hypochondriac. They're hearing that there's
a foreclosure crisis and I want to be a part of it, too, and
then there are others who are very seriously behind and may
have a stack of unopened letters and we use this as a way of
determining exactly how serious an individual is when we bring
them in for counseling.
But more than anything, they're just very unsure about the
process and they don't understand what it means and a lot of
individuals don't understand that foreclosure is a legal
proceeding. They look at it in some ways of the same kind of
repossession when you don't pay your car and you have to park
it around the corner to hide it from the snatch man and this is
a little bit different, that this is a legal proceeding.
The Coalition has also provided training for counselors on
best practices, available resources, and we're in the process
of really gearing up toward fighting a very aggressive
foreclosure fraud.
Another counselor, when we were preparing to come in here
today, handed me a very thick envelope just of all the
different types of solicitations that look like government
solicitations that will say that they are from HUD that will
tell you all you have to do is sign on the line to get your
$8,000 piece of the stimulus. I didn't know that--I knew about
the $8,000 tax credit for the first-time homebuyers, but I
didn't know that if I just signed this paper that I would get
$8,000 and give you my house. So it just doesn't seem like it
balances.
There are nearly 10 HUD-approved housing counseling
agencies who are members of the Coalition. Most of us are
averaging anywhere between five to 10 calls a day from
individuals who are--and families whose dream of homeownership
is really turning into a nightmare. We immediately assess their
circumstance, prepare authorization work so that we can begin
talking with the lender on their behalf and really looking at
their financial situation and preparing budgeting and really
helping clients to understand that not everyone is going to
retain their home, not everyone should retain their home and
really helping the individuals be very realistic, especially if
they've had the kind of life circumstance that would prevent
that from happening.
Once a proposal is submitted to the servicer, it could take
somewhere between three to five months before a decision is
even reached and even possible that in some cases we're finding
where new loan terms are only given for five years and in a lot
of cases loan modifications are given to individuals that they
still cannot afford and they're feeling very pressured to take
them.
We've also heard of instances where a lender has declined a
modification request from a client while working with a
counselor but then would turn around and send paperwork with a
different type of modification to the individual at home,
circumventing the counselor and the best advice that we would
be able to provide for the homeowner, and those type of
tactics, we believe, really have to stop.
In another instance, a lender was initially willing to
accept a short sale but declined the contract because the cost
of the contract was only $8,000 less than what they wanted for
the home, but then the home went into foreclosure and they
ended up putting it on the market and selling it for a $114,000
less than what they actually wanted. So they could have just
taken the contract from the borrower who would have walked away
and been able to restore their financial future, and I have the
name. The first one I mentioned was Countrywide, the second one
was American Servicing Company.
Technology is also a huge obstacle. You can imagine, as
we're pulling individuals, a lot of their financial
information, hardship letters, we can have a packet for someone
that could be anywhere between 40 pages and we're being told to
fax those things. When we fax them, we're told by other lenders
that they're just not equipped to handle it.
Wells Fargo and JPMorganChase at a Foreclosure Summit that
Fannie Mae set had said that they were just not prepared for
the onslaught and we were told by another servicer that a lot
of times when we fax the cases in, that they just sit on the
table. If we don't call, they don't do anything with them.
So I agree with Anne and those that have come before me in
saying that involuntary servicing methods are just not working
and individuals really need to know, just as the panel that
came before them, that their government is really going to step
up and work on their behalf. Before I close, I did want to
acknowledge that the State of Maryland, I know Secretary
Skinner is here, there are others that work with the counseling
agencies very closely and they've been on the forefront in
making sure that we've had the resources that we've needed and
making sure that we've had the right kind of technology that
would allow us to come to the right kind of outcomes because,
as a non-profit housing counseling agency, two years ago our
business was first-time homebuyers and we were very happy to
have a caseload of a hundred or so first-time homebuyers. We're
just glad that those individuals, because of the right kind of
counseling and education, are not coming back and joining the
more than 300 cases of foreclosures that we're handling now.
So thank you again.
[The prepared statement of Ms. McDougal follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Warren. Thank you. Thank you, Ms. McDougal. We
appreciate your being here.
Secretary Perez.
STATEMENT OF THE HONORABLE THOMAS E. PEREZ, SECRETARY, MARYLAND
DEPARTMENT OF LABOR, LICENSING AND REGULATION
Mr. Perez. Thank you, Madam Chair and Members of the
Oversight Board.
My name is Tom Perez, and I'm the Secretary of the
Department of Labor, Licensing and Regulation. I'm more the
hall closet of state agencies. I do a number of things. I have
a robust consumer protection portfolio. I have the Commissioner
of Financial Regulation who oversees and charters Maryland's
state-chartered banks as well as one of the tentacles in the
octopus known as DLLR.
I want to acknowledge again my good friend Ray Skinner. I
also want to acknowledge Sam Dean from the Prince George's
County Council who's in the audience who's been a real champion
in this issue.
Secretary Skinner and I have co-chaired the Governor's
Foreclosure Prevention Task Force and I was listening to Mr.
Neiman's very cogent remarks and we've been focusing on all
those things that you acknowledged and I don't want to be
redundant of that very comprehensive approach. We had three
different workgroups. We had a legal-regulatory reform group
that I oversaw. We had a financial products group that
Secretary Skinner oversaw, education outreach prevention that
we did jointly. Secretary Skinner's done remarkable work in
terms of working with the housing counselors. These folks are
boots on the ground and they are a lifeline and the real stars
are the courageous people on this panel, meaning no disrespect,
but the people before me, and I could spend all of my time
talking about housing counselors. I could spend all the time
talking about a lot of the laws that we enacted.
We addressed the ability to repay. We addressed a lot of
the defective features in the loan products. We addressed the
licensing problems. The case that you heard from this witness
about The Metropolitan Money Store, that is the largest
mortgage fraud case in the United States right now, and it is
out of Prince George's and Charles Counties, originated in our
office, and in terms of what it really illustrates, the main
ringleader in that case, her job prior to starting the
Metropolitan Money Store, she was a stripper. That's what she
did for a living, and it really illustrated the absence of any
meaningful barriers to entry for this area. So that's really
some of the areas that we've focused on.
