    [Senate Hearing 111-142]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 111-142

         FORECLOSURE MITIGATION UNDER THE TROUBLED ASSET RELIEF PROGRAM

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

                                 FIELD HEARING

                                   before the

                         CONGRESSIONAL OVERSIGHT PANEL

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

        HEARING HELD IN PHILADELPHIA, PENNSYLVANIA ON SEPTEMBER 24, 2009

                                   __________

            Printed for the use of the Congressional Oversight Panel

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                         CONGRESSIONAL OVERSIGHT PANEL
                                 Panel Members
                            Elizabeth Warren, Chair
                              Rep. Jeb Hensarling
                                 Paul S. Atkins
                               Richard H. Neiman
                                 Damon Silvers

                                C O N T E N T S

                                                                       PAGE
    Opening Statement of Damon Silvers, Member, Congressional
      Oversight Panel................................................     1
    Statement of Richard Neiman, Member, Congressional Oversight
      Panel..........................................................     1
    Statement of Paul Atkins, Member, Congressional Oversight Panel..     5
    Statement of Damon Silvers, Member, Congressional Oversight Panel     7
    Statement of Seth Wheeler, Senior Advisor, U.S. Department of the
      Treasury.......................................................    11
    Statement of Eric Schuppenhauer, Senior Vice President and CFO/
      Program Executive, Homeowner Affordability and Stability Plan,
      Fannie Mae.....................................................    22
    Statement of Edward L. Golding, Senior Vice President, Economics
      and Policy, Freddie Mac........................................    29
    Statement of Honorable Judge Annette M. Rizzo, Court of Common
      Pleas, First Judicial District, Philadelphia County;
      Philadelphia Mortgage Foreclosure Diversion Program............    46
    Statement of Irwin Trauss, Supervising Attorney, Consumer Housing
      Unit, Philadelphia Legal Assistance............................    59
    Statement of Eileen Fitzgerald, Chief Operating Officer,
      Neighborworks America..........................................    78
    Statement of Deborah Goldberg, Director, Hurricane Relief
      Project, National Fair Housing Alliance........................    85
    Statement of Dr. Paul Willen, Senior Economist and Policy
      Advisor, Research Department, Federal Reserve Bank of Boston...   112
    Statement of Allen Jones, Senior Vice President for Default
      Management, Bank of America Home Loans.........................   120
    Statement of Larry Litton, President and CEO, Litton Loan
      Servicing......................................................   127
    Statement of Joe Ohayon, Vice President for Community and Client
      Relations, Wells Fargo Home Mortgage...........................   133

      FIELD HEARING ON FORECLOSURE MITIGATION EFFORTS UNDER THE TROUBLED
                              ASSET RELIEF PROGRAM

                          THURSDAY, SEPTEMBER 24, 2009

                                         U.S. Congress,
                                 Congressional Oversight Panel,
                                            Philadelphia, Pennsylvania.
        The Panel met, pursuant to notice, at 10:03 a.m. in the
    Kirby Auditorium, National Constitution Center, Damon Silvers,
    presiding.
        Present: Damon Silvers, Richard Neiman, and Paul Atkins.
        Mr. Silvers. This hearing of the Congressional Oversight
    Panel is called to order. I thank you all for joining us today.
    My name is Damon Silvers and I serve as Deputy Chair of the
    Congressional Oversight Panel. The Panel's Chair, Professor
    Elizabeth Warren was called to testify before the Senate
    Banking Committee this morning at a hearing on TARP oversight
    in Washington, DC. She deeply regrets that she is unable to be
    here, but we are after all the Congressional Oversight Panel.
        I will now turn the gavel over to my colleague on the
    panel, New York Banking Superintendent Richard Neiman. Richard
    serves as the Chair of New York Governor Patterson's Halt
    Abusive Lending Transactions Taskforce and is a member of the
    Multi-State Foreclosure Prevention Working Group.
    Superintendent Neiman has done extraordinary work in the area
    of mortgage foreclosure prevention for this panel including,
    but not limited to, his efforts to put this hearing together.
    Consequently, it seemed appropriate to us for Richard to chair
    this morning's hearing. Richard, the gavel.

     STATEMENT OF RICHARD NEIMAN, MEMBER, CONGRESSIONAL OVERSIGHT
                                 PANEL

        Mr. Neiman [presiding]. Thank you very much Damon for those
    kind words and also for the opportunity to share today's
    hearing. Good morning. First, I do want to thank and am very
    grateful to the City of Philadelphia and the National
    Constitution Center for hosting this hearing of the
    Congressional Oversight Panel. This city has been hard hit by
    the foreclosure crisis. Too many Philadelphians know firsthand
    what it means to have a home taken away.
        The Panel would also like to thank Senators Casey and
    Specter and Congressmen Brady and Fattah and their staffs for
    helping to plan today's hearing on this important issue. I also
    want to give a special thanks to Judge Rizzo of the
    Philadelphia Court of Common Pleas for working with the Panel's
    staff on the hearing and inviting us to visit the court this
    afternoon to learn more about its innovative mediation program.
        The number of families at risk of foreclosures here in
    Philadelphia and across the country is on the increase. What
    started as a crisis driven by subprime borrowers with
    inappropriate products has now spread to include families with
    traditional mortgages. Even prime borrowers are now losing
    their homes as a result of the downturn in the economy and the
    downturn in housing prices and job losses resulting from a
    recession that few predicted.
        Today's three panels of witnesses will convey the view of
    (1) the homeowners who are in jeopardy; (2) the lenders and
    servicers who can modify mortgage terms to keep people in their
    homes; and (3) the government that is implementing and
    overseeing the programs to facilitate these modifications. Only
    with these three groups of stakeholders working together can we
    develop affordable and sustainable solutions to the housing
    crisis and a greater level of engagement and cooperation that
    is long overdue. I am concerned that the pace of modifications
    is not keeping pace with the rise in foreclosures. We are also
    hearing specific concerns from borrowers and housing counselors
    regarding the responsiveness and the capacity of mortgage
    servicers and we will hear much more from them today.
        To my knowledge, this hearing is the first time that
    Treasury, Fannie Mae, and Freddie Mac are together in a public
    forum along with housing advocates and mortgage servicers to
    discuss the progress of the Administration's foreclosure
    prevention programs. We need to see this crisis from the
    perspective of those who are facing foreclosure, as well as
    those who are helping these families through counseling,
    modifications, and the judicial process.
        The broad representation that we have here today from the
    servicing industry is especially critical. Housing counselors
    and government agencies may design initiatives to help
    borrowers at risk, but ultimately it is the servicers and
    lenders who will determine whether these programs succeed. They
    have the power to decide whether to modify a loan or to pursue
    a foreclosure.
        As New York's Superintendent of Banks since 2007 when the
    crisis began, I have seen firsthand the positive results for
    homeowners can be achieved when the public, private and
    nonprofit sectors come together with a common purpose.
    Foreclosure, as we all know, is in no one's best interest.
        Now, some procedural issues. Because of the number of
    witnesses appearing today and the extensive scope of the
    testimony, we invite each witness to make an opening statement
    limited to five minutes. All of us have already read your
    written testimony, so in the five minute time period I strongly
    encourage you to highlight those points that best capture your
    main positions and constructive suggestions for foreclosure
    prevention. We need to be strict on our time constraints in
    order to hear from everyone, so I ask that you be conscious of
    the time. We'd like to finish our work before 1 p.m. and allow
    time for members of the public to share their comments with us,
    as well.
        So, with those opening remarks I'd now like to turn it over
    to Commissioner Paul Atkins for remarks.
        [The prepared statement of Mr. Neiman follows:]

        [GRAPHIC] [TIFF OMITTED] 53159A.001

        [GRAPHIC] [TIFF OMITTED] 53159A.002

    STATEMENT OF PAUL ATKINS, MEMBER, CONGRESSIONAL OVERSIGHT PANEL

        Mr. Atkins. Thank you very much and I'd also like to thank
    Philadelphia for hosting this in the Constitution Center and
    most importantly to all of the witnesses who are appearing
    today at this hearing, some upon rather short notice. So, thank
    you very much for your efforts in coming here.
        The issue of foreclosure mitigation and its effectiveness
    is one of the areas that Congress specifically tasked this
    particular Panel to report on under the Emergency Economic
    Stabilization Act of 2008. I think it's appropriate for us to
    review what's being done in this area to help address the large
    number of foreclosures that the U.S. is experiencing these
    days. I welcome the opportunity to learn from our panel of
    witnesses today. This is an area that like much of what is
    being done by the U.S. government in the past year is fraught
    with moral hazard if poorly implemented. The interest, of
    course, is in helping those who may be in trouble through an
    interaction of bad luck, a bad economy, and perhaps bad
    personal circumstances. If you're out of a job, it is really
    difficult to make payments unless you've saved over time. But,
    just like that proverbial dichotomy between the ant and the
    grasshopper, we want to be sure that we're helping the ant and
    not necessarily the grasshopper.
        So, I'll be interested today to hear how these programs are
    operating, what steps are being taken to help those who
    actually deserve it, what measures are built in to root out
    fraud and who is actually bearing the cost of these
    extraordinary measures in particular, the taxpayers and the
    investors. Because I think they deserve to have accountability
    in this area. Thank you very much.
        [The prepared statement of Mr. Atkins follows:]
        [GRAPHIC] [TIFF OMITTED] 53159A.003

        Mr. Neiman. Mr. Silvers.

        STATEMENT OF DAMON SILVERS, DEPUTY CHAIR, CONGRESSIONAL
                            OVERSIGHT PANEL

        Mr. Silvers. Thank you, Richard and good morning. It's a
    pleasure to be here in Philadelphia, which is the city where I
    lived as a child. I mention this not as an exercise in mere
    nostalgia, but because we are here to talk about home
    foreclosures. An event in which banks, servicers, investors,
    courts, and ultimately officers of the law come together to
    remove a family from their home and their community and their
    children from their rooms and from their schools and their
    friends.
        I said this at our hearing in February on this subject and
    I will say it again. The fact that a lender can throw a family
    out of their home is a necessary part of a system of lending,
    but it is also an act of emotional violence and economic
    destruction. Foreclosed homes typically yield less than forty
    cents on the dollar to lenders while destabilizing
    neighborhoods. Foreclosure should be the last option after
    everything else fails.
        Before I turn to those economic consequences, I just want
    to say that I still see this issue through the eyes of the
    eight-year old I was here on Hamilton Street in Philadelphia
    and how I would have felt if we had suddenly been forced out of
    our house. Public policy should be about minimizing
    foreclosures for the same reasons it should be about minimizing
    child abuse or protecting the public health or educating our
    children. Others may disagree. Some may see no particular
    reason to view a home foreclosure any differently than any
    other failed financial transaction. Some may feel that the
    children should suffer from the sins of the parents. Some may
    feel that before the government can act to help a family, it
    should undertake an exhaustive inquiry into that family's
    morality, business judgment, and general character, for fear
    that some of the money that would otherwise go indiscriminately
    to the stock and bond holders of our large banks might be
    tragically and improperly diverted to a less than upstanding
    homeowner.
        The remainder of my statement is addressed to those who
    share one or more of those views. For the reality today is that
    the continuously escalating mortgage foreclosure crisis
    threatens to overwhelm the entire effort to stabilize our
    financial system in the interest of broader economic recovery.
    This is the intersection of morality and economics.
        Current estimates from the Mortgage Bankers Association are
    that so far we've had between five and six million
    foreclosures, which sounds big until you recognize that this is
    less than half of what is projected to occur between now and
    the end of 2010. This tidal wave appears to be the result of a
    combination of predatory lending, a collapse of underwriting in
    the bubble, rising unemployment, and the inability of
    homeowners with negative equity to refinance. This tidal wave
    threatens a vicious cycle in which foreclosures exert downward
    pressure on housing prices, falling real estate values and
    defaulted mortgages push down on bank capital, weakened banks
    pull back on lending, causing business activity to decline and
    unemployment to rise, feeding more defaults.
        This panel takes up the issue of foreclosure prevention--as
    my colleague Paul Atkins said--a statutorily mandated purpose
    of both the TARP and this panel against the continuing mystery
    of why lenders and processors are unable to renegotiate
    troubled mortgages at scale, when it has long been clear that
    such restructuring is generally in both parties' interest.
    Despite the enduring nature of that mystery, two things have
    changed since our panel held its last focused hearing on
    foreclosures. The first is that the Obama Administration's plan
    for prevention has been in operation. The second is that the
    driving force appears to have shifted from predatory loans to
    unemployment and negative equity. The Administration's
    commitment to help families is admirable. However, it appears
    that without addressing these issues of unemployment and
    negative equity, it may not be effective. I continue to believe
    there is no way to do this on a national scale without allowing
    judges to do so in bankruptcy.
        Finally, the problem of mass foreclosures is the other side
    of the coin of weak bank balanced sheets. So long as we make
    our policy centered on pretending we have strong banks, we may
    not be able to admit that these loans have to be written down
    if we are to end up with viable housing markets and stop the
    downward spiral.
        As Superintendent Neiman has said, we have outstanding
    examples of innovative approaches here in Philadelphia and
    Pennsylvania. The program Judge Rizzo has been leading, the MHA
    Program at the state level, I think is a large part of why we
    are here today. We have an outstanding set of panels and
    hopefully it will shed light on some of these questions and how
    we can make this epidemic of foreclosures a thing of the past.
    Thank you.
        [The prepared statement of Mr. Silvers follows:]
        [GRAPHIC] [TIFF OMITTED] 53159A.004

        [GRAPHIC] [TIFF OMITTED] 53159A.005

        Mr. Neiman. Now, for our first panel of the morning. We are
    happy to have three distinguished gentlemen who share
    responsibility for running the Making Homes Affordable Program
    of this Administration. I'm pleased to welcome Seth Wheeler,
    Senior Advisor in the U.S. Treasury Department, Eric
    Schuppenhauer, Senior Vice President and Program Executive for
    the Homeowners' Affordability and Stability Plan at Fannie Mae
    and Edward Golding, Senior Vice President, Economics and Policy
    at Freddie Mac.
        Mr. Wheeler would you like to start with your opening
    statements?

     STATEMENT OF SETH WHEELER, SENIOR ADVISOR, U.S. DEPARTMENT OF
                              THE TREASURY

        Mr. Wheeler. I would, thank you. Members Neiman, Silvers
    and Atkins, thank you for the opportunity to testify today
    about the Treasury Department's Making Homes Affordable Program
    and our efforts to stabilize the U.S. housing market and
    support homeowners. I'd also like to thank Chair Warren and
    Representative Hensarling for this invitation, though they're
    not able to be here today. I'd also like to recognize some of
    the housing counselors and advocates that will be on the next
    panel, who have been important partners in helping us
    understand how we can improve our efforts, as well as the
    servicers who are key in implementing it.
        We announced Making Homes Affordable or MHA in February. A
    plan to stabilize the U.S. housing market, support loan
    mortgage rates and offer assistance to millions of homeowners
    by reducing mortgage payments and preventing avoidable
    foreclosures. There are clear signs that MHA is already having
    a meaningful impact. However, as with any new program of this
    size and complexity MHA faces a number of challenges. The
    Administration is working to address these challenges and to
    expand and improve the program going forward.
        The Making Homes Affordable Program includes three key
    elements. First, broad support for the GSEs--Fannie and
    Freddie--to support mortgage refinancing and affordability
    across the market. We have supported loan mortgage rates by
    strengthening confidence in Fannie Mae and Freddie Mac,
    including through a $200 billion increase in the Stock Purchase
    Agreements and continued support for market liquidity.
        Second, we increased refinancing flexibilities for the
    GSEs, providing more homeowners with an opportunity to
    refinance to lower monthly payments. Lower rates have enabled
    nearly 300 million borrowers with GSE loans to refinance since
    the announcement of the Administration's comprehensive housing
    plan.
        Third, a key part of the Administration's broad housing
    plan is a comprehensive $75 billion program to lower monthly
    mortgage payments for borrowers and providing modifications on
    a scale never before previously attempted. On launching the
    modification program, we estimated the program could help as
    many as 3 to 4 million borrowers through 2012 targeting a run
    rate of 20,000 to 25,000 trial modifications starts per week.
        Six months into the program, there are clear signs that the
    program is working. Over 57 servicers have signed up for the
    program. More than 85 percent of loans in the country are now
    covered by the program. As of the end of August, servicers had
    approved and extended over 570,000 trial modifications offers.
    Also, as of the end of August, over 360,000 trial modifications
    were already underway.
        At the beginning of October, we will report on substantial
    progress that has been made in September. We are above our
    target pace of 20,000 to 25,000 trial modifications started per
    week and are on track to reach our goal of 500,000 trial
    modification starts by November 1st, but we can do better.
        On July 28th we held a meeting with servicers at Treasury
    where we told them that they need to ramp up modifications and
    treat borrowers better. We asked servicers to commit to doing
    better. Servicers must add more staff than previously planned,
    expand call center capabilities, provide a process for
    borrowers to escalate servicer performance and decisions,
    bolster training, enhance on-line offerings and send additional
    mailings to potentially eligible borrowers.
        I think we are making key progress here. We were hitting
    20,000 modification starts prior to that meeting and we've
    bumped up that number by 50 percent to over 30,000 since that
    meeting, but there is more to do.
        We are working with servicers and Fannie Mae to streamline
    application documents and develop web tools for borrowers. We
    are committed to transparency and accountability.
        First, on August 4th we began publicly reporting servicer
    specific results on a monthly basis. The second public report
    was published earlier this month. These reports provide a
    transparent and public accounting of individual servicer
    performance. In the future, we'll expand the content of these
    reports to cover additional areas.
        Second, we are working to establish specific operational
    metrics to measure the performance of each servicer and will
    include these metrics in our public reports.
        Third, servicers must report the reason for modification
    denials, both to Treasury and to borrowers.
        Fourth, we asked Freddie Mac, as a compliance agent, to
    develop a ``second look'' process pursuant to which Freddie Mac
    will audit a sample of MHA modification applications that have
    been denied. The ``second look'' process began on August 3rd
    and is designed to minimize the likelihood that borrower
    applications are overlooked or inadvertently denied.
        In addition, we are improving borrower outreach, which is
    essential to the success of the program. We have launched a
    consumer focused website, established a call center for
    borrowers and launched a series of borrower outreach events in
    cities facing high foreclosure rates across the country.
        President Obama's Housing Stabilization Plan has made
    significant progress in assuring the flow of mortgage credit,
    bringing down mortgage rates and providing many families with
    the second chance to stay in their homes. We are on track to
    meet the goals we set for the program. To reach 500,000 trial
    starts by November 1st and offer help to 3 to 4 million
    borrowers by the end of 2010. But, we can and we must redouble
    our efforts to broaden the reach of these programs.
        We look forward to working with you and your staff to
    achieve these goals. Thank you.
        [The prepared statement of Mr. Wheeler follows:]
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        [GRAPHIC] [TIFF OMITTED] 53159A.007

        [GRAPHIC] [TIFF OMITTED] 53159A.008

        [GRAPHIC] [TIFF OMITTED] 53159A.009

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        [GRAPHIC] [TIFF OMITTED] 53159A.011

        [GRAPHIC] [TIFF OMITTED] 53159A.012

        [GRAPHIC] [TIFF OMITTED] 53159A.013

        Mr. Neiman. Thank you very much for keeping right on time.
    Mr. Schuppenhauer.

