thank you very much for being here staff close a door there appreciate it good afternoon i'm dennis kucinich chairman of the domestic policy subcommittee of the comm of oversight and government reform welcome to today's hearing on foreclosures what needs to change in the administration's response today's hearing is  continuation of the subcommittee series of hearings examining the characteristics of the ongoing residential foreclosure crisis and the impact of the administration's response now without objection the chair and the ranking minority member w five minutes to make opening statements followed by opening statements not to exceed three minutes by any other member who seeks recognition and without objection members and witnesses may have five legislative days to submit a written statement or extraneous materials for the record i want to acknowledge the presence of my colleague from ohio congressman turner from the dayton area welcome i appreciate you being i know that you have another hearing to go to and we're going to move through the this subcommittee began holding hearings on the subject of the foreclosure crisis and solutions to it three years ago since that time we've met nine times on the subject it's not hyperbole to say that this is the worst economic crisis to hit america since the great depression the fallout from the crash of the housing market and the recession that has overtaken our country has left no community in the country on touch nearly every level of economic activity has been affected negatively nationally the unemployment rate is approximately ten percent and in some states it's nearly fifteen percent foreclosures continue to point nine million borrowers received foreclosure notices in two thousand and nine and it's predicted nearly two and a half million more bauers will lose their homes will lose their homes to foreclosure this year according to the most recent data more than fifteen percent one in six of all mortgages are in trouble two point six million borrowers have missed at least three payments on their mortgages make them making them seriously delinquent this is double the level of one year ago and is the highest number of delinquencies on record since nineteen seventy two according to the mortgage bankers association now let's be clear this foreclosure crisis started well before the current administration came into office but like the great depression the administration that inherited the crisis will be judged for how they respond and that judgment can be as harsh as if they had created a crisis and selves the american people expect and the american people deserve bold initiatives from their government to help as many people as possible unfortunately in my opinion much time has been wasted by relying on lenders and investors to choose to modify loans and keep people in their homes indeed even as this administration quickly created a program that the previous one wouldn't even consider the making home affordable program it continued to rely on the charitable impulses of the industry that is nearly bankrupted the nation but the industry that received a trillion dollar bailout has been unwilling to absorb the losses to write down bad debts and their recalcitrance is that seventy five percent of the one million or so borrowers who've been offered modifications under the program are making their payments and it's just a matter of borrowers getting all their documents to lenders and certainly for a program that is just under a year since its creation the efforts to publicize it and encourage participation a lot of bull but it's also severely flawed it doesn't address one of the key problems facing borrowers the problem of negative equity of a house that is worth less than the mortgage it is marred by geographical disparities and its affordability objectives rely upon stretching out the payments an approach that can saddle the  borrower with more debt not last and which makes sense only on the assumption that home values are eventually going to go right back up now on friday this administration announced a pilot and initiative to distribute one point five billion entire money to five states that list did not include ohio or other states that were hit harder and earlier by the foreclosure crisis even if ohio had been included in that list and would not a bit of enough to make a meaningful headway in a crisis in fact the state set a record for foreclosures last year the fourteenth year in a row of increases but as we will hear today no matter how grim the statistics are there are still plenty of people in ohio and many other states that are hoping and waiting for some really americans will be able to tell if washington is faking it known to people who have personal knowledge of whether or not the government gave them real help which for many borrowers must necessarily include principal reduction there is still time in ohio and in communities across america to create a positive and fruitful legacy of this administration's response to the foreclosure crisis my hope is that this administration impact of foreclosures but has really been a leader nationally in suggesting solutions in a way forward so treasury will caucus i appreciate your presence here today we also have a  hearing a few months back and jim we do appreciate this hearing today homeowners across the country are suffering just last week the mortgage bankers association reported that the combination of loans in foreclosure and one payment behind in their mortgage was over fifteen percent mortgage defaults and foreclosures in addition to trade organizations think tanks and government accountability groups have produced reams of reports that demonstrate how the administration's most active program hamp has not only failed to accomplish the ministrations promise of assisting three to four million american homeowners but is actually harming homeowners in the broader economy this harm mr chairman can be measured in several ways first the ministrations mortgage modification efforts are costing taxpayers taxpayers as much seventy five billion dollars since the president took office he has told the american people time and again that the answer to our economic problems more government spending and government programs and time again this administration's told the american people they say that they should expect a return on their investments through bailouts and stimulus spending and they have been told that they will be able to track this return to an unprecedented level of transparency and accountability but once again the administration is breaking these promises to the american people in the face of widespread bipartisan criticism of ham for example the treasury department has retreated into secrecy by halting the dissemination of information on the programs website that would allow the public to track the program's success rate public is also harming the government spends their money on failed programs it is doubly harmed when the government tries to disguise its failures by hiding information from the american people we've also learned that many of the people who have received temporary assistance  are now discovering they are not and eligible for the long term mortgage modification as new york times recently reported this means that many americans are throwing their money into homes that they believe the government would help them keep only to find out thousands of dollars later that they will face foreclosure anyway delaying foreclosure mr chairman does not help the many americans who are fighting to keep their jobs or find new ones delayed for closures only serve to prolong the economic hardship dream that drained them of much needed resources and the fraud and the opportunities to find more affordable housing options in fact it seems that the only good thing that the administration's efforts have is to reinforce in the minds of the american people the reality that technocratic tinkering is not an effective solution to our economic problems the only viable long term solution is to keep more americans in their homes and in their jobs for that matter it is a broad based economic recovery built on the foundation of free markets mr responsibility and limited government that has made our nation strong and prosperous prosperous for more than two hundred years mr chairman i would also ask  into the record a staff report that was released this morning along with ranking member of the full committee mr myself the title of which is treasury department's mortgage modification programs that they are prolonging the economic crisis so thank you jackson  she recognizes mr cummings marilyn thank you very much mr chairman sir and i thank you for holding this hearing in my fourteen years in congress i've devoted more energy to addressing the current foreclosure crisis in my most any other issue facing our nation because of that i thank you for holding this hearing as well as the field hearings in atlanta cleveland for using the domestic policy subcommittee to shine a light on this very tragic of today's witnesses for joining us and your input is crucial to our developing real solutions for real people who are suffering real problems what in a year ago i decided  were not doing enough to address foreclosures i am i just rick in baltimore so i hired someone in my district office to work only on helping our constituents keep their houses most of us  only have twenty employees that's between washington and the district and identity as governor i need another one so literally ten percent of my staff only deal with foreclosures keeping people in their houses after i hired a first one i decided that there was still more that we could do with figured out that the most common barriers to mortgage modify the cations will last paperwork understaffed lend call centers and lender and servicer denials without any explanation and another one was this the idea that sometimes when they got a hold of the lender the lender just simply did not take the time to work with the borrower and i want to say that it was not always in a good faith manner but i won't go that far but one thing that we did discover is that once my