[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                     HUD AND NEIGHBORWORKS HOUSING
                          COUNSELING OVERSIGHT

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INSURANCE, HOUSING AND
                         COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 14, 2011

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-61














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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

                   Larry C. Lavender, Chief of Staff
      Subcommittee on Insurance, Housing and Community Opportunity

                    JUDY BIGGERT, Illinois, Chairman

ROBERT HURT, Virginia, Vice          LUIS V. GUTIERREZ, Illinois, 
    Chairman                             Ranking Member
GARY G. MILLER, California           MAXINE WATERS, California
SHELLEY MOORE CAPITO, West Virginia  NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey            EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia        MELVIN L. WATT, North Carolina
SEAN P. DUFFY, Wisconsin             BRAD SHERMAN, California
ROBERT J. DOLD, Illinois             MICHAEL E. CAPUANO, Massachusetts
STEVE STIVERS, Ohio













                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 14, 2011...........................................     1
Appendix:
    September 14, 2011...........................................    41

                               WITNESSES
                     Wednesday, September 14, 2011

Bell, Peter H., President & CEO, National Reverse Mortgage 
  Lenders Association (NRMLA)....................................    25
Cackley, Alicia Puente, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office..............     8
Fitzgerald, Eileen M., Chief Executive Officer, NeighborWorks 
  America........................................................     6
Hill, Candy, Senior Vice President, Social Policy and Government 
  Affairs, Catholic Charities USA................................    27
Holston, Deborah C., Acting Deputy Assistant Secretary for Single 
  Family Housing, U.S. Department of Housing and Urban 
  Development....................................................     4
Olson, Debra, Interim Executive Director, DuPage Homeownership 
  Center, and Board Member, DuPage County, Illinois, on behalf of 
  the National Association of Counties (NACo)....................    29
Raymundo, Raul I., Co-Founder and Chief Executive Officer, The 
  Resurrection Project...........................................    31

                                APPENDIX

Prepared statements:
    Bell, Peter H................................................    42
    Cackley, Alicia Puente.......................................    49
    Fitzgerald, Eileen M.........................................    66
    Hill, Candy..................................................    81
    Holston, Deborah C...........................................    89
    Olson, Debra.................................................   104
    Raymundo, Raul I.............................................   114

 
                     HUD AND NEIGHBORWORKS HOUSING
                          COUNSELING OVERSIGHT

                              ----------                              


                     Wednesday, September 14, 2011

             U.S. House of Representatives,
                 Subcommittee on Insurance, Housing
                         and Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2128, Rayburn House Office Building, Hon. Judy Biggert 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Biggert, Hurt, McHenry, 
Duffy, Dold; Gutierrez, Waters, Clay, Watt, and Sherman.
    Also present: Representative Green.
    Chairwoman Biggert. This hearing of the Subcommittee on 
Insurance, Housing and Community Opportunity will come to 
order.
    We will start with our opening statements. Without 
objection, all members' opening statements will be made a part 
of the record. I will recognize myself for such time as I may 
consume.
    Good afternoon and welcome to this hearing on HUD and 
NeighborWorks Housing Counseling Oversight. I welcome today's 
witnesses. Today, we will examine the Federal housing 
counseling programs administered by HUD and the Neighborhood 
Reinvestment Corporation, or NeighborWorks.
    Housing counseling is an important form of financial 
literacy. As a former real estate attorney, I understand and 
appreciate the value of wise counsel. Now, we don't ever go to 
a closing on a home purchase without an attorney, which I 
enjoyed being able to go to all those, and I cannot say enough 
good things about encouraging prospective or current homeowners 
to seek in person HUD-certified housing counseling.
    When constituents come to my office for help, we always 
coordinate with our local housing counselors. That is why I am 
concerned that appropriations for the housing counseling 
programs administered by HUD were zeroed out in Fiscal Year 
2011 and would remain cut under the Fiscal Year 2012 
appropriations bill.
    Meanwhile, a separate program, NeighborWorks, has become 
the only recipient of Federal housing counseling funds, and I 
fear that by eliminating funds over the 2,300 HUD-certified 
local housing counseling agencies, as well as States and 
intermediaries, many seniors and first-time home buyers and 
others will lose access to housing counseling, and that is 
unacceptable.
    In the darkest days of this financial crisis in my 
Congressional District, it has been the counselors, not the 
array of new Federal foreclosure programs, that have helped 
many families restructure their budget, communicate with 
lenders or servicers, avoid foreclosure and stay in their 
homes. More than any government foreclosure scheme, reliable 
and effective financial counseling has made the difference for 
struggling homeowners. It also helps potential borrowers make 
informed decisions and avoid financial pitfalls down the road.
    Throughout this crisis, we have been reminded that some 
individuals would be better served by renting versus owning a 
home. We have also seen how certain financial products, such as 
mortgages or reverse mortgages, are not suitable for every 
household. That is why the law requires seniors to obtain 
impartial, nonpartisan advice from a HUD-certified housing 
counselor before securing a reverse mortgage.
    Today, our task is to closely examine Federal housing 
counseling programs and ensure they are working effectively to 
help those in need. I look forward to today's discussion, 
particularly about the distribution of funds, standards for 
agencies, counselors and counseling, and data on the 
effectiveness of counseling.
    I also look forward to an update on HUD's progress in 
setting up the Office of Housing Counseling and witnesses' 
comments on discussion draft legislation to enhance oversight 
and transparency of NeighborWorks housing counseling programs.
    The bottom line is that Congress should fund and encourage 
effective housing counseling to be more accessible in our 
communities. It is the first line of defense to prevent another 
foreclosure crisis, helping some families recover from this 
one, and is critical for our seniors seeking security in their 
retirement years.
    With that, I yield to the ranking member, Mr. Gutierrez 
from Illinois.
    Mr. Gutierrez. Thank you so much, Chairwoman Biggert.
    And thank you to all of the witnesses for joining us this 
afternoon as we discuss these vital housing counseling 
programs. I know that some of you have traveled from Illinois 
to be here, so a special welcome to you.
    As we sit here today, one in four families are underwater 
on their mortgages. Home values continue to fall in many parts 
of the country, and millions of families are still facing the 
possibility of foreclosure.
    Meanwhile, programs designed to prevent foreclosure aren't 
reaching as many people as intended. Faced with these 
challenges, it is essential that we use taxpayer dollars 
responsibly and in the most effective way possible. That is 
part of what we are here today to discuss. We need to work 
toward better coordination between various housing counseling 
programs, better research to show us which programs give us the 
biggest bang for our buck, and better oversight and guidance 
for the thousands of agencies providing these services in our 
community.
    But here is the unfortunate fact: While we sit here working 
with HUD and NeighborWorks, challenging them to constantly 
improve the way they deliver their services, HUD's housing 
counseling programs have been almost entirely stripped of 
funding for the second year in a row. HUD is facing $88 million 
in cuts that would have been used for pre-purchase counseling, 
rental counseling, and reverse mortgage counseling for seniors. 
This makes no sense.
    The market is desperate for more first-time home buyers, 
and we are shutting down programs that help families toward 
homeownership. It is getting more difficult for renters to find 
affordable apartments in many parts of our country, and we are 
telling community organizations to stop helping them.
    Seniors are struggling to make ends meet, and we are 
denying them the access and information they need to make tough 
decisions about reverse mortgages. It is hard to believe that 
this is how Congress is choosing to respond to an ongoing 
housing crisis.
    Today is a challenge to talk about solutions. We need to 
know that housing counseling dollars lead to positive outcomes 
in our neighborhoods. We need to understand the impact that 
funding reductions will have on the ground. I am looking 
forward to a productive discussion about what works.
    Before I conclude, I would like to ask the chairwoman for 
unanimous consent to submit two statements for the record: one 
from the National Council of La Raza; and the other from the 
Coalition of HUD Housing Counseling Intermediaries.
    Chairwoman Biggert. Without objection, it is so ordered.
    Mr. Gutierrez. With that, I thank the gentlelady for 
hosting this hearing, and I really look forward to working with 
my colleague, the chairwoman from Illinois. Thank you so much.
    Chairwoman Biggert. Thank you, Mr. Gutierrez.
    While we are on that, I would also insert for the hearing 
record, without objection: a letter dated September 12, 2011, 
from the National Association of REALTORS; and a letter dated 
September 13, 2011, from the executive director of the HOPE NOW 
Alliance.
    Mr. Hurt from Virginia, you are recognized for 1 minute.
    Mr. Hurt. Thank you, Madam Chairwoman.
    I thank the gentlelady for yielding, and I am grateful for 
her leadership as the subcommittee conducts another vital 
oversight hearing.
    Today, we are examining the efficiency and effectiveness of 
Federal housing counseling programs operated by HUD, 
NeighborWorks America, and the State and local organizations 
with which they work. Since the beginning of the 112th 
Congress, the Financial Services Committee has been engaged in 
rigorous oversight of the Dodd-Frank Act as well as the 
agencies and programs within the committee's jurisdiction. 
Today's hearing demonstrates this committee's commitment to 
this important work.
    As our country faces a national debt exceeding $14.5 
trillion, my constituents, the people of Virginia's Fifth 
District, and all Americans are demanding that the Federal 
Government do more to maximize the value of the limited funds 
we can allocate to Federal programs, such as the housing 
counseling initiatives that this subcommittee is analyzing 
today.
    I thank Chairwoman Biggert for holding this important 
hearing.
    I thank each of you for joining us and sharing with us your 
insights. I yield back the balance of my time.
    Chairwoman Biggert. I thank the vice chairman of this 
committee.
    And with that, I recognize Mr. Dold of Illinois for 1 
minute. This must be Illinois day here.
    Mr. Dold. We certainly are concerned about housing in 
Illinois, so we are glad to have the witnesses here. Thank you 
all for joining us. I certainly want to thank Chairwoman 
Biggert for hosting the hearing. And I want to thank again all 
of you witnesses for joining us today and for your important 
work in our community.
    As our witnesses will detail for us all, housing counseling 
helps people, and counseling assistance is especially important 
during these difficult financial conditions. At the same time, 
we must acknowledge our extremely difficult fiscal reality with 
repeated trillion and a half dollar deficits and with over 
$14.6 trillion in our national debt, the official national 
debt--if we look at the unofficial debt and our liabilities, 
long-term liabilities, it is significantly larger than that. 
This fiscal reality requires very difficult decisions with very 
difficult trade-offs that will necessarily dissatisfy many 
people.
    In this context, housing counseling programs, like many 
other Federal programs, must show meaningful, measurable, and 
verifiable cost-effectiveness, along with transparency and 
accountability. By doing so, we maximize the chances that the 
highest number of beneficiaries will receive the maximum 
available assistance and that American taxpayers will support 
these programs to the greatest extent possible given the fiscal 
realities.
    I look forward to hearing from our witnesses about how we 
can work together to achieve these important objectives.
    Thank you, and I yield back.
    Chairwoman Biggert. Thank you, Mr. Dold.
    We will now proceed with our first panel of witnesses.
    We have with us for the first panel: Ms. Deborah Holston, 
acting Deputy Assistant Secretary for Single Family Housing, 
U.S. Department of Housing and Urban Development; Ms. Eileen 
Fitzgerald, chief executive officer, NeighborWorks America; and 
Ms. Alicia Puente Cackley, Director of Financial Markets and 
Community Investment, U.S. Government Accountability Office.
    Without objection, your written statements will be made a 
part of the record, and you will each be recognized for a 5-
minute summary of your testimony.
    We will start with Ms. Holston. You are recognized for 5 
minutes.