    STATEMENT OF ERIC SCHUPPENHAUER, SENIOR VICE PRESIDENT AND CFO/
    PROGRAM EXECUTIVE, HOMEOWNER AFFORDABILITY AND STABILITY PLAN,
                               FANNIE MAE

        Mr. Schuppenhauer. I appreciate the opportunity to
    participate in today's hearing on behalf of Fannie Mae. In my
    opening statement I'll briefly touch on the main points of the
    testimony we've submitted today.
        First, as the Department of Treasury's Administrator for
    the Home Affordable Modification Program, our principal
    activities include, implementing the program guidelines and
    policies, preparing the requisite forms, tools and training, to
    instruct mortgage servicers on how to modify mortgages under
    the program; serving as paying agent to calculate subsidies and
    compensation under the program; serving as record keeper for
    executed loan modifications and program administration;
    coordinating with Treasury and other parties to achieve the
    program's goals.
        As Mr. Wheeler has testified, the program is making
    progress and several extensions of the program are in the works
    or underway.
        To make further progress, we're focused on two main
    challenges. First, we're helping servicers to ramp up their
    operations to modify loans under the HAMP program. We are
    providing information and resources that servicers need to
    implement the program through a special website for servicers
    as well as through our own business-to-business website for
    Fannie Mae servicers. We are also communicating all aspects of
    the program to servicers during both the initial rollout and as
    program parameters evolve. And, we are helping servicers
    implement the program and integrate with new systems and
    processes deployed for it. We work closely with the servicers
    every single day. We setup a servicer support call center. We
    have conference calls every week with the leadership of
    participating servicers. And, we provide servicers with ongoing
    training, both web-based and in person.
        Our second main focus is on expanding borrower awareness of
    the program. For example, we helped Treasury develop a website
    and a call center where borrowers can find out whether they're
    eligible for the program and find out more details. This
    website has received more than 36 million page views since its
    launch in March 2009. The call center offers free HUD certified
    counseling if borrowers need in-depth help with their case. The
    call center has received hundreds of thousands of calls since
    it launched in June 2009. We've also produced consumer oriented
    direct mail, flyers and brochures describing the program. Also,
    we're expanding our program tracking system to collect data on
    borrowers who did not obtain a modification to find out how to
    further assist them. And, we're supporting Treasury's efforts
    to train counselors so they can work more effectively with
    borrowers about the program.
        In addition, we're continuing to work with Treasury on a
    multi-city borrower outreach campaign that Mr. Wheeler
    mentioned. The goal is to draw struggling homeowners to events
    where they can meet with counselors and servicers and get the
    help they need. The events we've held so far drew nearly 10,000
    borrowers that were in need of help. In two weeks, we'll be
    right here in Philadelphia as we continue to target the hardest
    hit markets from a foreclosure standpoint.
        On top of our support of Treasury's efforts, Fannie Mae
    also has participated in over 140 foreclosure prevention events
    in roughly 70 markets in the United States with a range of
    public, private, nonprofit and industry partners. As we carry
    out the loan modification program, I also wish to note that
    through August we've entered into 133,000 HAMP trial
    modifications, just on Fannie Mae loans. We've also completed
    nearly 88,000 loan workouts outside the HAMP program to help
    our borrowers avoid foreclosure.
        Finally, I'd like to touch on what we are doing to help
    borrowers refinance their homes. Last month, FHFA, our
    regulator reported that Fannie Mae and Freddie Mac have
    refinanced more than 2.9 million loans this year through July.
    Of those, Fannie Mae has refinanced about 1.7 million loans.
    We've also made progress carrying out the Home Affordable
    Refinance Program to help our borrowers who saw their equity
    disappear as home prices fell. Previously, many of these
    homeowners were unable to refinance. Thanks to this program,
    borrowers with loan-to-value ratios above 80 percent and up to
    125 percent can refinance for a better loan and a better chance
    to keep their homes. To support this program, we built a loan
    lookup tool on Fannie Mae's website where borrowers can
    determine whether we own their loan and whether they can get
    refinancing assistance. We also streamlined the loan process
    and we offered new refinance flexibilities on credit scores,
    mortgage insurance and appraisals to support the Home
    Affordable Refinance Program.
        In closing, the Making Home Affordable Program has provided
    powerful tools to help borrowers modify or refinance their
    mortgages. The main program elements are now in place and we
    are steadily helping more borrowers. Clearly however, we have
    much work to do and progress to make. Fannie Mae sees this as a
    critical responsibility and we'll get the job done.
        [The prepared statement of Mr. Schuppenhauer follows:]
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        [GRAPHIC] [TIFF OMITTED] 53159A.018

        Mr. Neiman. Thank you very much. Mr. Golding.