staff member was sit down a lot of times and go over the paperwork with the borrower we discovered that say about eighty percent of those cases they were able to get a modification so this past saturday we had our third foreclosure prevention workshop in baltimore over the last year these events had what together some three thousand people from my district and by the way from all over the country we had over twenty five lenders and created the opportunity to keep hundreds if not thousands of families in their homes we discovered something a simple as a face to face meeting this is iraqi scientists face to face meeting does not seem that important but for the men and women who approach me on saturday literally in tears after negotiating modification it meant everything but there are those for whom the options are severely limited and they are employed we can do a lot of good with president obama's mortgage modification infrastructure i watch it happen on saturday in baltimore but the plight of fourteen point eight million unemployed americans demand we do even more and more is these three things first we need a mortgage assistance meaning mortgage assistance whether through grants or loans for unemployed persons while they continue to look for work we managed to get three billion dollars in the wall street  reform and consumer protection act but that funding is far from a done deal i was pleased that the president that the president's recently announced for him program help for the hardest hit housing markets when clued assistance to the unemployed as well as those who are underwater in their mortgages while i would have a hope to see the program implemented in more than just the five hardest hit housing markets we have to start somewhere second thing we need to do is we need a real jobs package senate passage yesterday of the fifteen billion dollars so called jobs bill is better than nothing but it is not nearly enough and this into separate it will move on that in the committee so many of the lost jobs simply are not coming back new jobs will come from new firms when braced new technology and innovation work the training whether through community college career centers or traditional fo year schools must be part of a long term solution clearly we need a comprehensive strategy to help the unemployed one to actually include the elements i just mentioned but today sas foreclosure prevention is the first and biggest element of that solution and so mr chairman i look forward to the testimony i want to thank the witnesses with that  families who are in ohio as we struggle with how to address the issue of the mortgage foreclosure crisis and its effects on our neighborhoods i want to take you in the ranking member for holding this hearing today to focus on the effectiveness of the administration's home affordable modification program and helping struggling families facing foreclosure and stay in their homes my congressional district as well the entire state of ohio has been significantly impacted by the current proposal crisis in the counties located within ohio's congressional third district there have been over six thousand housing foreclosures reported in two thousand and eight alone while congress has made attempts to address the root causes of the housing crisis we need to continue to improve federal housing policies in order to find new solutions to address these challenges we must conduct a comprehensive reevaluation of our federal state and local housing policies in order to stabilize the housing market keep people in their homes and help displaced families stay in their return to their homes to better understand how the greater dayton area has been particularly affected by the current housing crisis in august i convened a forum in coordination with the northeast midwest institute consisting of two panels to examine the impact of the housing crisis in our community and to discuss the federal response the northeast midwest institute as a washington d c based nonprofit nonpartisan research organization dedicated to economic vitality environmental quality and regional quality for northeast and midwest states the first panel was composed of miami valley leaders who discuss the effects of the housing crisis in the region we have in attendance today to mccarthy's in the back of the room from the maya valley their housing center has previously testified before this committee on the issues of the effects in miami valley the second panel was composed  federal policy experts who discussed the federal response to this crisis both panels highlighted recent successes and then to find some of the serious challenges we face as we continue to determine the appropriate role of federal government addressing the housing issues in our region panelists also provided considerations that address the current legal and regulatory framework governing the housing and mortgage lending markets the prevalence of fraudulent mortgage lending practices and the effectiveness of certain housing tax credits grants and programs as well as providing a complete re evaluation of federal housing policies and their impact on communities across the nation today i present a report that summarizes a number of the policy considerations based on the individual testimonies of discussions held at the housing forum that may assist us in helping families stay in their homes and stabilize our neighborhoods reporting tell of the impact of the housing crisis on local communities and federal response discusses preventing predatory lending by increasing financial product transparency and preventing the issuance of inappropriate loan products streamlining the mortgage servicing industry standardizing housing counseling and loan modification regulations improving the neighborhood stabilization program and building local organizational capacity in distress communities and rethinking the impact of low income housing tax credits on older cities report also provides congress government officials in the housing industry with a thorough understanding of the implications of federal housing policies with that i would like to offer the the report  without objection for the record thank you mr chairman i thank you for your support for that and i also thank you for your advocacy on behalf of ohio within this program that's the subject matter of this he thank the gentleman and i thank you for the opportunity to work with you on this and also my other colleagues on this committee we are now going to hear testimony from the from the witnesses was for members of congress and the subcommittee is going to receive testimony from a witness the first panel phyllis caldwell the chief of the office of homeownership preservation at the u s department of treasury while overseas management of the obama administration's making her home affordable program previously ms caldwell was president of the washington area women's foundation a public foundation soley focused on improving the lives of women and girls by fostering philanthropic giving in the washington metropolitan area is called why i want to thank you for being before this sub hearing record and will chairman christen it shrinking member jordan thank you for the opportunity to testify today about the treasury department's comprehensive initiatives to stabilize the u s housing market has been one year since the launch of making home affordable of which the home affordable modification program or hamp is a key component today campus making significant progress with over one million trial modification started yet we recognize that challenges remain we continue to monitor and update program guidelines to improve implementation and help more homeowners at the end of january nearly one million homeowners who are in active trial or permanent modifications more than one hundred sixteen thousand homeowners now have permanent modifications nearly doubling the number from december an additional seventy six thousand permanent modifications have been offered and are waiting only for the borrower signature homeowners in modifications are achieving significant savings on their mortgage payments over five hundred dollars per month on average and hamp is proven that it is helping homeowners who are faced real financial hardship nearly sixty percent of borrowers and permanent modifications have faced a reduction in income including loss of wages or hours or unemployment o spouse but it's important to remember that hamp is just one part of the administration's broader effort to stabilize the housing market together the treasury and the federal reserve have purchased over one trillion dollars in agency mortgage backed securities helping to keep interest rates at historic lows millions of americans have been able to refinance their mortgages into lower rate thirty year fixed rate mortgage is saving an average  fifteen hundred dollars per year on a refinance and thanks to the recently extended first time homebuyer tax credit more americans are now able to reenter the housing market and stem the slide in home values through hundreds neighborhood stabilization program hundreds of communities across the country are taking important steps to restore and maintain properties in neighborhoods that have been hardest hit by concentrated foreclosures and home price declines finally the administration last friday and now its that it will allocate one point five billion dollars to work with state housing finance agencies to help address the foreclosure problems in the five states that have been the hardest hit by the aftermath of the burst of the housing bubble as measured by housing prices eligible housing finance agencies may use the funding on a number of homeowner support programs including programs for unemployed borrowers for reducing the burden of with negative equity or for addressing challenges that arise from second liens and while there are still significant risks we are seeing some signs of emerging stability housing inventories continue to fall house prices measured on a year over year basis are declining less rapidly with some house price measures posting increases in recent months data released by the mortgage