I really want to focus, though, on two areas that I have
spent a lot of time on, which is, Number 1, data collection,
and Number 2, our interaction with servicers.
The legislation that we passed with the governor's
leadership last year addressed the problem prospectively and I
think we've gotten a good handle on the defective features, et
cetera, but the panelists before you, it is of no moment if
they had loans two years ago and they're in the soup.
Yes, we extended the foreclosure period, but we really need
to work with their servicers. We need to take meaningful and
scaleable actions and so contemporaneous with our actions, we
were negotiating with a dozen loan servicers to come up with
agreements so that we could put in place large-scale
modifications and we did reach agreements with six servicers
and this is the punch line of what I learned, having spent a
lot of time face to face with loan servicers.
I learned--I have two hypotheses. Why aren't there more
modifications? Hypothesis Number 1. Their hands are tied by
pooling and servicing agreements. Hypothesis Number 2. They
have the authority but not the will to modify.
I would respectfully observe, based on months and months of
work, face to face meetings, that what I would conclude is that
they have the authority in the vast majority of cases. Why do I
say that? Because they told me that. What they lack is the will
to modify and that is the real fundamental problem----
[Applause.]
Mr. Perez [continuing]. With the servicers. We got a
presentation in one of our meetings from Wells Fargo who told
us their, quote unquote, innovative modification practices,
they used an example of an individual who had an $1,100
payment. He was in the soup and they modified his loan with one
of their innovative loan practices and his new payment was
$1,466.66, to which I asked the obvious question, how's he
going to afford that? Answer. I'll have to get back to you, and
so that is part of the problem, is that we really need to
address the issues of the will. The bankruptcy reform is one
way to get at it and there are a host of other issues.
I want to move quickly because I know that my time is
limited.
We are one of the only states in the country that can
provide you with information on what servicers are doing. We
require servicers to submit data and that data has been very
interesting. We've seen, for instance, and it's in my
testimony, is that in August and September, roughly 60 percent
of the modifications, and we're talking a denominator of
roughly a thousand modifications a month, half of which, by the
way, are from Countrywide which will be relevant in a minute,
about 60 percent of those modifications resulted in the same or
higher monthly payment.
You move to October, 52 percent resulted in the same or
higher payment. In November, 43 percent result in the same or
higher payment. Throughout this, Countrywide is about half of
that cohort. Countrywide throughout has about 75 to 80 percent
of their modifications are the same or higher payment. So to
put it slightly differently, a number of the servicers with
whom we have reached agreements are actually doing a better
job. Places like Ocwen, for instance, third party servicers are
tending to do better than portfolio servicers.
We have seen no evidence of progress in the Countrywide
context and Wells Fargo refused to sign an agreement and does
not provide data to us, so I cannot comment on what they are or
are not doing, but I would simply observe that if you have this
data, it is powerful. We tried to get the OTC, OTS, OCC to do
the same thing. We worked with our congressional delegation,
didn't have any luck. That is a critical element here as we
move forward.
Finally, a couple quick concerns that I have. This attempt,
and it's a very righteous and appropriate attempt, to ensure
that we have large-scale modifications is going to lead to a
proliferation of mitigation specialists and we must get a
handle on that at the front-end because these mitigation
specialists--we're going to have another panel like the panel
we had in front of us if we don't get a handle on that at the
front-end.
What we've done in Maryland is we've prohibited upfront
payments through mitigation specialists who are helping people
who are in default. We have to do that at a federal level. We
have to get a handle on this or you're going to be having
congressional oversight hearings in which you're going to hear
from witness after witness after witness who was victimized and
with that, I will simply say we have lawyers who are helping
people and here's one more problem.
When they attempt to help someone who has a foreclosure
tomorrow, they can't do it with the federal money because the
bill that passed last year prohibits lawyers from providing
legal assistance to someone who's in a foreclosure proceeding.
Don't quite understand that one and I hope we can get a handle
on that as we move forward because lawyers in this room, we
have an army of pro bono lawyers, but we can't avail ourselves
of any of the federal money to help people because it's deemed
to be in litigation. So that's one more observation I would
make.
Thank you for your time. I apologize for going a minute or
two over.
[The prepared statement of Mr. Perez follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Warren. Oh, no. Thank you, Secretary Perez.
[Applause.]
Ms. Warren. We appreciate it. And, finally, Mr. Robinson.
STATEMENT OF PHILLIP ROBINSON, EXECUTIVE DIRECTOR, CIVIL
JUSTICE, INC.
Mr. Robinson. Madam Chair, Members of the Panel, thank you
for inviting me today.
My name is Phillip Robinson. I'm the Executive Director of
Civil Justice, Inc., and we're a Maryland nonprofit legal
services agency, and my charge today primarily is to describe
to you the foreclosure prevention pro bono project that we're
co-leading with the Pro Bono Resource Center of Maryland.
I provided written testimony. I'm not going to read that.
It's got a lot of detail in there and background for you.
You came to Maryland to hear what we're doing because,
frankly, when I talk to other consumer advocates around the
country, we are way ahead of the game. We have a very
sophisticated multipronged approach to helping homeowners and
it starts at the very top with Governor O'Malley and Secretary
Skinner and Perez who are giving an extraordinary amount of
time and effort and then down to the lower level that you've
heard from the housing counseling agencies and from homeowners.
You know, just by way of example, Secretary Perez isn't
just here to testify, he will actually go to the victims'
houses and meet with them for five hours, to interview and find
out their story. He's done it. I know he's done it. They were
my clients. He himself has done that. Secretary Skinner has
been out doing workshops and speaking and doing public
relations and I don't know what kind of grief he gets when he
gets home, but I'm sure it's as much as I get.
The Foreclosure Prevention Pro Bono Project is the largest
in the United States that I am aware of. There are other
similar projects that have been launched in New York, in New
Jersey and other states, but the number of attorneys
participating, the level of services that are being provided
are significantly less.
When we started this just last summer, we had no idea where
we'd be today. The market has changed completely. The types of
services that need to be provided to homeowners today versus
last July are different.
We've recruited over 700 attorneys who have volunteered to
provide time and resources to help homeowners and my testimony
outlines the kinds of things that we're asking them to do.