        STATEMENT OF EDWARD L. GOLDING, SENIOR VICE PRESIDENT,
                   ECONOMICS AND POLICY, FREDDIE MAC

        Mr. Golding. To the members of the Congressional Oversight
    Panel, thank you for inviting me to speak today. I am Ed
    Golding, Senior Vice President of Economics and Policy at
    Freddie Mac and I head Freddie Mac's team that supports the
    President's Making Home Affordable Program. Freddie Mac is
    proud to play a vital role in Making Home Affordable and in
    fact MHA is our number one priority. To help meet the
    President's goal of helping millions of families lower monthly
    costs and avoid foreclosure, Freddie Mac has introduced two new
    initiatives. The first is our Relief Refinance Mortgage
    Program. It assists families who are current on their
    mortgages, but cannot refinance because of declining home
    values. The program enables borrowers to lock in today's low
    rates and refinance loans up to 125 percent of the value of
    their homes. We also continue to support the broader mortgage
    market's refinancing needs. Freddie Mac, so far this year has
    refinanced more than 1.3 million mortgages and on average,
    these refinances reduce the mortgage rates by approximately
    1.25 percent, one and a quarter points. This saves families $4
    billion per year.
        The second initiative is our implementation of Home
    Affordable Modification Program or HAMP. HAMP helps at risk
    borrowers keep their homes by lowering monthly payments to
    affordable levels. HAMP requires borrowers to go through a
    trial period after which the loan will be permanently modified.
    Through mid September, approximately 80,000 of our borrowers
    have entered trial periods. We are working diligently to turn
    these trials into final modifications through direct outreach
    to borrowers. We are also pushing hard to get financially
    stressed families into the trial plans even before they become
    delinquent.
        Freddie Mac also plays a major role in MHA as the
    compliance agent for Treasury. In this role we conduct
    examinations and review servicer compliance with program rules
    and guidelines and report these findings to Treasury.
        Because of confidentiality issues, Freddie Mac has created
    a separate business unit within the company known as MHA-C to
    carry out these duties. MHA-C has over 100 employees and is
    continuing to staff up. MHA-C has developed an extensive and
    robust internal control and compliance system and it has the
    authority to conduct both announced and unannounced audits of
    the servicers. Based on these reviews, we are identifying
    corrective actions and follow-ups with the servicers. We will
    be using a number of fraud detection and compliance techniques
    to identify borrower, servicer, and systematic fraud and to
    improve the quality controls in the servicers.
        Additionally, we are reviewing servicers' implementation of
    the NPV model, which is a key component for determining
    borrower eligibility. We are testing whether they are using the
    model appropriately as the program requires.
        Treasury has also asked MHA-C to develop what is termed the
    ``second look'' process to minimize the likelihood that
    borrowers are incorrectly deemed ineligible. We are ramping up
    ``second look'' efforts significantly to increase the number of
    files reviewed and to help increase the number of HAMP
    modifications. In our reviews we have found variations in how
    servicers communicate with borrowers who are deemed ineligible.
    As a result, Treasury has issued guidelines earlier this month
    to standardize and improve communication between the servicer
    and the borrower. As more borrowers transition to permanent
    modifications and incentive payments are disbursed, we will be
    conducting audits to help ensure that the correct payments are
    made. As we move forward with MHA, we will continue to improve
    features of the compliance program to assist the greatest
    number of borrowers in need at the least cost to taxpayers.
        In conclusion, the employees of Freddie Mac come to work
    everyday highly motivated to make a positive difference for
    millions of families by lowering mortgage costs and helping
    more families keep their homes. We are focused on meeting the
    challenges involved in fulfilling our duties under the Making
    Home Affordable program and helping to ensure its success.
        Thank you for this opportunity to testify. I'm happy to
    answer questions.
        [The prepared statement of Mr. Golding follows:]
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        Mr. Neiman. Thank you very much for all keeping it within
    those timeframes and we'll try to keep that as a habit. My
    first round of questions, I'd like to start with the metrics of
    success because that is what is published every month and I
    think by which the program will be judged. As Mr. Wheeler
    indicated, through August there was a reported 360,000 trial
    modifications started. But, I think we would all agree that the
    success of the program really will be the degree of permanent
    sustainable modifications that are eventually implemented.
    Though the data may not all be in yet--particularly with regard
    to borrowers who have three months of payments--are there any
    estimates or target projections that the Treasury is using to
    assess what percentage of those trial modifications we can
    expect to convert to permanency?
        Mr. Wheeler. Thank you for that question because I think
    that highlights one of the biggest challenges and most
    important priorities for Treasury. As you noted as of the end
    of August and as we discussed 360,000 trial modifications were
    underway. When we update again with this month's report there's
    certainly many more. It's absolutely critical if the borrowers
    are to remain in their home that they complete these trial
    modifications and then ultimately are successful on their
    official modification. In terms of reporting, as you've noted
    right now we don't have any robust reports or any reports that
    we've put out to date on official modifications. The number of
    official modifications is still very low. As you probably know
    we put out a grace period of 60 days. In ramping up the program
    we laid out the program, set forth all the documentation
    standards that borrowers are required to complete and to ensure
    that we have as high a conversion rate to fulltime official
    modifications as possible. We also instituted a 60 day grace
    period while we review all those documentation standards to
    ensure that as many as those as possible are able to convert.
        Mr. Neiman. Any best guesses? Are you operating under any
    operating assumptions as a particular percentage of those trial
    modifications?
        Mr. Wheeler. At this point most of the information is
    anecdotal as we talk to servicers, which I'm sure you have.
    Right now there's certainly risk. If we're not able to close
    out those modifications there's certainly a risk that a high
    portion are not able to complete their trial modifications.
    There will be some who don't make payments and I don't know
    exactly what that number is, but certainly not a trivial
    number. And another segment even if they're making payments,
    they will not complete their documentation for completing the
    modifications.
        Mr. Neiman. And we will hear information and issues around
    the documentation and outreach necessary to complete a
    permanent modification. The monthly reports also show great
    disparities between servicers in trial modification starts.
    Partly, it could be the result of the fact that some trial
    modifications may start with verbal information as opposed to
    those that utilize full documentation. Those requiring full
    documentation will of course have a higher conversion to
    permanent as opposed to those with verbal. Is this a concern
    and is that an issue that you are rethinking to address that
    issue or taking any actions to address that concern?
        Mr. Wheeler. On that topic, I think you've correctly laid
    out the range of possibilities. Certainly, that may not explain
    all of the disparity, but a good portion may be explained on
    how far along they're able to document before borrowers start
    the trial modification. I think our number one priority now is
    that since we've ramped up capacity that it's essential that we
    have a program with both documentation standards, if we learn
    that documenting upfront is much more successful, and then
    allowing flexibility to start a trial modification. Then, I
    think we will rethink our standards and what we encourage
    servicers to do. At this point we have given them that
    flexibility. And just again to be responsive to this question,
    as soon as we have more robust data, we absolutely plan on
    reporting as soon as we're confident in the data. So, we
    understand the critical importance of being flexible on policy
    as we learn, as well as being accountable in reporting.
        Mr. Neiman. We're going to hear from servicers and
    borrowers later this morning. And we expect to hear that
    modifications are being hampered by response time and concerns
    about eligibility issues and servicer capacity. What is the one
    area that you would say that borrowers should stop doing--that
    servicers should stop doing or should be doing better to
    address those issues?
        Mr. Wheeler. I certainly have thoughts. I don't want to use
    up all the opportunity to share perspectives. So, Eric do you
    want to?
        Mr. Schuppenhauer. Yes, thanks Seth. I think from a
    servicer's perspective it's recognized that more needs to be
    done. We're in the ramp up phase. Servicers have been adding
    staff, have been adding personnel, have been adding
    capabilities to handle the shear level of documentation
    required under this program. It has taken time. Part of the
    reason why we instituted the 60 day grace period was to allow
    that further ramp up without dropping people out of trial
    periods. We'll continue to evaluate and that's why we are
    spending every single moment we can to understand the issues
    and continue----
        Mr. Neiman. Well, I'm over my time. Unless either of you
    have a quick response to what a servicer should stop doing.
        Mr. Golding [continuing]. Standardizing the documents and
    reviewing which documents are necessary. Sometimes there are
    variations in how much documentation is taking place from
    servicer to servicer.
        Mr. Atkins. Thank you very much again. I wanted to move
    from maybe the macro-level down to the micro-level a bit. We
    talked about successful modifications. We've talked a little
    bit about that as you're looking at the program. Overall, what
    about on the micro-level, what makes a successful modification
    of an individual loan?
        Mr. Wheeler. I'll take the first crack. For a successful
    modification, I think the only metric that can be used is
    whether the borrower is able to complete the trial modification
    and is able to remain in their home. We designed the program,
    the incentives to servicers and borrowers will continue. The
    borrower incentives reach out for five years. The servicer
    incentives reach out for three years. We think that clearly
    tying those incentives out to that long a period is critical in
    these challenging times that borrowers whose loans are modified
    don't just make it six months or a year, but they're able to
    stay in those homes and help stabilize those communities. So, I
    think that's ultimately the measure of success. In early
    measures it was how quickly we've ramped up. Our next view will
    be how successful we are at converting trial modifications into
    official modifications. But, ultimately when looking back five
    years from now the measure is how successful are we at helping
    these borrowers stay in homes, helping economic stability and
    stabilizing neighborhoods.
        Mr. Atkins. So, staying in their homes and meeting their
    obligations, I take it?
        Mr. Wheeler. And meeting their obligations, correct.
        Mr. Atkins. And then do you have any tracking? I know it's
    still at the early stages, but are there some studies--and I
    guess we'll hear more about that a little bit later--tracking
    the ongoing nature of these modifications whether we will fall
    into a re-default situation and what sort of percentage that
    looks like?
        Mr. Wheeler. Perhaps, briefly Eric could comment as Fannie
    is running the data reporting efforts and then Ed could
    comment, Mr. Golding could comment on the compliance efforts to
    ensure that we have accurate tracking.
        Mr. Schuppenhauer. Mr. Atkins, we are tracking a number of
    data elements as we go through the program. It is too early to
    tell at this point in the program. The first modifications were
    done in May, but we haven't had enough time to assess. However,
    we do plan to provide a tremendous amount of transparency about
    the types of modifications that have been done. Once the
    modifications become permanent, it would be the appropriate
    time to show how deep the modifications are, the payment
    reduction, as well as their sustainability. We are committed to
    providing that information as we go forward.
        Mr. Golding. And we, of course will be reviewing loan
    files. And it's important to point out we're reviewing both
    loan files that have been completed along with those that were
    not completed, that the person was determined ineligible. So,
    we'll have data of Type 1 and Type 2. Both the ones that were
    given the modifications, we'll also be able to look at those
    that were not given modifications.
        Mr. Atkins. As far as geographic distribution of this
    effort, is it more concentrated on the coast versus the
    interior of the country or how does that pan out?
        Mr. Wheeler. At this point, we're starting to get the data
    and trying to verify it. Certainly, expectations are that the
    hardest hit neighborhood; areas will see the most number of
    modifications. Certainly, California, Florida, Nevada, Arizona
    and Ohio, Michigan are especially hard hit areas along with a
    number of others, Pennsylvania included. So, I think we expect
    that we'll see modifications where there is the most need. But
    we are collecting that data and starting to verify that data
    and we will report it in the coming months on a detailed basis,
    determining how successful we are in each area.
        Mr. Atkins. Okay. Well, my time is up so I'll yield the
    floor.
        Mr. Silvers. Let me pickup on some of this a little bit in
    the same vein. Mr. Wheeler, what is Treasury's estimate of the
    current rate at which foreclosures are being initiated on a
    monthly basis?
        Mr. Wheeler. On a monthly basis we read analysis reports,
    we don't have an independent estimate.
        Mr. Silvers. But what's your collective sense of the data
    you received?
        Mr. Wheeler. I think several hundred thousand. Certainly,
    several hundred thousand modifications are being started each
    month.
        Mr. Silvers. No, I don't mean modifications.
        Mr. Wheeler. I'm sorry, foreclosures.
        Mr. Silvers. And you said that the Treasury's target is
    20,000 a week?
        Mr. Wheeler. 20,000 to 25,000 trial modifications.
        Mr. Silvers. So, 100,000 a month roughly?
        Mr. Wheeler. Roughly, 100,000.
        Mr. Silvers. In light of that, don't you think you ought to
    be adjusting the goal? I mean, is the goal adequate? Is the
    goal of roughly a million intakes a year against a run rate of
    3 to 4 million, is that an adequate goal?
        Mr. Wheeler. I think again, this an excellent question. I
    think a response can be made in several parts. First, it is the
    design and who our target population is in terms of borrowers
    and then second, how well we're going against helping those
    borrowers. So, each of those can be evaluated. I think on the
    first point we are trying to help all borrowers and we will see
    millions, as you noted, millions of foreclosure starts over the
    next several years. We are targeting a subset of those
    foreclosure starts or those borrowers that are facing the risk
    of foreclosure. We've targeted borrowers who occupy their own
    home or residence. Borrowers whose loan balance is below
    729,000 in principal balance and then which we've deemed that
    the eligible population.
        Mr. Silvers. Can I stop you there? What I'm really
    interested in is not the question of meeting your targets and I
    think my opening remarks indicated that. I'm not really
    interested in the question of who's been a good boy or girl and
    who is not. I'm interested in whether or not we're going to be
    able with the targets you've got--and I understand that they
    seemed appropriate at the time they were sent--will that be
    sufficient to counteract the downward pressure of the
    foreclosure epidemic on housing markets in our economy?
        Mr. Wheeler. I think not only are we trying to help
    individual families, but we are trying to stabilize
    neighborhoods. The question is, who is our targeted population
    and who are we able to help in that targeted population enough
    to help stabilize neighborhoods? I think a second distinction
    I'd make is between foreclosure starts, which could certainly
    be traumatic for families and borrowers and foreclosure sales,
    where borrowers actually lose their homes. The foreclosure
    sales rate is much lower, but still very, very high. I think we
    are, right now, focused on as quickly as possible getting the
    program up and running, implemented as you know. For our entire
    target population we have a rule that servicers are not allowed
    to start foreclosure proceedings. They cannot go through a
    foreclosure sale until a borrower has been fully evaluated and
    we strongly encourage them not to even initiate foreclosure
    proceedings until a borrower has fully been evaluated. I think
    we are trying to move as quickly as possible to help as many
    borrowers as possible. But I think in terms of neighborhood
    stabilization and as we watch foreclosure sales rates and
    borrowers losing their homes, I think we will need to continue
    to evaluate.
        Mr. Silvers. Mr. Wheeler and other members of the panel, I
    think we had hoped that you might be the last panel rather than
    the first. We understand that you could benefit from the other
    witnesses. We understand that was not possible for scheduling
    reasons. I think that's regrettable. However, I'm going to do
    my best to make up for it by giving you a glimpse of the
    testimony that's going to be heard later on in the day. This is
    from Irwin Trauss, who is the Supervising Attorney for
    Philadelphia Legal Assistance and I'd like you to react to
    these statements. He says, ``The noncompliance with the HAMP
    guidelines is pervasive.'' He's talking about servicers. ``The
    absence of a meaningful method to challenge this noncompliance
    is frustrating to advocates particularly, to housing counselors
    who were led to believe that HAMP would be streamlined and self
    effectuating without the need for an attorney or for
    litigation.'' It's an odd thing for an attorney to say, in a
    way. ``To address this situation, we need a multi-pronged
    approach that is not dependant on the willingness of the
    mortgage servicers to agree to the solution and is not
    dependant on the lenders themselves determining for themselves
    whether they have complied with the requirements of the
    program.'' Can you comment on that assessment?
        Mr. Wheeler. I'll take just twenty seconds and then let Mr.
    Schuppenhauer and Golding cover the balance. We've certainly
    heard those concerns. So, it has been a primary part of our
    focus in recent months. The comments I'd like to make concern
    empowering borrowers and in terms of providing transparency
    around the process. These have been the key areas of feedback
    we've heard from housing counselors and advocates. So, we are
    undertaking a number of initiatives, many of which I outlined
    in my opening comments. I'll let Mr. Schuppenhauer comment in
    detail on that effort. But, equally important is the compliance
    role of Freddie Mac. Specifically, if services are not getting
    the job done, then recommendations can be made by Freddie Mac
    to close that gap or penalties assessed as appropriate. So, Mr.
    Schuppenhauer.
        Mr. Schuppenhauer. Thank you, Mr. Wheeler. There are two
    important points here. First, there is an escalation process
    that we've put in place that serves the borrowers very well.
    First, they can contact the Help Hotline that's been
    established, 888-995-HELP, which is a trusted source for
    information. Second, counselors can also contact our HMP
    Support Center if there are pervasive issues. Finding out about
    these issues and dealing with them is of paramount importance
    from our standpoint so we can get the right training and the
    right tools out there in the servicers' hands. I'll turn it
    over to Mr. Golding to talk more about the compliance.
        Mr. Golding. As I mentioned, we launched ``second look''
    this month. We soon think we'll be able to have a large enough
    sample so that we would be able to detect whether any servicer
    was systematically denying modifications that should have been
    approved.
        Mr. Neiman. I'm going to use my time to follow-up on the
    compliance issues because that really is the bulk of what we
    will be hearing from housing counselors on the next panel.
    Evidence that servicers may not understand the various terms,
    specific noncompliance, or violations of the HAMP guidelines.
    I'd like to understand a little further about, what are the
    compliance process schedules that Freddie Mac really intends to
    employ and also what kind of reporting will there be? And also,
    how transparent will it be both in terms of overall compliance,
    but also servicer by servicer reporting? Also, to the extent
    that you can address, what's the response, are there any
    remedies built in as a result of that noncompliance for
    borrowers or sanctions against those servicers? I threw a lot
    at you, but please do your best.
        Mr. Golding. Yes. Please come back to me if I miss any of
    them. Basically, in terms of the review of servicers I divide
    it into two. One is the on-site visits looking to see what
    their procedures are, lining them up with HAMP. Are they
    basically implementing HAMP as directed by the guidelines?
        Mr. Neiman. What's the staffing for this?
        Mr. Golding. We currently have a hundred employees. We're
    ramping up. Our expectations are to be around 200 and we will
    use contractors as necessary to make sure that we're adequately
    staffed to reach the servicers that we need to reach. It's
    basically first lining up--I think of this as two steps--first
    lining up their procedures with the HAMP requirements and then
    the second test is going back and seeing whether or not they
    improperly implemented the procedure. So, testing against their
    stated procedures, including looking at individual loan files.
    I should also point out; Eric talked about the escalation
    process. We are also in constant contact with Fannie Mae as the
    program administrator listening to what complaints they're
    getting following their data also.
        Mr. Neiman. Once those violations are identified they will
    be recorded, too?
        Mr. Golding. Well, first this goes a little bit into the
    remedies. Clearly, if there's a violation where there should
    have been a modification, the first thing is to stop the
    foreclosure and make sure that the homeowner gets the
    modification. Then there are two areas. Let me go to the
    reports and then I'll get to the remedies and I think I will
    have covered the three prongs. The reports; we are an agent of
    Treasury; the reports will be written up servicer-by-servicer
    and given to Treasury. We are in discussions with Treasury as
    to how much of that information and what the content will be
    made public. That's still to be determined.
        As for the remedies, clearly there's a range of remedies
    that we've talked about. One of them would be to withhold the
    servicer incentive payments that were discussed. Clearly,
    remedies could go as far as terminating someone from the
    program. That's not a remedy you would want to use right away
    because all you're doing is hurting someone on that. So, what
    we really are focused on are correcting and making sure the
    homeowner gets that modification. I think correcting the
    procedures are the most important. If they are not implemented
    properly, getting to the servicer, having them correct it, and
    making sure that they try to maximize the number of eligible
    borrowers that are offered modifications.
        Mr. Neiman. So, if I heard you correctly decisions with
    respect to making these reports public and in which format, as
    well as sanctions are still open issues that have not yet been
    decided?
        Mr. Wheeler. They have not been decided and certainly we
    have a strong commitment to supporting Freddie Mac in their
    role as compliance agent and ensuring that these problems are
    identified and disclosed. Exactly what the content will be has
    not been determined, but appropriate remedial measures will be
    taken.
        Mr. Neiman. In my last 30 seconds, I'm going to ask for a
    one letter response. What I'd like to do is, I think we should
    all be evaluating each other's performance. So, what I'd like
    you to do is give a grade to the servicers in assessing their
    performance, recognizing this maybe the first semester in terms
    of A to F.
        Mr. Wheeler. If ``C'' means average then I think I give
    them a ``C''. They're doing very well, again against program
    goals, but we have a lot more work to do on helping borrowers
    and implementation.
        Mr. Neiman. Any other differences in grading?
        Mr. Schuppenhauer. That is a fair assessment, it's the
    first semester.
        Mr. Golding. Obviously, I've had college aged kids. Seth,
    there's been grade inflations since you've been in college. I
    gave one of my students a B+ and he complained it was the
    lowest grade he had ever gotten and I ruined his life. So, I'm
    with the old scale, I think C is appropriate, but maybe on the
    new scale they don't give C's anymore.
        Mr. Atkins. I want to turn to cost, the flip side of all of
    this because when you were talking about $4 billion of savings
    on the Freddie Mac side for borrowers, obviously the money is
    coming from somewhere. So, I was wondering if you all could
    address what the estimated cost of all this activity is so far
    to taxpayers, in general? Obviously, we're talking to both
    Fannie Mae and Freddie Mac which now are explicitly government
    entities.
        Mr. Wheeler. So, there are at least three different types
    of cost. There's the cost of TARP direct outlays in terms of
    the financial instruments, SPA's that enable the non-agency
    programs to operate. There's the cost associated with lost
    mitigation in order to avoid future losses on Fannie and
    Freddie. And then the program administration cost--what we pay
    Fannie and Freddie. Right now, as you can see on the third one
    we don't have a detailed cost estimate. We are trying
    aggressively to manage cost and Fannie and Freddie certainly
    they are doing their best to keep cost down. But, we also want
    to do the program right. It's a balancing act.
        The first two we've allocated up to 50 billion in cost for
    the program and the process by which that's obligated. Each
    time a servicer signs up, we establish a servicer cap for the
    agreement that we purchase via Fannie Mae on Treasury's behalf.
    So, right now we have a certain amount that's been obligated.
    That doesn't mean all of that will go out the door and then
    ultimately we are able to increase those obligations as needed
    through the end of the year. Very few dollars have gone out the
    door and the program is structured so that we only pay for
    success. No trial modifications, unless they're successful,
    cost the taxpayer a dime. When they are successful, even then
    the incentives are back loaded so servicers can earn much more
    all the way through an official modification. So, we've tried
    to be very thoughtful of shepherding and stewarding taxpayer
    resources. But again, this is a strong, strong priority of the
    Administration to achieve economic stability and stability in
    the housing market. So, certainly we are thoughtful on both
    sides.
        Mr. Atkins. Any further on your individual sides?
        Mr. Golding. I might just add that part of what we're doing
    in general in lowering the frictions in the mortgage market and
    trying to get it easier to get the modification, easier to get
    the refinancing. I think to the extent that if you lower
    frictions, the transaction costs that benefit the system.
        Mr. Schuppenhauer. And, as we stated in our written
    testimony and in the earlier questioning, transparency around
    this is something we hold very dear. It is in the early innings
    or the early semester, however you want to phrase it. Very few
    dollars have gone out the door, but we will be giving a full
    accounting as time progresses. A very full public accounting in
    terms of the cost of running the program, as well as the cost
    involved in the incentives to make these modifications happen
    and be sustainable.
        Mr. Atkins. I have a little bit of time here remaining. I
    want to focus on quality control a little bit and just how you
    all are focusing on that internally, as far as internal audit.
    Do you have a special program that is supervising these
    internally?
        Mr. Wheeler. Are we talking compliance?
        Mr. Atkins. Yes.
        Mr. Wheeler. Mr. Golding, you want to take a first answer
    to that?
        Mr. Golding. Yes. I guess the simple answer is yes, we have
    internal audit. They obviously report independently to the
    Chair of the audit committee. They have reviewed our processes.
    We have two functions. One is we're implementing the
    President's program on our own book and then we have the
    separate unit, MHA compliance. And audit has been involved in
    both of those.
        Mr. Wheeler. Mr. Atkins, I'd point out that the Office of
    Financial Stability within Treasury obviously has its own
    compliance function and dedicated teams that work with Freddie
    Mac. They design plans, establish protocols and ensure that
    these programs are following the directives.
        Mr. Golding. And I'd be remiss not to mention that we also
    have a federal regulator who has also reviewed our
    implementation.
        Mr. Atkins. The Special Inspector General for the TARP, has
    he been involved yet with this, with you all?
        Mr. Wheeler. Certainly, at various points TARP, both Mr.
    Barsharfsky, as well as his team have been consulted. They've
    been very constructive and thoughtful. They've challenged us, I
    think more deeply about how we can do a better job and given us
    very good feedback. As well, I should point out the GAO has
    also given us constructive feedback and we have tried to be
    very open. Many of those are very, very good recommendations
    and we've tried to act on nearly all of those to improve the
    program.
        Mr. Silvers. I want to continue on the vein of testimony we
    haven't heard yet. First, I read you a quote before from Mr.
    Trauss that would appear to allege a fair amount of improper
    conduct by servicers trying to avoid restructuring people's
    loans. One of your testimonies, I believe in Mr. Wheeler's
    testimony, you talked about an interagency group that's met to
    discuss fraud and other misconduct involving law enforcement
    and so forth. I would like Mr. Trauss' testimony reviewed as to
    whether or not it constitutes a legal problem in any respect
    for any servicers. In particular, whether or not any servicers
    are accessing TARP money upon assurances that they're doing
    things, which they are not doing, which strikes me as raising a
    whole series of rather serious legal issues, if that's the
    case.
        Now, I'd like to come to some other testimony, briefly. Two
    important financial issues are covered in later testimony. One
    is what the likely re-default rate is going to be on mortgage
    restructurings and the second is the issue of self-cure. How
    many people, having been served a foreclosure notice for
    getting 60 days behind, how many people have actually been able
    to get out? There are some historical data, I gather, that
    suggest that self-cure rates of 30 percent have been common in
    the past. On the other hand, we're not really in the past and
    there's data that says that self-cure rates now are 6 percent.
    Do any of you have an opinion as to which number is the right
    number to be thinking about here as we look at the economics of
    restructuring?
        Mr. Golding. First of all, it's been a while since I've
    looked at--and I'd be glad to get you a further answer later.
    As I read the study, it is sort of a little bit of apples and
    orange versus the long term rate because the 30 percent cure
    rate--and sometimes you'll hear as high as 50 depending on how
    serious the delinquency is--tends to be the long term. As I
    read the study, they were looking at a shorter time period. So,
    I will have to go back and make sure to see whether they've
    lined up the time periods. But as I read that there was a
    difference. I think your basic point is absolutely right we
    have to wait and see. This is a very different environment than
    historical studies where you saw just a few local regions with
    a downturn.
        Mr. Silvers. You don't disagree that the 6 percent numbers,
    the data we have on the current environment although its short
    term dropped.
        Mr. Golding. I agree that the cure is likely to be lower.
        Mr. Silvers. Lower than historical?
        Mr. Golding. Lower than historical, yes.
        Mr. Silvers. Mr. Wheeler.
        Mr. Wheeler. I'll weigh in with a few thoughts here. You
    started with re-defaults and clearly re-default is essential
    for how we establish metrics for success and how to measure how
    well we're doing, as well as in the NPV model. We've had a
    number of teams in our agency across both federal regulators,
    as well as the enterprises in developing an NPV model. They
    looked at the experience of OCCOTS. They looked at the FDIC
    experience. They looked at other reports on re-defaults to try
    to start a benchmark of what a set of re-default assumptions
    might look given certain borrower characteristics. I think
    importantly though, some of those reports have indicated a very
    high re-default rate and we do expect re-defaults. But, in
    program design we try to minimize those.
        Mr. Silvers. Mr. Wheeler, is it not the case that if you
    design a poor mortgage relief program, one that doesn't grant
    real relief, that re-default rates will be very high. And, if
    you design one that actually is sustainable, re-default rates
    will be lower?
        Mr. Wheeler. Clearly, the better job we do, the lower the
    re-default rates will be.
        Mr. Silvers. And, your program--I believe and I would hope
    you would agree--your program is significantly more helpful to
    borrowers than the voluntary modifications that were going on
    prior to the adoption of your program?
        Mr. Wheeler. There are a number of safe guards that are
    intended to achieve that.
        Mr. Silvers. But, you've got a 31 percent income-to-payment
    number, right?
        Mr. Wheeler. Correct.
        Mr. Silvers. That wasn't common prior to your program, was
    it?
        Mr. Wheeler. Several of what we believe to be improvements
    and it's required that every modification, HAMP modification
    target a 31 percent debt-to-income ratio, payment relative to
    their income, but also a fairly robust documentation to ensure
    that we get that modification at the right level. Again,
    aligning success payments so that servicers and borrowers are
    both incentivized to keep borrowers current. So, we certainly
    expect that our performance will be much better than it
    would've otherwise been. It's still hard to say how much
    better.
        Mr. Silvers. Well, my time has expired. I would like you
    all in writing to respond to the suggestions by a number of our
    witnesses that will succeed you. That is that as part of the
    Federal program we adopt a HEMAP-like program for unemployment,
    that we have compulsory mediation that goes on in Philadelphia
    as a result of the court system and that you look at outreach
    canvassing of the kind that goes on here in Philadelphia to
    actually find people. I would appreciate it in writing. Thank
    you.
        Mr. Neiman. I'd like to thank the panel and before
    dismissing you, I do want to highlight particularly for members
    of the public that though this is our first public setting with
    the three of you, we have been in regular contact certainly
    with the Treasury both at the senior and staff levels. Both of
    you have also offered ongoing commitments to dialogue, both in
    formal and in informal sessions and we certainly will take you
    up on that and look forward to that.
        Again, I thank you for making the trip here and we look
    forward to your continued involvement and response to the
    requests that we made during the panel. Thank you very much.
        Now, we'll do a transit to the next panel of witnesses.
    Thank you very much.
        Our second panel is here to give us the homeowner's, the
    borrower's perspective on foreclosure mitigation and we really
    are privileged for the panel that we have here this morning.
    From your left you have Judge Annette Rizzo, of the
    Philadelphia Court of Common Pleas and the Director of the
    Philadelphia Mortgage Foreclosure Diversion Program; Irwin
    Trauss, Supervising Attorney for the Consumer Housing Unit,
    Philadelphia Legal Assistance; Eileen Fitzgerald, Chief
    Operating Officer for NeighborWorks and Deborah Goldberg,
    Director of the Hurricane Relief Project for the National Fair
    Housing Alliance. And, again I'm going to ask each of you for
    your opening statements. Please, do try to keep them to five
    minutes to leave time for questions and answers. Judge Rizzo.