bankers association on feb nineteenth show that the thirty day delinquency rates on one to four unit residential mortgages fell in the first quarter along with the number of new foreclosures started going forward we recognize that there are still a number of challenges ahead the permanent modification conversion campaign in december and january yielded valuable insights for program improvements we have made a number of programs changes to improve implementation for example at the end of january treasury released guidance which requires greater income documentation prior to beginning a trial modification a simple and standard package of documents will be required prior to the servicers of valuation of the borrower for  trial modification we took these steps to speed up the process of conversions from trial to permanent modifications in the future this new upfront documentation will be required for all new hampshire modification that become effective after june first although mortgage servicers may implement it sooner and we continue to make more changes to improve implementation one important improvement we are working on now is protections for homeowners to ensure that modification process treats borrowers fairly treasury anticipates releasing guidance soon which will include a set of improved protections for homeowners in the hand mortgage modification program notably the package will standardize outreach required for homeowners who fall behind in their mortgages and make an offer to include them in hamp if they qualify additionally we recognize that the foreclosure process is often cute confusing to homeowners already in distress and we have been regularly reviewing guidelines around the process as part of our ongoing commitment to ensuring transparency and maximizing program effectiveness campus made great progress in its first year we look forward to working with you to enhance the programs performance and to help keep american families in their homes thank you thank you very much as caldwell for your testimony last week the administration announced a one point five billion dollars program to help five states deal with the foreclosure crisis but in designing that program you excluded a number of hard  long suffering states such as ohio pennsylvania texas to name just a few i have here a letter from a dozen members of the ohio delegation a letter that circulated by myself and congressman la tourette signed by democrats and republicans alike demanding to know how you could possibly justify the exclusion of ohio from any foreclosure initiative and i ask for your answer now before the subcommittee well first let me say having testified in your district in cleveland a few months ago we really understand that there are residents suffering in the state of ohio and in cleveland in particular and i think it's important to also set the context of that camp and the programs announced last week are just one part of a broader administration's the broader ministrations efforts to stabilize housing and ohio was the recipient of over one hundred forty five million in neighborhood stabilization grants including forty million dollars in cuyahoga county to deal with the very real foreclosure processes that were in place that before hamp was even started but i think stepping back to the announcement last week as representative cummings said negative equity is a severe problem and we had to start somewhere and so we looked at those markets that had price declines of over twenty percent based on the peak to trough and those markets where they are the markets that are going to be the target of this particular program you know i noted in looking at the state show all but one of the states in the new initiative are so called on stage i know they've been hit hard but they don't have a monopoly on the pain caused by the foreclosure crisis and predatory lending what assurances can you give this committee that future administration initiatives will not shemar only focus primarily on the sun stage to the exclusion of the hard hit midwestern states like ohio mr chairman i think it's  important to to understand that we have a broad array of initiatives and while this particular one was focused on those states that had very high rapid price declines on purchase day we are studying the problems facing homeownership in american families and continue to iterate our programs to address cceptable because when you have these initiatives you're still setting priorities that's the message you're sending out and you're going to have to do better is going to have to be able to come back to those of us who are in the banks and investors are holding millions of mortgages that are not worth anything near their paper value the value of the houses that secure their status father just a fraction these bankers and investors have no hope to ever recoup their investment but even after they g tax bailout these bankers and investors refuse to write the losses so far the government seem willing to ask the bankers and investors to pay their fair share happy as a result in many principal reductions now the american people are wondering the political influence of the very banks and investors or taxpayers bailed out that is causing you to avoid taking the necessary step of promoting principal reduction in the federal response to the foreclosure crisis and what is the administration going to roll out a real program for getting principal reduction is called well mr chairman we continue to think about principal reduction and the challenge facing real american families who wake up every day and realize the value of the largest asset that they have is below what they owe in the house so we have continued to study how we can make negative equity in principal reduction work better for him currently the program allows the lenders to take principal reduction at any point in time in the modification but one of the things that we've learned is most of the people who are underwater on their mortgage defaults after they've had a point in point shock or income shock and so this program was designed to target that afford ability payment and keep them in their homes recognizing that we continue to put pressure on the financial institutions to sign up for a second lien program so that we can we can have more principal write down on the second liens and continue to have more on the first i'm going to ask the committee to just indulge me in a quick follow up so what's stopping treasury from writing down the principle of those loans and thereby giving the borrower a more affordable mortgage i think as as we step back and look at hand by think it's important to remember that when this program was started we were looking at a crisis of epic proportion and a mortgage industry and a program that was largely terry where there were mortgages there were servicers there were investors and there were banks and well many people look up to the place where they write their check and they see the name of the bank and they think that's where their mortgage is when their mortgage in fact has been sold to an investor and one of the things that this program has done over the last year is brought together banks borrowers servicers and investors to reshape a mortgage modification industry that last year was just about collecting payments this is about keeping people in their homes with affordable payments and i think the next stage is to look at how we can enhance the program to continue to address the challenges we go forward thank numbers we have as of the end of last month january thirty first two thousand and ten camp had achieved just over one hundred and sixteen thousand permanent mortgage modifications again the stated goal being three to four million so i guess my question is is that really significant progress in member join i think it's important as we step back and look at the program goals the program was set out to provide an opportunity for three to four million homeowners to have a chance at a mortgage modification from program inception which was a year ago through the end of two thousand and twelve in its first year we have one million homeowners modifications in those traumatic a chanst they are realizing close to forty percent reduction in their monthly payment let me ask you this do you do you expect by two thousand and twelve to have three to four million homeowners in a permanent status we're on trial is one thing but by the mean that's your term trial modifications the trial is not not their trial so do you expect you expected to get to the goal the stated goal right from the outset three to four million do you expect to get to that number in two years based on the fact only one hundred sixteen thousand are there today after one year well again just to reclear five legal i think first let me just say we have never seen a mortgage crisis at this proportion so it's too soon one year in the program to talk about what will happen two years out but the program was designed to offer three to four million homes call an opportunity for a mortgage modification and not a permanent more modification and opportunity and one year in we have one million homeowners saving five hundred dollars a month in a modification i mean i come out and i'm not i'm sure you're working hard and and i just question is how i did it the big federal government can do these kind of things they come out with a promise we're going to we're going to do i mean we're going to do a stimulus plan is going to keep unemployment eight percent we're going to do a whole modification program we're going to help three or four million people we've done one hundred sixteen thousand and one year but we're going to get the four million we promise promise promise by two thousand and twelve i mean do you yes or no do you think by two thousand and twelve two years from today you will have three to four million people in a permanent modification plan i'll just say again we're one year in to a mortgage modification program that it is that a scale that has never been done in history and it's really too soon to predict what will happen in two thousand and twelve ok let me let me move to the second one