First, we're asking them to provide brief advice and
counsel. The Number 1 thing that homeowners say to us when they
get to any one of the different vehicles to the Maryland system
is they don't know what their roadmap is. They don't know what
their options are. They're calling their servicers and can't
get an answer. No one is answering the phones. No one is
responding to them.
So we started a series of workshops where we would bring
pro bono attorneys and housing counselors and homeowners could
come and they could get free advice. The basic thing is we're
giving them a roadmap. This is where you are in the process. We
hear about your individualized situation and every situation's
a little different and we try to give them a roadmap of where
we go.
Now, these events have been quite successful. Just in the
last six months, we've seen over 500 homeowners at these
events. Congresswoman Edwards mentioned earlier, Congressman
Van Hollen, Congressman Cummings, and Majority Leader Hoyer,
they've all sponsored events and essentially used the pulpit of
their positions to get the servicers and homeowners and pro
bono lawyers and non-profit-qualified housing counselors to
come and provide assistance and get these homeowners some help
and try to mitigate their damages.
We're continuing to do more of those events and for
homeowners who are here today, there's a list in the back of
upcoming events that are happening. They're free. They cost
nothing.
We also are asking pro bono attorneys to do direct
representation. There are not enough housing counselors in the
United States or in Maryland to meet the need. You heard Ms.
McDougal talk about the caseload just at her one agency, how
it's tripled in this area just in a couple years.
The state and our project believe that we need to use the
pro bono attorneys to supplement what's needed at the
counseling agencies. In effect, the pro bono attorneys are
acting as extensions for the counselors. So they will provide
direct representation in attempting to negotiate loan
modifications and writing letters, making phone calls to those
servicers.
The second aspect of what they will do is they will
represent homeowners in court and despite what I think is the
ridiculous and completely unnecessary restriction on the
federal money that was given last year to provide legal
services to homeowners in foreclosure, we are still able to
find lawyers who will do this without that need of money, but
that's a completely unnecessary restriction and it's an
impediment.
In most cases, if a lawyer is helping a homeowner who is on
the foreclosure train and the case has been filed, that can be
resolved with loss mitigation. There is no need for adversarial
litigation, but it's not clear why that restriction was in
there, it's not necessary, and I know in over half the states
that are non-judicial foreclosure states or--I'm sorry--half
the states that are judicial foreclosure states, that money
could not be used. That's my expectation and it will come back
to Congress and you'll be wondering, Congress will be wondering
what happened.
The third aspect of what we're asking the pro bono
attorneys to do and that they are doing is that the long-term
solution here is to affiliate them with housing counseling
agencies. There are approximately 30 or so qualified housing
counseling agencies that the State of Maryland is supporting.
We are recruiting attorneys to volunteer to become an extension
on a regular basis.
In my written testimony you have what is a draft job
description for that volunteer attorney and details the kind of
work that they will do, but the long-term solution to this for
a sustainable solution is to have those pro bono attorneys in
our vision affiliated with the agencies and working with them
on a regular weekly basis. The St. Ambrose model times 30. The
St. Ambrose is one of the only agencies in the state that has
its own inhouse attorneys.
I provided a series of recommendations that you can see at
the end of my testimony. Some of those you've already heard.
Let me just echo what Secretary Perez emphasized. There is
absolutely no reason to have the kind of restrictions that were
passed on the federal money that came to legal service
entities. Future federal money to support local and state
programs like ours do not need to put the restrictions that
were put in, [1] by Congress that you can't do litigation and
use this money for litigation purposes and [2] NeighborWorks
put in its own restriction and said before the lawyers can
provide assistance, the homeowner must get housing counseling
first.
Now, our model is to do it simultaneously and I would like
to encourage any future bills and efforts in this manner to do
that. That restriction wasn't necessary and it doesn't fit the
problem of us trying to get rid of the caseloads for the
housing counseling agencies.
I'm happy to answer any questions.
[The prepared statement of Mr. Robinson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Warren. Thank you, Mr. Robinson. I appreciate it.
We're going to do a round of questions, a brief round of
questions, and I'd like to start. I'd like to start with a
question for Ms. Norton.
I was thinking about the numbers we started with, a 124
percent inflation adjusted run-up in housing prices, now
housing values in free-fall, and so I wanted to just ask--I'll
just ask it in a series and I think you can link the questions
together.
How many people do you find or do you find that it's rare,
I won't ask you for actual numbers, is it rare or is it a free-
fall, that people come in who are in trouble on their mortgages
who owe substantially more than the current market value of
their homes?
And then a related question because I want you to be able
to give a very good answer here is that for those people, even
if there's, let's say, a 100 percent loan-to-value ratio
financing available, can they save their homes using that and,
if not, what tools do they need? Ms. Norton?
Ms. Norton. Well, I'll let my colleague answer.
Ms. Warren. I was just going to say whoever would like to
answer on this, too. I'm glad to hear from both of you.
Ms. Norton. And particularly, and you can speak to this in
more detail than I can, for us for the most part, it depends on
geography. So homeowners coming from different communities in
different jurisdictions in the state typically reflect where
that loan-to-value ratio is or how underwater they are at the
point that they're seeking assistance.
There are communities in Baltimore City where property
values are still at $75,000. There are, and then we get into
the fraud conversation, two blocks away there are properties
selling for $1.2 million in which comparables at the time of
loan origination for the subject property of $75,000 were based
on this other neighborhood. Baltimore is pretty representative
of other urban areas in those dramatic changes.
So there are certainly--for the most part, it depends on
geography, different parts of the state, that cause this
inflated home value. The home values were rising at an
artificial rate and also in areas where there was increased
development.
Harford County, Maryland, is one where there was sprawling
development. It was a Baltimore suburb in which the eight-
bedroom, six-bath houses were built and just sort of popped up
and I think in those communities that's where we are really
seeing this, the up-ended values at the points that they come
in for assistance and I know certainly this is an issue with
Prince George's County which is why I was advocating for the
use of principal reductions in loan modifications.
Do you want to jump in?
Ms. McDougal. Well, we are seeing some servicers who are
willing to reduce principals and in some cases even interest
that's still outstanding on the loan, but we're not seeing very
many, and certainly in Prince George's County, we don't have
very many clients who are not underwater in their homes which
is very unfortunate because property taxes are going to
continue to rise in the county.