    STATEMENT OF HONORABLE JUDGE ANNETTE M. RIZZO, COURT OF COMMON
         PLEAS, FIRST JUDICIAL DISTRICT, PHILADELPHIA COUNTY;
          PHILADELPHIA MORTGAGE FORECLOSURE DIVERSION PROGRAM

        Judge Rizzo. Thank you. Of course, Mr. Neiman, Mr. Silvers
    and Superintendent Atkins great to have you here. ``Build it
    and They Will Come'', such were the words that started my
    testimony approximately one year ago when Senators Casey and
    Specter came to Philadelphia to have a Senate Judictiary
    Hearing on our program. In June, when we pasted the one year
    mark on our program, our motto or logon was, ``We Built It and
    They Came''!
        We welcome you, the Oversight Panel to Philadelphia to
    focus on our a very homegrown local effort to stem the flood of
    foreclosures happening throughout this country and particularly
    in our city. I want to just share with you some obviously
    overarching aspects of our program that we have in place, as
    well as some lessons learned in the year and a half we've been
    in progress, as well as some of the challenges we've faced,
    which have really been introduced by the first panel in terms
    of us implementing the provisions that we now have out of
    Washington regarding HAMP.
        Since our inception, we've been the subject of a multitude
    of media events, locally, nationally and even internationally.
    We've been the subject of conferences both in the legal and
    business communities and the blueprint for the implementation
    of programs across this country, either locally or on the state
    level. We've gotten inquires, from as far as Alaska to Maine
    and even to the paradise island of Hawaii.
        In a judicially driven foreclosure state such as
    Pennsylvania, we really view this program as one of effective
    case management--and this is of course from the judiciary
    perspective--to stem the tide of an increased caseload over the
    last few years where equitable remedies are available. It is
    not perfect. It is ever-evolving in circumstances, which change
    as new relief plans avail themselves. However, programs such as
    ours which are locally based, serve as the staging, really and
    the theater in which direct and timely relief can be crafted
    for homeowners on a micro basis.
        We are in extraordinary times. I don't refer to this as the
    crisis--that's the ``C'' word and we don't use that here--but
    we see this really as an era of new financial challenges the
    likes of which we've never faced in our lifetime and it is in
    need of an extraordinary response.
        I really often talk about this in more lofty terms, but in
    problem-solving, we often look to new ways to deal with
    existing problems and I say let's flip that. Let's really look
    at a new situation in an old way. What I kindly refer to as the
    George Bailey Building and Loan Model. That was a system where
    local bankers really knew those customers who came into the
    bank. The highs and their lows of their finances, and based on
    that strong financial relationship and personal relationship,
    banking was conducted. We are returning to community banking.
    We are really infusing in this system a way to try to cut
    through of all of the complexities of all these new programs.
    To really be that human touch, that connection as you'll see in
    our courtroom as you visit us, hopefully this afternoon.
        Our program is really all about the fact-to-face between
    the lender and the borrower. We have created a forum in which
    lenders and borrowers can dialogue in good faith to bring about
    attainable, and, more importantly, sustainable solutions to
    keep borrowers in their homes. The provisions under the HAMP
    program have provided a useful roadmap for participants in our
    program to achieve such results. This is not to say that we
    have not encountered some bumps in the road; bumps which I
    believe are not insurmountable.
        Just briefly, the Program did begin in June of last year
    and we have passed the one and a half year marker. It is really
    based on a prototype I developed in 2004 when a moratorium was
    declared or at least requested by our Sheriff John Green. The
    moratorium was not given--I really call that the ``M'' word--
    but instead we did a prototype of actually stopping the sales,
    looking at these cases on a real micro basis to see if really
    we could do some workouts and we did achieve success in doing
    that.
        In addition, we also convened a group of stakeholders from
    all sides of the issue to come together and meet on a regular
    basis for four years to deal with some of the issues dealing
    with foreclosures in general in our procedures, and that really
    is the genesis of the current program. Because of this Steering
    Committee, we now have lender bar, consumer bar, the City, the
    Sheriff, and also all nonprofit groups involved with the issue
    at the table to try to develop the program. So the Committee is
    the beginning of it all. We dealt with day backward cases where
    we literally did pull cases off of the Sheriff's sale block to
    see if we could actually do workouts and that was the beginning
    of our program. But, now our focus is more on the day forward
    program where all cases filed in Philadelphia after September
    8th of last year are subject to conference, which we schedule
    45 days out. Lenders are required, as they are in any civil
    action to file a civil complaint of foreclosure along with a
    notice to the homeowners that they must immediately call the
    Philly Hotline, the Save Your Home Hotline--which Mr. Trauss of
    course will talk to you in detail about--and as well as to
    attend a conference which we schedule automatically at the
    filing of the complaint. In that window, it's very important
    that then we see a marriage between the courts and non-judicial
    entities, such as community outreach groups, which literally--
    with their staff who are experts in this--go out to canvas
    neighborhoods and actually reach people at their doorstep, ring
    the bell and go, ``You're in foreclosure. Did you call the
    hotline? Did you call the hotline!? You didn't? Here is my cell
    phone, call the hotline.''
        Mr. Neiman. If you could start wrapping up. Thank you.
        Judge Rizzo. With that said, we have had success with about
    6,300 conferences coming through our program to date. We have
    about 1,500 in terms of actual homes we've saved from
    foreclosure. Approximately 3000 according to OHCD are actually
    in queue to be resolved, postponement with purpose and we are
    looking forward to more iterations of this as we move forward
    out of the pilot phase into an established program coming 2010.
        I'm sure I have more to come in terms of reaction to some
    of your questions. Thank you for your time.
        [The prepared statement of Judge Rizzo follows:]
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        Mr. Neiman. Thank you. Mr. Trauss.

       STATEMENT OF IRWIN TRAUSS, SUPERVISING ATTORNEY, CONSUMER
              HOUSING UNIT, PHILADELPHIA LEGAL ASSISTANCE

        Mr. Trauss. To the members of the Panel, I'd like to thank
    you for your invitation to share my perspective on the MHA
    Program and the HAMP Program as they relate to the availability
    of mortgage modifications and folks facing foreclosures in
    Philadelphia.
        I want to start by saying how privileged I am to be on this
    panel with Judge Rizzo. Judge Rizzo really has been the driving
    force behind this Diversion Program and it would not work to
    the extent that it does without her dedication to try to save
    people's homes. This is one of the reasons why I'm worried
    about the replicability of this program because not every
    location is going to have a Judge Rizzo.
        I also want to applaud the efforts of the Treasury in
    creating the Making Home Affordable Program. I think the
    Program, if mandatory, if implemented as designed, could help a
    broad spectrum of people facing foreclosures in a way that
    would have little impact on the Treasury and would have a
    tremendous impact on avoiding foreclosures. However, there are
    areas in which Making Home Affordable as designed could not
    help even if it worked 100 percent and one of those is
    addressing the needs of the unemployed, as Mr. Silvers has
    already indicated. Making Home Affordable was not designed to
    and cannot address the needs of people who can't pay their
    mortgages, fair mortgages, decent mortgages, simply because of
    the--of unemployment crisis. I'm sorry, to use that word, but
    the unprecedented levels of unemployment that we're
    experiencing. To address that, I think some of TARP money,
    which has been recovered from the bank, should be re-purposed
    by this MHA Program. I think an additional program could be
    created along the lines of the HEMAP Program in Pennsylvania,
    which, by the way, over its life has recovered more money than
    it's paid out to homeowners for grants and loans, which could
    be used to enable people to pay arrears and for continued
    assistance to pay mortgage payments or part of mortgage
    payments while people are unemployed.
        I'd also like to comment on a couple of things that were
    said by the previous witnesses. One, about the Hope Now
    Escalation Team, which we just found out about two days ago and
    we called yesterday and they don't know, Hope Now does not know
    that there's a Hope Now Escalation Team, as far as we can tell;
    at least the person we spoke to on the phone. If we run a
    hotline, we need to know these things. We're always trying to
    find out where can you go. We called Hope Now and we said, ``We
    want to talk to somebody in your Escalation Team.'' They had no
    idea what we were talking about and they said that they do not
    do any sort of enforcement and that what they do is help
    consumers and make referrals. So, I don't know if the Treasury
    people are still here or if Fannie Mae is still or Freddie Mac,
    but they need to get the word out to Hope Now that there is an
    Escalation Team.
        Mr. Neiman. We will make sure to convey that to the
    Treasury.
        Mr. Trauss. Also, with respect to the remedies from our
    experience, the servicers would like nothing better than to be
    kicked out of the program, at least some of them. With respect
    to what can you do to a servicer who is not complying, many of
    these servicers seem to be very reluctantly involved in this
    program and really would love for business to go back to normal
    where they hound homeowners and foreclose and take sales to
    Sheriff's sale because that's what they know how to do, they
    can do it, they can do it quickly, they can do it efficiently,
    they can do it cheaply, they make lots of money doing it. So,
    the threat of being bounced from the program, I don't think is
    a significant threat for compliance.
        From my perspective, despite the promise of the program,
    HAMP and MHA have not been particularly helpful in the
    Diversion Program with respect to achieving permanent
    modifications and I think that's reflected in the numbers. It
    has been helpful in the Diversion Program because it's served
    to slowdown the foreclosure process while lenders have been
    acting on HAMP applications. And, it's provided some leverage
    to advocates to press for meaningful resolutions. But, simply
    put, lenders are avoiding making permanent loan modifications
    and as long as homeowners have no leverage to force such
    modifications, they will not happen in great numbers.
    Overwhelmingly, as has been pointed out in my written
    testimony, servicers are not complying with the guidelines and
    they're doing it with impunity. Servicers generally--in my
    limited experience--seek ways to find homeowners ineligible.
    Even when servicers provide trial agreements, they do not
    provide permanent HAMP modifications at the end of them.
    Instead, we have seen them offer arrangements that are less
    favorable than what HAMP requires.
        As I pointed out in my written testimony, there's a slew of
    inadequacies with respect to the enforceability of the program.
    I'd like to make two points which are related to enforceability
    and taking the problems out from the discretion of the
    servicers. One is that in the Housing Economic Recovery Act of
    2008, $30 million was provided for attorneys to help homeowners
    prevent foreclosure. Because of the way the Neighborhood
    Reinvestment Corporation is interpreting that statute, the
    regulations prevent that money from being used by lawyers
    representing people to defend foreclosures, including
    participating in the Diversion Program. That needs to be
    changed.
        Mr. Neiman. I'll give you an opportunity during the
    question and answer. That was my first question, on change. So,
    if you could just wrap up.
        Mr. Trauss. To wrap up, if you want the MHA to work, if you
    want HAMP to work, I think the most important thing is to
    convince the Senate to pass the amendments of the bankruptcy
    code. It would give the bankruptcy court the authority to
    modify mortgages and make them affordable without incentives to
    the homeowners. And if there is a threat, then you're going to
    get lenders doing what we need them to do. Thank you again for
    the invitation.
        [The prepared statement of Mr. Trauss follows:]
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        Mr. Neiman. Thank you. Ms. Fitzgerald.

       STATEMENT OF EILEEN FITZGERALD, CHIEF OPERATING OFFICER,
                         NEIGHBORWORKS AMERICA

        Ms. Fitzgerald. Thank you, Superintendent Neiman, Mr.
    Atkins, Mr. Silvers. Thanks for the opportunity to talk with
    you today about NeighborWorks' Foreclosure Mitigation work and
    feedback we have received on negotiating modifications under
    the Making Home Affordable Program.
        By way of background, NeighborWorks is a congressionally
    chartered nonprofit. We were established in 1978 with a
    statutory board, which includes the Directors of the Federal
    Financial Regulatory Agencies and the Secretary of HUD, or
    their designees. Our mission is to expand affordable housing
    opportunities, working through a network of more than 235
    community based organizations. NeighborWorks was at the
    forefront of identifying the foreclosure crisis, creating the
    NeighborWorks Center for Foreclosure Solutions five years ago.
    In December 2007, NeighborWorks was named the Administrator of
    the $180 million National Foreclosure Mitigation Counseling
    Program, which was created under the 2008 Appropriations Act.
    Two additional Appropriations have been made since then, $180
    million in July 2008 and then an additional $50 million in
    2009.
        To date, 674,000 homeowners have received counseling
    through NFMC is 1,700 grantees and sub-grantees. During this
    foreclosure crisis, working with servicers has posed challenges
    for counselors across the nation. While many issues are being
    addressed, working with servicers has continued to be a
    challenge since the launch of MHA. Before I discuss the
    challenges, I do want to point out that MHA includes a number
    of really successful components, the trial modifications having
    been extended and initiated. The 31 percent front end DTI
    requirement really improves a borrower's chance of success and
    was a critical element. As was the willingness of both
    servicers and Treasury to get input on the modification
    process, and their commitment to addressing issues identified
    and the addition of the MHA, FHA program.
        Back to challenges, NeighborWorks recently held a series of
    seven feedback sessions with NFMC counselors on MHA
    implementation uncovering three major themes: difficulty
    communicating with servicers; servicers not following MHA
    program guidelines; and frustrations with the system as a
    whole. Given the time constraints I'll just address a few of
    these. So, difficulty trying to communicate with servicers.
    Counselors noted that many servicers will not work with them.
    Some servicers still ask for their social security numbers,
    even though servicers have directed staff not to continue this
    practice. Counselors also told us they spend as much as two
    hours on hold trying to reach a servicer and then frequently
    are transferred to numerous phone lines before getting answers
    for their questions. Some servicers have contracted with third
    party collection agencies who call borrowers demanding payments
    and do not address refinance or modification options.
        Challenge two: Servicers are not following MHA program
    guidelines. Counselors gave many examples of servicers not
    helping homeowners who were current on their payments, but who
    knew they would have trouble making payments in the near
    future. Instead, the servicers advised the borrowers to stop
    making payments and call back when they were 30, 60 or even 90
    days delinquent. Counselors also reported that some servicers
    would not disclose terms of a modification or a payment
    breakdown or put their offers in writing. In one case, a
    servicer made three separate offers to a borrower on the
    telephone and then sent the borrower a letter stating she was
    ineligible for a modification.
        Servicers are giving misinformation about the program,
    stating that only Fannie and Freddie loans are eligible or
    misstating the required front and backend ratios. Other
    servicers are offering other workouts before MHA workouts,
    which clearly is not supposed to happen. MHA modifications are
    supposed to be offered first.
        Counselors also gave examples of a number of servicers not
    halting foreclosures while reviewing files for MHA eligibility.
    In one case a servicer moved forward with foreclosure sales
    when clients were being reviewed for MHA. In California there
    is a 90 day moratorium on foreclosure sales. When asked about
    this practice, that particular servicer said they were exempt
    from State and MHA requirements.
        Challenge number 3: Frustrations with the system as a
    whole. Counselors gave many examples of servicers not giving
    explanation of a denial for HAMP. They also noted it takes too
    long to get a response to the modification request, two to
    three months for a trial modification. In some cases counselors
    are required to resubmit the same packages when servicers lose
    documents or take so long to review them that the data and the
    document is outdated.
        Finally, a few thoughts on program improvements. NFMC
    counselors support the creation of a central portal for
    submitting modification requests, such as Hope Now and Treasury
    portals which are currently under development, we hope. They
    also would like uniform procedures and forms. The efforts
    currently underway to establish uniform servicer guidelines
    would assist counselors immensely if that happens. And finally,
    counselors say they could be more effective if they had access
    to servicers' NPV (not present value) models to understand how
    servicers determine MHA eligibility.
        In sum, government entities, counselors, lender servicers
    and investors have to continue to work together to address this
    crisis and improve the effectiveness of the programs.
        [The prepared statement of Ms. Fitzgerald follows:]
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        Mr. Neiman. Thank you. Ms. Goldberg.