let's go to question is going to go to are going to be hard to see let me just cut right to the chase why did you decide to quit if i understand you in july of last year august september october november every month on your website you were putting up a number of requests for financial information and here the last two months you decided not to display that number is there a reason why you decided to put that number  and if you had continued the practice you started with what would the number be today well first of all let me just emphasize that since its inception the hand program has been focused on affordability stability and transparency and so we we are very committed to transparency of the program but you admit the number that you met you're no longer putting that that correct is the numbers referencing there was removed because it was confusing to the public just to clarify the number of is the number of requests for information that lenders sent or servicer send to their entire portfolio of sixty day delinquent borrowers it's not a measure that has anything to do with applications to hamp or the making home affordable program that's just a measure of solicitations or inquiries on any modification to them and many people are confusing it with stamp and so we removed it because it was causing confusion and i mean you've heard from taxpayers you've heard from american citizens that was confusing or you just decided that it was confusing we heard from a number of people on conference calls visits and press visits but if it's an important number to the public we'll put it back in if it's your question on what would it be today it's about three point five million so it's up to you so you're make a comment to put that but that number back up there we will wait but with more clarity that it relates to overall solicitations not just to me i think that's the i mean i think it's a good thing you know you know transparency transparency the american people are smart people they put percentage in jordan in than the savings in the permanent in terms of the data collection we don't have exact data on the savings in a trial modification but if there's been no change in the income it should be the same and so are our population has a median savings of just over five hundred dollars per month and so in other words when they negotiate the you negotiate the trial if they don't get their income doesn't change when they move to that date that would make them permanent then they just you would assume is pretty much the same right because it's based on affordability on thirty one percent debt to income the  you know it was reported in the press on monday that treasury plans to implement changes to hamp including a prohibition against lenders following foreclosures while bar is the modification process is you familiar with that right and i'm very pleased about that because i cannot tell you how many people at my event on on saturday and the two previous events that we had  said that their lender went ahead with falling foreclosure while they were in the process if you could please run down the changes to him that are being considered there are other things that are being considered well let me just first back up to the the changes that you referenced that were mentioned in the paper earlier this week those have not been confirmed or proved those are changes under discussion and is a program that has multiple stakeholders those were changes that are being recommended considered and were being vetted with stakeholders that were leaked to the press in advance of approval i think everyone in this room has experienced in advance leaks so that certainly is along the lines of what is being considered but it is not yet finalized  on to say just in terms of future iterations to the program every single day my office is looking at the homeowner experience in this program and what we can do to make it better and so we are we have continually made adaptions and to not putting people out while they are trying to modify well let me just be clear at the front the hamp current guidelines to prohibit a home from going to foreclosure sale modification and so these changes are not these changes are designed to enhance the communications so that homeowners have a clear understanding of their rights and that they know that their home cannot go to very important hamp is a voluntary program but i think it's important once a servicer signs up for hamp they are under contract with us treasury and they must perform you know when the program was was launched a year ago folks said you'll never get servicers to sign up to modify mortgages within the first year we went from zero servicers to one hundred servicers covering ninety percent of us mortgages and so while it is a voluntary program once someone is in they under contract and they must comply with the regulations and that that leads me to a question you know in my district you heard what i said laura earlier i mean we we work very hard to put lenders together borrowers and the number one complaint is that the borrowed can't get a hold of anybody in the lenders office i don't care who it is i mean we just we dealt with twenty five we had him all in one place this weekend last weekend and so i'm trying to figure out where that where the problem is here there's a disconnect following and i'm sure this is happening all over the country and actually number one complaint and we can get we can get a thousand people out i want to start the morning in the snow i'm serious but they can't get a lendl and the reason why they come to me and they can have to have a congressman to facilitate them you know so i'm just trying to figure out you just said that you all are trying to make sure that you try to address all the issues because i know you want to be as effective and efficient as you can be and i just wondering if there's anything that we're missing here well let me first say that homeowner events like the one you held last weekend are very important i was actually supposed to speak at the one when it was originally scheduled for the first part of february when we had the the big snow and so those are very important i was happened to be at a similar event that our office was hosting in houston texas and that opportunity for face to face connection with the service or is important but i think it's important to remember a year ago servicers were just in the business of collecting checks making phone calls and foreclosing and as part of this crisis they have had to fundamentally reshape their operations to handle homeowners  crisis to follow the rules of a government program to shift modifications from those that used to increase the homeowner's payment to those that are long term and it's and sustainable and so as it as they have ramped up there have been some implementation challenges some signed up before they were ready some are doing better than others and part of our commitment to transparency is publishing a monthly service or performance report so that we can record state which institution first began as a mortgage loan officer i have never been a mortgage loan officer  have you ever in your prior position handled the assets and liabilities of a financial institution and how they actually account for the value of real estate yes no i have ok and for which institution was that with bank of america bank of america have you ever been a part of the resolution of an institution or any instrumentality of bank of america as they tried to work out on the books that institution troubled real estate loans yes and have you marked been a part of an effort to mark the value of those assets to market for those institutions on their own books a certain asset classes are required to mark to market uncertain art so it really depends on the accounting rules with the various assets that i've been a part of i am trying to understand now you're over at the treasury building right correct here with treasury bills i have found this whole approach to dealing with the housing market for into anything i have ever known and in a way i think you have a job doomed to failure and i don't understand why the last administration in this administration are using these means to deal with the real estate  implosion in this country so some of my questions and i asked secretary geithner yesterday to come and see the people over in the administration who are involved in these programs because i can't figure out if treasury has been selected to try to dig out of this avalanche of troubled loans because the system can't find the loans on the books of the institutions that originated them and then sold them upstream or if they're doing it for some other reason that i don't really understand but what's been happening in communities like my own foreclosures are going up and down home values are going down not up credit is frozen across this country because the banking system doesn't have confidence that the regulators or those in charge of regulating the financial institutions of this country have any consistency in what they are doing and so this recent decision by tarp tarp the group that decided that merrill lynch would be merged but lehman would go down now the same instrumentality has decided that five states are going to get tarp money to deal with home foreclosures but forty five other states aren't and i can tell you i represent a district where the unemployment rate in the four counties i represent are higher than the unemployment rate of the states of nevada and california and florida and the other states that were selected so it's really making so treasury now picked five but it didn't pick troubled areas of the other four it makes no sense to me and i'm wondering why the f d i c and the f c c aren't being used to deal with holmes value in a normal manner so that the books are resolved to the institutions that have held these loans but rather all this is being thrust at treasury which is not a h what's being done to date is driving us into further recession less lending and more delinquencies and i can tell you i mean i'm not the only one up here in the ham program it's not  working as hard as