So I would say that it's probably along the same vein that
Anne did talk about with regard to the counties surrounding
Baltimore. Certainly when you look at the lack of affordable
housing in the first place which led to the inflated prices as
a result of the sprawling-out, then we really do see very high
incidence of individuals that are underwater.
Ms. Warren. This is very helpful, and I want to be careful
to be disciplined about the time, as well.
I want to include now in this question Mr. Perez. I'm very
struck by your comment that you can think of two reasons why
there are no modifications or such a limited number of
modifications, one the limitations imposed by law, in effect by
the purchase and servicing agreements, and two, that they don't
have the will.
The question I really want to put to you is we hear the
examples that mortgage companies end up losing an enormous
amount when these houses go into foreclosure. We've heard
different estimates. Some estimates around $70,000 per
foreclosure. Some say numbers suggest they get 40 percent of
current market value when they take a house all the way through
foreclosure.
Why are they so unwilling to modify?
Mr. Perez. I may be the wrong person to ask that.
Ms. Warren. I think you're the right person to ask.
Mr. Perez. My own hypothesis is we have to go back to--
we're talking about 2008, that's our data, and it was apparent
to me that I think a lot of the servicers were understanding
that there was going to be a new administration and were,
frankly, waiting to see what the Federal Government was going
to do and whether they were going to share the risk.
I mean, we saw in the 72-hour period, you know, Bear
Stearns get bailed out. We saw, you know, all the other
activity at a congressional level and my own sense was that
they were taking a wait-and-see approach.
Well, the day of reckoning has come and it will be very
interesting as we move forward to see what happens, but that--I
mean, again, I don't have that--I haven't been in the board
room, but I can simply say that, you know, our data--I used to
hear that we've done more modifications than ever before and
what we saw was, well, they're not meaningful modifications and
that's really the touchstone and as we collect data, another
important thing is to make sure we're collecting data on
modifications disaggregated by race and ethnicity.
This is a problem that touches every community but it
disproportionately touches communities of color. In Maryland,
for instance, 54 percent of African Americans are in subprime
loans, 47 percent of Latinos, 18 percent of non-minorities. We
had problems of discrimination at the origination end. It is
not a stretch to suggest that there are going to be potential
fair housing issues at the modification level.
So as we move forward, I think we need to be mindful of
that.
Ms. Warren. Thank you, Mr. Perez. My time is up. So I'm
going to have to yield to Mr. Silvers.
Mr. Silvers. Mr. Robinson, did you want to answer?
Ms. Warren. Mr. Robinson, let me ask you briefly.
Mr. Robinson. Sure. From our perspective, the biggest
problem in getting meaningful modifications in the work that we
directly do helping homeowners and indirectly through the
housing counselors has to do with the securitized loans and
when you add in the equation of the mortgage-backed security
investor not giving the leeway and the easy way to the
servicer, it adds an extra layer of complexity that's not
needed, and we know from our fraud cases, because I've taken
four or five depositions of mortgage-backed securities in the
last year, they don't even know what's in their portfolio. If
they had even looked at the paperwork, they would have seen the
loan was toxic and unaffordable and in the fraud case, they
would have seen it was fraudulent, but they still bought it and
they're refusing to sell it back to who originated it to them.
Ms. Warren. Thank you. Thank you, Mr. Robinson. Senator
Sununu.
Senator Sununu. Ms. McDougal, you're obviously in a
position where you're seeing a very wide variety of homeowners
facing different kinds of challenges.
In the panel that we had previously, Richard Neiman pointed
out they sort of brought together all of the many problems that
we see in the system, but for any individual family there may
one problem that's greater than all others.
What's the most common obstacle that you see for these
homeowners? In other words, is there any particular thing,
anything that gets repeated more often than any other that you
would therefore identify as a real priority so that the first
thing that you would want legislators, policymakers or
regulators to try to address?
Ms. McDougal. I think that probably the most prevalent
problem that we're seeing is the loss of income, where an
individual's hours may have been cut from their job, they
obtained the mortgage based on overtime hours that were
reduced, there was a divorce or some kind of loss of income in
the family that is very hard for the borrower to recover from.
We've had lenders or servicers tell us, well, maybe they
can rent out a room, but I think that it really does go back to
making sure that if there is some--and the fact that there's no
equity in the home makes it a lot more challenging to try to
refinance and so I would say probably the most important thing
is the loss of income.
Senator Sununu. So the practices of the servicers and the
lenders obviously complicate matters, make it more challenging
to work things out, but more often than not, that's not what
drove the problem in the first place. It's that you had a
problem with income, you had a problem with the family's
ability to pay and then the system wasn't really well-suited to
deal with that and to help them through it.
Ms. McDougal. Almost. Because I don't want to back away
from the responsibility of the servicers in this because I can
say that in the two years that we've really seen the problem
escalate, it did start with a very large portion of subprime
loans where they were just not being negotiated at all for
whatever reason on the servicing side.
Senator Sununu. Are there servicers or lenders for that
matter, local perhaps or national, that have operated and
worked better than others that we might look to as a model for
performance?
Ms. McDougal. I think I'm going to yield to the Secretary
because I know that Maryland does have a group----
Senator Sununu. I'll give the Secretary a chance. But I'm
curious to know through your opinion, again because you're
dealing with them on a personal level as the intermediary
between the family that really needs the assistance and the
lender, the servicer themselves.
Ms. McDougal. At one point it was the third-party
servicers, the smaller servicers that were willing to
negotiate. The larger ones, the Wells Fargo or some of the very
large ones, lenders were not just at all and they would a lot
of times say it's based on how the loan was written. Some loans
are written so that the investor would not approve the loan
modification. We weren't finding that out until later. We were
just being given denials without any kind of explanation at
all.
So I would say that the smaller servicers were more willing
to work in the beginning and now--and then a lot of larger
ones, especially larger lenders, started going out of business,
so it just made it a little bit harder.
Senator Sununu. Secretary.
Mr. Perez. I actually agree with that. I mean, again
extrapolating from our data, there's a wide disparity in
meaningful modifications between, say, Ocwen and Litton and
I'll note parenthetically when we met with Litton, who did we
meet with? We met with Larry Litton and I think that was
helpful to have, when we were negotiating that agreement, the
principal at the table. He didn't have to turn around and say I
have to run it up the flag pole. He was the top of the flag
pole and their book of business are loans that are all very
fraught with problems and so I think they saw the need for
principal reductions and other more aggressive steps earlier.