       STATEMENT OF DEBORAH GOLDBERG, DIRECTOR, HURRICANE RELIEF
                PROJECT, NATIONAL FAIR HOUSING ALLIANCE

        Ms. Goldberg. Thank you. I want to add my thanks to that of
    my co-panelists here for you all hold this hearing and for
    inviting me here to testify. I'm here on behalf of the National
    Fair Housing Alliance, which is the nation's only national
    organization that's exclusively devoted to eradicating
    discrimination in the housing market. As noted, I run the
    Hurricane Relief Project at NFHA and since 2005 our project has
    been working with homeowners in the Gulf to help them recover
    from the storms of that season. What we have found is that many
    of the homeowners that we have helped would be facing
    foreclosure even if Hurricanes Katrina, Rita, etc, had not
    occurred. The reason for that is that they have the same kinds
    of unaffordable and unsustainable mortgages that so many other
    homeowners around the country have and whose failure has really
    launched this current crisis. We do view it as a crisis at the
    National Fair Housing Alliance and we are very mindful of the
    fact that to a large extent the cause of this crisis have been
    born by people of color and the communities in which they live.
    We have decade worth of research that tells us that these
    borrowers in these communities have been targeted for the kinds
    of loans that are not sustainable, that are high cost, that are
    high risk and they have been on the front lines of this crisis.
    It's been estimated that people of color, over the last couple
    of years have lost hundreds of billions of dollars worth of
    equity as a result of foreclosures. That's going to have a
    profound effect on their families' financial security now and
    into the future and it may take us generations to be able to
    recover from that.
        The foreclosure crisis is unraveling several decades worth
    of concerted efforts by a lot of people to promote community
    revitalization and wealth building in our nation's cities. And
    I want to say, I think it's been pointed out that the misery
    now is being shared by a lot of other people. That loans that
    might not be considered unsustainable and unaffordable are
    still going into foreclosure. That's not the kind of sharing I
    think any of us want to see.
        With a crisis of this proportion we think it's been
    imperative for the government to intervene and we applaud the
    Obama Administration for launching the Making Home Affordable
    Program and HAMP. Several people already talked about some of
    the key elements of that program that have had a really
    positive impact on the market within limits and we want to
    support those things, such as the affordable payments and some
    other things that have been mentioned. And I want to say that
    we've been trying to work since the beginning with Treasury and
    other government officials to try and improve the program's
    operations. I think the early numbers indicate that HAMP is on
    target to meet its goal. But as has already been discussed
    extensively, and as we certainly believe, those goals are too
    modest and the number of foreclosure starts that are projected
    far outweigh the number of people that we expect that the
    program will be helping. Our goal needs to be to stop
    foreclosures, not to meet the goals that have been established
    for HAMP.
        My written testimony describes a number of operational
    problems with HAMP and suggests a bunch of changes that we
    think would strengthen the program, would increase its
    transparency and accountability and extend its reach. My
    testimony also makes a number of proposals for steps outside of
    the context of HAMP that we believe would help us deal with
    this crisis more effectively. Clearly, I don't have time to go
    through those all, so I'm just going to focus on a few. I want
    to point out two that I think have particular fair housing
    implications. One is the data that are collected and made
    public about how servicers are performing under the program. We
    think it's very critical that loan level data, including
    information on the race, gender, and national origin of the
    borrower who is applying for a HAMP modification, be made
    available to the public and that this be done at a geographic
    level that makes it possible for public officials, community
    organizations, individual borrowers, and the public at large to
    understand how the program is working in their communities, to
    be able to identify places where it may not be working
    equitably or effectively and to intervene to change that.
        A second thing is that we think that there needs to be
    better support for borrowers, and particularly for outreach
    into communities where English is not the primary language.
        Third, we think that the NPV model must be made available
    to the public. Borrowers should know what information about
    them and their home (and a particular concern to us is how the
    value of that property is assessed) is put into the model and
    what the model tells them or what comes out of the model about
    whether they succeed or not and by how much they failed. It's
    particularly important to catch folks who just barely failed
    the model's analysis. We also make some suggestions for ways to
    make the model more accurate.
        We believe that it's critical to establish a strong
    effective and neutral appeals process that is borrower
    initiated, where someone outside the system, not in the
    servicer's shop, can review an application to make sure that it
    was handled appropriately. And finally, I would say we think
    it's really important to stop all foreclosure actions. We are
    hearing of far too many borrowers who are either having
    foreclosure initiated or moving along the path towards
    foreclosure even though the final sale may not take place. That
    racks up a lot of costs that undermine the borrower's ability
    to obtain a successful modification.
        And, I will stop there and welcome your questions.
        [The prepared statement of Ms. Goldberg follows:]
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        Mr. Neiman. Thank you. Our intent for this panel was to get
    the borrowers perspective through the views and the eyes of
    advocates and judges like yourselves. You have represented them
    well. The testimony that you all have provided us, in my
    opinion is really the most comprehensive summary of the
    significant issues facing this program and will really serve as
    a terrific basis for us in our work, as well as in our reports
    to the public and interactions with Treasury. My first question
    is designed to expand on your reports as a follow-up to the
    issues that you've identified and give you an opportunity to
    address what is the most important change either in the program
    design of the Making Affordable Home Program or in its
    implementation. If we had to leave here with one critical--and
    I was going to start with three but I know we're pressed for
    time and some of you may overlap--think of the one most
    important change that we really should be looking at
    recommending with respect to the design of the program or the
    way it's being implemented. I'll start with anybody.
        Judge Rizzo. I'm going to start. Again, I hope I can get
    you more when I come a calling and you visit with us because we
    have more to talk about. I obviously have the view from the
    judiciary so I'm sort of level on all sides. Parties come to
    the court by due process equally. I have to say in terms of
    actually on the ground running, I go to my colleagues on this
    panel to discuss it. The bottom line is, I don't know about
    tweaking it anymore other than just reducing it down to fine
    points and getting the word out where it's easy to read
    language and that we have direct, what I would call batphone
    hotlines to really get clarity on points. Through association
    I've had being on panels in Washington, etc. I've had outreach
    to individuals who I personally called to get clarity on.
    That's all well and good, but what we need is something where
    there is actually somewhere to go where we can get a clear,
    quick answer. And that's why programs such as ours, I believe,
    really work because we can react to that change very rapidly on
    this micro basis in a case. But, any delay brings more
    arrearage, more issues with the property, more hopelessness, as
    I refer to it. So, when we wait and wait to get clarity the
    numbers are rising and that's going to factor into the
    numerical formula to actually see if this person can really
    get----
        Mr. Neiman. And getting clarity, you mean from the
    servicer?
        Judge Rizzo. Well, the point is the clarity, I would think
    from the program itself to those who are the stakeholders in
    it. So, if our servicers don't understand what's going on, how
    can they in good faith negotiate to know all the terms when in
    fact from the consumer side there's a conflict--and I speak
    about this in my comments--there's a disconnect of how it's
    interpreted. Well, that takes time to unravel all of that. That
    is time wasted on getting this deal done and now we have more
    arrears to deal with in terms of the formula we apply.
        Mr. Neiman. Thank you. Counselors or Ms. Fitzgerald?
        Ms. Fitzgerald. I'm going to hope Debbie says transparency
    of NPV so then I'll say the other thing I want to say. There is
    a huge process problem here. At the end, there's a lot of good
    core guts to MHA, but if you dropped from the sky and said how
    could you design a more dysfunctional system, you probably
    couldn't get there. The hours and hours and hours of wasted
    time, whether that's a homeowner, a counselor, or a legal
    structure in trying to get resolutions--every servicer using
    different forms for this, everyone having different
    requirements. While MHA is the same, the paper requirement
    documentation is not the same across all of the servicers.
        Mr. Neiman. How important is the web portal? Is Fannie
    talking or are administrators talking about this?
        Ms. Fitzgerald. The web portal is a really good first step
    because at least we can say some servicers require fax, some
    require email, some require mail. So, that solves that problem.
    What it doesn't solve is what gets pushed up into the web
    portal and that requires some kind of standardization of
    documents. In the loan origination process lots of folks use
    Fannie documents. That's become a consistent process. We're
    saying come up with one set of documents for every counselor,
    every borrower. It makes outreach events go a lot better. So,
    that seems very doable. It's not rocket science. Let's just all
    agree to that and make that happen.
        And then, I think the other piece of the process is really
    trained staff and servicers. We are very appreciative that
    servicers have obviously added a lot of staff, which has been
    required and that's a huge effort to get everybody on the same
    page. But, particularly on the collection side, I think a
    homeowner or a counselor might wind up talking to anyone. And
    while the loan modification groups seem to be maybe a little
    bit more informed it's not clear that that has permeated the
    organizations. So, I think really making sure that everyone
    there knows this is the requirements.
        Mr. Neiman. I give you ten seconds.
        Ms. Goldberg. There isn't just one and I think that reduces
    it too far. I want to completely underscore and echo all the
    comments that Eileen made. I would say two things. One is we
    need transparency across the board. Because there are so many
    issues about the program, because it is a complex program, then
    we need to know. We need to know what's going on within the NPV
    model, with the denials for borrowers and the reasons for
    denial that they're given, with the performance data for the
    servicers. The only way that we can really get a handle on
    where the bottlenecks are, where things are falling out is when
    that kind of transparency is provided.
        The other thing I would say is, I think we need to be
    looking ahead more at how the program guidelines must be
    changed to deal with what we can see coming down the road. We
    are in many ways--for all the good things about HAMP--we are
    kicking the can down the road to the end of the program. We
    don't have really permanent modifications. We have five-year
    modifications and who knows what's going to happen at the end
    of that. We have an economic climate where unemployment is at
    an all time high or a record high and expected to stay there
    for quite some time, but yet we're not allowing for people who
    re-default to get a new modification or to get a forbearance or
    whatever might be appropriate. We're kicking them out of the
    program. So, program changes to deal with circumstances like
    these are needed if we really want to get our arms around the
    foreclosure problem and keep it from overwhelming our economy.
        Mr. Neiman. Thank you. My time has expired.
        Mr. Atkins. I wanted to address first a question to Judge
    Rizzo because it sounds like your program is pretty interesting
    and I look forward to seeing it in action this afternoon. How
    are you staffing and supervising this? Have you taken on more
    folks who are able to delegate this? How does this work,
    actually?
        Judge Rizzo. Well, I always feel like it's the Wizard of
    Oz. If you move the curtain you'll see it's one person working
    all of the gadgets. We really are short staffed in terms of the
    court system. We are really in an all stretch assignment,
    myself and all my staff and wonderful court administrators. So,
    from that perspective the court is working within its budgetary
    bounds. That's not to say it's optimistic and that of course an
    infusion of some funding in that regard to expand it wouldn't
    be welcomed. But, more importantly, we are in true partnership
    with these non-judicial entities, these community outreach
    groups who actually go into the neighborhoods, our wonderful
    housing counselors under the office of Housing and Community
    Development and others, our Philadelphia VIP with our volunteer
    lawyers, Judge Pro Tems--who I appoint and they work without
    fee after being trained. We also try to support our wonderful
    CLS and PLA attorneys who actually are staffed up to handle the
    more complex cases. So, from an infrastructure perspective, the
    money side really goes to the City and Mayor Nutter is in
    complete support in terms of his message to call the hotline.
    We're all in sync. It's really a marriage of judiciary with
    non-judicial entities to get this thing going. So, it's always
    in need of more legal services, more community outreach and
    increasing our ready, wonderful staffed up and well trained
    Housing Counselor Network in partnership with the courts. So,
    we work on a shoestring from the court's internal perspective,
    yet we'll of course welcome funding to be with our other
    partners. So, it's a network and I think maybe Mr. Trauss can
    speak to some of that in terms of the funding demands that are
    placed on it. But, we do thank our mayor for trying to really
    support this initiative.
        Mr. Trauss. The court has managed to--without any increase
    in funding--to create a program in which all this happens. Most
    of the funding--as Judge Rizzo said--comes from the City of
    Philadelphia. A lot of it comes from the Office of Housing and
    Community Development and the cost associated with the program,
    which are somewhat invisible. One of the problems with this is
    that this model has been advocated as a cost free model. It's
    all volunteer and in the court side that's true, the Judge Pro
    Tems (JPTs) are volunteers, there are a lot of volunteer
    lawyers. But, in fact there's probably a million dollars,
    actually several million dollars that goes in--probably a total
    of about three million dollars--that goes into the cost of
    funding the hotline, funding about 32 housing counseling
    agencies, funding outreach--although the amount of funding for
    outreach is actually very small for the bang for the buck. So,
    there is a significant cost and that cost is born by the City
    in creating the structure, the infrastructure, which needs to
    be there to have a meaningful program such as the Diversion
    Program. You have to have housing counselors. You have to have
    some way for them to get to the housing counselors where the
    hotline comes in. The hotline, as I indicated in my testimony,
    serves as something of a coordinating function. There's a
    feedback loop that's created with the hotline. So, you need all
    these things. And also, in a lot of cases, you need the one
    thing that's missing which is beyond the volunteer attorneys
    who get involved on a limited basis as lawyers that actually
    step in and represent people when the lenders--and it is not
    unusual--when the lenders overstep their bounds and ask for
    things that they are simply not entitled to.
        Mr. Atkins. What kind of backlog do you have, caseload
    right now?
        Judge Rizzo. Just very quickly. When we're in session we
    hear approximately 150 cases in the morning and 150 in the
    afternoon, that are called in. We have no backlog in a sense in
    that regard. Philadelphia has seen a bump and increase, of
    course, in foreclosure filings. It's leveled off and we
    anticipate another bump. So, we're at about 10,000 filings per
    year just in foreclosures. That has been a 2,000 jump up from
    the years past. But, in terms of backlog, we're in flow and I
    think we estimate about 140 or 150 filings per--well actually
    that's by one firm so I don't know about how many filings per
    month. We're steady in that regard and there is no backlog
    because on initiation they immediately go into the chute and
    they're scheduled for the 45 day conference. I will also add,
    just to the other point almost a million dollars in pro bono
    services have been generated and given to support this program.
    So, that's daunting, but it is actually dedicated volunteers
    serving.
        Mr. Trauss. One of the unadvertised benefits of this
    program is that to the extent that there are resolutions that
    are reached, it takes cases out of the inventory of foreclosure
    cased needed to be tried by the courts.
        Judge Rizzo. I agree.
        Mr. Trauss. So, that is a benefit the court experiences.
    For these to be taken out of the system early, that's a benefit
    to the court and that saves time and money.
        Mr. Neiman. Mr. Silvers.
        Mr. Silvers. Like my fellow panelists, I'm pleased to have
    you all here. Particularly pleased to have Judge Rizzo here and
    it's an honor to be with you and we're certainly coming to
    visit. Let me just make sure I heard the testimony right. Judge
    Rizzo, you said that you've had 6,300 conferences and 1,500
    homes saved roughly from foreclosure?
        Judge Rizzo. Yes, that's right. We can go on and on and
    debate how you describe success because from the Court's
    perspective when it's out of the system, those are the 1,500
    because the case has been closed, we're judicial.
        Mr. Silvers. How many of those 1,500 have come back?
        Judge Rizzo. Well, that's the point and that's where the
    data has been. How do you measure success? So, time has to pass
    in effect for us to go back and revisit that. We're very
    grateful that a national foundation has come calling to really
    breakdown our data and give us that kind of critical
    information.
        Mr. Silvers. So, at this time you don't know?
        Judge Rizzo. No, we do not. We're dinosaurs, we aren't very
    good at collecting our data.
        Mr. Silvers. I would note that the kind of cost figures
    that you're talking about in the prior exchange, $3 million,
    1,500 homes saved is comparable to the servicer fee that is
    being paid under the MHA program per mortgage, which is only a
    small portion of the total cost in the MHA program.
        Moving forward from that, Mr. Trauss, when you say that MHA
    should be mandatory, what do you mean? MHA is mandatory in a
    sense of participating in the program is mandatory for TARP
    recipients, more or less. Tell me what you mean by mandatory.
        Mr. Trauss. Before I answer that question. Can I answer Mr.
    Neiman's questions about the one thing that should be done?
        Mr. Silvers. Please.
        Mr. Trauss. And that is, the Administration needs to get
    behind passing the amendments to the bankruptcy code to allow
    for mandatory modifications. If that happened, if that was
    real, then bankruptcy could modify these loans and make them
    affordable, everything else would fall into line because the
    creditors would want to avoid that and they would be looking to
    what program would have incentives for them to make the changes
    that benefited everybody.
        With respect to mandatory, yes participation if you sign
    the participation agreement then you're supposed to follow the
    rules, but there're no teeth. So, I guess by mandatory I mean
    some system where there are immediate consequences for failing
    to do what you're supposed to do.
        Mr. Silvers. Maybe I'm not following. Laws being
    complicated, maybe I'm not following this, but it seems to me
    that a firm that signs that agreement, receives TARP funds, has
    entered into an arrangement with the Federal Government where
    they're receiving money for making commitments and adhering to
    them and in our law there are real penalties, including
    criminal penalties for intentionally not following such an
    agreement, isn't that right?
        Mr. Trauss. Well, I haven't looked into it. I assume that
    you're correct about that. What I know is that on the ground
    day-to-day--and you maybe right that five years from now they
    will----
        Mr. Silvers. My point is just that maybe we have an
    enforcement problem here and not a lack of penalties problem.
        Mr. Trauss. Well, we have an enforcement problem, but
    that's exactly my point. I mean, it's not a question of
    penalties because penalties down the line do not help the
    hundreds, thousands and millions of people who lose their
    homes. For example, Bank of America--I don't know if they're
    here yet--Bank of America until, I think August in Philadelphia
    at least, were telling our hotline people that they signed the
    SPA, but they were only doing GSE loans. They were not offering
    MHA or HAMP on any non-GSE loans. There were thousands,
    millions possibly, but thousands, tens of thousands perhaps
    hundreds of thousands of people were not being put into the
    system, their houses were going to foreclosure, they were
    losing their homes because Bank of America was blatantly, as
    far as we could tell, violating their obligations. We contacted
    Fannie Mae, we contacted Freddie Mac and the response we got
    from Freddie Mac was, ``Yes, we know.''
        Mr. Silvers. You may have noticed Mr. Trauss, I don't know
    if you were here earlier, but I asked the Treasury Department
    to review your testimony in relation to allegations, plausible
    allegations of misconduct and to report back to our committee
    as to what they found. Can I ask Judge Rizzo--and Mr. Trauss
    you may know the answer--when your outreach people go knock on
    a door, they knock on the door and the person says ``Who is
    it?'' what do they answer?
        Mr. Trauss. Well, I am not directly involved in the
    outreach. I don't know if anybody from the agencies is here.
    So, I can't answer exactly what they say. We do get the calls
    when the outreach workers--we try to coordinate with the
    outreach workers so that we are there even when we're not.
        Mr. Silvers. I assume they don't answer, ``It's your bank
    calling''.
        Mr. Trauss. No.
        Mr. Saber. They identify themselves from the organization
    they're with.
        Mr. Silvers. I hope that the record taker here could hear
    that response from the audience.
        Judge Rizzo. That's Lance Saber from the City.
        Mr. Saber. They identify themselves from the organization
    that they are with. There are different organizations that are
    out there.
        Mr. Silvers. Thank you. My time has expired.
        Mr. Neiman. We're going to try to do one more round. We're
    running a little behind so we'll really try to keep these
    within our time limits. I'd like to go back to my first line of
    questions to the Treasury panel regarding their metrics of
    success because it is currently focused on trial modifications.
    As you all know, some trial modifications are offered and
    started before verification of income based on verbal
    information while other servicers do wait to verify that
    documentation before offering a trial modification. Do you all
    have any views as to whether either of those approaches is
    preferable?
        Mr. Trauss. I have no problem with the oral implementation
    and what I find happening is that anything that reduces the
    excuse that a servicer can give for not immediately saying, yes
    we will consider you, we are stopping foreclosure, start
    sending us money.
        Mr. Neiman. So, the earliest you can to get people into it?
        Mr. Trauss. Right, that is the best thing because it
    doesn't take long. The paperwork that is required by HAMP is
    very minimal. Now, the servicers add to that paperwork, but the
    HAMP paperwork is pretty minimal and that's pretty easy to get
    through. What we find is that the paperwork requirement is used
    as an excuse to frustrate the ability of people to participate.
        Mr. Neiman. How about from the counselor's standpoint.
        Ms. Fitzgerald. I think it would be important to track
    those two numbers differently. So, we don't disagree that you
    should give the borrower the modification as soon as possible,
    but when someone is going back to look at success, I guess I'd
    want to know, was there a difference in those, because I
    wouldn't want folks to say this program didn't work because of
    stated income. So, I think it's really important if we're going
    to do that to track separately.
        Ms. Goldberg. I would also add a second and related but
    important question is the servicers' ability to handle the
    paperwork and review it in the timeframe that's provided by the
    program. In my testimony I cited an example of a client we had
    recently in Mississippi who got one of the early trial
    modifications. She got it based on verbal information provided
    to the servicer. She made her first payment under the trial
    modification in April, the beginning of April, and at that time
    she sent in all of her documentation. Unfortunately, she did it
    without consulting with our counselors so she got some of it
    wrong, like she didn't sign the tax return that she had
    submitted electronically originally to the IRS. Five months
    later, she's made five payments now. That's two payments beyond
    the trial period and the servicer--who was Chase--contacted her
    and said, the paperwork that we have for you is either missing
    or it's invalid and if you can't get it to us within 60 days
    you'll lose your shot at a modification. The servicer had this
    paperwork for nearly five months and couldn't get through it in
    a timely fashion to give the borrower the opportunity to
    correct the errors before the trial period ends.
        Mr. Neiman. So, how big is it? We keep hearing
    documentation, we hear it from the servicers because they're
    saying the individuals are not providing back signed documents.
    We hear it from the counseling agencies that the documents are
    either lost or not being presented in a timely fashion. How big
    on a one to ten scale is documentation?
        Ms. Fitzgerald. Big, but again it's the system: They
    haven't sent any efficient system for collecting and making
    standardized documentation. That is, to me the bigger problem.
        Ms. Goldberg. I think earlier testimony alluded to one of
    the things counselors struggle with, which is that the
    servicers are consistently changing the system that does exist.
    So, you're getting a new phone number, a new fax number, a new
    email address to send stuff to all the time. So, you thought
    you knew how to do it efficiently until you get the new policy
    tomorrow.
        Mr. Neiman. You may have been here when I asked the
    Government Panel to assess the performance of the servicers
    using a score grade of A to F, recognizing that this is a first
    semester as opposed to a year end review. I'd be very
    interested in your assessment of how you would grade servicers
    as a whole.
        Ms. Fitzgerald. My solution, when I heard that question was
    incomplete.
        Mr. Neiman. Incomplete, well that's fair.
        Ms. Goldberg. Well, with some qualifications, I think I
    would have to say a ``D'' and that's for two reasons. One is
    that I don't think we're in the first semester. This problem
    has been going on since long before HAMP, and servicers for
    quite some time have been saying that they've been ramping up
    and they're not there yet. So, I don't think we're in the first
    semester.
        The second thing is, my kid's teacher sends home a little
    rubric to grade them by. It says these are the things we're
    going to judge and effort doesn't count towards your grade.
    It's what you actually have mastered and can demonstrate that
    you mastered and the servicers just are not there yet. They
    maybe making a great effort, but they don't have it mastered.
        Mr. Neiman. Judge Rizzo or Mr. Trauss, care to weigh in?
        Mr. Trauss. I concur.
        Judge Rizzo. I'm going to refrain from any grading, but I
    just want to say with all parties at the table, we really need
    simplification and a way to make it an easy read for everyone.
    That's also going to benefit our borrowers. Sometimes part of
    the delay is caused by them even coming up to get it all
    together. So, I have to, as a Court, balance that. The
    simplification as easy read will help those wonderful housing
    counselors and those who assist in the process, get it in the
    chute so that it can be evaluated for the servicers. Hopefully,
    we're all on the same page.
        Mr. Neiman. Thank you. I'm out of time.
        Mr. Atkins. I want to ask the Panel, especially here in
    Philadelphia, what you all estimate the percentage of
    nonstandard loans might be as part of this problem--and
    subprime and no doc loans--such things as that. What's really
    driving this or do you see this throughout all parts of the
    population?
        Judge Rizzo. I'll just start. What I've seen coming into
    the program consistently is not necessarily the subprime.
    Obviously, it exists to some degree, but that's not where we
    are. We're an old historic city, made up of Philadelphia row
    homes, individuals who've been in their homes for many, many
    years. Our demographics show that our program really assisted
    the elderly and single parents, moms that were looking into
    that and we actually have special protocols to deal with their
    very special needs. It's the situation you read about in law
    school where someone wants to put aluminum siding on your
    house, they get into some loan situation, nonpayment or they
    run, it gets converted into some mortgage document, here we
    have a lien and now here is someone who was in a home 35 years
    and are about to lose it. So, I see some of these anecdotal
    stories, not necessarily of the mass of subprime. We're not the
    city with these people buying these mansions and being
    underwater immediately. That's not what we're seeing. So, this
    consistency of need that I'm seeing coming into the room is not
    that.
        Mr. Trauss. I would just have to disagree with Judge Rizzo
    to some extent.
        Judge Rizzo. And he always does.
        Mr. Trauss. There's a combination and it's been a moving
    target. To some extent in Philadelphia, I think the subprime
    crisis, which was directed much more to low income homeowners,
    kind of peaked in 2004. Subprimes did increase their
    foreclosures to a level of 6,000 a year to close to 9,000 or
    10,000 a year, perhaps last year. At this point we are seeing
    unemployment as a huge component. Unemployment, under
    employment, people lose their jobs, get their jobs back, lose
    their jobs again, get another job. So, there's a shifting face
    in what we're seeing. Now, remember this is a case, this is a
    program which looks at cases in which complaints of
    foreclosures have been filed. And, also in Pennsylvania the
    time to get to foreclosure is somewhat long, relatively on a
    case. So, the foreclosure rush that's resulting from the
    unemployment increase, I don't think has yet hit the Diversion
    Program to the extent that it might have hit other places
    because there's a lag of probably about five months before a
    case actually gets to a complaint of foreclosure. So, we're
    seeing a change in the composition of the majority of what's
    causing the foreclosures and it's moving more towards
    unemployment.
        Ms. Fitzgerald. In general across the country I can't find
    the percentage, but our counselors serve a higher percentage of
    folks with ARM than are in the general population. So, I think
    it's probably 35 to 40 percent. With that said, there are a lot
    of prime loans in this mix and a lot of families in particular.
    We see each time that the percentage increases and problems
    with income increase. I do think that we have a really big
    challenge with the Option ARMS coming, particularly in
    California. They are very concentrated, but they only peak in
    2010 and 2011 and they're going to present a totally different
    problem. I do know that Treasury seems to be aware of that and
    is thinking of different strategies.
        Ms. Goldberg. I can't speak at all to the numbers in
    Philadelphia. I can tell you that in Louisiana it's a different
    situation. We still see a mix of different loan types. And,
    thinking of what I've heard from NFHA's members around the
    country, I think it varies a lot depending on the particular
    local market. In the Midwest it's a little bit different than
    in some of the sand states. I think everybody is seeing
    unemployment as an increasing factor regardless of the loan
    type. But, we're also still seeing the troubling loan types.
        Mr. Trauss. I was going to talk about the troubling loan
    types. Philadelphia has historically had a high percentage of
    its low-income population owning homes and that is what was
    going up for a while. One of the problems is it's not always
    obvious what the loans are. In some of these loans, you look at
    them look like first mortgages, traditional first mortgages.
    But, if you look closely at them, you find out that they are
    predatory or unfair, they have high interest rates, they might
    be part of a 80/20 loan where a person bought a house with a
    first mortgage and there's a second mortgage they don't really
    understand for 20 percent that's a high interest rate mortgage,
    which makes the total package unaffordable. Unlike normal
    loans, escrow is not included so that when they start getting
    the payments there's a shock that happens as rates go up and
    they didn't realize that it wasn't a traditional loan. So, from
    the Court's point of view it would not necessarily be obvious
    that the particular loan involved is the kind that they're
    trying to breakout. There's a lot, of I guess I would call them
    unfair loans that are in there along with traditional, prime,
    credit and also these exotic loans with adjustable rates.
        Mr. Atkins. My time is up. Thank you.
        Mr. Neiman. Mr. Silvers.
        Mr. Silvers. Thank you. When my last time expired I was
    asking about how the outreach is conducted. Is it your view
    that having outreach conducted by parties other than the banks
    has contributed to the success of the program, either Judge
    Rizzo or Mr. Trauss?
        Judge Rizzo. I can tell you, I believe it's been a
    significant benefit to have this type of canvassing done by
    neighborhood groups who are known in the community, who have
    the way to engage and actually have a level of trust infused in
    the dialogue. When they knock and it's not someone serving
    papers, it's someone saying, ``Listen, I know who you are.
    You're in foreclosure. Did you get your papers? Did you look?
    Did you see your date? Did you make the call?'' If there were
    issues with language, we even have abilities through our
    hotline to deal with those types of issues. So, that outreach,
    that one-to-one human touch by people in the community, I think
    that really started it. Actually, some studies were done where
    we took some batches of our cases coming in subject to canvas
    or not and we saw that the failure to appear rate was higher in
    those which were not contacted through canvas. So, we really
    have some experience with this to know that it really does make
    a difference and I think it really is a key in terms of our
    local program.
        Mr. Silvers.  Thank you. I want to shift to a much broader
    question. There is a certain amount of dissatisfaction on this
    panel and I think on the last one, to somewhat of a more
    moderate degree, with the servicers. Any of you, what is
    happening here, is this disorganization? Is this
    intentionality? Do the servicers wish not to participate and if
    so, why?
        Ms. Fitzgerald. I think its really hard to aggregate a
    group of organizations so, we have to be careful at that.
        Mr. Silvers. Well, then let me help you. I mean, I'm just
    interested in volume. If you look at the Treasury reports,
    monthly reports, there's a half dozen, I think that constitutes
    almost all of the volume. I mean, not just the volume of the
    modifications, but the volume of the underlying loans. Lets
    talk about them.
        Ms. Fitzgerald. I do think that the mergers have created
    maybe even unanticipated consequences because they have many
    servicing systems. They have different procedures so I think
    we've certainly seen probably a decline in responsiveness and
    just our ability to solve escalated problems due to the
    consolidation, than maybe we did three years ago about
    awareness of the problem across senior leadership. Obviously,
    there's a challenge in execution.
        Ms. Goldberg. One thing I would just add to that, I can't
    speak to intent but I think we should be mindful of the
    incentives that are built in for servicers to move towards
    foreclosure and how those compare to loss mitigation. Attorneys
    on the Panel can probably speak to this better than I, but the
    feedback that I get from the lawyers that I work with is that
    servicers get paid more, they get paid faster, and they get
    paid more reliably for all the steps that they take to move
    somebody towards foreclosure than they do for loss mitigation.
        Mr. Silvers. Ms. Goldberg, stop right there. Is that still
    true today with the MHA Program being in place?
        Ms. Goldberg. I believe it is.
        Mr. Silvers. What could be done to the MHA Program--and I
    invite any of you to comment--that would alter that fundamental
    calculus? And, not giving in to the deeper questions of the
    fundamental economics of the loan, but this questioning of
    servicing and where those incentives are.
        Mr. Trauss. There's a big problem with the incentives.
    There's four problems mainly, which relate to your question. I
    think there's a problem with culture, which is very hard to
    overcome. There's been a way of doing things since the
    servicers were created, which is now about 10 or 15 years ago
    when it became big. They have a way of doing things, they have
    a mindset that it's our way or the highway and they're not used
    to changing that mindset and that's a big problem and that
    relates to habit. And then there's the incentive problem. To
    answer your question, we can't answer your question, at least I
    can't without further study about the nature of the incentives.
    My suspicion is, my gut is that the amounts of money involved,
    even at this level are not big enough to overcome the cultural
    problems, the habit problems, the disorganization problems, and
    the existing incentives to foreclose.
        Mr. Silvers. Can I stop you there for a second? You and I
    have both stated that we think that restructurings and
    bankruptcy would help here. From what you just said, might
    another different approach be to--and this is more like a
    business approach as opposed to a legal approach--to
    essentially to get subcontractors who do nothing but this that
    specialize in reformatting loans, if we've got profound
    cultural problems with businesses that have been built to do
    something different?
        Mr. Trauss. The problem with using subcontractors, as
    evidenced by the last opinion of Judge Sigmund, the bankruptcy
    judge. One of her last opinions, talks about how theoretically
    it could work depending on how you select the subcontractor.
    Sometimes if you select somebody to do a narrow thing, they
    don't do it with the right understanding.
        Mr. Silvers. Well, they might not have the broader capacity
    that the large banks and their servicing facilities have. Is
    that what you're suggesting?
        Mr. Trauss. Well, what I'm suggesting is the incentive that
    loss mitigation has been farmed out, which it has by these
    servicers already, even before Making Homes Affordable. It has
    not enhanced the process and I don't know why that is. But,
    doing exactly what you do hiring a subcontractor to do
    something repeatedly and efficiently has not made it better,
    it's made things worse.
        Mr. Silvers. Thank you. My time has expired.
        Mr. Neiman. Thank you. I want to thank you all for being
    here this morning, but even more importantly I want to thank
    you for what you do everyday and I look forward to the
    afternoon with Judge Rizzo. I will look forward to staying in
    communication with you. Please keep us advised as you update
    your data and look at us as a resource, as well. Thank you very
    much.
        Let's try to change panels as quickly as possible because
    we are running a little behind.
        The witnesses--and this is our largest panel so we really
    do have to be conscious of the time--the witnesses in our third
    and final panel include three servicers and an economist from
    the Boston Fed. From the left we have Dr. Paul Willen, Senior
    Economist and Policy Advisor, Research Department at the
    Federal Reserve Bank of Boston who has been writing and
    researching this for many years and well known to many of us;
    Allen Jones, Senior Vice President of Default Management with
    Bank of America Home Loans; Larry Litton, President and CEO of
    Litton Loan Servicing and Joe Ohayon, Vice President in
    Community and Client Relations for Wells Fargo. I very much
    appreciate you all being here. I know these are tough
    environments for you all. I know you all travel and have come a
    great distance, but I think this is very important. I am glad
    that if we couldn't get Treasury to sit to the end and listen,
    I think it's even all the more important that we have the
    servicers sitting and hearing those prior panels. So, I look
    forward to your opening statements and to the questions and
    answers. And please do try to limit those to within five
    minutes. Thank you. Dr. Willen.