you try they've given you an impossible job and to resolve what's wrong with the housing market i asked secretary geithner for a meeting and i guess he's agreed to do it he's not a house or  bit involved in real estate this is really complicated we need to use the proper regulatory instruments and we're not using them and it is beyond me why unless we can find a loan unless they're somewhere and we can't and i don't believe that i think that we can resolve them on the books so i guess rather than giving you all the trouble real estate loans in the country what i think should be happening is every single institution that made those loans we should be look at the mortgage structure that we have today over ninety percent of the mortgages in the united states are serviced by hamp eligible servicers and that happens from within its first year of operations we have one million homeowners that are saving forty percent a month on their mortgage payment and it's and this is only one piece of the administration's overall housing solution when you think about interest rates you think about refinance about the purchase of mortgage backed securities so they're not and you think about a neighborhood stabilization patient funds there are a number of agencies working together to address what is the largest housing crisis of our time we're going to go to mr tyranny then we're going to have one more round caldwell because myself mr jordan and perhaps other members have some additional questions thousand homeowners in trouble modifications in the state of ohio and our job number one is to get those homeowners into permanent modifications and so we are focused on that every day don't you have about nineteen point four percent of people in ohio they're already underwater i don't know the underwater statistics for a while but we continue to look at everything we can do in ohio and across the united states to keep homes of those because some of the granular details about what's going on in cleveland county i'm sure you're doing your best wake up call and considered a friendly wakeup call i'm concerned that you haven't done enough to pressure loan servicers and investors and all the effort put into this program will not make a meaningful difference for the large number of homeowners in america who need help that is the underwater borrowers the borrowers who do not get modifications because of conflict of interest by the lenders owning both the first and second mortgages for biggest banks control two thirds  we're doing a number of things i think it transparency is key here beginning in november with our data published in december we published servicer by servicer performance reports and that is a big motivating tool in getting those modifications made and converted in addition we've hired making home affordable compliance it's a separate unit of freddie mac that goes in and inspect all of the major servicers to make sure that they are appropriately soliciting the homeowners that are eligible for hand modifications and that they're doing it in the appropriate way and third we run a call center for in partnership  programs across the country relayed their stories to the media and we hear that one of the most common reasons loan servicers deny bauer's modifications is see the alleged reason that the borrowers hardship isn't permanent what can you tell borrowers who are getting this kind of treatment from loan services you know our office and they call centers speak with borrowers every day on the phone we have been out to forty cities across the united states made a commitment to go to forty cities we've been to twenty two to meet with homeowners in person we regularly go out into the district offices because we want to hear about the experience that people are having this program was designed with the borrower at the forefront and every day this office take seriously the experience big complaint among borrower advocates is that loan servicers can proceed with a foreclosure or the borrower is still being evaluated for it isn't a trial period for a loan modification what are you doing to change that  as i said earlier i think it's important to understand that hamper guidelines have always said that a high may not be sold go to foreclosure sale while borrower is in hand foreclosure laws do differ across  state and so there are some states where there may be borrowers or homeowners in a foreclosure process albeit not a sale while undergoing hamp and i one of the things that we are very committed to doing is making sure that homeowners understand that process that servicers understand their responsibility in the process and that there are no situations where a homeowner go through an avoidable foreclosure my time thank you my time is expired but i'm going to ask you to be open to submissions by members of this subcommittee of follow up questions that we may have i'm going to follow a question about underperforming servicers but i'll put it in writing we're going to move along with  income the book compare the income report on the mortgage modification application with the income reported on the original loan they list in their latest report that recommendation has not been e program is a modification program not an origination program and so this program is designed to prevent avoidable foreclosures so the focus is on what is the homeowners current hardship and the documentation of the income that they have today donate sure they can and keep an affordable paid my goodness caller don't you think in light of all that took place a few years ago when we talked about some of these loans that were made and there was maybe no documentation not there was potential fraud don't you think it makes sense you as a professional who serve in this industry don't think it makes sense to look at that and the guy who's supposed to inspect the specter general of the program supposed to watch out for the billions of taxpayer dollars potentially at risk why would you do it the specter general telling you to do it it makes sense it was part of what started this in this mess to begin with a few years back seems to me that would be something oh yeah no brainer let's do our focus right now in the hand program is getting the documentation in from the borrowers currently in trial modifications on their income and the hardships that they're facing today so that you are going to get converted to permanent mode on whatever not any point over the next year or two years you're trying to get to this goal of three million for man and you've only done one hundred sixteen thousand you would do you and intend at any point over the next two years to do what the inspector general is asked to do we're always looking at ways to iterate and improve the program to provide a better experience for the borrower and for the taxpayer right now we're focused on the conversion from traumatic a chanst to permanent modifications but we continue to look at the program that i know you're not going to do with inspector general i suggest you do it is a i can't say today one year into the program what we're going to do between now and two thousand and twelve be the one prediction that i would be prepared to say is that when documentation is required upfront the conversion ratio will be higher because the documentation collection has been a challenge i do think it's important to just again emphasize that the program is designed to provide three to four million an opportunity for a modification not a commitment to modify the reform million or let me ask looks like a high number and are going to be in trial and not make it to the  permanent with that fact in mind if homeowners who get trial modifications but don't qualify for permanent ones end up defaulting on their mortgages would've been better for them to to pursue some other type of approach some other type of remedy for the difficult economic situation they're in i think it's important remember that hamp is a pay for success program so incentives do not get paid to the service or into the loan becomes permanent and then their incentive payments as the loan stays current over a five year period so to the extent that alone doesn't redefault taxpayer money is not paid to support that loan in terms of keeping homeowners in their home and avoiding foreclosure for a longer period of likely would be likely to redefault within months quote they didn't want our views mr moffat says looks like he was somewhat you know visionary prophetic on his on his statement there is that statement accurate in your mind miss miss caldwell and were in fact those of you at treasury i don't know if you were there quite yet but you know folks at treasury were were warned about got this warning that mr moffat states in the article you're correct i was i joined treasury in november of two thousand and nine so i can't speak to what people are thinking of treasury but i what i can say is that in the program today we have over two thirds of homeowners current on their mortgage and that is and we've never had anything at this scale so we don't have historical today data to fall back on but we do know in loss mitigation prior to this crisis close to forty five to fifty percent moffat maybe some of the many thank you thank you very much chair recognizes mr comics in the administration has been studying ways to look at principal write down as part of a mortgage modification but one of the things that we have learned is that the bulk of the people who are underwater in their mortgage are currently paying and so we're always examining that in the lens of cost to the taxpayer moral hazard and keeping the program running and so with that in mind this program was designed for affordability to make sure that people could stay in their homes with the payment involved actually took taxpayer money will be requiring a little bit more from them in terms of principle forgiveness right now we're looking at this program announced last week we're trying to get it up and launched and learn from what the local housing finance agencies are doing and like with everything else that we've done with the with this kind of crisis that is something we've never seen