Now, are they where we'd like them to be? No, they're not,
but I give them credit and I think it's important to give
credit where credit is due. I think they're moving in the right
direction faster than some of the----
Senator Sununu. Now they're servicers and you mentioned
Countrywide is servicing very large percentage of a couple of
different classes, but my last question is about where these
troubled mortgages came from in the first place, about the
originators.
What portion of the subprime mortgages, for example, in the
state--you regulate----
Ms. Warren. Senator, you're out of time.
Senator Sununu. Well, it's important.
Ms. Warren. They're all important.
Senator Sununu. You regulate the brokers and the state
banks that initiated----
Mr. Perez. Correct.
Senator Sununu [continuing]. Many of these. So in Maryland,
what percentage of the subprime mortgages were originated by
entities that you regulate?
Mr. Perez. We regulate both state-chartered banks and non-
bank originators. The subprime foreclosure problem, the
origination problem that is your question is primarily a non-
bank phenomenon.
Our state-chartered banks, with one or two exceptions,
didn't get into this business. The main problem were non-bank
originators which is why we've really clamped down on brokers
and you look at--I mean, brokers----
Senator Sununu. But maybe for the record, could you just
identify what percentage of the subprime mortgages in the state
were originated by those?
Mr. Perez. Oh, by--well, we regulate about 70--actually,
it's going down. As of a year ago, we regulated about 60 or 70
percent of the residential mortgage loan portfolio at
origination. Then when Countrywide was taken over by Bank of
America, they're a huge book of our business. So we're now
under 50 percent.
Senator Sununu. But about 70 percent of those that were
originated, initially originated----
Mr. Perez. Subject to state regulation because they were
originated by brokers.
Senator Sununu. Thank you.
Ms. Warren. Thank you, Senator. Mr. Silvers.
Mr. Silvers. Secretary Perez, in your comments, you seem to
be unhappy with Wells Fargo and Countrywide which, as you point
out, is now a subsidiary or part of Bank of America.
Mr. Perez. Yes, sir, that would be a fair statement.
Mr. Silvers. My question is going to be to the panel, but I
want to make this observation. The TARP Program has provided
Wells Fargo with $25 billion of taxpayer money and has provided
Bank of America with $45 billion of taxpayer money and a
guarantee against a $100 billion of Bank of America assets.
That is roughly somewhere between $700 and $1,000 per household
in the United States. People in this room on a proportionate
basis have given those two banks in cash something probably on
the order of $40,000.
Now I want to talk about sticks. What kinds of sticks
should we be applying to those institutions? Let me one give
you a menu. Stick one is the stick that Franklin Roosevelt
applied, a mortgage moratorium, a mortgage foreclosure
moratorium.
[Applause.]
Mr. Silvers. Stick two--by the way, we could make this
retroactive to this money. That power is vested in Congress in
the Emergency Economic Stabilization Act or we could make it a
condition of more money.
I read in the newspapers that somebody's coming for more
money.
Stick two would be the bankruptcy provisions that are being
discussed and that were mentioned by the Congress people that
joined us earlier.
Stick three could be every bank-holding company is deeply
intertwined with the Federal Government. We could start pulling
threads. We could start denying them access to various benefits
they receive from the public--from the government, ranging
anywhere from access to the Federal Reserve Window, to access
to deposit insurance, if they did not move forward with a
structured mortgage mitigation program.
My question to you all is how much of a stick is necessary
here?
Secretary Perez, I heard you describe these two
institutions' behavior six months ago. It sounds like they
haven't changed in the slightest, despite having received all
this public money. How much of a stick is necessary?
Mr. Perez. Well, I don't think this voluntary compliance
model has worked and we have the data to demonstrate that it is
not going to lead to the large-scale reform that we need.
Bankruptcy reform, in my opinion, is the low-hanging fruit.
I will put that aside. I think we've spoken about that enough.
A moratorium on foreclosure. We had a de facto moratorium
as a result of the governor's bills last year for about six
months, but if you don't address the underlying need to modify,
a moratorium is just postponing the inevitable and so what we
really need--when the market wanted it, we had what was called
``automated underwriting'' in the early '90s. We were able to
get you into a home in four days.
Why don't we have automated modification that's automated
and meaningful and why can't we tie some of this money to
benchmarks and having said that, it's important to understand
that not everybody should be eligible for a modification. For
some people, regrettably, the solution is going to be a short
sale and so I don't come in here with pie in the sky
expectations. That is a reality in Maryland, but I think we
need those benchmarks and we really need to tie the
productivity in meaningful modifications and by that, I mean
principal reductions.
To answer your question from before, people are upside down
in this state. In Prince George's County, where I live in
Montgomery County, Baltimore County, Baltimore City, all sorts
of people who are upside down, interest rate freezes aren't
going to work and so that to me would be some of the things I'd
be looking at.
I'd also add a couple more sticks, which is the Fair
Housing Act. The City of Baltimore has sued Wells Fargo for
violations of the Fair Housing Act. We need to look at those
civil rights tools. The FTC has jurisdiction over servicers
that is very useful, and, you know, to me a more systemic
reform that has to be on the table is when we're looking at the
Treasury Department, as we look long-term here, the voices of
consumers and the voices of civil rights protection need to
move away from the kid table to the front table because I would
observe that that is a systems problem that has been in place
for way too long and if we don't address that systems problem
at Treasury and at the Fed and tell them that, yes, Reg. B is
not an impediment to collecting data in this area, you can do
it, we need those voices internally, and so those are, I think,
an amalgam of reforms that I think could help us move forward.
Professor Warren. Thank you. Mr. Silvers, you're out of
time. That was a good question.
Mr. Neiman.
Mr. Neiman. I just want thank you for highlighting the
efforts at the state level, in progressive states like
Maryland, like New York. But as we all know, states can only do
so much.
These are policies and financial funding and incentives
have to come at the national level, and that's why we also have
to deal with issues around federal preemption.
Senator Sununu rightfully highlighted that many of these
subprime mortgages were originated by non-depository
institutions regulated at the state level, but it was the
federal regulators that really thwarted the actions of states
as far back as 2000 to bring actions against institutions,
particularly the national banks, that participated in funding
those non-depository institutions in securitizing.