   STATEMENT OF DEBORAH C. HOLSTON, ACTING DEPUTY ASSISTANT 
SECRETARY FOR SINGLE FAMILY HOUSING, U.S. DEPARTMENT OF HOUSING 
                     AND URBAN DEVELOPMENT

    Ms. Holston. Chairwoman Biggert, Ranking Member Gutierrez, 
and members of the subcommittee, I thank you for the 
opportunity to testify today regarding HUD's Housing Counseling 
Assistance Program and the steps we are taking to speed and 
improve the program to ensure that it has the greatest possible 
impact in our Nation's communities.
    I appreciate the strong support for the program provided by 
so many members of this subcommittee, including, of course, 
Chairwoman Biggert.
    For nearly 4 decades, HUD's Housing Counseling Program has 
played a critical role in helping American families realize the 
dream of owning a home and finding quality, affordable rental 
housing. In 2010, HUD-approved housing counseling agencies 
counseled more than 3 million households, a record for the 
program.
    However, Congress recently elected to cut HUD's housing 
counseling appropriation from $88 million in 2010 to zero in 
2011. While we will be able to fund housing counseling agencies 
through September 30th, without 2012 appropriations, counseling 
agencies across the Nation will face a gap in funding. The 
effects of our severe economic downturn make this a wrong time 
to cut counseling funding.
    Madam Chairwoman, there is strong evidence that housing 
counseling is one of our most powerful weapons to help 
distressed homeowners avoid foreclosure. Preliminary findings 
from a recent study by ABT Associates show that the vast 
majority of homeowners who receive foreclosure counseling from 
HUD-approved agencies, that is 84 percent, continue to live in 
their homes after 18 months. More than two-thirds were current 
on their mortgage.
    In terms of pre-purchase counseling, one well-cited study 
found that face-to-face counseling was the most effective mode 
of delivering counseling, resulting in a 34 percent reduction 
in delinquencies.
    Put simply, Madam Chairwoman, housing counseling works.
    And HUD's Housing Counseling Program is focused on results. 
Through the first three quarters of 2011, agencies have used 
HUD grant funds to help more than 15,000 clients bring their 
mortgages current; 11,000 to obtain mortgage modifications; 
11,000 to purchase homes; 12,000 to become mortgage-ready; and 
nearly 8,000 seniors to obtain reverse mortgages.
    The HUD program is the only dedicated source of Federal 
funding for the full spectrum of housing counseling. Because of 
this, agencies can use their funds to provide services that 
respond to local needs. For example, in Florida, agencies 
provided 60 percent of their clients last year with foreclosure 
prevention counseling while also dedicating 20 percent of their 
services to providing reverse mortgage counseling to their 
large population of seniors.
    Housing counseling grant funds are made available to 
locally approved housing counseling agencies, intermediaries, 
and State housing finance agencies. Approximately 650 local 
agencies are unaffiliated with an intermediary or State agency. 
Last year, HUD provided grants to approximately 400 of these 
agencies, more than 100 in New York, North Carolina, Florida, 
California, and Illinois, States hard hit by the housing 
crisis.
    That said, Secretary Donovan has shown a commitment to 
measuring what works and discovering what we need to do better, 
and housing counseling is no exception. One area where we know 
we can improve is speed.
    Historically, running the housing counseling grant 
competition and obligating all the funds has taken about 8 
months from the time appropriations are made, and we know that 
is not quick enough. That is why HUD has developed a 
department-wide plan to streamline its processes and reduce 
that timeframe. We have already made great progress. HUD has 
reduced the average number of days between appropriations and 
NOFA publication to 60 days, an 82 percent reduction from last 
year.
    But it is not just about doing our jobs faster. We also 
need to ensure that every taxpayer dollar is achieving results. 
Our certification and monitoring includes onsite and remote 
reviews. In 2011, we enhanced our monitoring of intermediaries 
by awarding a contract to a top 10 CPA firm to ensure 
compliance with Federal financial and administrative grant 
requirements.
    Finally, as part of the Dodd-Frank Act, we have been in 
discussions with the Appropriations Committee about 
establishing the Office of Housing Counseling, and we expect to 
submit our request for staffing reorganization to counsel 
Congress in the next 60 days.
    So, Madam Chairwoman, I am confident that the changes we 
are making will result in a more effective Housing Counseling 
Program. I look forward to continuing our work together, and, 
with that, I would be happy to take your questions.
    [The prepared statement of Ms. Holston can be found on page 
89 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    Ms. Fitzgerald, you are recognized for 5 minutes.

  STATEMENT OF EILEEN M. FITZGERALD, CHIEF EXECUTIVE OFFICER, 
                     NEIGHBORWORKS AMERICA

    Ms. Fitzgerald. Thank you.
    Good afternoon, Chairwoman Biggert, Ranking Member 
Gutierrez, and members of the subcommittee. My name is Eileen 
Fitzgerald and I serve as CEO of the Neighborhood Reinvestment 
Corporation, doing business as NeighborWorks America.
    Thank you for inviting us to speak today. My testimony will 
address NeighborWorks America, our role as administrator of the 
National Foreclosure and Mitigation Counseling Program, or 
NFMC, and the need for a broad scope of housing counseling 
programs.
    NeighborWorks America was established by Congress in 1978. 
It is the Nation's original community public-private 
partnership model. NeighborWorks provides support for a wide 
range of housing and community development activities, not just 
housing counseling, to its network and to the broader field. 
Today, NeighborWorks' affiliated network includes more than 235 
local and regional nonprofits serving urban, rural, and 
suburban communities in all 50 States.
    NeighborWorks has a rigorous annual assessment process for 
the members of our network, and we hold them to high standards. 
For those organizations that cannot meet the standards, we 
provide intensive assistance. However, if they are unable to 
turn around their organization, we do disaffiliate them. We 
also have led a coalition, including HUD, to develop the 
national industry standards, which establish criteria for 
housing counseling and training. My written testimony goes into 
greater detail about our governance, our oversight, and our 
transparency.
    NeighborWorks is an efficient and effective local delivery 
system for getting taxpayer dollars working quickly in our 
cities, towns, and counties, which is especially important in 
this period of scarce Federal budget dollars.
    In Fiscal Year 2010, NeighborWorks organizations generated 
$4 billion in direct investments in their communities, 
leveraging our core Federal appropriation 23 to 1. In Fiscal 
Year 2010, NeighborWorks and its network assisted 252,000 
families with their housing needs; owned and managed 80,000 
quality, affordable rental units; counseled over 100,000 
families on homeownership; and supported more than 22,000 local 
jobs.
    NeighborWorks, as the largest nonprofit trainer in the 
affordable housing and community development field, also 
awarded 20,000 training certificates to staff and board members 
at more than 3,500 nonprofit and governmental agencies.
    NeighborWorks was already a national leader in the fight 
against foreclosure when Congress asked us to administer the 
NFMC program in Fiscal Year 2008. To date, more than 1.2 
million homeowners have been counseled through NFMC.
    We view this as a temporary role, responding to the 
mortgage crisis. The NFMC legislation required us to launch the 
program and award funds within 60 days, which we did. 
NeighborWorks continues to get money out quickly while ensuring 
a high level of compliance and oversight to meet our fiduciary 
duty to Congress and to the taxpayers.
    And through an independent study by the Urban Institute, we 
know that NFMC foreclosure counseling works, saving homeowners 
$3,200 a year on modifications compared to clients who did not 
go through NFMC counseling, and they also have shown that NFMC 
reduces the likelihood of redefault.
    We know, however, that the best defense against foreclosure 
is objective education and counseling before a borrower buys a 
home, and the most reliable counseling is provided by 
independent agencies that put consumers and communities first.
    NeighborWorks is a strong partner and supporter of HUD's 
Housing Counseling Program. For many years, NeighborWorks, as a 
HUD-approved intermediary, has received HUD housing counseling 
funds to pass through to some of our affiliates. HUD funds also 
support a portion of the housing counseling training which we 
provide to practitioners.
    HUD housing counseling funds have been critical to building 
the infrastructure for a strong foundation in a wide range of 
counseling activities, pre-purchase, rental, reverse mortgage, 
for NeighborWorks organizations and other agencies. In 
comparison, NFMC provides very targeted support only for 
foreclosure counseling activities.
    In closing, on behalf of the hundreds of thousands of 
families served by the NeighborWorks network and NFMC 
counselors across the country, I thank the committee for its 
support and stand ready to respond to any questions. Thank you.
    [The prepared statement of Ms. Fitzgerald can be found on 
page 66 of the appendix.]
    Chairwoman Biggert. Thanks so much.
    Ms. Cackley, you are recognized for 5 minutes.