before in our history we want to take the lessons that we learned from this take some consideration maybe some emphasis on trying something new particularly where some of the banks involved already taken the taxpayer money and now season is where it's appropriate we're going to make a conscious effort to aggressively go get principal reduction s get these people to stay in their homes and at these banks do something responsible not something to go aggressively after our office has been aggressively considering proposals from all areas that we can do to address the foreclosure crisis in this country and prevent affordable foreclosures but as i said earlier we have to do that with the lens of affordability stability and transparency and we have to think about it with the taxpayer dollars it seems to be tremendously and i just checked with my office to make sure there are people i don't care what is in law not the people who are being foreclosed upon when it's an alarm not and we can give you names dates and serial numbers thing of listing the servicers and how many what they did i don't know what i'm trying to figure out how do you see that as an incentive is there any data that shows that they get i mean they get overjoyed there is something when they see their name listed in there a lot of you know they have a lot of they've done a lot of these modifications because it doesn't seem to be working you know public pressure and transparency is one tool but i think it's also important to remember that hamp is a pay for success program so the modifications don't come virt servicers don't get paid to get paid for success in addition if there are modifications that have not been done appropriately then under the contract treasury can go back and take back that incentive so we have situations where people are doing that thing about with the closures while they're working out the ham program w get that information to you absolutely if there are cases where you have servicers in your market that have violated the guidelines and are hampered we want to we want to know about that and what will you do we then to turn that to our compliance agent we have a compliance committee they review it they determine the facts and then there's a recommendation made about remedies thank you michel you bet thank you gentlemen chair recognizes the ranking member the  that the american people deserve one hundred percent transparency on your actions and your progress i do as we said this program has been designed to look at affordability stability and transparency ok we're going to the transparency since you've only done one hundred sixteen thousand permanent loan modifications or three percent of your call and we're well into your time horizon how can we see transparent way your progress so that we can determine whether or not you have any hope of in a qualified way in an effective way achieving anywhere close to your original goal or if you're not to take back a substantial portion of the seventy five billion because ultimately if you're not going to get close to three to four million permanent loan modifications shouldn't we really encourage the president let me answer i think your first question was about the three to four million and it's important to again stress as i did from member jordan that it was not designed to provide a commitment of modifications to three to four million banks we're demanding of all kinds of institutions we didn't before if you don't have if you come before the congress in a scheduled hearing and you don't have the answer to a question of how much you spent then i would like for the record a place where my staff can go on a daily basis from here forward click on a public site or if there is a reason for it not to be public and less than public sites and get that answer can you make that commitment to me today that you will bring us back that answer i can bring you back an answer on the amount spent yes but i will again say because approach because the program only pays for permanent modifications it has not spent much do you by the way receive a tally on a daily basis or has requested immediately of how much has been spent is that a question you ask and get answered periodically it's a question asked periodical a but not daily but when you ask it how long before you get an answer usually publishing my staff to go during this meeting and get that information from the tarp funds financial statements for the tarp the special id basically said no there isn't that's one of the problems is the accountability and transparency in his report which is rather lengthy comes up with a not so good you know this is not a b plus exercise is a demoness exercise in many of the things that he said let me move on to just maybe one or two other questions you're now well enough into it with one hundred sixteen thousand modifications let me go to a question that was asked before maybe to set a stage how many banks did we give money to in the tarp not in your program in the tarp overall did we give money to anybody or do we loan money to them in the tarp yes we loaned money to the bank they paid back with interest and most have acceded the largest banks have acceded when you're going to the banks asking them to do loan modifications to basically forgive in some cases substantial portions of principal  you haven't given them any money the only money is the money that you you know that you in fact are standing there are your seventy five billion isn't that correct that there inducement is whatever you bring in with your seventy five billion dollars in funds is that right and in force and under contract that they've signed if they choose to participate with you of which over one hundred servicers have covering ninety percent of the mortgages ok and the tar banks servicers have all signed up but those are those who so i just wanted to make clear that the gentleman on the other side was implying we gave money and therefore they had obligation but the only people have an obligation to those who signed up for this program and you're giving them money from the seventy five  according to information that i have in the past two thousand five hundred twenty nine homeowners homeowners in our program we at this point in time because we have homeowners in a temporary review at the end of december we put homeowners in a trial modification to do one more review so that we could make sure that those that they understood what documents needed to be in and that they had a chance to become current so therefore we have not had very many people declined in order to that's not a number we can give you everyone that's still in a trial unless their property is ineligible for hamp or they have withdrawn from hamp they have not been able to be declined well according to the numbers that i have had about ninety thousand homeowners who were foreclosed on in the last and of that number we have two thousand five hundred twenty nine a very small percentage who got permanent modification to their mortgage but when you really probate the surface that permanent modification doesn't necessarily mean that they remained in their home because something can change because it's in the program and something else can happen to it so my point is it's a very very small number of people who got any home security out of this program after one year in ohio maybe it's different in other states i don't really know but certainly in ohio we don't see any kind of real bounce from this program if it's all right i would like to state some of the  no i think it's again as i stated earlier this program went from start up to one million homeowners and trial in a year and zero to one hundred servicers in the first year and we have acknowledged there have been implementation challenges as this industry fundamentally restructured and so we continue every day to learn from what's happened in the prior month to make improvements now when you talk about permanent modifications we started the month of december with thirty one thousand modifications back when i testified for the chairman of the ranking member a few months ago we had thirty one thousand modifications through daily efforts with the servicers setting goals improving prophecies we now have one hundred sixteen thousand modifications that's in two months with another seventy six thousand out the door waiting signature to decide what modification really the permanent modifications where a homeowner has been through a trial and converted to permanent modification so that's been a doubling of pace in the last sixty days and that's a result of just growing into the second panel consists of mr bill shale to show as a journalist an investigative reporter for w j w channel eight in cleveland ohio where he's won numerous regional emmys as well as the edward r murrow award for his reporting mr general caucus has served as the cagr county treasurer since one thousand nine hundred seven under his leadership the office took an early role in combat in a foreclosure crisis particular in regard to abandon properties in the creation of county land bank he helped create oversee the county's don't borrow trouble mortgage foreclosure prevention program finally patricia stringfield is a resident washington d c and is li the record reflect that each of the witnesses have affirmative now i'm going to ask each of the witnesses give a brief summary of their testimony what you'd like keep in mind that your testimony should be no more than five minutes in duration your complete written statements will be included in the hearing record now mr shales our first witness and his testimony is in the form of an excerpt from an investigative reporter produced for fox  so what we did here is these are some pictures in new orleans and these are some pictures in cleveland and we're asking you can you tell the difference that's part of hurricane katrina some of those videos cleveland there interspersing with the orleans and the point of the story was to be that you can't really tell which is which that is cleveland right there those four homes in a row that are bacon tony brock a tele is a councilman that is slavic village and what