       STATEMENT OF DR. PAUL WILLEN, SENIOR ECONOMIST AND POLICY
      ADVISOR, RESEARCH DEPARTMENT, FEDERAL RESERVE BANK OF BOSTON

        Dr. Willen. Thank you. Mr. Atkins, Mr. Neiman, Mr. Silvers,
    thank you for your invitation to testify. My name is Paul
    Willen and I am a Senior Economist and Policy Advisor at the
    Federal Reserve Bank of Boston. I come to you today, however,
    as a researcher and as a concerned citizen and not as a
    representative of the Boston Fed, the other reserve banks, or
    of the Board of Governors. Over the last two years we have
    searched for policies to help troubled borrowers avoid
    foreclosure. In New England, we at the Boston Fed have worked
    with banks to setup a lending facility to help subprime
    borrowers refinance into prime mortgages. We brought borrowers
    and servicers together in large scale foreclosure prevention
    events that have served as a national model. In the research
    department we have gathered and analyzed detailed loan level
    data to help us evaluate policies to ameliorate the effects of
    this crisis on our communities and on the country.
        In my remarks today, I would like to focus on three aspects
    of the foreclosure crisis relevant to foreclosure prevention
    plans. The first is that an effective plan must address the
    problems of unemployed borrowers. Long term loan modifications
    that yield affordable payments for borrowers, but also provide
    attractive payment streams to lenders will help some, but they
    cannot help unemployed borrowers. 31 percent of an unemployed
    person's income is often 31 percent of nothing and a payment of
    zero will never be attractive to a lender. This is important
    because our research shows that, contrary to poplar belief,
    unemployment and other life events like illness and divorce,
    much more than problematic mortgages, have been at the heart of
    this crisis all along, even before the collapse of the labor
    market in the fall of 2008. This may seem counter-intuitive.
    Life events could not explain the surge in defaults in 2007
    because there was no underlying surge in unemployment or
    illness that year. But that view reflects a misunderstanding of
    the interaction of house price depreciation and life events in
    causing default. When prices are rising and borrowers have
    positive equity, detrimental life events lead to profitable
    sales. But when prices are falling and borrowers cannot pay off
    their mortgages with the proceeds of a sale those life events
    lead to foreclosure. Thus, we did not need to see a surge in
    life events to get a surge in foreclosures, but rather a fall
    in house prices, which is exactly and unfortunately what we
    saw.
        The second policy-related finding from our research is that
    it is unlikely that a modest financial nudge to servicers will
    lead to millions of modification that will help millions of
    worthy borrowers. In a recent paper we show that in the period
    of 2005 to 2008 lenders gave payment reducing modifications to
    only 3 percent of seriously delinquent borrowers. In addition,
    we show that this did not result from contractual issues
    related to securitization. Lenders were just as reluctant to
    modify loans when they owned them as when they serviced them
    for a securitization trust. We argue that the main reason we
    see so few modifications is that it simply isn't profitable for
    lenders. Modifications benefit lenders because it helps to
    avoid the high cost associated with foreclosure, but re-default
    risk, the possibility the borrower who receives the
    modification will default again, and self-cure risk, the
    possibility that the borrower would have repaid the loan
    without any assistance from the lender can wipe out these
    benefits. The role of self-cure here is key. About a third of
    the borrowers in our large sample are current on their
    mortgages or prepay a year after they become 60 day delinquent.
    An investor would view assistance given to such borrowers as
    wasted money.
        The third result from our research is that policy makers
    need to exercise care in designing foreclosure prevention
    policies to provide the right incentive to borrowers and
    servicers. A program that offers monetary incentives to do as
    many modifications as possible and to minimize the probability
    that modified loans re-default, may not in fact prevent many
    foreclosures. To see why, one must realize that the easiest way
    to ensure that a borrower doesn't re-default is to choose a
    borrower who is unlikely to default in the first place. Thus, a
    servicer could make minor modifications to millions of loans to
    perfectly creditworthy borrowers, collect large sums from the
    government and then collect even more as a borrower continues
    to repay the loan. Taking these research results into account,
    we believe the most effective use of government money for
    foreclosure prevention would involve direct assistance to
    borrowers rather than to servicers. Two recent proposals, one
    offered by a group of Federal Reserve Economists--including
    me--and the other by researchers at the University of Wisconsin
    target the unemployed to help them cover their housing expenses
    until they get their feet back on the ground. Either plan would
    prevent large numbers of foreclosures and would be a good
    starting point for an effective foreclosure relief plan. We
    hope these findings add perhaps unexpected insights to your
    work as policy makers and thank you again for the opportunity
    to appear before you today and of course I'm happy to answer
    any questions.
        [The prepared statement of Dr. Willen follows:]
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        Mr. Neiman. Thank you. Mr. Jones.

      STATEMENT OF ALLEN JONES, SENIOR VICE PRESIDENT FOR DEFAULT
                 MANAGEMENT, BANK OF AMERICA HOME LOANS

        Mr. Jones. Superintendent Neiman, Mr. Silvers, Commissioner
    Atkins, my name is Allen Jones, Bank of America's Default
    Management Executive. I appreciate the opportunity to appear
    before you today and provide you an update on Bank of America's
    efforts to keep our borrowers in their homes. As the country's
    largest mortgage servicer, we are a major partner in the
    Administration's Making Home Affordable Program and we
    understand the responsibilities that are associated with that
    leadership role. We are committed to helping the Administration
    achieve its goal of 500,000 trial modifications by November
    1st. Bank of America is working to transition 125,000 at risk
    loans into trial modifications as part of its goal. As a
    demonstration of our growing momentum, in August we doubled the
    number of trial modifications we started. And based on the most
    recent reporting I can tell you that we now have 81,000
    borrowers in trial modification. Throughout this historic
    downturn Bank of America has extended credit to drive economic
    growth and worked to develop financial solutions for our
    customers. For example, we were one of the first lenders to
    leverage the Administration's MHA refinance program and to date
    have completed refinancing under the program for more than
    74,000 borrowers. Earlier this year, Bank of America began
    reporting on how it continues to lend and invest in the
    communities we serve. In our second quarter report we stated
    that the first half of this year, we've extended more than $394
    billion in total credit, more than $196 billion in first
    mortgages $40 billion in loan moderate income mortgages,
    provided more than $8 billion in small businesses and $149
    billion in commercial non-real estate loans. We will continue
    to provide transparency into our lending and investing efforts
    and we anticipate our next report on third quarter activity
    will show continued leadership.
        We understand the decisions we make have broad implications
    even beyond our customer base. Recently Bank of America
    announced we have created a new position, Consumer Policy
    Executive, a role which will work directly with our core
    consumer lines of business to ensure that view points from key
    external stake holders, including community groups and consumer
    advocates are taken into account as we address policy issues
    critical to our customers. We're leveraging lessons learned
    from this economic crisis as well as input from customers to
    improve and strengthen our products to better meet consumer
    needs. At the center of that work is our commitment to
    simplicity and clarity, developing straight forward products
    that are easy to use and have clear terms. As described in my
    written testimony, my teammates on the credit card and deposit
    teams have also recently announced exciting new innovations.
    The focus of today's hearing is on what we are doing in the
    market to keep Americans in their homes. Before MHA we were one
    of the first lenders to implement a national home retention
    program. Through that program and other efforts Bank of America
    completed loan modifications for approximately 190,000
    customers from January through mid-September of this year.
    That's in addition to more than 230,000 for all of 2008. We are
    now working hard to help ensure MHA's success and have
    established a sizeable infrastructure to handle customer demand
    and program details. Significant resources have been devoted to
    this effort, including expanding our default management
    staffing to more than 11,000, a 55 percent increase since the
    beginning of the year. Our recent results reflect our
    conversion to MHA as the centerpiece of our home retention
    efforts. As a result, we have significantly increased our trial
    modifications from approximately 28,000 in July to more than
    81,000 through mid-September. In that same period, we have also
    increased the number of offers extended under MHA to more than
    141,000. Importantly, as we have ramped up, we've placed on
    hold any foreclosure sale. With that said, we continue to look
    critically at our loan modification process. Three areas of
    particular focus right now are how we can make the process more
    customer friendly and responsive, how we can more efficiently
    handle customer documentation, and how we can keep customers
    better informed throughout the process.
        In addition, there are other challenges we continue to
    confront in our efforts to help as many borrowers as possible
    realize the benefits of MHA. In an effort to improve our
    outreach and close these gaps, we've ramped up activity through
    traditional avenues, such as mail, telephone and we've
    escalated our participation in community and outreach events.
    Since January we've participated in more than 167 community
    outreach events and we'll be here in two weeks in Philadelphia.
    We also have partnered with three national nonprofits. I've
    heard earlier in the panel the importance of a trusted advisor.
    So, we partnered with three national nonprofits in the creation
    of the alliance for stabilizing communities. There are limits
    to what the current programs can achieve. Unemployment and lack
    of interest in maintaining a property, those are issues that we
    have to consider. And as I wrap up my written oral statement,
    I'd like to focus on the fact that we really understand the
    urgency here. The strong focus from the Administration has
    added substantially to our collective efforts to assist
    homeowners. Yet, we understand we have a long way to go in very
    challenging circumstances. We look forward to working with the
    Administration and the Congress and I appreciate the chance to
    be here. Thank you.
        [The prepared statement of Mr. Jones follows:]
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        Mr. Neiman. Mr. Litton.