STATEMENT OF ALICIA PUENTE CACKLEY, DIRECTOR, FINANCIAL MARKETS 
AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Cackley. Chairwoman Biggert, Ranking Member Gutierrez, 
and members of the subcommittee, good afternoon. I am pleased 
to be here to participate in today's hearing on housing 
counseling.
    As you know, housing counseling can take many forms and can 
help consumers determine whether and when to purchase a home, 
how to manage a mortgage, and how to deal with setbacks that 
could limit their ability to make timely mortgage payments.
    My statement today is based on recent work we have 
conducted on one type of housing counseling, homeownership 
counseling, and we will discuss three related topics: first, 
what research suggests about the effectiveness of homeownership 
counseling and the challenges of conducting such research; 
second, shortcomings that our prior work found in Federal 
agencies' implementation of homeownership counseling 
requirements; and, third, the status of efforts to establish an 
Office of Housing Counseling within HUD.
    With respect to the research, the limited body of 
literature on homeownership counseling does not provide 
conclusive findings on the impact of all the different types of 
such counseling. Recent research on foreclosure mitigation 
counseling, which helps financially distressed homeowners who 
are delinquent on payments, suggests that it can help 
homeowners avoid foreclosure and prevent them from lapsing back 
into default.
    Findings on pre-purchase counseling, which helps potential 
home buyers learn about buying a home and explains the 
financial responsibility of homeownership, are less clear. One 
study we reviewed concluded that such counseling lowered the 
default rate for new homeowners, while other studies showed no 
effect.
    Efforts to measure the impact of homeownership counseling 
have been hampered by a lack of data, as well as by challenges 
in designing studies and creating effective performance 
measures. Our recent evaluation of Treasury's financial 
education and counseling pilot program illustrates this last 
point.
    As a condition of receiving grant funds under the program, 
grantees are required to report on results of 5 performance 
goals within 6 months of disbursement and annually thereafter. 
We found that some grantees were calculating the results of 
their impact measures in erroneous or misleading ways or were 
not fully capturing meaningful information, potentially 
limiting the usefulness of these data for assessing program 
effectiveness. Further studies on the impact of homeownership 
counseling are under way at HUD and at Fannie Mae, and these 
studies are designed to overcome some of the limitation we and 
others have found related to data and study design.
    Turning to my second topic on implementation of 
homeownership counseling programs, prior GAO work identified 
shortcomings in the implementation of homeownership counseling 
requirements for two Federal programs. A 2009 study of HUD's 
reverse mortgage program found that HUD's internal controls did 
not ensure that counselors were complying with program 
requirements. HUD later made improvements to the program that 
specifically addressed our recommendations.
    Another GAO study from 2009 found that Treasury did not 
effectively track whether borrowers required to seek counseling 
under the Home Affordable Modification Program actually 
received the counseling or whether it reduced their rate of 
redefaults. Treasury officials said that they had not 
implemented a monitoring process because it was too burdensome 
for Treasury and for mortgage servicers. They also did not plan 
to assess the effectiveness of counseling in limiting 
redefaults, in part because they believed that the benefits of 
counseling on the performance of borrowers with high debt 
burdens were well-documented.
    We continue to believe that monitoring and assessment would 
provide valuable information on whether the counseling 
requirement is having its intended effect.
    Finally, with respect to HUD's establishment of the Office 
of Housing Counseling, as required by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, according to HUD, 
the agency is developing a reorganization plan but has not yet 
submitted it for congressional review. Budget constraints could 
affect the new counseling office.
    Although the Dodd-Frank Act authorized $45 million per year 
through Fiscal Year 2012 for the operations of the new office, 
HUD has not received appropriations for this purpose. In 
addition, appropriations for Fiscal Year 2011 eliminated HUD's 
housing counseling assistance funds, which are primarily grant 
funds for approved counseling agencies. HUD officials told us 
that some counseling agencies had already reduced the level of 
services they provided due to this cut in funding.
    Housing counseling groups we spoke with said that the cuts 
in HUD funding, which they use to leverage private funds, 
ultimately could result in fewer counseling services for 
prospective and existing homeowners unless private funds make 
up the difference.
    Chairwoman Biggert, this concludes my prepared statement. I 
would be happy to respond to questions.
    [The prepared statement of Ms. Cackley can be found on page 
49 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    With that, we will turn to questions from the members.
    I will recognize members for 5 minutes each to ask 
questions, and I will claim the time for the first 5 minutes.
    Ms. Holston, in House Report 111-564, House appropriators 
noted that the reason they zeroed out HUD's housing counseling 
funds for Fiscal Year 2011 is because HUD was too slow to 
disburse funds. In House Report 111-218, to accompany the 
Fiscal Year 2010 Transportation-HUD appropriation bill, House 
appropriators expressed a similar concern of the slow 
expenditure of funds. Has HUD fixed this problem?
    Ms. Holston. Thank you, ma'am, for the question, and I 
would like to say with great pride that we have tremendously 
increased our NOFA process. In fact, in 2011, we have decreased 
the time it takes to clear a NOFA to 60 days, which is an 82 
percent reduction in that timeframe. So we are very happy to 
say that there have been significant improvements in our NOFA 
process.
    That also includes a major reduction in time from 
publication to obligation. In fact, in our most recent grant 
competition, comparing publication to obligation, we were 
actually comparable to the NeighborWorks' most recent 
competition. So we are very pleased to say that not only is the 
Department improving its NOFA processing, we are also doing 
that for the Housing Counseling Assistance Program, where we 
are actually streamlining that process to include a streamlined 
manner for high-performing agencies or high-performing 
grantees.
    Chairwoman Biggert. All right. Thank you.
    Then, Ms. Holston, again, what evidence do we have that 
housing counseling is effective? In my Congressional District, 
our local housing counselors do a great job with helping many 
struggling families or those seeking impartial advice about 
buying a home or securing a reverse mortgage. But what kind of 
data has HUD collected to measure the results of housing 
counseling and its effectiveness?
    Ms. Holston. HUD is conducting a housing counseling outcome 
evaluation in partnership with--excuse me, ma'am. HUD has 
actually conducted research and is conducting a review of 10 
prior studies by Collins and O'Rourke--finds that counseling 
provided before a homeowner purchases a home can reduce the 
likelihood of mortgage delinquency. Most studies have found 
that pre-purchase counseling leads to positive results, 
reducing delinquency anywhere from 19 to 50 percent, although 
one study did report no impact.
    HUD's PD&R office has implemented a controlled experiment 
to measure the impact of pre-purchase counseling on a random 
sample of pre-purchase counselees over time. We will have the 
preliminary results of that study a year from now, next fall.
    Chairwoman Biggert. Is there room for improvement, to 
better track the effectiveness of counseling?
    Ms. Holston. Yes, there is room for improvement, and we are 
studying that, the effects of counseling now.
    Chairwoman Biggert. Okay. As a follow-up, we want to make 
sure that all counseling agencies as well as their counselors 
are qualified and giving sound advice to our constituents. Are 
HUD standards for oversight of agencies and counselors 
sufficient, and is there room for improvement?
    Ms. Holston. HUD has actually embarked on a strengthened 
oversight program where we are overseeing not only our HUD-
approved--not only the national intermediaries, but also the 
State housing finance agencies. We oversee multiple State 
agencies and also local housing counseling agencies. We 
actually conduct onsite visits or remote monitoring of all of 
them, all of the affiliates of our national intermediaries, and 
we do that once every 2 years, at least once every 2 years, 
providing technical assistance when we are there.
    We also are in the process of developing a risk model with 
realtime data that will allow us to target or better target our 
remote monitoring, and which would tell us where to go for 
onsite monitoring.
    Chairwoman Biggert. I have additional questions, but I will 
try later or submit them for the record. I recognize Ranking 
Member Gutierrez for 5 minutes.
    Mr. Gutierrez. Thank you so much.
    Ms. Holston, following up, you spoke about program dollars 
coming to an end in the very immediate future. Just what 
program dollars again are coming to an end, and what particular 
types of counseling would it impact, or all counseling in 
general, housing counseling in general?
    Ms. Holston. HUD provides the only dedicated source of 
Federal funding for the full range of housing counseling; that 
is pre-purchase to foreclosure prevention. We fund 450 grants--
or we provide 450 grants a year. If we were not to receive 2012 
funding, then we would not be able to provide that funding.
    Mr. Gutierrez. All housing counseling programs under HUD, 
none of them would receive any funding? They would all come to 
an end in the very immediate future?
    Ms. Holston. Yes.
    Mr. Gutierrez. Okay. I just wanted to make sure that it was 
all and not just some of the programs.
    Ms. Holston. All of them.
    Mr. Gutierrez. So how many people were served by these 
housing counseling programs last year?
    Ms. Holston. In 2010, we served 3,000 counselees or 
clients.
    Mr. Gutierrez. But how many families? So for $88 million, 
we served 3,000 families?
    Ms. Holston. I am sorry, 3 million. I am sorry.
    Mr. Gutierrez. I was hoping we were going to do a little 
bit better than that. It is okay; take your time.
    Ms. Holston. Okay. We actually serviced in 2010, 3 million 
families, and that includes 108 with our specific HUD funds.
    Mr. Gutierrez. Okay. Ms. Fitzgerald, what is looming in the 
immediate future and what needs to happen so there aren't some 
draconian impacts on housing counseling?
    Ms. Fitzgerald. As we mentioned in our testimony, we think 
having a HUD Housing Counseling Program is really critical. 
What it does is support an infrastructure of agencies out there 
that then, depending on the issues in those communities and the 
issues like foreclosure, they can leverage that infrastructure 
to attract additional funding. But without that base of HUD 
counseling funds, those agencies don't know that they can just 
keep their staff on, or train their staff to provide that broad 
range of services.
    We know that foreclosures, unfortunately, are still going 
to happen. There are estimated to be 2 million families facing 
foreclosure in the next year. So continued resources, both 
through the NFMC program and through HUD counseling, are 
critical.
    Mr. Gutierrez. Is there any particular requirement under 
the law that before someone can receive a reverse mortgage, 
they must receive counseling?
    Ms. Holston. I am sorry, could you repeat the question?
    Mr. Gutierrez. Is there any particular requirement in the 
law that someone receive counseling before they receive a 
reverse mortgage?
    Ms. Holston. For our HECM program, yes, sir.
    Mr. Gutierrez. And will there be any money in the budget in 
the immediate future for that kind of counseling?
    Ms. Holston. At this point, if we don't receive an 
appropriation in 2012, no.
    Mr. Gutierrez. So there won't be any money, but it is a 
requirement.
    Ms. Holston. That is right, sir.
    Mr. Gutierrez. So senior citizens would have to acquire the 
counseling?
    Ms. Holston. Senior citizens would have get to get the 
counseling, because it is statutory, but there are no funds in 
the budget for that.
    Mr. Gutierrez. It seems to me a rather complicated--I have 
seen them on TV, and I understand why people would want to 
access the equity in their home. At other times, it would 
probably be easier just to sell your home, but you might not be 
able to sell your home.
    What do you think, Ms. Fitzgerald? What do you think the 
impact will be of not having money for senior citizens?
    Ms. Fitzgerald. One big impact is going to be an increase 
in scammers, so both NeighborWorks and HUD have done a lot of 
work to try to prevent loan scams, mortgage scams. Many of 
those folks who were out doing predatory and subprime loans 5 
years ago are now in communities trying to really strip equity 
out of senior citizens. And we have several cases where those 
scammers know that a person is in a health crisis or needs to 
fix a leaky roof or something and just doesn't have the income 
to do it, but has the equity, and they will turn around, scam 
them, charge them, sometimes actually taking title to their 
home, which they can't get back.
    So having money for counselors so that we can all tell 
people, here is a safe place for you to go so that you can be 
protected from these shysters.
    Mr. Gutierrez. Thank you. My time has expired.
    Mr. Hurt [presiding]. Thank you, Mr. Gutierrez.
    I will yield myself 5 minutes. I was hoping to hear from 
each of you on the question of the Office of Housing 
Counseling. It sounds to me from your testimony and from what I 
have read that that office has not really gotten up and running 
yet. I would like to know about how effective you think that 
will be in reaching more people with less resources, and is the 
future for this office viable?
    Ms. Holston. Thank you, sir.
    Last year when we realized that we would not receive any 
additional funds, we quite frankly changed our focus. But we 
have since--at that point, we had a plan established, and we 
have since been working with the appropriators to put that in 
play.
    An Office of Housing Counseling would allow us to actually 
target housing counseling activities. We could strengthen our 
oversight. We could provide a more directed program to assist 
families in not only pre-purchase but the full range, the full 
gambit of housing counseling services.
    Mr. Hurt. When you say ``target the services,'' what do you 
mean?
    Ms. Holston. That means that the HUD program actually 
provides a full array, as you know, of housing counseling 
services, allowing each locality, each area to target specific 
services or to develop a tailored approach to housing 
counseling. So that if there is a community that actually needs 
two types of services more than others, they can provide 
those--it's up to them.
    Mr. Hurt. So it is not necessarily prioritizing counseling 
among the people you are trying to serve; it is really just 
trying to identify the needs?
    Ms. Holston. Yes, sir.
    Mr. Hurt. Can you submit to this committee a report of 
where you all are in the planning for this office at this 
point?
    Ms. Holston. We intend to have a plan together within 60 
days, a reorganization that shows the Office of Housing 
Counseling.
    Mr. Hurt. Maybe we can just skip to Ms. Cackley, if you 
could answer that question as it relates to this Office of 
Housing Counseling. What will it be providing us that we didn't 
have before and especially in the context of the fact that we 
are really in bad financial shape here in Washington?
    Ms. Cackley. We have just started looking at the Office of 
Housing Counseling more specifically so we haven't done direct 
work on it, especially because it is still so much in the 
process of being stood up. But we expect to be looking much 
more carefully at what the counseling office will do in the 
near future as part of our ongoing work, looking at issues.
    Mr. Hurt. But you all have looked at other programs, and I 
am sure that the inclusion of this office in the Dodd-Frank 
bill was well-intentioned, but I guess my question is, what 
will it be doing that the current structure does not provide 
for? Based on what you all have found, is there a need for it?
    Ms. Cackley. What we--we have not yet tried to look into 
the distinctions that this office will make in terms of how 
they will differ from what came before. Our understanding in 
talking to HUD officials is that they are reorganizing from 
within. So we have been waiting to hear what their 
reorganization plan is, and then we will be able to give you a 
better answer in terms of whether it makes sense or not. We are 
just not at a point where we have gotten enough information to 
tell you.
    Mr. Hurt. All right.
    And this brings me to my last question really for Ms. 
Holston and Ms. Fitzgerald. When you are faced with obviously 
diminished resources coming from Washington and from the 
appropriators, how do you target your counseling? Can you only 
provide enough funding for so much, that is, you hit a 
threshold, or are you able to determine what the people who 
need it the most, that is the priority? Is there a mechanism, 
some sort of measurement that allows you to prioritize the 
counseling, when we all know that we are not going to be able 
to provide as much as we would like?
    Ms. Fitzgerald. In the NFMC program, we are required to 
look at the areas of greatest need. Given how much the 
foreclosure crisis has expanded across the country, that does 
include a large portion of the country, but we make sure that 
most of the resources are going there.
    The Urban Institute study found that clients who went 
through NFMC counseling saved more on their loan modifications 
than those didn't. And that is because a counselor pushes back 
on the servicer and says, this family has to keep their car to 
make sure that they can get to the job so they can keep their 
job so they can pay you. If you total average savings by the 
number of clients who got loan modifications, that is an annual 
savings to the American taxpayer who owns a home of $560 
million. So we are generating savings more than--far in excess 
of what the program for NFMC is costing.
    Mr. Hurt. Thank you, and my time has expired.
    Ms. Holston, do you have anything briefly you want to add? 
My time has expired.
    Ms. Holston. I would just add that in our last round of 
funding, we directed our funding to 100 major metropolitan 
areas with the highest need for--that showed a need for 
mortgage scam funding.
    Mr. Hurt. Thank you, Ms. Holston.
    My time has expired, and so I am pleased to recognize Mr. 
Watt, the gentleman from North Carolina, for 5 minutes.
    Mr. Watt. Thank you, Mr. Chairman.
    I understand we have only 4 minutes left before the end of 
the voting process, so I will try to expedite this.
    I want to direct this question to Ms. Fitzgerald and Ms. 
Holston.
    Some of us have raised questions in the past about 
directing all of the counseling funds through only one 
neighborhood organization, NeighborWorks, when there might be 
in some communities other agencies that can do this work more 
effectively or better. We had some discussions about that 
previously. Can you tell me what the current status of that is 
and if we are still directing all of the funds through 
NeighborWorks, or are there other agencies that are receiving 
counseling funds?
    Ms. Holston, maybe you can tell me that from the HUD 
perspective, and then Ms. Fitzgerald I am sure will defend her 
own agency. But I am not condemning what you are doing. I am 
just trying to find out, is this a rational approach to confine 
it to just one agency?
    Ms. Fitzgerald. What NeighborWorks does--
    Mr. Watt. Let me hear from Ms. Holston first.
    Ms. Holston. One of the differences between NeighborWorks 
and HUD is that we provide the full spectrum of housing 
services and also eligibility. We provide 450 grants every 
year--
    Mr. Watt. Wait a minute. You are answering a question I 
didn't ask, Ms. Holston. I am asking, is there a rationale for 
your directing all of your counseling dollars only through 
NeighborWorks as opposed to through other community-based 
organizations?
    Maybe Ms. Fitzgerald understood the question a little bit 
better.
    Ms. Fitzgerald. So under the NFMC program, by statute, 
Congress has directed us to give funds to HUD-approved 
intermediaries, State-housing financing agencies--
    Mr. Watt. How many of those are there?
    Ms. Fitzgerald. Only 10 percent of the money goes to 
NeighborWorks organizations. By statute--
    Mr. Watt. How many other organizations have been identified 
and approved by HUD?
    Ms. Fitzgerald. Over 1,500.
    Mr. Watt. And how is that working? That is all I am trying 
to find out. This is not a trick question.
    Ms. Fitzgerald. Great. Other parts of what NeighborWorks 
does are under a very different model. Under what we do for 
counseling, we try to cast as broad a net as possible. We have 
had 35 State FHAs, between 16 and 20 HUD intermediaries, and 
they have worked with over 1,600 grantees.
    Mr. Watt. So any organization that is out there complaining 
about this, we ought to direct them to HUD to make sure that 
they get preapproval, is that what you are saying?
    Ms. Fitzgerald. Exactly.
    Mr. Watt. All right. I thank you, and I yield back so I can 
go vote.
    Mr. Green. Madam Chairwoman?
    Chairwoman Biggert. Mr. Green is recognized for a unanimous 
consent request.
    Mr. Green. Thank you, Madam Chairwoman. I would by 
unanimous consent ask that a report entitled, ``The Role of 
Housing Counseling for Asian American and Pacific Islanders,'' 
this would be the AAPI community, be placed in the record, and 
my hope is that I will have an opportunity to speak when I come 
back with reference to this and other things.
    Chairwoman Biggert. Yes. Thank you.
    In case you are wondering why everybody is going in and 
out, if you see the lights up there, we had votes, but it is 
only one. So we were trying to keep going while we were running 
back and forth. So I just ran back.
    Ms. Waters from California is recognized for 5 minutes.
    Ms. Waters. Thank you very much. I am sorry I could be not 
be here, Madam Chairwoman. But I have a few concerns that I 
would like to try and address.
    I know that some actions have been taken recently against 
the Neighborhood Assistance Corporation of America; that is 
NACA. I have a letter here from NACA complaining about 
NeighborWorks' administration of NFMC and legal compliance. I 
ask unanimous consent to enter both of these documents in the 
hearing record.
    Can you tell me what actions have been taken against NACA 
and who took them?
    Ms. Fitzgerald. NACA has now filed a lawsuit against 
NeighborWorks America. NACA's lawsuit suggests that all of the 
funding of round five of the last round of NMFC, which is out 
in communities, should be pulled back and the entire process 
should be rescored for that. Obviously, that would put lots of 
homeowners at risk of not receiving foreclosure counseling. 
NACA has said that because they are concerned with our 
administration of the program.
    NACA did receive funds in rounds one, two, three and four. 
In round five, NACA at the time the round five awards were made 
was not receiving funds from HUD because HUD had them in a form 
of a suspended status due to some compliance issues. So HUD can 
speak to that better for that piece.
    Ms. Holston. NACA was approved as a HUD-approved housing 
counseling agency in 2008. In May of 2009, we conducted a site 
visit to investigate several themes that had come to our 
attention after monitoring about 14 of their branches and 
affiliates. On that day, we identified several compliance 
issues. We asked them to provide information. They did not do 
that.
    In December of 2010, we suspended their grant. And in 
August of 2011, they responded to us, and we have cleared their 
outstanding compliance issues and went forward and obligated 
their funds for the 2010 Housing Counseling Assistance Program. 
They had two grants, one in the amount of $700,000 and the 
other $200,000.
    Ms. Waters. Let me just slip away from that for a moment, 
if I still have some time left here on the clock. I want to get 
a feeling for, how successful are the counseling operations 
periods with loan modification work?
    Ms. Fitzgerald. They are very successful, given the 
servicer environment. And certainly, Ms. Waters, you have 
highlighted in the past some of the challenges that counselors 
have with servicers. So to the degree that the counselors--we 
have worked to get much better forms of communications with the 
servicers.
    The Urban Institute study that was performed on the NFMC 
program shows that a comparison group of NFMC clients who did 
not go through counseling performed worse.
    Ms. Waters. You have some numbers for loan modifications?
    Ms. Fitzgerald. Absolutely. Right. NFMC clients who got a 
loan modification saved $267 a month on their loan modification 
compared to those who didn't go through counseling, and that is 
because counselors know how to talk with the servicer--
    Ms. Waters. How many successful loan modifications are you 
talking about?
    Ms. Fitzgerald. Probably a couple hundred thousand; I can 
get back to you with those numbers.
    Ms. Waters. And have you come to us with documentation of 
the obstacles that these counselors face working with the 
servicers? Do you have something to show us that we could use 
in trying to alleviate these obstacles that the counselors and 
others are facing in attempting to get loan modifications? Do 
you have any recommendations whatsoever?
    Ms. Fitzgerald. Yes, absolutely. In our most recent--we 
have had reports to Congress on the NFMC program. They all 
document some examples of reported challenges that counselors 
face in dealing with the servicers. So we have that, and there 
is a recent report that we are just producing, and we also--
because we also train counselors, we frequently have meetings 
with them to get really detailed feedback on what their 
challenges with the servicers are, and we are happy to share 
those with you.
    Ms. Waters. Any other recommendations relative to loan 
modification?
    Ms. Fitzgerald. That the servicers move more quickly. There 
is still a big a challenge with them taking months and months 
and months to give an answer to a counselor or a homeowner and 
to make sure that those that are outside Making Home Affordable 
are realistic modifications.
    Ms. Waters. How much fraud have the counselors experienced? 
Do you have any idea?
    Ms. Fitzgerald. They see a lot of loan scams from their 
clients.
    Ms. Waters. What do they do with those loan scams or fraud?
    Ms. Fitzgerald. There is a couple of things they do. 
NeighborWorks has worked with a broad consortium, including HUD 
and Justice and the Federal Trade Commission, and on our loan 
scam alert site, homeowners or counselors can put in a report 
