[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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                            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

                              ----------                              


                       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.]

                                  
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