       STATEMENT OF LARRY LITTON, PRESIDENT AND CEO, LITTON LOAN
                               SERVICING

        Mr. Litton. First of all, I would just like to thank you
    for the opportunity to be here and if many of you can't tell,
    I'm from Texas. I'm the funny sounding guy up here. So, I am
    very excited to have this opportunity to kind of share some
    insights with you. I am responsible for running a mortgage
    portfolio for about 365,000 loans and about $58 billion worth
    of mortgage products. We're in all 50 states. It's
    predominately subprime as well as ALT-A products. At Litton
    we've been a leader in providing workout solutions to
    homeowners for more than 20 years. We have been and we continue
    to be a proponent of thoughtful as well as practical loan
    modifications that provide affordable opportunities to
    struggling homeowners and that is very consistent with our
    obligations to the owners of those loans. We are very proud
    that many of our early strategies served as a basis for many of
    the loss mitigation methods that the industry deploys up to
    this day.
        Over the past twelve months or in the twelve months prior
    to the announcement of the HAMP Program in February, we had
    modified more than 44,000 loans over that twelve month period
    of time. That represented about 30 percent of our service to
    first lien mortgage portfolio that were 60 day or more past
    due. On average, these modifications lowered the homeowner's
    monthly principle and interest payment by about 20 percent
    based off of how those loan modifications had been structured.
        Since March 2009, when the initial HAMP guidelines were
    published up through August 2009 when Litton had signed up for
    HAMP, we had extended trial modifications to approximately
    40,000 additional homeowners. These trial modifications were
    offered in accordance with the broad principles of the HAMP
    guidelines. Since signing onto the program in early August we
    have offered another 10,000 HAMP loan modifications. So, when
    you add all that up you get 44,000 loan modifications that we
    had done in the twelve months leading up to February, 40,000
    trial modifications over that timeframe from February up until
    we signed on the HAMP and then 10,000 additional loans that we
    modified under HAMP, makes up a total of about 25 percent of
    our total portfolio that we service has been modified over the
    past 18 months.
        So having said that, I'm here today to kind of offer a
    couple of suggestions as it relates to the HAMP guidelines.
    HAMP has very successfully created substantial momentum in the
    mortgage servicing industry by providing more loan modification
    opportunities to struggling homeowners. But as with any
    government program, there are some lessons that I think that
    we've learned and there are four suggestions I'd like to make
    here today.
        The first suggestion has to do with debt-to-income ratio.
    So, the 31 percent debt-to-income standard is a very reasonable
    basis to calculate a modified mortgage payment. However, I'm
    going to give you an example. There are homeowners who have
    substantial arrearage that has built up and that arrearage was
    built up because a borrower may have had a prior unemployment
    situation or other life event that may have created an instance
    where the borrower got past due. Today they may have a front
    end debt-to-income ratio that's less than 31 percent and then
    after capitalizing arrearage or forbearing the arrearage, you
    may create a situation where the DTI payment may be greater
    than 31 percent, but those borrowers would be excluded from
    HAMP. So, expanding HAMP to include situations where borrowers
    have less than 31 percent debt-to-income ratios in those
    instances where arrearage have been created, might be a
    worthwhile way for policy makers to consider expanding the
    program to be more effective. From an income documentation
    prospective, it's completely understandable for a program that
    relies on taxpayer funds to require lots of income
    documentation. However, I would say that there are delays that
    are created by requiring some of the documentation that HAMP
    requires. The earlier panel made reference that in many
    instances there is not a lot of documentation. I would agree
    with that. However, I would state that it is a problem in many
    instances getting that information from some of these
    consumers. So, I think a way to streamline that might make the
    program more effective, as well.
        As it relates to the NPV model that the GSEs rolled out,
    the NPV model was based on state averages of home price
    depreciation and is not often granular enough to take into
    account home price appreciation or declines within specific
    communities and neighborhoods. This will cause some loans to
    fail or some loans to pass the NPV test when they potentially
    should not. Our experience has found that more loans fail than
    what should actually fail in this situation because it's not
    granular enough. So, being a little bit more specific as it
    relates to the NPV models might also be something for
    policymakers to consider, as well.
        The last point I'll make has to do with option ARMS. Your
    prior panelists made reference to a point--I think they are
    exactly on point--that there's a coming wave as it relates to
    option ARMS loans and many of those loans will not fit within
    this program. So, policymakers considering ways to expand the
    program to make it more focused on option ARMS product might be
    something very worthwhile, as well. Thank you very much, I'm
    happy to answer any questions that you might have.
        [The prepared statement of Mr. Litton follows:]
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        Mr. Neiman. Mr. Ohayon.