that is then given to the lawyer's committee on civil rights 
who will follow up on that scam. They will also connect them 
with individual attorneys who can represent them in that case.
    Ms. Waters. What does HUD do about loan scams and fraud 
that come to their attention?
    Ms. Holston. We have actually just announced awards for our 
mortgage modification--our mortgage scam grant and--with regard 
to mortgages that were modified--11,000 mortgages were modified 
in 2011, and I am looking for other data for you.
    Ms. Waters. So you have grants that go out to nonprofits or 
others?
    Ms. Holston. Yes, ma'am.
    Ms. Waters. Legal Aid, is that one of them?
    Ms. Holston. Any HUD-approved housing agency was able to 
compete, and I will read a list of those successful grantees. 
Do we have those? I will get back to you with that information.
    Ms. Fitzgerald. And one of the big challenges is building 
awareness. So we have both worked on awareness campaigns. 
Obviously, the best prevention against scams is trying to help 
people not be scammed in the first place.
    Ms. Waters. But we have been through this for a long time 
now. We have been educating and counseling and the rip-off 
artists and the servicers and the bad folks are winning. They 
still win and people can't stay in their homes. We have to be 
more aggressive. We have to come up with some better policies, 
and I am seeking information and recommendations about what we 
can do because we are just not able to help enough people.
    Ms. Fitzgerald. Right. Through our database in the last 
year-and-a-half, 17,500 homeowners reported scams. The Federal 
Trade Commission actually does take some of that information 
when they have enough, and goes after Internet scammers, as do 
State AGs and various other enforcement agencies. So 
encouraging folks to report is also critical.
    Ms. Waters. Thank you.
    Chairwoman Biggert. Thank you. A further question, Ms. 
Holston. We are told that HUD is developing a risk model to 
evaluate the effectiveness of housing counselors and grant 
recipients. Could you update this committee on the status of--
on the development of this risk model with an explanation of 
the objectives of the model?
    Ms. Holston. Yes, ma'am. We have already developed the 
preliminary aspects of it. We have already identified the data 
sets that we need. We will be collecting it from our systems 
and other systems. We intend to launch it within the year. We 
will base the risk model on the performance review score, the 
level of grant funding, timely expenditure of grant funding, 
leveraging funds from lenders and other industry partners, 
agency performance, substantial complaints, the number of 
noncompliance findings and recurrence findings, directly 
approved or not, experience in the program, unspent funds, 
counselor compensation model. Those will be built into our 
system. It will take additional funding and we have 
approximated that cost to be about $800,000, and that it will 
take about 9 to 12 months for implementation.
    Chairwoman Biggert. So how would that make things better?
    Ms. Holston. It would make things better because we would 
have more targeted monitoring reviews. We would understand 
going in what the issues are associated with that housing 
counseling agency. We would be able to provide more technical 
assistance and identify those housing counseling agencies that 
are not in compliance.
    Chairwoman Biggert. Thank you. Ms. Cackley, in your 
research, what has GAO found about the effectiveness of 
homeownership counseling, and what have been the challenges in 
such research?
    Ms. Cackley. We have found that the study that has already 
been referred to that the Urban Institute did on foreclosure 
mitigation has been the best result in terms of effectiveness, 
shown the most effectiveness of all of that type of counseling. 
The counseling--pre-purchase counseling, when we looked at the 
literature, we found a more mixed bag in terms of some studies 
that did find positive effects and other studies that it wasn't 
that they found negative effects, it was that you couldn't find 
a particular effect one way or the other, and that has to do 
with the challenges which is the study design is very 
difficult.
    It is hard to get good data. It is hard to design a study 
in a way that allows you to identify the counseling as having 
an impact or not. You need to be able to have a control group. 
You need to be able to really identify the factors in a way 
that and control for them carefully. It is hard to do that, but 
it is not impossible. More studies are being done, and HUD is 
doing some of that work but it isn't done yet.
    Chairwoman Biggert. Can you work with HUD to offer 
recommendations for improvement?
    Ms. Cackley. We can certainly share with HUD our 
information on what we found in the literature, and we would be 
happy to do that.
    Chairwoman Biggert. Okay. Thank you. The gentleman from 
California, Mr. Sherman, is recognized for 5 minutes.
    Mr. Sherman. Thank you. Thank you for holding this hearing. 
I want to thank the witnesses for being here. What role is the 
housing and mortgage industry playing in financing or otherwise 
providing housing counseling? Should we be doing more to 
encourage private industry participation, housing counseling 
efforts?
    Ms. Fitzgerald. Yes. It is--
    Mr. Sherman. Okay. That is the answer to the second 
question. What is the answer to the first question? What are 
they doing now?
    Ms. Fitzgerald. In a very inconsistent and ad hoc way as 
far as providing support, they do in certain areas. However, in 
general, they are not--despite conversations by many, many HUD 
intermediaries, they have not adopted a fee for service. We 
know that they save money, usually up to $20,000 to $35,000 if 
their property--if their loan doesn't go through foreclosure. 
Paying a counselor $500 or $700 to help make sure that happens 
is a very cheap proposition, but time and again, we haven't had 
any success there, and that would save the taxpayers money.
    Mr. Sherman. Although, does the servicer have the option to 
do that on behalf of what might be dozens of people who own 
that particular home mortgage?
    Ms. Fitzgerald. It would seem that for the relatively de 
minimis amount of money that we are talking about, their legal 
team could figure out that. We have evidence that shows that 
this makes a better loan, that there is lower redefault. They 
will pay someone $500 to just go find a customer, but they 
won't pay a counselor $500 to help the family work through a 
budget.
    Mr. Sherman. You say they pay $500. I am talking about the 
mortgage servicer. It is not the lenders. The problem that we 
have here is you are describing what would be logical if you 
had one decision-maker acting for the benefit of the lender. 
The problem is we have 20 lenders owning a single mortgage and 
no one can act logically on their behalf. The servicer can't 
act on their behalf, only pursuant to the existing agreements 
that all 20 mortgage lenders who are participating in that 
mortgage have signed on to. We need in Congress to provide that 
servicers, regardless of what contract they have signed, have 
the right to spend the lender's money, in this case, as you 
say, $500 or $700 to provide this counseling if it makes sense.
    Other than that, you basically are criticizing a ship for 
careening in the water illogically and harmfully. There is 
nobody with the power to steer it, as far as I understand. Do 
either of the witnesses have a comment on that?
    Ms. Fitzgerald. I would just like to say the investors have 
said that the servicers can choose to pay for counseling but 
they have to do it out of the fees that the servicer is getting 
to manage that.
    Mr. Sherman. We can--any one of us here in this room could 
pay for the servicing out of our own salaries, and a few of us 
make charitable contributions to do a little bit toward that, 
but to say that the servicer should go spend $700 of its money 
for an act designed to benefit the banks or the homeowner asks 
them to be charitable, and as you explained, part of the 
beneficiary of the charity goes to these big banks who are not 
on my personal charity list.
    Let me move on. I would like to explore with some of our 
colleagues here whether the servicer should be able to do what 
you want them to do but to charge the banks for it. To say that 
it should come out of the servicing fee ignores the fact that 
their whole fee on that mortgage, absent the default, might be 
$500 for the year or less.
    I understand, though, that research on the impact of 
housing counseling is under way at HUD and Fannie Mae. What do 
you believe would be the best ways to measure the impact of 
housing counseling on clients? Perhaps I could hear from either 
of the other two witnesses. Yes, Ms. Cackley?
    Ms. Cackley. The best way to--could you, please--
    Mr. Sherman. They are studying the effect of housing 
counseling. What do you believe would be the best measures of 
whether that housing counseling is doing a good job?
    Ms. Cackley. The best measure would be if the study was 
designed to be a randomized sample so that one could 
effectively be able to tell--in other words, there are some 
people who get the counseling and some people who don't, and 
one can tell truly what the impact is of the counseling. The 
hardest part of doing this kind of research is being able to 
make those distinctions.
    Mr. Sherman. So you would have to pick from a pool of 1,000 
borrowers, 500 at random who would get free counseling, because 
if you just look at those who sign up for it, that is not 
randomized?
    Ms. Cackley. That is right.
    Mr. Sherman. I believe my time has expired. Thank you.
    Chairwoman Biggert. Thank you. Mr. Hurt, you are 
recognized.
    Mr. Hurt. Thank you, Madam Chairwoman. I just had one 
question that I would love to hear Ms. Holston and Ms. 
Fitzgerald speak to if they can, and it may be something that 
is kind of hard for HUD to speak to if you are not at the 
ground level dealing with these counseling sessions. But I 
would love--as you know, we in this committee are struggling 
with the aftermath of--and as a country, of course, we are 
struggling with the aftermath of what happened in 2008 or what 
culminated in 2008.
    I was wondering if you could speak to, from the perspective 
of one who deals with folks who have gotten themselves into a 
situation that has gone bad on them or could potentially have 
gone bad and they end up losing a tremendous amount of wealth 
as a consequence, if you could speak to the underwriting 
practices that you all have found in the last couple of years 
that maybe we need to be focused on in terms of making sure 
this doesn't happen again. I know it is probably beyond your 
jurisdiction, but I would love to have your comments on that.
    Ms. Fitzgerald. At NeighborWorks for 30 years, we have 
always focused on sustainable mortgages for families, and our 
focus is on low- and moderate-income families, and we would say 
that 30-year fixed mortgages for most of those families that 
are underwritten at a DTI of 31 percent at the front end is a 
good mortgage. One of the things that happened certainly was 
front-end debt-to-income ratios that were way too high and 
families encouraged to be in that, and that is just not a 
sustainable solution, particularly, again, for a low- to 
moderate-income family. Another thing that happened is teaser 
ARMs, all of those kind of things that underwrote. So somebody 
got an ARM where the rate was 1.99 percent for the first year, 
and then bumped up 2 percent a year for 3 years. But the 
underwriting at that point only underwrote whether they could 
afford a 1.99 percent rate, not whether they could afford what 
the payment was going to be in 2 years, and most families don't 
see their incomes double or triple in a 2-year period.
    So those are two really egregious things that happened that 
we certainly hope would never show up again.
    Ms. Holston. I would think that good, solid housing 
counseling, where a family is able to learn how to budget and 
understand what the responsibilities of homeownership are going 
to be. I know I am not speaking directly to your underwriting 
question, but a good understanding of what homeownership is 
about, how to qualify for a 30-year fixed-rate mortgage, and I 
think that is probably the basis for it.
    Mr. Hurt. Thank you, Mr. Chairman.
    Chairwoman Biggert. Thank you, Mr. Hurt. The gentleman from 
Texas, Mr. Green, do you have--you have 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman, and thank you for 
allowing me to be part of the hearing. I thank the witnesses as 
well.
    I am fortunate in that I represent a district that has the 
ballot printed in three different languages. It is in English, 
it is in Spanish, and it is in Vietnamese. I think there is a 
reality that we sometimes don't see with reference to the 
linguistic challenges that we have in our country, people who 
are lawfully here and who do need assistance, which is why I 
was proud to submit to the record the national capacity 
document entitled, ``Role of Housing Counseling for Asian 
American and Pacific Islander Communities.'' This organization 
has done a stellar job. It is in 17 States, has more than 100 
community-based organizations and individuals working with it, 
and they work to help the AA/PI community. I am in support of 
what they do and I am proud to submit their document for 
consideration.
    I am also very much concerned about the loss of the $87.5 
million. There are people who can benefit from this 
individually and families, but more importantly, the country 
benefits. Statistical information has been recorded indicating 
that we actually save money when we have people receiving this 
counseling, and my suspicion is that at some point, we would 
move into some sort of refinancing of many of the loans that 
are with the GSEs, Fannie and Freddie, through FHFA, and if 
this is done, many persons who could benefit from this and help 
the country benefit by virtue of not going into foreclosure 
because this counseling is done from the purchase through 
foreclosure mitigation, first-time home buyer, many of these 
people who could benefit, many persons who could benefit, will 
not benefit simply because of some of the linguistic 
challenges, and these organizations perform a meaningful 
function. This did not happen by accident that they are doing 
what they do. They have to prove and demonstrate that they 
would be a help. So I am supportive of what they do and wanted 
to make sure that we got this in the record.
    With reference to the counseling, let me just ask a 
question. I know you don't have the empirical evidence today 
because a study is being performed, but can you give some 
anecdotal evidence--we take a lot of anecdotal evidence, and if 
you have anecdotal evidence, that has become very important to 
this committee, and I would ask that you share anecdotal 
evidence with the committee if you have such, and it doesn't 
matter to me who shares first.
    Ms. Fitzgerald. In addition to the Urban Institute report 
we have spoken about, there is a--the Peter Zorn report from 
the early 2000s that Freddie Mac funded and is still probably 
one of the state-of-the-art reports, and that report showed--
and it used Freddie Mac data--that there was a 34 percent 
reduction in delinquencies if there was counseling. So there 
has been evidence out there. The one thing that hasn't happened 
is this random blind study, but that is both incredibly 
expensive and very difficult.
    On a local basis, we have organizations that have done very 
strong studies showing that counseling has brought an increase 
in credit scores and they look at a FICO score for pre-purchase 
education and counseling, and over 6 months or a year, there is 
an increase in the FICO score. So there are several studies and 
maybe Ms. Holston can speak more about them.
    Ms. Holston. The studies that we are conducting now will 
not be completed until next year, but preliminary findings from 
a recent study by ABT Associates shows that the vast majority 
of homeowners who received foreclosure housing from HUD-
approved counseling agencies, and that is 84 percent, continued 
to live in their homes 18 months later and more than two-thirds 
were current on their mortgages.
    Mr. Green. Thank you, Madam Chairwoman. My time is about 
up, so I will yield back. Thank you.
    Chairwoman Biggert. The gentleman yields back. I might 
note, Ms. Holston, that we really do want more tracking and 
comments on the discussion draft to address the oversight. And 
with that, I would recognize the gentleman from Illinois for 5 
minutes.
    Mr. Dold. Thank you, Madam Chairwoman. Ms. Holston, this 
question for you to start out with, if I may.
    Prioritizing funds obviously is something that I think is 
very important certainly for our government as we try to make 
them go and stretch further and that they get to the area of 
greatest need. Can you tell me how HUD right now is determining 
how the funds are being distributed? Are they being 
distributed--and I apologize if you covered this while I was 
voting--but are they being distributed on the greatest need 
first or is it more by geographic region first or how is it 
really being disseminated?
    Ms. Holston. Because we offer a full range of housing 
services--housing counseling services, we actually develop a 
NOFA, send it out, and it is on a geographic basis, but we also 
set aside funding. We have--this last year, we actually 
developed a NOFA and put $1 million for scam elimination. So, 
at this point, it is geographic primarily.
    Mr. Dold. Okay. I appreciate that. In your testimony and 
other data we read that since 2005, between 2005 and today, 
over 4.1 million households have received individual 
foreclosure prevention counseling and more than 150,000 have 
participated in homeowner default education workshops which I 
recognize represents a little over a third of the HUD housing 
counseling activity between 2005 and 2010. Do you know how many 
of these households were able to stay in their homes as a 
result of housing counseling?
    Ms. Holston. I know for those who received housing 
counseling in 2010--
    Mr. Dold. Okay.
    Ms. Holston. --84 percent continued to live in their 
homes--this is foreclosure counseling, 2005 forward. Just a 
moment. Let me get the exact figure.
    Mr. Dold. Not a problem.
    Ms. Holston. Could we get back to you, please, sir?
    Mr. Dold. Absolutely. Again, it--I believe, again, as we 
talked about in the opening statements it is important that we 
are able to reflect how well things are going. We want to make 
sure we can highlight these things so we can try to make sure 
that when it comes time for the appropriators to make some 
difficult decisions, which we know are not going to be received 
by many well, that we can highlight programs that are working 
and working well.
    Can you give me just your own thoughts or if there are ones 
that you believe--and I will ask this both of Ms. Holston and 
Ms. Fitzgerald and then we will try to get down another one to 
make sure we are not leaving everybody out--in terms of the 
role that you believe that housing counseling should play in 
preventing another foreclosure crisis? Obviously, we are in the 
midst of a foreclosure crisis right now. What should the 
counseling do in order to try to prevent another foreclosure 
crisis from happening again?
    Ms. Holston. In many instances, a housing counselor is the 
best friend of a homeowner going into foreclosure. So a housing 
counselor can help that family secure a modification. They can 
provide comfort to them as they go forward, giving them options 
as to the best route to take. In terms of what we can do as 
housing counselors to avoid foreclosure or to avoid this 
mortgage crisis, better and more housing counseling earlier in 
the process, so some families will decide perhaps not to 
purchase, and others will know what the responsibilities of 
homeownership are before they purchase their home.
    Mr. Dold. Ms. Fitzgerald?
    Ms. Fitzgerald. Absolutely. The best prevention against 
foreclosure is an educated consumer who understands the 
responsibilities they are getting into, can choose a mortgage 
product, and also understand the impacts of other credit that 
often gets offered to them after they become a homeowner and 
how to manage that. And we know that for the last 20 years, 
homeowners who have gone through that process early enough--not 
the day before the closing table--are more successful. If both 
spouses lose their jobs, obviously things in life happen that 
counseling can't prevent, but it makes them much more likely to 
be sustainable.
    Ms. Holston. One more thing. I also think it is important 
to have a third-party counselor so that you have a non-involved 
party in the deal, a counselor giving advice and guidance.
    Mr. Dold. And I appreciate that. I guess, obviously, we 
would love to be able to have some sort of counseling before 
they make any purchase decisions because they might not be able 
to, but in the reality, that might not be realistic. Ms. 
Fitzgerald, you talked just a moment ago about, the earlier the 
better. Do you know the percentage in terms of the counseling 
you see beforehand, how close to the actual purchase of a home? 
I know my time has expired.
    Ms. Fitzgerald. Certainly in our network we recommend that 
it is at least 90 to 180 days beforehand, and our organizations 
work really hard to get that message out early to customers to 
do that, but I don't have a percentage.
    Chairwoman Biggert. The gentleman's time has expired. The 
gentleman from North Carolina.
    Mr. McHenry. Thank you, Chairwoman Biggert. Ms. Holston, 
does HUD use a competitive method to, or a merit-based system 
to award counseling funding?
    Ms. Holston. Yes, sir. We actually issue a NOFA and open it 
up for any HUD-approved housing counseling agency to compete. 
They submit their proposals. We rate and rank them. They have 
to receive a fundable score. And then based on the availability 
of funding and formula, it is determined how much their grant 
will be for.
    Mr. McHenry. Okay. Ms. Fitzgerald, in terms of 
NeighborWorks, do you have metrics for success, in terms of 
your operations?
    Ms. Fitzgerald. We do two different things. On the 
counseling side for NFMC when we have a competitive process, we 
had the Urban Institute give an independent evaluation which 
has shown that the program actually works. Again, 70 percent of 
the clients who enter are more likely to cure their foreclosure 
than clients who did not go through that program. We require 
reporting from the counseling agencies on a quarterly basis on 
what is happening with them.
    Mr. McHenry. And so you determine if these intermediaries 
are actually spending the funds appropriately?
    Ms. Fitzgerald. We do substantial on-site and off-site 
compliance. We do on site to those who receive 64--we do a risk 
rating system that we have had in place for 3 years, and in 
doing that, we made sure that we are going to the folks who get 
the largest amounts of funding, and we make sure that they are 
spending that money well in a variety of ways.
    Mr. McHenry. So how do you determine success rates for 
these--for counseling, how do you determine success rates?
    Ms. Fitzgerald. One of the challenges for foreclosure 
counselors is that because servicers take so long still to 
handle a situation, often 9 months--the most recent data shows 
that the average loan has been in foreclosure for 599 days. 
That means there are 599 days that the homeowner doesn't 
necessarily know what is happening, nor does the counselor. So 
the counselor is doing everything in their power to help solve 
that, but often they are at the mercy of servicers who are very 
backlogged.
    But a success, they are always working to, if at all 
possible, get that homeowner a loan modification, and if they 
can't, then helping them exit in a good way for that family.
    Mr. McHenry. Okay. So the eligibility of each applicant of 
the national foreclosure mitigation counseling is based on 
their approval by HUD, correct?
    Ms. Fitzgerald. The eligible applicants, by statute, are 
HUD-approved intermediaries, State housing finance agencies, 
and NeighborWorks organizations.
    Mr. McHenry. Okay. So how do you become HUD approved?
    Ms. Holston. Your question is how to become a HUD-approved 
housing counseling intermediary?
    Mr. McHenry. Yes.
    Ms. Holston. I will get back to you in just a second.
    Mr. McHenry. That is fine. So what is the average time and 
cost to become one of these intermediaries?
    Ms. Holston. Three to 6 months.
    Mr. McHenry. And cost?
    Ms. Holston. And the cost is processing. There is no cost 
associated with it. There is no cost. They submit an 
application. We review the application and approve it or 
disprove it.
    Mr. McHenry. Yes, time has cost. So if you have five 
staffers putting something together to fill this paperwork out, 
their salaries actually have a cost. That is what I am 
interested in.
    Ms. Holston. We will have to get back with you and compute 
that cost.
    Mr. McHenry. Okay. I would be interested in that because we 
do want qualified counselors, but if the hurdle is so difficult 
to become one of these intermediaries, then you need to look at 
your processes so that reasonable groups can go through this 
process.
    So, with that, I am obviously concerned that we do have 
foreclosure counseling and it is done well, and the challenges 
are for determining success and that was to you, Ms. 
Fitzgerald. If you--no two families are the same. No two family 
situations are the same. No two foreclosures are exactly the 
same. So determining success in counseling is a challenge 
because you have some folks for whom there can be a remedy. 
Let's say they have a job. It is much easier for them to get 
something worked out than those who are not employed; is that 
right?
    Ms. Fitzgerald. Typically, yes, unless there is a local 
program that would help those folks, yes.
    Mr. McHenry. All right. Thank you.
    Chairwoman Biggert. The gentleman's time has expired. I 
would like to thank the first panel for your insights and the 
information that you have given us, and I would note that some 
members may have additional questions for this panel which they 
may wish to submit in writing. Without objection, the hearing 
record will remain open for 30 days for members to submit 
written questions to these witnesses and to place their 
responses in the record. Again, thank you so much, and we will 
now turn to Panel II. Thank you.
    Welcome to the second panel: Mr. Peter H. Bell, president, 
National Reverse Mortgage Lenders Association; Ms. Candy Hill, 
senior vice president, social policy and government affairs, 
Catholic Charities USA; Ms. Debra Olson, interim executive 
director, DuPage Homeownership Center and DuPage County board 
member, on behalf of the National Association of Counties. And 
I would like to say a special welcome to Ms. Olson who is from 
the district and from the State of Illinois.
    Ms. Olson. Thank you for the invitation.
    Chairwoman Biggert. And then Mr. Raul Raymundo, chief 
executive officer, The Resurrection Project.
    Thank you all for being here, and again, for the panel, 
without objection, your written statements will be made a part 
of the record, and you will each be recognized for a 5-minute 
summary of your testimony. We will begin with you, Mr. Bell, 
and you are recognized for 5 minutes.