So I agree, we have to address issues around federal
preemption which contributed to the creation of the problem.
Federal preemption is also inhibiting the solution. As you
pointed out, the inability to collect data from institutions
like Wells Fargo is totally unacceptable. We need, all need to
assess the mitigation efforts of every institution,
notwithstanding charter-type.
My question, if I have still some time left, is to the
follow-on to the issues of obstacles to mitigation efforts by
the servicers I think this is really at the heart of the
question because each obstacle is going to require a different
legislative remedy.
Is it the capacity; is it the restrictive pooling
agreements, the pooling service agreements, which I think have
been overstated; is it the fear of litigation, or that may
require safe harbor that's truly a fear; or is it that they're
just waiting to see if the government is going to share in re-
defaults? I'd be interested in your thought as to the critical
obstacles that need to be addressed and that we should be
recommending to Congress.
Ms. Norton. I think there are several, and I wish I could
give you one particular answer. Unfortunately from our
observations, that's not the case.
There is, and from my colleagues that are in the servicing
side, the lending side, there really is the threat of
litigation, but from my review of the pooling and servicing
agreements, there tends to be broad language in which servicers
do have that, you know, option to engage in loss mitigation
when it's going to prevent losses, and I think the example that
we've given, if they're going to take a $70,000 loss at a
foreclosure sale, why is it you can't knock $20,000 off of
principal?
So that brings in a fear or a reluctance and the
reluctance, I think, does go somewhat to the capacity issue,
but there are solutions. We've mentioned technology before and
servicers do use automated models. I've seen two demonstrations
of two different software models which, if they were made
available, whether to housing counselors or to their borrowers,
you could log in, enter your information, enter your budget
information, the reason for your hardship, and have an answer
on the spot.
We've seen 30 seconds of this because the pooling and
servicing agreements are entered into these systems. They're
not used in my office and SEED and others around the state of
Maryland still have to go through this three-to-five-month
process of obtaining the answer that could be provided within a
matter of minutes.
So that's one of the fear frustrations, and I think that is
a capacity issue in terms of perhaps they do not have the
manpower, but at the same time, I think technology, like in the
origination model, has supplemented that. They already have it
available. Many have already adopted these systems. They just
are not providing those, whether it is to the borrowers or to
the housing counseling agencies, pro bono attorneys, whomever.
You can do online banking but you can't do online loss
mitigation. It should be one and the same. If you have an
account, you have an account.
I know the bankruptcy issue we have discussed at length,
but I think that is a fine line, I think I called it perverse
incentive in my testimony, in that that is the final say to the
investor if you've already provided this discretion through
your servicers to engage in meaningful loss mitigation and loan
modifications and principal reductions where it is going to
provide a savings which in fact it does or it mitigates the
losses that will be realized. So now the alternative is we'll
let a bankruptcy judge cram down the value to the recurrent
principal market rate and I think that's--unfortunately,
something like that is going to be the tool needed to really
source these technological advances that they can have access
to really implement those and put those into practice.
Mr. Neiman. Thank you very much. Very solid.
Ms. Warren. Thank you. Thank you very much.
Mr. Perez. Thank you for your time.
Ms. Warren. I want to thank this panel not only for coming
here today and exchanging your ideas with us but also for the
work you are doing day-in and day-out in a time of real crisis.
Very much appreciate it. Thank you very much.
Mr. Perez. Thank you.
[Applause.]
Ms. Warren. And now we're going to have a brief opportunity
for open mics at the two mics. If you'll just line up, we'll go
back and forth, one at a time, and I'm going to ask our
timekeeper just because I want to give everybody a chance,
better that we hear a little bit from more people than a long
story from just one or two. I'm going to ask him to stand up
where you can see him and he's going to hold it up the whole
time. We'll have one minute and I'm going to ask you to stop
when it goes to zero.
So if you would identify yourself for the record, please?
Ma'am, could I start with you?
Ms. Harrington. Certainly. My name is Mosey Harrington. I'm
the Executive Director of Housing Initiative Partnership. We
counsel approximately a thousand people a year in the county.
One, we were very worried about a second wave of
foreclosures when the five-year work-outs which some lenders
are insisting on expire. HomeQ is one that that's particularly
true of. We're often taking them because it keeps somebody in
their house but it's a lousy deal.
We feel that the government needs to mandate some wholesale
resets. The arguments that they can't because the loans were
securitized is spurious. Governments can take over banks. They
can nationalize fuel industries and they can go to these
investors and say I'm sorry, we know you thought you were
getting nine percent but you're going to get a nice fair five
percent return on your investment which I wish I were getting
on my retirement right now.
The new work-out scams have to be reined in. They're often
operating just within the law so the law needs to move and
that's exactly what was going on with the subprime. Most of
those were operating just within the law. The law has got to
move.
The reporting requirements that are imposed on the
counseling agencies are onerous and are getting in the way of
our obtaining work-outs for counselors. A campaign to urge
people that are behind on their mortgages to save partial
payments so that the lenders--when the lenders refuse to take
the whole payment--what I'm saying is they come to us with
nothing, even though they haven't made a mortgage payment for
five months. So we have nothing to work with. They've used the
money to pay other bills. we need to campaign to do that.
The Latino population particularly needs to be reached out
to as they're very isolated and were particularly badly hit in
this.
We were heartened by the press account of the sheriff in
the Midwest who was refusing to do foreclosure evictions
because it was a TARP bank that hadn't offered a real work-out.
We'd love to see that institutionalized. Why not?
The 50 percent--we'd just like to point out that the 50
percent of the work-outs, we keep hearing this number, the 50
percent of these work-outs that go into default again and I
would like to point out that those work-outs are coming from
the kinds of repayment plans that Secretary Perez was talking
about. They're lousy deals. We're increasing people's payments.
Of course they're going to be going into default.
Ms. Warren. Thank you very much. Thank you.
[Applause.]
Ms. Warren. Yes, sir.
Mr. Dean. My name is Samuel Dean. I'm a member of the
Prince George's County Council.
The elephant in the room here for Prince George's County is
that this is a majority African American community and what we
have been faced with is predatory lending.