it looked like about thirty years ago a middle class neighborhood just south of the city this is the sense of what slavic village looks like today these are pipes inside a house that's more than a century old that had gas lamps in it plumbing in the back obviously another shot of katrina as we go back to new orleans councilman brancatelli showing us that it was the perfect storm in cleveland that led to this housing crisis in many ways these homes about last their usefulness the plumbing is in the back because they predate indoor plumbing and the plumbing was attached later and they're often flipped and sold and paint slapped on them and then they're resold and we have the problem again and again and again  which is what i'm saying hopefully better than you're hearing it from me now right there and then the question is are there ways that we can you know improve the region in other ways that we can make things better this is a pair of teachers they are talking about the problems in their neighborhood and how they want things to get better and how they want to be part of the solution and how they want to purchase this old abandoned home and they had some problems making the purchase some problems quite frankly to do with the governmental agency that i think have been resolved now but this is on the west side of the one this is a totally separate area from slavic village we're focusing only on one house here because it's next door to the new home that they invested in and they're trying to make the city work just in their neighborhood but it's very hard to do with that ice or next to them that they want to be part of the solution for bringing it down and putting a park quite frankly on that corner which is not far from lake erie it's a beautiful piece of property and they're there explaining that they're just frustrated by what's happened in the neighborhood that they've really invested in and that they want the neighborhood to get to get better and they want the government however it should do to help them that's their house on the right that's the property that's on the corner behind them is a view of the lake brancatelli in slavic village indicating that you know that the local officials need help making this happen talking about all the different for sale  that around slavic village we had a lot of copper stolen from all these homes when copper prices were high this is what some people think the solution is actually which is to knock down these homes that no longer have value give them to the neighboring homeowners plant trees do something other than having boarded up drug houses in in the areas this is a and that is if you look up the top there that's where was kerosene came in predating  electricity this is where all the copper was stolen when copper prices were high from these abandoned homes and people sold them for money the tragedy in these neighborhoods and parts is a lot of older people still live in the area who can't leave we're talking here i think about the infrastructure that still exists in these neighborhoods banks gas stations the neighborhoods have not yet died there still is the infrastructure that creates neighborhood there if something can be done about what you're seeing behind me here and i want to say these are not  isolated neighborhoods you can go to twelve neighborhoods in cleveland and get this this is explaining a process where how money flowed into a government account and how that was part of the problem again i think that's been addressed and i think that's the portion we're showing them just i want to thank you mr sharon for being here and for the investigative report we're going to go to questions to you when we finish with the other witnesses but thank you for that presentation chair recognize burst at the end of two thousand and six in this dubious distinction worst in the country moved to other communities in places like california nevada arizona and florida this crisis did not go away in communities like cleveland or in states like ohio in two thousand and six the last year cuyahoga county led the country in foreclosures we had thirteen thousand six hundred foreclosures we had over thirty fourteen thousand in two thousand and seven when we were no longer first almost fourteen thousand to two thousand eight fourteen thousand in two thousand and nine and we're expecting a similar number in two thousand and ten a quick review of the county foreclosure maps i don't know if you have them there we have a glitch with i t m so every time i tend to do this mr chairman i botch it but a quick review of these maps would show you that the foreclosures while they have decreased just a bit in cleveland that's the core city in part because there's nothing left they've really picked up in the in a ring and the outer ring suburbs if you move the progression through to two thousand and nine you'll see those shifting dark shades results are density and foreclosures they have moved from the core city two thousand and seven two thousand and eight two thousand and nine the last year and as you see the cancer has spread out even more troubling is evidence that tens of thousands of loans that could be foreclosed are backed up and are at least ninety days late as evidence by this next progression of slide you will see in these light clearly demonstrate that delinquent loans are backed up in the foreclosure queue look at the ninety day slide to the right just keep progressing forward what you will see that there are tens of thousands of loans in ohio there are now ninety day late they've backed up in this foreclosure dam and when they burst and they will burst it will add to the misery and despair we feel in our communities this crisis as a result at least thirty five thousand vacant properties eighteen that thousand eight hundred twenty thousand properties awaiting demolition akaka county and a population loss in cavite county that is second only to orleans parish and louisiana and we know why their first cleveland which had four hundred seventy three thousand residents in two thousand census it has been estimated may drop to assist us three hundred twenty five thousand residents in the two thousand and ten cen us a thirty percent loss of population in just ten years property values have plummeted throughout the county half of all sales in cleveland last year mr chairman and members of committee were share sales the consequences and governmental budgets especially public schools which rely heavily on property taxes will be felt for the next generation in one recent study if you could put that up it's a study negative equity high it shows up as negative ninth in the country but congresswoman kaptur made a very good point we never experienced the run up of real estate prices that many of the other states ahead of us on the list experience so our losses were more significant as they took away real value not one driven by real estate speculation we're talking here today about the discipline with the with the ham program those reasons i've been well reported but hamp is been especially ineffective in ohio as you see on the chart members of the committee as only three states have experience a lower percentage a loan modifications than a while for all these reasons we were stunned to see the rollout of the plan last week by the obama administration to use one point five billion dollars in tarp funds to assist california nevada florida arizona and michigan how can the state at the epicenter of this crisis for so long be ignored once again how is that possible the only effective remedy in our experience that works in this fight is foreclosure counseling and to congresswoman cummings port point i'm not talking about the one eight hundred call numbers to call and senators i'm talking about the intense face to face personal counseling where train foreclosure counselors work with homeowners in distress and stay with them as they do loan modifications a program we establish in cuyahoga county our don't borrow trouble campaign one of the most effective in the country it takes people who call two one one and refers them to four train counseling agencies where people sit down face to face again not over a long distance phone number homeowners and assigned to foreclosure counselors who meet with them gather financial information assess the situation and proceed to work on their loan modifications with the service or our success rate in two thousand and eight was fifty six percent of those who came in and sat down with their counselors has a lot of the loans modified more to modify now some of these mortgages are beyond repair but our success rate with the homeowner calls us again as i said we think is the best in the country which brings me for my raise maser reason for being here today which is to plead with you mr chairman members of this committee to restore funding to the national foreclosure mitigation county program or n f m c which is an arm of  neighbor neighbor neighborhood works reductions at the federal level to this program would result in direct funding cuts to counseling agencies in calgary county and ohio organizations like aesop a nationally regarded community group that is i think the most effective housing counseling agency in ohio last year aesop received one point seven million dollars in funding through an f m c because of reductions in funding their allocation this year is only five hundred sixty eight thousand dollars they are laying off counselors housing counselors beginning monday other organizations throughout the state are doing the same last year a stop counseled eight thousand families statewide this year as a result of the cuts they expect only be able to counsel three thousand families the chart i'd like to show you their last  graphically demonstrate that a real policy is moving in the wrong direction delinquencies are moving up but foreclosure counseling dollars and moving down is in comprehensible nonsensical and wrong time is running out if only two tenths of one percent of them out allocated each of those states assumes an even split three hundred million dollars if two tenths of one percent of the monies allocated to those five states