 STATEMENT OF PETER H. BELL, PRESIDENT & CEO, NATIONAL REVERSE 
              MORTGAGE LENDERS ASSOCIATION (NRMLA)

    Mr. Bell. Madam Chairwoman and members of the subcommittee, 
thank you for convening this hearing to look into the important 
issue of housing counseling. This subcommittee, including 
members from both sides of the aisle, has been consistently 
sensitive to reverse mortgage issues and has continually taken 
steps to improve and enhance FHA's Home Equity Conversion 
Mortgage (HECM) program. For that, we are very appreciative, as 
are the 660,000 senior households who have utilized the HECM 
program.
    I would like to focus today on one aspect of housing 
counseling that is a relatively small niche but a very 
important one for those who are affected. This is counseling 
for older homeowners who are contemplating obtaining a reverse 
mortgage or for those older homeowners who already have a 
reverse mortgage and find themselves facing new financial 
challenges.
    The equity accumulated in a home represents the largest 
component of personal wealth for many middle-class households. 
Typical retiree households might have one or two incomes from 
Social Security, a modest pension, perhaps some savings and 
low-yielding fixed-income instruments and nowadays perhaps a 
diminished 401(k) account. The equity they have built up in 
their home is by far their greatest asset and an important 
resource for funding their future.
    Analyzing how a reverse mortgage might fit into the 
picture, however, is not an easy task, particularly for older 
homeowners who might not have been active in financial markets 
in recent years, for newly-widowed individuals whose loss of 
their spouse's Social Security creates financial insecurity, 
for seniors struggling to make ends meet, and for those trying 
to plan ahead to maximize their resources and sustain their 
financial independence.
    When Congress enacted the HECM program back in the 1987 
Housing Act, it recognized this and made mandatory counseling a 
critical component of the HECM program. Counseling is a very 
effective consumer safeguard, and as a result of that, we have 
seen very few problems with the HECM program over the years. 
Reverse mortgage counselors are employed by HUD-approved, 
community-based and nationally designated nonprofit housing and 
credit counseling organizations. Each individual counselor must 
be qualified by passing a HUD-administered exam and must meet 
continuing education requirements. The result of this has been 
the development of a robust network of committed counseling 
organizations and qualified individuals who deliver counseling 
through face-to-face sessions or via telephone, depending on 
each client's personal choice and mobility.
    On top of the fact that all seniors considering a reverse 
mortgage must undergo counseling before they can actually even 
apply for a HECM, counseling agencies are required by HUD to 
perform such counseling at no cost whatsoever to any clients 
whose income is below 200 percent of the Federal poverty level. 
Fifty-six percent of HECM clients report one of the most major 
counseling agencies fall under this threshold.
    So the issue we face today is, how will these mandates be 
met? How will counseling continue to be available to all HECM 
borrowers? We face a legal mandate to make sure the counseling 
is provided. We face a moral mandate to make sure that this 
counseling is equally available to those with more limited 
means who are unable to pay for it up front.
    In the earliest years, the AARP foundation provided 
technical assistance and support for HECM counseling. In more 
recent years, their work has been taken over by NeighborWorks 
and the National Council on Aging. Each of these organizations 
has made a very significant contribution towards furthering the 
quality and availability of counseling by training, tracking, 
collecting and analyzing data, and providing technical 
education for the counseling community.
    One particular area that has emerged in recent years, due 
to the economic downturn--and both NeighborWorks and MCOA are 
to be commended for stepping up to the plate on this issue--is 
providing remedial counseling to reverse mortgage borrowers who 
have had setbacks in their financial affairs and have had 
difficulties meeting their obligations to pay property taxes 
and insurance.
    As a result of this remedial counseling, a high percentage 
of households facing this situation have been able to be put on 
a repayment plan to reimburse the lenders' advances, protecting 
FHA from possible payouts for claims while preserving the 
homeowners' ability to continue living in their home, a win-win 
solution for all involved. All in all, the cost of providing 
this type of HECM counseling for those who cannot afford it is 
small. The cost of not providing it would be very great.
    Thank you for the opportunity to appear here today. I would 
be pleased to answer any questions.
    [The prepared statement of Mr. Bell can be found on page 42 
of the appendix.]
    Chairwoman Biggert. Thank you, Mr. Bell.
    Ms. Hill, you are recognized for 5 minutes.