As an example, Bank of America would give interest-only
loans and tell folks in two years, you can roll it over into a
30-year loan and that was done quite often for homeowners. So
you put people in a bind going in.
One of the problems that we have with foreclosures here in
Prince George's County is that the lifeblood of this county to
serve its people is predicated upon receiving taxes from
property taxes, transfer taxes, recordation taxes. When you
don't sell property, your community is in a crisis and we are
in a crisis at this moment.
So there's other issues relative to foreclosure and there's
other issues relative to making sure that people stay in their
homes. We have a glut. We're ground zero and we're ground zero
because of people who look like me and the banks and lending
institutions have taken advantage of us. We're no different
than what used to occur with redlining.
So I think that there has to be some other things that you
have to deal with relative to just dealing with foreclosures.
You have to put in legislation and some guidelines that banks,
and I'm talking Bank of America--when you use Bank of America,
you think that's a legitimate institution that offers a loan
that they know is going to have an impact if this bubble
bursts.
In the Upper Marlboro area that they talked about, these
folks bought into homes that were running $700 thousand to a
million dollars and they're in upside down market and so you
all need to do more than just say how are you going to rectify
the foreclosure.
Thank you.
Ms. Warren. Thank you. Thank you very much, Mr. Dean.
Yes, ma'am.
Ms. Goldsby. Good morning. My name is Terri Goldsby. I'm a
resident of Upper Marlboro, and I want to thank Mr. Silvers, is
that your name, for talking about sticks.
I listened to the three options and I want to preface my
stick with the fact that I listen to C-SPAN a lot and I hear a
lot of the congressional debates going on.
My stick has to do with activity. I understand that the
Commonwealth of Virginia prosecuted successfully and convicted
three sets of fraudulent individuals or companies in the whole
real estate chain back in 2008 and the chain involved loan
originators, appraisers, real estate agents and lending
institutions. According to the article that I read in the Post,
the fact set was that there was a concerted intentional effort
to go into neighborhoods, inflate the value of the home through
the appraisal, get the loan, and then resell it and continue
the process, so that our neighborhoods were being inflated for
X number of reasons.
I suggest that a way to counterbalance the 124 percent
inflation is to roll back the value of homes back to 2001,
before these nationwide all across the board and when those
values are set, they won't be at rock-bottom prices. They will
be at 2001 prices. Buyers will be induced into buying. The
mitigators will have a set place where they can go in--they're
going to lose but they're not going to lose as bad as
foreigners coming in and buying it at rock-bottom prices.
Ms. Warren. Thank you. I just want to remind you all that
you can also e-mail us, so we can hear from you at
cop.senate.gov. If you don't want to stand up or if you don't
have enough time to say all you want to say, I encourage you to
do that.
Yes, ma'am.
Ms. Richardson. Good morning. Is it still morning, that is?
Ms. Warren. For a few more minutes.
Ms. Richardson. My name is April Richardson, and I'm from
the Prince George's County States Attorney's Office, and I've
prepared brief notes.
This is not just a loan modification issue. This is not
only about hearing the stories of desperate homeowners in need
of a solution. It's about cleaning up the industry by holding
scammers accountable for victimizing our residents in
foreclosure distress.
As mentioned before, Prince George's County is ground zero
for foreclosures in Maryland and as a result, we are ground
zero for mortgage, real estate, and foreclosure fraud. We are
at the heart of equity-stripping schemes. We are at the heart
of fake buy-outs. We are the heart of fraudulent deeds.
Our seniors, they're being scammed by reverse mortgage
schemes designed to take their homes and to take their equity.
There is a great need to hold unscrupulous lenders, loan
officers, attorneys, appraisers, criminally accountable for the
vulnerable positions that they have put this county in.
When you have an opportunity to review your reports and
findings from hearings such as this, think about the need for
local funding of law enforcement agencies such as my own to
send a message and that message is as it pertains to real
estate and foreclosure fraud, the game is over and they will
serve jail time.
Thank you.
[Applause.]
Ms. Warren. Thank you. Thank you, Ms. Richardson. Yes, sir.
Mr. Kagman. Good morning, Madam Chair, Members of the
Panel. My name is Billy Kagman. I'm a housing counselor here in
Prince George's County, former Executive Director for Cairos
Development Corporation.
One thing I want to bring to the panel's attention and to
the audience is we always talk about the loan servicers and,
first and foremost, we need to understand what their primary
role is--that is, debt collection. They are not equipped to do
loss mitigation and some the other things. So we're looking at
an organizational culture that needs to be restructured. That's
my first comment.
Secondly, as far as loss mitigation actions within itself,
I feel that the best process is not to have it at the federal
level or the technology as Anne and some of the others
mentioned, but move it at the state level. The state's
Department of Housing and Community Development should have the
apparatus to make this technology work so that they can monitor
what the servicing communities are doing and then interact with
the housing counseling agencies.
As far as the housing counseling agencies are concerned, we
need more money. There's always been talk about capacity. Our
capacity is stretched. Funding is urgently needed. We are the
people on the ground. We're here. We hear the cries. It was
very heartening to hear some of the comments from the first
panel, but we hear that all the time and we would just ask that
you all take everything that you hear today and understand that
this is not related to Prince George's only. You can probably
replicate this throughout the United States.
Thank you.
Ms. Warren. Thank you very much. Thank you, Mr. Kagman.
Yes, ma'am?
Ms. Tucker-Ross. Good morning. My name is Catherine Tucker-
Ross. I'm a resident of Prince George's County, residing in
Clinton, Maryland.
I want to thank the panel for holding this oversight
hearing. I want to echo the sentiments of the U.S. Attorney in
arresting these people. As a former law enforcement officer, I
think it's criminal what has occurred to us here in Prince
George's County.
I want to thank Senator Sununu for asking about the
brokerage with Mr. Perez. I do think that Prince George's
County and the State of Maryland was fertile ground for people
to come in and offer subprime loans and do what they did to the
citizens here, and I do believe that the U.S. Attorney stated
that they should be arrested or somebody should be held
accountable for this.
I'm sitting at my kitchen table working out my budget and
when I look at my budget, I look at the 30-year fixed Federal
Housing Act. What I'm asking for is that you consider extending
that Act beyond 30 years. Car dealers are doing it. They're
extending loans 36, 72 months, whatever the case may be. Look
at that for case-by-case basis.