       STATEMENT OF JOE OHAYON, VICE PRESIDENT FOR COMMUNITY AND
              CLIENT RELATIONS, WELLS FARGO HOME MORTGAGE

        Mr. Ohayon. Thank you. Members of the Congressional
    Oversight Panel, I'm Joe Ohayon, Senior Vice President of
    Community and Client Relations of Wells Fargo Home Mortgage
    Servicing. Thank you for the opportunity to speak before the
    Oversight Panel today. We take seriously the responsibility
    that comes with Treasury's investment in Wells Fargo through
    the Capital Purchase Program and we are committed to do
    everything we can to assist struggling homeowners as part of
    that responsibility. Wells Fargo may be a big corporation, but
    we operate within the conscience of a company determined to do
    what is right for our customers, our investors and all American
    taxpayers.
        Of course, this year much has changed and evolved in our
    economy and in our efforts to assist struggling borrowers.
    First, we worked hard to implement the very detailed and
    evolving Home Affordable Modification Programs, which include
    different guidelines and requirements for Fannie, Freddie, non-
    GSE, and most recently FHA borrowers.
        To handle the greater than 200 percent increase in
    borrowers requesting assistance--including the 35 to 40 percent
    who are current on their mortgages--we have hired and trained
    an additional 4,600 U.S.-based home retention staff for a total
    of more than 12,000. As of September 3rd, we have qualified
    more than 304,000 customers for trial and completed
    modifications this year alone. As it pertains specifically to
    HAMP, we have offered 78,000 customers a trial modification and
    we have received at least the first payment for about 44,000 of
    those trial modifications.
        We have further enhanced our support systems, our training
    and our retraining to aide our service representatives in
    appropriately communicating modification programs and
    guidelines as they continue to change and expand to help more
    borrowers.
        In addition, we have improved the ways to obtain from
    borrowers the extensive documentation the government requires
    for its programs and we continue to work to ensure all
    documents are processed in a timely manner. And most
    importantly, in this dynamic environment we continue to conduct
    final review to ensure every option is exhausted before a
    property moves to foreclosure sale because when a foreclosure
    occurs everyone loses.
        Despite widespread decreases in home values, more than 92
    percent of our customers in our entire servicing portfolio
    remain current on their mortgage payments. This is the direct
    result of our customers' efforts and our commitment to
    responsibly servicing all of the loans in our portfolio,
    including those formerly owned by Wachovia and loans we
    service, but did not originate.
        In addition, our delinquency and foreclosure rates continue
    to be significantly lower than the industry average and the
    lowest of the nation's largest mortgage lenders. And for all of
    2008 and 2009 year-to-date, less than 2 percent of the owner-
    occupied properties in our servicing portfolio have actually
    proceeded to foreclosure sales. These results would not have
    been achievable without the continued collaborative public and
    private sector efforts to inform customers of their options and
    the introduction of the new Home Affordable Modification
    Programs.
        While we're proud to be part of the HAMP development, it's
    important to acknowledge that HAMP will not help all borrowers
    in need of payment relief. For the customers who are ineligible
    for HAMP and where we can reach affordability, we offer
    customized solutions.
        You've also asked for our feedback on Philadelphia's
    Residential Mortgage Foreclosure Diversion Pilot Program and
    I'm happy to provide you with a few comments based on our
    experience. In general, we found that intervention programs
    like Philadelphia's can be helpful when they allow a servicer
    to engage in the discussion of alternatives to foreclosure with
    borrowers that have not yet had such discussions with us.
    Anytime we have the opportunity to work with a borrower that we
    have been unable to reach or to have a deeper discussion with a
    borrower, we open up the possibility that we can find a way to
    avoid a foreclosure that otherwise would have occurred.
        From our perspective, Philadelphia's Diversion Program is
    one of the most streamlined and cost effective programs of this
    kind and provides intervention in a way that can be helpful to
    the borrower without being overly burdensome on the servicer.
    Conferences are scheduled in a relatively short time, servicers
    can participate by telephone, key steps in the foreclosure
    process can proceed in parallel with the conciliation process
    and the standards for evaluating whether or not the foreclosure
    can be avoided are relatively clear. The city also has done a
    good job of adapting its program and making adjustments as
    lessons are learned.
        In terms of ways to improve the program, we find that some
    homeowners for whom a conference is scheduled fail to attend
    the conference and a limited number of borrowers come out of a
    conciliation conference with the potential for a workout
    solution. If the city could provide some means of limiting the
    conference to only those borrowers who have not been fully
    evaluated for a possible alternative to foreclosure and those
    who are actively engaged in the process, the resources required
    on behalf of the city and servicers could be significantly
    reduced and the customers who can truly benefit could still be
    served. As servicers, we sit between the customer and investors
    and we are responsible for doing modifications the right way.
    We also have the responsibility to execute these programs well
    for all American taxpayers by ensuring that customers given
    modifications are truly facing hardships and that they can
    afford and sustain their home payments after a modification is
    completed.
        Thank you and I look forward to your questions.
        [The prepared statement of Mr. Ohayon follows:]
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        Mr. Neiman. I started off my questioning of the Treasury
    and GSEs by pointing to the success metrics that the Treasury
    has been using to evaluate the success of the program and also
    to establish performance among the various servicers. As you
    all know, there is great disparity between performance, with
    some down at zero percent with others up in the high double
    digits. Recognizing that some of these disparities maybe due to
    the timing when some servicers entered the program or based on
    the type of trial modification. Is it based on verbal
    information or have they waited for full documentation? I'd
    like your views on what is the best way to analyze this
    information and should there be changes in how we implement or
    look at trial modifications? I'm open up to whomever. Larry,
    you seem to be nodding.
        Mr. Litton. As it relates to whether we start with the
    verbal or a written, I 100 percent concur with the statement
    that was made earlier that the most important thing is to get
    moving whenever we have a customer on the telephone. So, we're
    of the view that proceeding with verbal information is critical
    so that we can stop the foreclosure and so that we can begin
    the process of the loan modification. So, we're very supportive
    of that. However, that does bring up challenges later in terms
    of making sure that you follow-up with getting the income
    documentation that we have to have. But I do think that that's
    one area that could be driving substantial disparity, the fact
    that some may be waiting for the written information to come in
    before they start the trial.
        Mr. Ohayon. I would agree with Larry. We've done it both
    ways at Wells Fargo. A program has evolved over time now since
    February and certainly has gotten better and more refined as
    the months have gone on. Things like the roll out of FHA in
    late July--which went live in the middle of August--certainly
    help a servicer like Wells Fargo because we have a strong
    concentration of FHA loans. But we started with fully
    underwriting, requiring proof of income and documentation
    upfront. It has since moved to a verbal approach. It provides
    immediate relief to the customer because we can grant a trial
    payment and reduce payments immediately. But, as Larry points
    out, certainly it provides the opportunity that once we get
    supporting documentation it may exceed that level or beyond the
    level of income that we actually got from the customer.
        Mr. Neiman. Thank you. You know, I'm also interested to the
    extent that the program has restricted your ability to offer
    loan modifications outside of the program. And, I would
    particularly like to start off with Mr. Litton because he, to
    my understanding, was one of the few servicers that had been
    utilizing principle reduction as a favored loan modification
    and the fact that HAMP does not prohibit it, but it doesn't
    require it--permits it, but doesn't require it. Do you have a
    view on whether this is making it more difficult for principle
    reduction and is that something that the program should be
    reconsidering?
        Mr. Litton. You know, I testified back in November in front
    of Congress on this issue. We adopted a policy in November
    2008, ran that policy up through March 2009 that did support a
    principal reduction strategy. That was based off the fact that
    our analysis at that time concluded that using principal
    reductions is a way to reduce payments, create lower loan-to-
    value ratios, provide more exit opportunities for consumers
    later on down the road and might provide more motivation.
    Obviously, under the HAMP program, constructed as the way it
    is, it is an option. However, the industry standard now--most
    servicers are not using the principal reduction component of
    that, they're using the principal forbearance part of that. The
    ASF as well as several other entities have, I think been
    comfortable with that and you'll see most servicers executing
    it within those broad parameters.
        Mr. Neiman. Any of the bank servicers care to?
        Mr. Jones. Sure, I'd be happy to address that. Bank of
    America's perspective is that in certain circumstances
    principal reduction makes sense. I mentioned earlier that we've
    done 190,000 modifications outside of MHA this year. Under MHA
    the centerpiece of our activity today--81,000 loans in trial--
    what we have found, it's not really the exit strategy as much
    as keeping our borrowers in their homes. And we've found that
    rate reductions, we've found that forbearance, we've found that
    extension of term, those are the ways that we can keep
    borrowers in their homes and that's what is important in
    communities.
        Mr. Neiman. So, even though the affordability may be the
    same, I think it's your rationale that the motivation to
    sustain that and when we look at re-default rates down the road
    that may have a difference?
        Mr. Litton. Absolutely. That's what led us down that road.
    When I said exit, what I meant there is that the borrower then
    has an opportunity if he needs to sell the house in two years
    or three years or if he gets transferred, you're not carrying a
    balance that is unsustainable at that point in time. That's
    what led to that conclusion back at that point in time.
        Mr. Neiman. Appreciate that. Mr. Atkins.
        Mr. Atkins. I wanted to refocus on the re-default aspect
    here, especially with unemployment statistics as they are. OCC
    and OTS had a study that they also released earlier this year,
    which pretty much--which we were talking about, Dr. Willen. So,
    I was wondering is this principal reduction really the only
    type of ultimate tool or what are the other types of things
    that make sense in this context?
        Dr. Willen. On the issue of principle reduction it's
    exactly right. What I said before is the problem with negative
    equity is basically the borrowers can't respond to life events
    and I think--I don't know if it's quite the right way to put
    it--it's sort of like they don't have an immune system. So,
    there are shocks that happen to people with positive equity
    that never show up in the data as foreclosures. They just show
    up as sales. So, for example in Massachusetts in 2001 we had a
    big increase in unemployment. We had a recession. The number of
    delinquent borrowers went up, doubled. But, then you actually
    saw a reduction in the number of foreclosures. It was a record
    low for foreclosures. So, when people have positive equity
    there are lots of different ways they can refinance, they can
    sell, they can get out of the transaction. So, in the long run
    I think one of the things we've been emphasizing is that it's
    not just the re-defaults, it's the fact that there are a lot of
    borrowers out there who are okay right now, who are fine right
    now, and who may be fine a year from now. But, until they build
    up some equity in their house, those are at-risk homeowners.
    So, in that sense dealing with the principle reduction has its
    virtues and the problem is most homeowners with negative equity
    continue making their mortgage payments. So, you run this risk
    when you start reducing principal that you're inviting all
    kinds of people who can make their mortgage payments, and who
    do make their mortgage payments, to look for relief.
        Mr. Atkins. Right and I guess basically, that's for the
    rest of you. I think that once we go down that road, rather it
    be cram down or whatever, we're basically changing the whole
    risk or ratio of this entire industry and I was wondering what
    you might--how you would expect that to affect interest rates
    for everybody in the whole way that industrialists look at this
    industry?
        Mr. Jones. I certainly will agree with much of what Dr.
    Willen said and would cite as an example, negative equity
    around payment option ARMS. That certainly is an area product
    based whereon principal reduction makes a lot of sense. A
    program like that existed a couple of years ago, but we
    eliminated that program. So, payment option ARMS prospectively,
    we will not offer. As it relates to improvements to MHA around
    these same types of issues--keeping borrowers in their homes--
    we've made suggestions and have had a good dialogue around what
    can we do for those who are temporarily unemployed and how can
    we help borrowers--our borrowers--stay in their homes as they
    go through a gap in unemployment. But, we predict that they
    will gain reemployment. So, there are opportunities there for
    us to keep working with our borrowers and keep them in homes.
        Mr. Ohayon. Regarding the principal curtailments we do at
    Wells Fargo, depending on a product type that pay option ARMS,
    certainly it may make sense to actually utilize curtailment,
    just to get the dynamics of the product itself. But, when
    you're looking at a background of what we're trying to
    accomplish and one is addressing a hardship a customer is
    facing and trying to create affordability. To get to
    affordability, you can get there quicker and deeper through
    rate reduction, term extension, and really the top of the
    waterfall for HAMP and that's really the approach we've been
    taking given the government's plan.
        Mr. Atkins. Quickly, part of the bubble produced a lot of
    questions regarding documentation and now we see that come up
    in some courts as ownership issues, who owns the mortgage. Have
    you all experienced that as a problem?
        Mr. Litton. No. From a practical prospective, day-to-day,
    I'm not saying that there's never documentation issues, but in
    terms of being able to demonstrate who the owner of the
    mortgage is, that has not been an issue.
        Mr. Ohayon. Yes, I would agree.
        Mr. Silvers. I would agree, as well. Like my fellow
    panelists, I want to express my appreciation to all of you for
    coming and being with us today. A person might wonder whether
    this would be a pleasant experience and I want to commend you
    for being here. Dr. Willen, his testimony stated that we really
    needed to do something directly to deal with the consequences
    of unemployment and I think it's been the theme today that
    that's not in the design of the original MHA Program. Do the
    rest of you agree that that would be a good idea for the
    Administration to address that problem directly in the MHA?
        Mr. Ohayon. We do at Wells Fargo. We've had a number of
    conversations with the Administration around a short-term
    solution to specifically address unemployment and even under
    employment when you can't create affordability based on that
    underemployment status, so we do.
        Mr. Silvers. Is Pennsylvania a good model for how to do
    this? The long-standing Pennsylvania program has been in effect
    for about 20 years.
        Mr. Litton. With regards to the ACT 6 and the ACT 91?
        Mr. Silvers. I forgot the acronym. Is that program a good
    model for the Treasury to consider in your view?
        Dr. Jones. I think we will continue to look for innovations
    and that is one that ought to be considered. I go back to the
    earlier comments, Mr. Silvers, that we need to continue to
    refine the program and work very strongly with the
    Administration to keep our borrowers in their homes.
        Mr. Silvers. Dr. Willen, you said a moment ago that in
    relation to principal reductions that there was a problem of--
    everyone would like a principal reduction, not everyone needs
    one. Why is that not kind of a slam dunk argument given the
    fact that principal reductions--and I think everyone has said
    that there are circumstances in which principal reductions are
    the only solution? Principal reductions in commerce are
    typical. Meaning, in other lending relations principal
    reductions happen all the time when people get in trouble in
    various ways. Dr. Willen, is it the point that there needs to
    be some sort of activity here, not just a slam dunk argument
    for putting this in the bankruptcy courts?
        Dr. Willen. You know, the bankruptcy claims I don't know.
    That may well be. Let me say, I'm no expert on this, but I do
    question how appealing it will be for the borrower.
        Mr. Silvers. It's not an appealing place, is it?
        Dr. Willen. No, it doesn't seem at this point that telling
    a borrower, I got good news for you, you can file for
    bankruptcy, that that's the kind of solution that we're looking
    for right now.
        Mr. Silvers. But isn't that a good thing in a way if we
    want people who really want to stay in their homes to pay a
    price?
        Dr. Willen. Let me say, I think another alternative to this
    is an enhanced short sale program because in a sense a short
    sale is a principal reduction. So, I would guess in this sense
    I would direct questions to Larry in a way about what's
    happening.
        Mr. Silvers. But that doesn't keep anybody in their homes,
    a short sale program.
        Dr. Willen. It doesn't keep anyone in their homes, but it's
    an exit strategy for borrowers. And I think in some cases what
    borrowers are looking for is closure. And I think one thing to
    keep in mind, one of the problems borrowers face is that
    they're unemployed and they have a job opportunity and they
    need to move.
        Mr. Silvers. That's a different issue.
        Mr. Litton. But these are the kinds of problems. When you
    talk to people these are the kinds of problems they're facing.
        Mr. Silvers. I think that this seems to me to be the
    argument for having this option available. It's that you have--
    as I think your testimony quite compellingly states--certain
    types of life problems, such as needing to move for a job.
    Being underwater is very problematic and this helps. If you
    don't want to move, short sales aren't a big help and short
    sales put a lot of inventory on the market and that may not be
    what we want to do right now. But in any case, I just wanted to
    get that clear on the bankruptcy court issue. Mr. Litton, we
    heard from Dr. Willen that his financial model is driven, I
    think, by two numbers, re-default rates and self-cure rates
    suggest that it may not be profitable for people in your
    position to restructure loans. You've just finished telling us
    that even before MHA you had restructured something, I think
    something like 80,000 loans in total when you add all the
    numbers up?
        Mr. Litton. Yes, sir.
        Mr. Silvers. You seem like a bottom line focused type of
    person. Explain to me why Dr. Willen is wrong?
        Mr. Litton. Well, I wouldn't say it that way, that he's
    wrong. The way I would phrase it is this, at Litton Loan
    Servicing, and taking into account our prior ownership, we were
    aligned with the holder of the credit risk. So, as loans
    defaulted and as losses mounted it was in our best interest for
    those guys, in order to modify the loans and keep in their
    homes because the losses would be lower, that's number one.
        The number two, what I would argue is that it's clearly
    stated in the pooling and servicing agreements that we are all
    kind of responsible for servicing loans in that that we have a
    contractual responsibility to represent investors and make
    losses as low as we can make them. And, loan modification, in
    our judgment, has been one of the ways to fulfill those
    contractual responsibilities. And then there are economic
    incentives way above and beyond what the HAMP program calls
    for. So, for example, advances. Anytime a borrower doesn't pay
    me, our company has to write the check and fund those advances
    to the investors. And in this kind of climate those advances
    add up to a lot of money at the end of the day. So, all of
    those things combined is what I would argue is what led us down
    this road.
        Mr. Neiman. During the prior panel a statement was made
    that the incentives under the HAMP program were not enough to
    overcome the culture, systems, and other incentives that are
    provided to servicers. Do you agree with that statement and
    would you like to comment on it?
        Mr. Ohayon. As Larry mentioned we've been doing loan
    modifications for a long time, even pre-HAMP, because of
    judiciary responsibilities to our investors. We also do it
    because we think it's the right thing to do for our customers.
    So, regardless of the incentives structure, we think it's the
    right thing to do. Certainly, I want to get back to Larry's
    point around the cost of foreclosure. The advances made are
    significant. The reimbursement from investors doesn't happen
    until a foreclosure action is taken or the loan reinstates
    through modifications. So, actually we were recovering monies
    sooner by doing a modification. So, you would think the
    incentive structure is probably a reverse of that.
        Mr. Ohayon. We don't have incentive to foreclose.
        Mr. Neiman. Mr. Jones.
        Mr. Jones. I agree with much of the remarks.
        Mr. Neiman. Okay. Mr. Litton, do you?
        Mr. Litton. Yes, sir.
        Mr. Neiman. Do you think that was overstated?
        Mr. Litton. Well, what I would say is the following. Most
    servicers, well some servicers--and the reason that that
    argument comes up is that some servicers have historically
    owned REO outsourcing firms or foreclosure trustee firms,
    things like that. And most of us don't. so, it is not a profit
    center I can tell you in any way, shape or form in our company
    and for most of the guys in the industry today.
        Mr. Neiman. I'd also like to understand--and I've asked the
    other panelists--about recommendations for changes in the
    program design or in the implementation that would improve the
    process under which you comply with this program. Are there any
    that you would like to highlight for our panel in our work?
        Mr. Jones. What I'd like to offer is number one, a thought
    around the value of uniformity for all of us here. MHA offers
    that uniformity. As far as, improvements we certainly have----
        Mr. Neiman. Meaning web portal documentation?
        Mr. Jones. We're a strong supporter of that and have been
    engaged in dialogues around that. That is very helpful.
    Documentation is one thing, but again there is a segment of
    borrowers that MHA is not able to help today and so our efforts
    in discussing the unemployment issue is something that we'll
    see definite value in and update. But, I'd like to look at MHA
    as one part of Bank of America's overall approach to keeping
    borrowers in their homes. We support the Administration going
    forward and want to continue the dialogue that has been very,
    very positive. We'll see things coming around second liens,
    around short sales, around deeds and--as much as we can make
    those uniform, the better for the industry, the better for the
    borrower.
        Mr. Neiman. Thank you. Mr. Litton.
        Mr. Litton. Yes, sir. I had one other thing that wasn't in
    my written testimony, which is I think more clarity around
    imminent default would be a great, great thing. We have lots of
    customers that are current that call us that need a loan
    modification and you're right it is absolutely silly to wait
    for the loan to go delinquent. I think HAMP does allow you to
    modify, but you have to have an imminent default standard.
    Having a little bit more clarity around that, I think would
    make servicers more comfortable doing more loan modifications.
        Mr. Neiman. Good practical suggestion. With my last sixty
    seconds I also asked the other panelists to grade the
    servicers' performance recognizing where we may be in this
    school year using a grade of A to F. Since I am used to self-
    grading and I often feel that we are probably toughest on
    ourselves in grading performance, I'd be interested if you
    would grade--you don't have to necessarily grade your own firm,
    grade each other or grade the man next to you. No, grade all
    the servicers as to an A to F, I'd be curious.
        Mr. Jones. Certainly. Thank you for the question. I think
    this has been an evolutionary process to get to where we are
    today. In the beginning of the year to summer, I think we were
    really challenged. I think all of the servicers would say, ``We
    could do better. We could do more.'' Today where we are, I
    would give Bank of America a B.
        Mr. Neiman. Mr. Litton.
        Mr. Litton. I would comment on more from an industry
    prospective. I deal with a lot of people whether it be up from
    the regulatory side, the advocacy side, or customers, etc., I
    would say our industry given an honest self-grade right now, is
    at a C versus where we need to be.
        Mr. Neiman. Mr. Ohayon.
        Mr. Ohayon. I'll look at it from an industry prospective as
    well and including the Administration and everyone else putting
    this together. It's come a long way in six months.
        Mr. Neiman. And the grade is?
        Mr. Ohayon. I think the ability to get where we are is
    pretty good. So, I would say a B.
        Mr. Neiman. Dr. Willen, you want to weigh in?
        Dr. Willen. Just to weigh in, I think that if we're giving
    them a grade we should take into account that I think what we
    were trying to say, just to clarify a little is, I think this
    is an extremely hard problem. So, this is like a grade in a CAL
    Tech astrophysics lab. So, I think they're doing well given
    what an exceedingly difficult challenge they have.
        Mr. Neiman. Thank you very much.
        Mr. Atkins. Some of the stories we've heard today and
    elsewhere sounded like a lot of it has to do with training and
    internal processes and it sounds like you all have increased
    the number of people. It sounded like they had 11,0000 people
    and Wells Fargo 12,000 and so I was just wondering what your
    efforts are to recruit, train and--internal quality control is
    my question.
        Mr. Ohayon. We had to adjust quickly given the volume that
    came in pre-HAMP and post-HAMP. So, as I mentioned earlier, we
    increased to about 46,000 team members in home retention just
    this year. The training program is really comprehensive. Its
    traditional training types, which is more classroom based, but
    also a very practical experience in working with our most
    seasoned representatives. We'll actually rotate our
    representatives so that they're working with the skills that
    they have. So, less complex tasks are given to new staff. And
    then as they become more seasoned we kind of rotate them into a
    more seasoned position. So, I think between traditional and
    practical experience is what we've been doing with our staff.
    We have an internal QC operation, which listens to phone calls.
    So, everyone of our calls are actually voice recorded and we
    sample that to make sure that what the customer is hearing is
    consistent with what we're actually putting forth. It's been a
    difficult environment, I can tell you that. Just look at the
    HAMP program over the past six months. Things have evolved
    significantly and it's been really important for us to make
    sure that are baseline employees understand what those changes
    are. So, that's sort of how we've been doing it.
        Mr. Jones. Mr. Atkins, I agree with a lot of what has been
    said around training. I would add that from Bank of America's
    prospective the way we look at it really is top down. So, we
    have our executives all focused on home retention. They are all
    focused on how we train. The mention of call listening, we do
    that as a practice. We listen to calls, we connect them and
    then we give them to the line and we grade. Here it is, here is
    where we need to make improvements. It has been a process of
    bringing that 11,000 folks onboard. It's not easy as in
    astrophysics as Dr. Willen said, but it is something that we
    have gotten better at each month. And with the commitment of
    our leadership across the board, I think the focus and the
    urgency around making these programs successful ultimately will
    win.
        Mr. Atkins. And then as far as incentives for
    representatives for themselves to show personal success, what
    sort of motivation is there internally as far as benchmarks?
    How are they themselves graded?
        Mr. Jones. We have a standard package for our staff that
    are working and we do not compensate on an incentive basis by x
    number of calls, this number of outcomes. So, we have a base
    salary that we offer to our staff and we have across the board
    for all employees at Bank of America a paid performance
    rewarded depending on how the company does.
        Mr. Ohayon. I would agree. There is team member kind of
    report cards. There are group goals that we meet and there's
    investors score cards that we have that are directly tied to
    their status. So, I think a combination of those report cards
    is telling how really great we're doing.
        Mr. Litton. And then, what I would add is, Mr. Atkins, is
    that since HAMP has come out we've really enhanced our quality
    control focus as it relates to that. I listen to phone calls. I
    talk to customers. I deal with the advocacy groups. I do
    understand that there's frustration around customers as it
    relates to making sure that we have a consistent theme and
    message coming out from our employee base. That is
    fundamentally critical so we want to make sure incentives are
    aligned to accomplish that objective.
        Mr. Atkins. Mr. Silvers this will be our last around of
    questions.
        Mr. Silvers. Just, I want to get a couple of things about
    data straight. Mr. Jones and Mr. Ohayon, you both gave totals
    for temporary modifications offered, temporary modifications
    entered into. Are these totals at the holding company level or
    are these for your primary banking subsidiary?
        Mr. Jones. The trial modification number that I gave you of
    81,000 is for Bank of America.
        Mr. Silvers. Bank of America the national bank, not for all
    subsidiaries of the holding company?
        Mr. Jones. This is for all of the operations of Bank of
    America, which for all intensive purposes is the legacy
    Countrywide company and Bank of America that rolls up to Bank
    of America National Association.
        Mr. Silvers. I was told that Bank of America, the parent
    owns a firm called Home Loan Services. Is that correct?
        Mr. Jones. That is correct.
        Mr. Silvers. Can you explain to me why it is that Home Loan
    Services has zeros on the Treasury Department charts?
        Mr. Jones. Sure, I'd be happy to do that.
        Mr. Silvers. Let me also say that there have been some
    other statements made about Bank of America by prior witnesses.
    I would invite you to respond to those, as well if you wish
    either now or in writing.
        Mr. Jones. Sure. I'd rather go to----
        Mr. Silvers. Answer this.
        Mr. Jones. Okay. As we have acquired entities, as Bank of
    America has had the opportunity to acquire firms, Wilshire Home
    Loan Services, the transition and the technology and the
    platforms associated with those companies have come into our
    system. So, the number that I gave you is 81,000. I saw the
    zero for HLS. Certainly understand and would expect that you
    would ask that question. We are working with our most at-risk
    borrowers and doing everything that we can to get trial
    modifications started. So, I think when you look at going from
    28,000 to 81,000 today, the trajectory is very good and that
    will continue for all of Bank of America.
        Mr. Silvers. I would invite you Mr. Jones--I don't want to
    spend all of the time we have on these matters--I would invite
    you in writing to comment to the panel on prior testimony
    relating to Bank of America. Frankly, I don't understand zeros.
    I understand differentials, I don't understand zeros. If you
    want to expand more in writing on that, I'd appreciate it.
        Mr. Jones. Sure.
        Mr. Silvers. Mr. Ohayon, a similar question to you. Are
    there subs of Wells Fargo parent that I need to know about
    behaving differently than the numbers that you just described?
        Mr. Ohayon. The numbers I described are part of Wells Fargo
    Home Mortgage, which includes loans that we originated directly
    or those that we acquired the servicing. It's that umbrella
    itself. It doesn't include like corporate trusts or things with
    trustees.
        Mr. Silvers. It includes Wachovia mortgages that you know;
    the Wachovia servicing?
        Mr. Ohayon. I don't think so.
        Mr. Silvers. Because again, I think we have an issue here
    where the Wachovia numbers are really not so good. Again, if
    you could just explain why that's so since that would
    apparently be a pool of mortgages that really needs help.
        Mr. Ohayon. I certainly will. A big part of the Wachovia
    portfolio that we service is the pay option ARMS portfolio. As
    I mentioned would be for a solution on the pay option ARMS
    portfolio for HAMP.
        Mr. Silvers. We heard you on that and that was very helpful
    testimony to educate us on that subject. I want to come back to
    you Mr. Ohayon, one more time. Wells has a large, I believe,
    portfolio of second mortgages held in-house. Is that right, not
    laid off on the securitized markets?
        Mr. Ohayon. We do.
        Mr. Silvers. Can you just give me a dollar value of that in
    number of loans?
        Mr. Ohayon. I believe its $129 billion portfolio size
    between junior liens as well as the equity lines that we have
    out there. I can't give you a loan count.
        Mr. Silvers. That's alright because it gives us some
    dimensions. What are the circumstances in that portfolio in
    terms of 60-day no payments foreclosures arising out of that,
    do you know?
        Mr. Ohayon. I don't and I apologize. I don't directly
    manage the home equity group.
        Mr. Silvers. I would appreciate it if you could respond in
    writing giving us that data on that book and also the face
    value of that book and also what it's current at.
        Mr. Ohayon. Absolutely.
        Mr. Silvers. Thank you very much.
        Mr. Neiman. I very much like again to thank this panel. As
    I said for our earlier panels, this is not a one time. We hope
    that you can continue to have this level of dialogue with us. I
    know we've been in contact with you previously to this public
    hearing and I look forward to continuing this level of
    cooperation with your organization. So, thank you again and you
    may leave. Thank you very much. Now, we're going to try to take
    as many questions or comments--not questions--this is an
    opportunity for members of the public who would like to share
    any comments with us that we can take away with us. We would
    not like to engage in and it wouldn't be appropriate for us to
    engage in a dialogue of answering any questions, but it is an
    opportunity for anybody to make a statement. We would like you
    to try to keep that to a minute.
        Mr. Haver. My name is Lance Haver. I will encourage you, as
    you do your analysis to think about people like me. I pay my
    mortgage, but my house becomes worthless as mortgage companies
    who I support through my tax dollars refuse to do the workouts.
    And I encourage you to explain to other homeowners why it's so
    important that you force these mortgage companies or you come
    up with the money necessary to help unemployed people pay their
    mortgages. That you help other homeowners understand that every
    time a house is foreclosed, their neighbor's house is
    foreclosed, the house across the street is foreclosed, the
    value of their house goes down. And frankly, living in
    Philadelphia with two houses on my block that are vacant, it
    would be almost impossible for me to sell my house now at the
    price that I think I would've gotten two years ago. If the
    mortgage company would've helped those families out and those
    houses were occupied, I would be able to sell my house for what
    it was worth. Thank you.
        Mr. Neiman. Thank you. Any other comments? Well, thank you
    all. We very much appreciated being here. I think this was a
    very constructive hearing for the panel and for those who are
    listening or who will read about this in the future. So, I
    thank everybody who participated here. I also want to thank
    members of the public who were here for their time and
    patience. Again, appreciate the efforts of the staff that
    helped put this together as well as the hospitality of the City
    of Philadelphia and others who contributed to this event. Thank
    you very much. Meeting is adjourned.
        [Whereupon, at 1:01 p.m., the hearing was adjourned.]
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