 STATEMENT OF CANDY HILL, SENIOR VICE PRESIDENT, SOCIAL POLICY 
         AND GOVERNMENT AFFAIRS, CATHOLIC CHARITIES USA

    Ms. Hill. Good afternoon, Chairwoman Biggert, and thank you 
to the subcommittee for having us here today.
    I am here representing Catholic Charities USA where I am 
the senior vice president for social policy and government 
affairs. Housing has always been a primary area of service 
delivery for Catholic Charities throughout its 100-year 
history, and is a major concern presently in our work to serve 
those in need and reduce poverty in America. We very much 
appreciate this opportunity to come before the subcommittee and 
provide input and data on the critical importance of housing 
counseling based on our experience as a national housing 
counseling intermediary for more than the past 10 years. With 
38 of our agencies serving 26,429 individuals during the grant 
cycle of 2009-2010, we want to underscore the value of these 
services to so many in these challenging economic times.
    The important role that housing counseling services has 
played and continues to play in ensuring a stable housing 
market and safe, affordable housing for those who receive these 
services is immeasurable. These services are comprehensive and 
should not be narrowly directed only to foreclosure prevention. 
In fact, housing counseling assists with rapid rehousing 
prevents renters from losing their homes and addresses 
homelessness. It is essential that these services, which 
support individuals and families in need, be preserved. In 
fact, if it had not been for housing counseling programs, 
thousands more would have been vulnerable in the housing 
crisis.
    At the same time, it is incumbent on those who administer 
these funds to ensure the efficiency and effectiveness of these 
services without undue or unnecessary administrative burdens so 
that more funds go directly to those who need the services. For 
example, in Elmira, New York, the housing counseling program 
operates a first-time home buyer program. Four hundred families 
have purchased their first home through this program which is a 
partnership between Catholic Charities and the City of Elmira. 
The program consists of intensive pre-purchase education and 
support. Successful participants complete 9 hours of some kind 
of education and workshop and approximately 7 to 10 hours of 
one-on-one counseling. Their housing counseling services are 
tailored to the clients' needs, not necessarily their wants.
    The success of the first-time home buyer program in part is 
attributed to the extensive pre- and post-education and support 
given by housing counselors, and the foreclosure rate for homes 
bought by home buyers in this program is under 3 percent.
    Stable housing is the goal for all those that we serve in 
our network. Housing counseling is an essential element of our 
housing services. Catholic Charities' programs uniquely reach 
those who are challenged by poverty and often turn to us as a 
last resort. However, I want to mention that the population 
that we see currently is not just low income. More and more 
middle-income individuals and families, including significant 
numbers of military families, are approaching Catholic 
Charities' agencies to receive housing counseling services.
    Catholic Charities continues to work for innovative ways to 
help people secure and maintain housing with the ultimate goal 
of helping individuals and families to achieve self-
sufficiency. I highlight that for you that in my written 
testimony; I have reported on a number of local Catholic 
Charities housing counseling programs and the innovation and 
success that they have had.
    As you well know, funding for HUD's housing counseling 
assistance program was eliminated in the HUD Fiscal Year 2011 
budget appropriation. However, funding for the National 
Foreclosure Mitigation Program was maintained at $65 million. 
While Catholic Charities USA recognizes that NeighborWorks 
America's NFMC program does important work related to 
foreclosure intervention, and in fact, 11 Catholic Charities 
agencies received grants from NeighborWorks, it is important 
that we highlight the fact that there is a difference between 
the two in that one is a program that addresses specifically 
foreclosure intervention and mitigation, while the other is a 
more holistic approach to housing counseling services which are 
crucial as it provides much-needed counseling to millions of 
families and seniors.
    With that, I would like to make a few recommendations to 
this committee. We urge you to make affordable and accessible 
comprehensive housing a priority and encourage local 
governments and private interests to do the same; invest in 
this critical housing counseling program and support 
comprehensive and innovative programs that allow communities 
the flexibility to meet local housing concerns; restore the 
$87.5 million in funding to the housing counseling program; and 
finally, ensure that all Federal programs, including these we 
discuss today, are effective and efficient, not overly burdened 
with layers of administrative oversight, but effectively 
overseen so that funding and services meet the needs of those 
individuals these programs have been designed to serve.
    Thank you.
    [The prepared statement of Ms. Hill can be found on page 81 
of the appendix.]
    Chairwoman Biggert. Thank you, Ms. Hill.
    Ms. Olson, you are recognized for 5 minutes.