Along with that, bring my property value back to its market
value.
With that, I'm looking at my FICO score. How can I modify
my loan, receive modification, if you tell me my credit score's
400? I'm still not getting anywhere. So we also need to look at
the FICO score, the market value, as well as the FHA Act.
I don't live on main street. I never went to Wall Street. I
live on my street and my community and I'm asking you to keep
these people's hands out of my pocket and out of my mailbox
because that's what's occurring and whatever you need to
legislate to do that, please do so because even today, I am
constantly receiving modification loans, requests to refinance,
we'll give you, you can have, you're pre-approved. So whatever
you need to do, get them out of our pockets and shut them down.
Thank you.
Ms. Warren. Thank you.
Yes, sir?
Mr. Walamu. Good morning. It's still morning or early
afternoon.
I want to thank you----
Ms. Warren. Could you identify yourself for the record,
please?
Mr. Walamu. Yes. I'm Shahaali Walamu. I live in Upper
Marlboro, Maryland, and I'm the President of the African-
American Democratic Club of Prince George's County.
One of the things that I want to do is thank you for
holding this important hearing here in Prince George's County
where our neighbors and communities are on fire with
foreclosures.
First, I would like to say that if they automate the
process of mediation when people go into foreclosure they can
very easily save time, save expenses, and provide some
emotional support to people who have to face foreclosure, and I
would like to remind each of us that spent a lot of time trying
to buy a house and when they go into foreclosure, it seems like
it takes forever and ever and ever and the process never goes
away in 10 years. We need help.
Thank you.
Ms. Warren. Thank you, sir.
Yes, ma'am?
Ms. Laramie. Hi. Good morning. My name is Jennifer Laramie.
I am with the Pro Bono Resource Center, and I'm the Project
Manager of the Foreclosure Prevention Pro Bono Project, the
project that Phillip Robinson spoke of this morning.
I just wanted the opportunity to introduce myself and to
thank you for the work that you're doing and just to expand on
a couple of Phillip's comments about the project.
I did want to reiterate that we do have a Resource Guide on
the back table for any homeowners that want to pick one up on
their way out. That guide will have our upcoming workshops
where we're bringing pro bono attorneys to provide free one-on-
one legal advice to homeowners who bring their loan documents
and information about their monthly budget.
There is a way to pre-register for those workshops on the
Resource Guide that will guarantee you a free legal consult if
you come to that particular workshop. So please do take
advantage of that information.
I also just wanted to reiterate the importance of the
Maryland HOPE Hotline to our project. That's 1-877-462-7555.
That is the line that homeowners can call to be determined
whether they are eligible for referral to a pro bono attorney
to actually represent them in negotiations with their lender to
modify their loan. So I encourage homeowners to call that
hotline and I encourage everyone in this room to spread the
word about that because that is the way to be matched with one
of our pro bono attorneys.
We did submit some written testimony from the Pro Bono
Resource Center, so hopefully you have that in your materials.
Thank you.
Ms. Warren. Thank you.
Yes, ma'am?
Ms. Wilson. Hi. My name is Cynthia Wilson, and I'm a
resident of Prince George's County, and I do realize it is now
lunch time, so I will be brief in my comments.
I really just want to underscore the importance of the
impact of the declining property values in Prince George's
County. We've touched on it. Many of the panel members spoke of
it, but there are a majority, I would say, I don't know the
exact statistic, but a majority of Prince George's County
homeowners are underwater and for those of us who may still be
current on our mortgages, we are not able to refinance our
loans because of the declining property values.
Now, I'm encouraged by the preliminary Affordability and
Stability Plan put out by the Administration that will attempt
to address this group of homeowners, but my concern, as a Bank
of America customer, is that the bank will not be incentivized
to actually do anything for us until we become delinquent on
our mortgages.
So in my case, for example, your statistic said that there
was a 124 percent run-up between 2000 and 2007. I bought my
home in 2007. So you can imagine where that places me. So I
have an interest-only loan.
So if Bank of America won't talk to me because I've tried
to ask them for a streamlined refi, something to that effect,
they won't do it. If they won't talk to me until I'm delinquent
and I'm already significantly underwater and last year I paid
$22,000 of mortgage interest alone, what would you do if you
were me?
That's all I have to say. Thank you.
Ms. Warren. Thank you.
Yes, ma'am?
Ms. Gray. Hi. Good afternoon. I want to thank the panel.
I'm the President of the Brandywine Neighborhood Coalition, and
I just wanted to add another piece to what--oh, Camita Gray. I
just wanted to add another piece to everything that everybody
has said as to predatory lending as to loans, but the main
thing that I see is the service providers not willing to
remodify the loans and also they're doing it for two to three
years and I think there needs to be some regulation there.
The other thing is with the RESPA. Some of the homeowners
are not--the loss of income or loss of job is not the main
reason for them losing the house. The other part is the RESPA,
the escrow increasing every year and they're not able to make
that payment, and I think that needs to be looked at.
A couple of people have lost their houses because of the
loan--the service provider can ask for that \1/16\ when it's
not needed. So I think that needs to be looked at and I will
submit some written comments.
Thank you.
Ms. Warren. Thank you. Thank you. Anyone else who wishes to
speak?
[No response.]
Ms. Warren. Then I will bring this hearing to a conclusion
by thanking you all for coming here.
I want to thank all of those who spoke. I want to thank all
of those who came just to listen.
It is important that we hear this from the ground. This is
not just a bunch of abstract numbers and statistics. We need to
hear it. We need to see faces. We need to hear voices and what
you bring to us makes its way into our reports and what we take
back to Congress as part of our description and our
recommendations for what happens as we try to work together for
economic recovery.
But I want to make one last plea and that is, I appreciate
your coming today, but this crisis is not over and the fight to
resolve it is not over. Indeed, the fight is just beginning.
The voices of those who helped bring us this crisis and who
have profited handsomely from it are well heard in the halls of
Washington. They are well heard in our state legislatures and
they are still active. We must fight back.
So thank you for coming here today, but please don't regard
this job as finished. Please continue to show up, to be heard,
to speak out, to reach out in every possible way you can. Our
country needs you.
Thank you.
[Applause.]
[Whereupon, at 12:05 p.m., the panel was adjourned.]