 STATEMENT OF DEBRA OLSON, INTERIM EXECUTIVE DIRECTOR, DUPAGE 
    HOMEOWNERSHIP CENTER, AND BOARD MEMBER, DUPAGE COUNTY, 
  ILLINOIS, ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES 
                             (NACo)

    Ms. Olson. Thank you, Chairwoman Biggert, Ranking Member 
Gutierrez, and members of the subcommittee. I appreciate the 
special invitation today.
    My name is Debra Olson and I am a DuPage County, Illinois, 
board member and a member of the National Association of 
Counties (NACo) community and economic development steering 
committee. I thank you for the opportunity to testify at this 
important oversight hearing. It is my privilege to represent 
NACo today, and we appreciate Chairwoman Biggert holding a 
hearing on housing counseling programs.
    NACo, the only national organization representing America's 
3,068 counties, supports housing counseling programs which 
provide vital services to county residents, particularly in 
this stalled housing market and difficult economy. Low property 
values caused by foreclosed homes have led to a smaller tax 
base and budget shortfalls.
    HUD-certified counseling agencies help to ensure that 
county residents are getting accurate information and effective 
services, which can mean the difference between homeowners 
saving or losing their homes. These services are primarily 
offered free of charge, thanks in part to Federal funding. 
Empowering residents with information makes the process better 
for all involved. Counties know these services have prevented 
foreclosures and helped homeowners make better decisions in a 
process that can be confusing and overwhelming.
    This year, NACo published an issue brief on foreclosure, 
``The Fall and Rise of Neighborhoods in Counties Across the 
Country.'' The brief notes the importance of having homeowners 
who are potentially facing foreclosure contact HUD-approved 
housing counseling agencies for assistance in working with 
their lender.
    In NACo's June 2008 survey of large urban counties, 
approximately 96 percent of the county officials responding 
noted an increase in home foreclosures during that year. 
Approximately 36 percent reported a 50 percent or more increase 
in foreclosures. Fifty-six percent of the officials reported a 
decline in housing values as a result of foreclosures, and 52 
percent are experiencing revenue shortfalls, a result of either 
foreclosures or declining home values.
    DuPage County has experienced similar problems. 
Furthermore, according to RealtyTrac, Illinois has the 5th 
highest foreclosure rate in the United States, and DuPage 
County foreclosure rates, as a ratio of homeownership, rank 8 
out of 102 counties. In DuPage, over 8,500 houses are in some 
stage of foreclosure.
    DuPage County has, for years, partnered with the DuPage 
Homeownership Center, DHOC, the only HUD-certified housing 
counseling agency providing comprehensive services in the 
county. DHOC has a national reputation for excellence. We have 
received numerous awards, and our innovative programs have been 
profiled in six national best practices publications, and as 
the volunteer interim executive director, I can assure you we 
believe in, and welcome, strong accountability.
    DHOC provided services to over 2,500 families in Fiscal 
Year 2011. Of those, 833 households were in some state of 
default, many more in imminent threat of default. Though DHOC 
has received NeighborWorks grants, as well as HUD grants, 
NeighborWorks round six is not guaranteed and the significant 
cut in HUD funding is jeopardizing DHOC services for these 
thousands of DuPage residents.
    Perhaps now more than ever, there is a need for 
comprehensive, federally-funded housing counseling services. 
More than 85 percent of DHOC's foreclosure clients report they 
never had any home buyer education. Pre-purchase counseling and 
reverse mortgage counseling have been defunded, and local 
agencies may be forced to charge cash poor seniors for these 
services which are required by law.
    Foreclosure prevention counseling has proven to be highly 
cost-effective. According to a report in Mortgage News Daily, 
the average cost of a foreclosure is $77,000 while the average 
cost of foreclosure prevention is $3,300. DHOC helped 279 
families prevent foreclosure in Fiscal Year 2011 alone, saving 
lenders, governments, communities and homeowners in crisis over 
$20 million. Hundreds more DHOC clients are in process.
    HUD's housing counseling programs provide accessibility to 
financial education for all, creating more responsible renters 
and homeowners. HUD's housing counseling programs impose 
standards of certification on participating agencies resulting 
in professional, accurate, reliable information for renters, 
home buyers, and families in crisis.
    HUD requires accountability measures such as independent 
third party audits, biennial on-site performance reviews, and 
uniform reporting of performance outcomes. HUD's competitive 
grant process ensures participating organizations will meet and 
exceed mandated goals or lose funding.
    DuPage County applauds strict enforcement of the standards 
of certification and accountability measures to give Congress 
and consumers confidence that their tax dollars are being spent 
wisely. We support requiring stringent compliance with national 
industry standards for home buyer education and counseling for 
grant awards.
    As a government official myself who looks for the most 
effective and efficient use of tax dollars, the cost of housing 
counseling is a fraction of the cost of a foreclosure. 
Defunding housing counseling is counterproductive to long-term 
resolution of the economic problems we face today and 
prevention of recurrence in the future. I implore you to 
improve HUD's programs, not gut them.
    Thank you for this opportunity and I welcome any questions.
    [The prepared statement of Ms. Olson can be found on page 
104 of the appendix.]
    Chairwoman Biggert. Thank you.
    Mr. Raymundo, you are recognized for 5 minutes.

 STATEMENT OF RAUL I. RAYMUNDO, CO-FOUNDER AND CHIEF EXECUTIVE 
               OFFICER, THE RESURRECTION PROJECT

    Mr. Raymundo. Buenos tardes. Good afternoon. I am honored 
to be here.
    The Resurrection Project is a community-based nonprofit 
serving primarily Latino neighbors in Chicago's west side and 
the City and suburbs. The Resurrection Project is also a proud 
affiliate of National Council of La Raza and the National 
Association of Latino Community Asset Builders, for which I am 
the current board chair.
    Thank you, Chairwoman Biggert and Congressman Gutierrez, 
for allowing me to be here to talk to you about the impact of 
HUD counseling support that we have received over the past few 
years.
    In 1990, The Resurrection Project began with a $30,000 seed 
capital investment from area parishes. Today, we have leveraged 
more than $200 million in reinvestment through our 
comprehensive community development efforts, a cornerstone of 
which is housing and financial literacy counseling. As a HUD-
approved agency, we empower families with the knowledge about 
the right way to purchase a home and arm them against predatory 
lenders.
    Last year, The Resurrection Project counselors served over 
2,700 families through pre-purchase, foreclosure, and basic 
financial literacy education. Many of these families 
successfully purchased a home, improved their credit scores, 
and opened savings accounts. The families we serve on the 
southwest side of the City and western suburbs have been hit 
hard by this great recession. Communities of colors have lost 
far more wealth in this great recession than the general public 
as a result of banking and what used to be a secure investment, 
owning part of the American dream through homeownership.
    The counseling support we provide to families is often the 
only thing that helps with the soft landing that many of these 
families are experiencing. When they are foreclosed on, it does 
not only impact their finances but also the entire psyche of 
the family. I cannot imagine how much worse things could have 
been for our communities had we not received counseling support 
over the past 5 years.
    In a survey of HUD-certified counseling agencies conducted 
by Housing Action Illinois, several agencies indicated that 
cuts would force them to lay off staff or see fewer clients. 
Two agencies anticipated they would be forced to shut down 
completely. We know that counseling alone does not revitalize 
neighborhoods, but again, it is a cornerstone for comprehensive 
revitalization efforts.
    Currently, there is an incredible excess of inventory of 
foreclosed housing units in the market. Many of the strategies 
being considered across the country to reduce this inventory is 
supply driven, REO disposition of properties, short sales, and 
donations. The key to reducing this inventory should be demand 
driven as well. In other words, we need well-prepared buyers, 
well-qualified buyers, and well-educated buyers. It is 
shortsighted to think that preparing the next generation of 
home buyers will happen overnight. It is going to take some 
time to build this foundation, not just repair the old.
    Let me give you an example of the foundation I am speaking 
about. Orelia Abeja, a single mother of four, came to The 
Resurrection Project in 2000 with a dream of owning a home, but 
settled into one of our affordable apartments to give her the 
time and space she needed to save money. Over the next 10 
years, Ms. Abeja earned a bachelor's degree and eventually a 
master's and became a schoolteacher. In 2006, she began 
receiving one-on-one counseling to help realize her dream of 
owning a home. After a few years of budgeting, saving, and 
learning the ins and outs of homeownership, Ms. Abeja purchased 
a single family home, and in 2009, she and her family moved 
into a 3-bedroom home.
    The Resurrection Project and similar HUD-approved 
counseling agencies across the Chicagoland area continue to 
help families like the Abejas work to manage steps towards 
sustainable homeownership and a better life.
    Without this funding, our neighborhoods will suffer. Home 
buyers like Ms. Abeja will not be able to receive the type of 
high-quality individualized education to help prepare them for 
sustainable homeownership and prevent future foreclosures. HUD 
counseling is crucial right now in order to jump start a demand 
market to prepare families like the Abejas, often first-time 
home buyers to buy a home. This demand will, in turn, spur 
local economies which will create much-need jobs, which will, 
in turn, help revitalize local neighborhoods.
    Therefore, I urge Congress to restore the housing 
counseling programs funding to the Fiscal Year 2010 level of 
$88 million.
    Secondly, and finally, I urge Congress to invest more in 
counseling agencies that are culturally and linguistically 
sensitive to communities that have been hit hardest by this 
great recession and this housing crisis.
    [The prepared statement of Mr. Raymundo can be found on 
page 114 of the appendix.]
    Chairwoman Biggert. Thank you.
    We will now move to questions and members will have 5 
minutes to ask the questions and we will start with that.
    This question is really for everyone. While helping 
families, especially those who are in foreclosure counseling, 
what are the greatest challenges that counselors face? Just one 
or two from each of you, so we get your top challenges that 
what you see. Some of the Panel I witnesses mentioned problems 
with servicers, for example. We will start with you, Mr. 
Raymundo.
    Mr. Raymundo. Yes. I think that continues to be a serious 
problem, that servicers are taking a very long time. We heard 
earlier in the panel the length of time that it takes them to 
respond to families, to the counselors, and I think there needs 
to be some kind of legislation that forces, if you will, 
servicers to act as one instead of many in terms of providing 
mitigation as quickly as possible to our families.
    Chairwoman Biggert. Thank you. Ms. Olson?
    Ms. Olson. I would agree with the assessment that working 
with servicers is perhaps the most difficult part. Furthermore, 
I would say that scams have definitely been a problem, and one 
of the problems that nonprofit agencies have is that we don't 
have a lot of dollars for public relations (PR). We offer these 
highly professional certified counseling services, but don't 
have the dollars for PR in order to get the word out there that 
we offer these services. So scammers who have lots of money to 
put toward PR have their name out there and promise to help. I 
think that is another problem that we face as an agency that 
would be helpful to--more PR dollars would be helpful, I think.
    Chairman Biggert. Ms. Hill?
    Ms. Hill. I would echo that servicers are a great challenge 
for us, but I would also say that the--
    Chairman Biggert. Could you pull the microphone closer to 
you?
    Ms. Hill. --continued economic downturn, so in families 
where unemployment is an issue or a loss of job, where it has 
been over the course of more than a year, makes it much more 
difficult to mitigate a situation where foreclosure is imminent 
because of the lack of funds to actually pay the mortgage. So I 
would say both the servicers and the continued economic 
downturn for this length of time are a great challenge for us.
    Chairman Biggert. Thank you.
    Mr. Bell?
    Mr. Bell. Yes. Our clientele is slightly different because 
they are the elderly, and there is a different set of issues 
there. But when it comes to mitigation counseling for the 
seniors who have problems, one of the challenges has been that 
the servicers possess personal nonpublic financial information 
that would be very helpful to the counselors, but because of 
privacy laws, it is challenging for them to be able to share 
that with the counselor, which would help make a much more 
informed counseling session.
    We have been working on some efforts to overcome those, but 
it would be helpful if the Congress would look at that and 
perhaps engineer some opportunities within the privacy laws to 
allow the servicers to make such information available to the 
counselors.
    Chairwoman Biggert. Mr. Bell, what are the losses 
associated with reverse mortgages to FHA over the last 5 years?
    Mr. Bell. Historically to date, the program has been run on 
a revenue-neutral basis. The way this has been maintained is 
that each year in budgeting for the program, FHA and then OMB 
project out how the book of business might perform based on its 
projections of future home values, and then they have made 
adjustments accordingly.
    Over the past couple of years, they have reduced the 
benefit that seniors can get out of a reverse mortgage. Two 
years ago, they reduced the amount by 10 percent across-the-
board and, for the current Fiscal Year, from 1 to 4 percent, 
depending on the age of the borrower. Also for the current 
Fiscal Year, they increased the mortgage insurance premium, the 
annual mortgage insurance premium, that is paid to keep the 
program on a revenue-neutral basis. So, to date, there has not 
been any real loss from the HECM program.
    Chairwoman Biggert. There was a story not too long ago 
about some seniors who had gotten a reverse mortgage, and they 
were given a lump sum instead of like a monthly or whatever, 
and they spent it all. Then, of course, they didn't have the 
money to pay the property taxes or anything. Is this happening 
still, or is this something that has changed?
    Mr. Bell. A borrower under the HECM program has the choice 
of having a fixed-rate mortgage or a variable-rate mortgage, 
and they have the choice of receiving the money all at once as 
a lump sum or taking it out in fixed monthly payments or 
setting it up as a line of credit and drawing it down as 
needed.
    The fixed rate requires a full draw. The reason for that is 
that a lender can put out the money today because he knows the 
cost of funds if somebody takes it all at once. If they want to 
take it out a little bit at a time, they must choose a variable 
rate. By and large, in the last couple of years, with the 
financial uncertainty, seniors have overwhelmingly chosen the 
full draw fixed rate to have the security of the fixed rate. So 
that is in fact going on in more than half of the reverse 
mortgages that are made.
    In a large percentage of those cases, the other reason for 
taking out the full amount up front is because they are paying 
off existing indebtedness on the property, and they require all 
those funds for it. However, if a senior does not need all the 
money up front, they are well advised to consider the variable 
rate, which gives them the other options. Unfortunately, that 
is not often what they choose, but that is why the counseling 
once again becomes so critical, to help them make that 
determination.
    Chairwoman Biggert. So the housing counseling should really 
make sure that they understand taking all the money out at once 
is not going to work?
    Mr. Bell. Or that they have to guard their money and use it 
judiciously.
    Chairwoman Biggert. I think the reverse mortgages are an 
issue that maybe we want to consider looking into with another 
hearing or something. So I appreciate your being here.
    Mr. Bell. We would welcome the opportunity.
    Chairwoman Biggert. I yield to Mr. Gutierrez for 5 minutes.
    Mr. Gutierrez. Thank you so much. First of all, I want to 
welcome my friend and advocate for housing, for people who 
really, without his advocacy, wouldn't have an opportunity to 
be part of the American dream.
    So I wanted to thank Raul Raymundo for taking up our 
invitation to come, and for--I was on the city council when you 
were--your resurrection more than 2 decades ago. So thank you 
for all of the wonderful work, Raul, that you have done, and I 
am really delighted that you are here, because I think you add 
a magnificent and very timely voice to what we are doing.
    So, tell me, Mr. Raymundo, the relationship between HUD 
funding, lack of HUD funding and what that might do in terms of 
what you do. I know you represent a broader group of people who 
are just like you and that do the kind of work. Tell me what 
your fear is. Tell me what we should know.
    Mr. Raymundo. I think we are facing--the foreclosure crisis 
has been ongoing for a few years now. And as I mentioned in my 
remarks, we continue to have increase in these units out there. 
I think if we really are going to turn around the devastation 
that is going on in these communities as a result of boarded-up 
buildings and crime that is happening in these communities as a 
result of these buildings, we need to figure out how to 
stimulate a demand side of the market.
    I think what has worked for us, and I believe what has 
worked for many counseling agencies, is preparing people and 
well educating them. This is not going to happen overnight. In 
our experience, it often takes 2 to 3 years to make sure that 
there is a well-qualified, well-prepared buyer to become a 
homeowner. It is not going to happen overnight, particularly as 
a result of the crisis that people are facing with lack of 
jobs, lower wages, and so forth.
    So, it might take a little longer to be ready to become a 
homeowner, but once they are ready and they do become a 
homeowner, it is going to have other ripple effects in our 
community, such as building up our communities and creating a 
better economy in our communities. It is something we have to 
look at differently. It is not short term. We have to be 
looking at this longer term as well.
    Mr. Gutierrez. So what kinds of moneys does the Federal 
Government provide--
    Mr. Raymundo. It would be devastating if HUD cuts their 
funding or future funding. As my colleagues mentioned as well, 
it is not just about the one-on-one counseling; it is getting 
the word out. It is making sure that people know that there are 
opportunities in today's market, but also to prevent them from 
going down the wrong path, as they have.
    We are competing daily against predators who are better 
resourced than housing counselors who are out there promoting 
on a weekly basis. In our community, as you know, Congressman, 
they do this through radio shows, sponsoring the whole half-
hour, a whole hour of radio show, inviting people to come to 
them, and they will assist them, often charging them hundreds 
if not thousands of dollars for assistance that HUD counselors 
provide absolutely free and do a better job of this.
    So that is the market and the environment we are competing 
with. Resources to be proactive in informing people, marketing 
to them, to do it the right way, is very important, as well as 
one-on-one counseling.
    Mr. Gutierrez. I just want to say to you, Mr. Raymundo, and 
the thousands of others like you, which I know we have, like 
Mrs. Olson and others, who really are out there to give a 
benefit to the consumers, and to watch out for their interests; 
I want to thank you for the wonderful work and contribution you 
make toward the realization of the American dream of 
homeownership or just getting a decent place to rent.
    I think, Madam Chairwoman, it is interesting, because I was 
listening to Mr. Bell's response to the question, and it just 
seems to me that it might be a good idea to take a look at it, 
because I had this concept, because I guess I am not old enough 
to be thinking about a reverse mortgage, so I just kind of 
watch it on TV, and it always came across to me that you kind 
of get this income, you don't lose your home, you get to live 
in it until you die. Anybody raise your hand if you don't think 
this is the way you got it. I watch the commercials.
    But then it sounds like the explanation can be pretty 
starkly different, right? I am wondering, what if the roof 
leaks and you don't pay the taxes, a host of things. You have a 
medical emergency; you lose your house.
    So, I think that housing counseling is very, very 
important. I think we should look at it. Because you don't have 
to be--even I was walking the other day through the airport, 
and they said, oh, you know, get this credit card, 25,000 miles 
and you get a free airline ticket somewhere. Has anybody ever 
really tried to get a free airline ticket with 25,000 miles? 
They got them for 60, for 90.
    Then I signed up for a credit card for one of the major 
hotels. I said, oh, great. They said, you have accumulated 
enough for three nights. When I went to try to get one of the 
nights, it was at the lousiest hotel in their chain--no, I am 
not making this up. You try it. You are going to say that Luis 
was right.
    So just think about, what it is you perceive to be, right, 
that warranty on your car. It is like, oh, those things weren't 
under the warranty. Only the little light bulb was under 
warranty. And if it happens to me on such simple things as a 
reward program, on frequent flier miles, on my--imagine how 
important, because those things, I just won't take the hotel, 
right?
    But this can have very grave consequences beyond what hotel 
or what trip you might have to cancel or how much you are going 
to have to deal with your car and not let it turn into a 
clunker. So I think it might be advisable, we will talk more 
later. But I want to thank all of the panelists. Thank you so 
much.
    Chairwoman Biggert. Remember, there is no free lunch.
    Mr. Hurt is recognized for 5 minutes.
    Mr. Hurt. Thank you, Madam Chairwoman.
    I thank each of you all for joining us this afternoon.
    One of the things that I was asking about in the earlier 
panel, and I think many of you were here, but I was wondering, 
do the programs that HUD and NeighborWorks coordinate and 
operate, are they able to target those most in need? It sounds 
to me that there really is not a mechanism to do that, that the 
targeting, to use Ms. Holston's word, was really more 
geographic by nature. And that makes sense to me. Obviously, 
that would be the easiest way to do it. But is there a way to 
target those most in need?
    The reason, of course, I ask that is because we do have 
limited resources, and our ability to fund these programs is 
going to be more and more difficult as we face, as I said in my 
opening statement, as we face the prospect of balancing a 
budget that is $1.5 trillion out of whack. So it seems to me 
that it is incumbent on all of us to try to figure out how to 
help the most in need.
    Does that make sense to you? And if it does, what can you 
tell us or what thoughts might you have on how to reach those 
who are most in need. I would just like to hear from each, if 
you have any thoughts on that, starting with Mr. Bell, if that 
is okay?
    Mr. Bell. Yes, Congressman. In the HECM counseling, it is 
very definitely targeted to need, because the counseling 
agencies, many of them charge for the counseling, and they use 
the HUD funds to provide the counseling to those people who are 
under 200 percent of the Federal poverty level. So the HUD 
funding is targeted to the lowest income.
    The other place the HUD funding gets used is people get the 
counseling before they apply. You cannot apply for an FHA-
insured reverse mortgage until you have been out, met with the 
counselor, completed the counseling and return to the lender 
with a counseling certificate issued by the counselor. What 
happens sometimes is people go out for the counseling--
    Mr. Hurt. Which is different than foreclosure prevention, I 
guess. Right?
    Mr. Bell. Yes. Right. People go out for the counseling, and 
they decide it is not for them as a result of the counseling, 
so, therefore, the counseling agency has incurred this cost but 
does not have a client who will get the loan and will 
ultimately pay for it. So the HUD funding is used for that. 
Those are the two spots: for those below 200 percent of the 
Federal poverty level; and for those where the client does not 
proceed with the HECM loan.
    Mr. Hurt. Got it. Thank you.
    Ms. Hill, do you have any thoughts on that?
    Ms. Hill. I do. A couple of things that I just want to 
highlight. One of the comments when we were preparing to 
testify here from our housing counseling agencies was to 
underscore that we have a number of underserved communities and 
particularly in rural communities from housing counseling 
programs.
    So as a national intermediary, we actually go through an 
RFP process with our own Catholic Charities agency where they 
both have to demonstrate their capacity to do the work as well 
as the compelling need in their local community. So one way for 
us under the NOFA is to actually look at our network and then 
have them make the compelling argument from their local 
community that they need the funds to do this particular work, 
because it is a finite pot of money.
    So that is the way in which we address it. We do believe, 
however, that there needs to be more attention given to 
underserved communities, especially rural communities that need 
the services.
    Mr. Hurt. Thank you. Ms. Olson?
    Ms. Olson. Thank you for your question, Congressman.
    It really depends in my view on how you define need. Do you 
define need based on the number of foreclosed homes in a 
geographic area; based on the number of foreclosed homes as a 
percentage of homeownership; based on unemployment rates, 
because with unemployment, you have people who won't be able to 
pay their mortgages; based on poverty levels; based on 
percentage of drop in home values, so you have homeowners who 
are underwater. There are so many factors that go into 
determining why and where foreclosure happens--
    Mr. Hurt. Is there a mechanism that you know of that HUD or 
NeighborWorks uses or could use, is there a mechanism in place 
that you go to, to make that assessment?
    Ms. Olson. When we apply for grants, when local agencies 
apply for grants to HUD, we are required to demonstrate need, 
both in narrative and in data. So it is HUD that has been 
making that determination of what the need is. And I understand 
it has been on geographic.
    But I think requiring agencies to demonstrate need in their 
applications is going to help any agency, funding agency, then 
prioritize where those funds are going to go.
    Other than that, I honestly would have to think about that 
and provide you with a written answer, because that is 
something that I am very happy to think about and provide you 
my thoughts on.
    Mr. Hurt. Thank you. Mr. Raymundo?
    Mr. Raymundo. Yes, I would agree with Ms. Olson.
    I think it depends. You don't necessarily want to just 
focus on need, because communities that are adjacent have 
different problems. One community that is adjacent to another 
may have a greater need. But it doesn't do very much for that 
community that is doing okay to also fall apart. And that is 
important to recognize, because we don't want to necessarily 
penalize communities that are improving themselves, and at the 
same time, we don't want to necessarily not include communities 
in need or in the greatest need.
    So I think what exactly we are defining as need is 
something that we have to look at. But we need to invest again 
moving forward. Some communities are ready to improve 
themselves more than others because they are ready. But given 
the economy, it won't take long for them to fall back.
    Mr. Hurt. Got it. Thank you. Thank you for your answers.
    Chairwoman Biggert. Thank you, Mr. Hurt.
    Just one quick issue. I think, Ms. Hill, you mentioned that 
one of the challenges was PR and getting the word out. Is that 
correct?
    Ms. Olson. Actually, I think we both did.
    Chairwoman Biggert. You both did. Good. In the testimony 
from Ms. Fitzgerald of NeighborWorks, she talks about the fact 
that they have reached millions of homeowners in their Ad 
Council campaign which she says was primarily financed by 
private sector funds from NeighborWorks America's partners, but 
this campaign has been ranked in the top 10 of all Ad Council 
campaigns, and it reached millions of household its and 
garnered more than $165 million in donated media.
    I wonder if any of you had been benefited by this ad 
campaign, had you been part of that?
    Ms. Olson. I am sure that there are clients that DHOC has 
seen that came because they have seen that. We do look at the 
data as to how people found out about our services. Really, the 
majority of people find out about our services either through 
recommendations from our county government or another agency 
that they are going to because they are in need. So it is more 
word of mouth or referral.
    Also our Web site--we are actually find out that IT, using 
the Internet is the most effective way to let people know that 
you have services available. It is just a matter of funding 
that kind of IT development within an agency. Word of mouth 
from friends and neighbors, people share at their churches that 
they are in trouble. That would be the third way.
    So, really, I would put the NeighborWorks ad campaign down 
lower in terms of our agency.
    Chairwoman Biggert. But NeighborWorks didn't reach out to 
you or other counties to be part of the campaign or have your--
DuPage County or whatever--mentioned in that?
    Ms. Olson. Not to my knowledge.
    Chairwoman Biggert. Or Catholic Charities?
    Ms. Hill. Not to my knowledge, either.
    Chairwoman Biggert. And the other one was also a scam alert 
that was--to have an anti-rescue scam public education 
campaign, and that was done in 2009. Were either of you 
involved in that? It was actually partnered with a lot of other 
organizations, like HUD, Treasury, FTC, the Department of 
Justice, Fannie Mae and Freddie Mac. Does anybody know anything 
about that? FDIC, State attorneys general?
    Ms. Olson. We applied for the HUD funding round, the most 
recent one that included mortgage scam assistance, but we have 
not been asked to participate in an ad campaign like that. 
Actually, the Attorney General of Illinois has a Web site that 
we refer people to when they have been scammed or a local legal 
service, but no ad campaign. That would be great.
    Chairwoman Biggert. Okay. I think there is a lot there.
    With that, the Chair notes that members may have additional 
questions for this panel which they may wish to submit in 
writing, and without objection, the hearing record will remain 
open for 30 days for members to submit their questions to the 
witnesses and to place your responses in the record.
    I really appreciate all of you being here. This has been a 
great panel. Thank you so much for coming here and really 
giving us the information that we need as we move forward on 
these issues.
    With that, this hearing is adjourned.
    [Whereupon, at 4:17 p.m., the hearing was adjourned.]




                            A P P E N D I X



                           September 14, 2011






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