last friday were allocated to these programs we could keep these housing counselors on and and i have just had staff take a copy of it over to mr caldwell who unlike most people who testified in front of our committees actually stays to hear what other people have to say i have always appreciate that about in the state are so concerned when we get a signal from the administration perhaps it's not looking care closely enough what's happening in our community i also want you know mr ok that this afternoon we'll have a copy of your testimony sent over to the treasury secretary as well we believe this is very very important message another important message about to be delivered to us from someone who's lives in the neighborhoods of washington d c and  string i am a resident of the district of columbia and i come here today to tell you the story of my situation i am a single mother who has worked my entire life to make sure that my son and i are tak purchased a home for sixty six thousand dollars over the years as we financed the time to cover expenses take advantage of lower interest rates and to do some repairs and cover college expenses for my son when things seemed like they were under control my mother developed excuse me a medical condition forcing her to no longer be able to work and i had to take over paying her bills my mother has now been diagnosed with dementia and i am now her probably a care taker she receives social security payments to cover her insurance and her medicine but little is left to cover food and basic expenses when i contacted my lender they tell me that they with happily refinance my loan again to help me cover the increased balance on my credit card and to pay off my son's school expenses they suggested that i go to another lender to get a second mortgage as my home have plenty of equity and it could help me pay the bills after followed their advice and took out a second mortgage this only solidify my situation for a few years until the price of gas and utilities rose sharply i depend on my car to get to work making in the king so difficult that i had to dip into my savings account until it was due and at this point i turned to taking out loans on my four one k until i no longer could be allowed to do despite the financial stress i was able to keep making mortgage payments for several months however i missed my first payment in september of two thousand and eight and as i ran out of ways to get extra income i attempted to work with muslims or several times but was not given any options for resolution i had to turn to my neighbors to help pay for food me and my mother i missed a few payments received warnings of foreclosure from my lender when i finally was able to get in contact with national community reinvestment coalition in c r c in c r c was able to arrange a work out only to find out that the lender on my first mortgage was able to sign an acceptable work out solution this caused my lender on the second loan not to offer anything because the first was not modified as the days pass and the foreclosure sale date approach i decided to move out of my home because my mother's doctors didn't think she could handle being thrown out on the street i began to move out on february twenty second two thousand and nine into a rental partner with my mother we await it until in  got as a resolution the lender cancelled the foreclosure sale and i was to enter into what three months hamp trial period because the modification on the first allow my second loan holder was able to reduce my monthly payments by one hundred dollars but this news we return scuse me with this news we return to our home in april the landlord however asked me for six months of rent but then sent another great but then within another green minute to begin in june two thousand and nine with a different payment amount i made my payments for five months only to be told that it was denied because of missing information this was not the case as we had submitted all the documents to them in c r c tried several times to get them to reduce the amount file one more for the program after several weeks of being told that i was in foreclosure again i began to panic as they we had already fixed everything back in april of two thousand and nine but we were still in a back and forth i do not understand how this works and became frustrated to the point of crying i'm out there every night i have listened to everyone that is help me and through the hard work  many people over in the hope that this is the last modification that i received this week will be the final one and will be approved i have had for ha trout modification i hope that you can take my situation to heart and understand that these issues face real people and the decisions that you make affect us all i don't understand how i can be that we are ok and everything is on track to be modified begin the trial period and have it turned down because it seems to be technicalities is seems to me that if i owe more than what my house is worth they could just reduce to the value of my home thank you again for your time i hope you can go to other home owners like myself who are struggling to get by every day but want to pay their bills more about the plight of your you and your family of experience which is really something that many americans are experiencing i guess my time for questions and i've got five minutes i want to start with mister show pictures of an of a neighborhood in cleveland but you get around the city a lot because at your job would you say that this effects of the foreclosure crisis including residential neighborhoods just based on what you things that we're concerned about is people think we just went to the one bad street in a neighborhood and took it i could a point in my camera in probably almost every neighborhood in cleveland and found similar scenes and as treasurer caucus indicated  he has the statistics are just visceral when you go out into suburbs now you can start to see this as well and it is just it's a robbing and i think mr chairman what's significant when we talk to local people there they want to save these neighborhoods they still have the infrastructure of neighborhoods in place but in five years i don't think that infrastructure will be there well thank you for your again for your testimony to this subcommittee mr o k as you made a case about instability in neighborhoods and county can you talk about how principal reduction would make a meaningful difference and what have loan servicers said about it jim and i've been involved in this crisis now for about nine years we went to the federal reserve bank of cleveland back in the fall of two thousand with complaints about what was going on with loans and lending in northeast ohio in the hope that the fed would step up under what we've been take some measures to slow the runaway train down so i've been involved with that going back to late two thousand very intensely involved in the past let's say five years with banks and counselors and workouts and i have to tell you that i'm exhausted and i find that the tools that we really need as long as these are all voluntary agreements we're right where we were when we started this process years ago as long as all we have is is maybe a carrot but no stick as long as all we can or we can do is rely on the goodwill of the banks were valid voluntary the word voluntary and the phrase loan modifications bank loan market to please don't go together and what we have found i'm not surprised by the low percentage of workouts we've experiences for years it's hand to hand combat i think the one tool that we would like to have is the tools that you and other members alluded to congressman tourney if we had the ability to force principal reductions of loans i think we could take a number triple quadruple our successful loan modifications this mirror what i find stunning is that when they greet when they refused to modif those principal loan balances typically the loan and the poor closing the family ends up leaving the property ends up being vandalized of the home value is completely lost as opposed to partially some of the loss and it destroys remaining value left in very much for your testimony mr of crackers i'd like to go to mr strength i i want to know a little bit more about your experience with the lending industry you said that you've been able to refinance your home over the years and since you bought your home in one thousand nine hundred eighty for about could get they get that to refinance my first for how much depends on what i need it like did they tell you your home was worth four hundred twenty thousand yeah yeah i mean when i talk to them i told them that i took the loan out to sixty when i refinanced with them it was you tell them what sixty six thousand and they wanted to refinance four hundred twenty thousand because that's what the the guy came back with the the appraisal so what happened they came back well the first time they came back with twenty two i don't need that much they says well you can get another fifty thousand on your home and that would pay your son's college it would help you with your bills and is not going to make your payment that much so they kept trying to get you to borrow more and more money on the house th all i want you to do is restructure let me lower the interest i can handle it and they says well we'll after somebody's out and do the appraisal this appraisal came out and he used to house at three know what happened when you felt when i got in trouble you there first one idea was from the literature is call your mortgage company let them know before you get in  two thousand and eight two thousand and eight and at that time they told me i have to write a letter may fifteenth that letter was in their office because our backs did it along with a financial report of my earnings and what i had going on they had now contact me the hope now representative sa over it's one year i can't speak to the results in arizona california nevada i saw the chart just like i can only speak to the results in ohio and i can speak to the results in the community i represent and the chart speaks for itself with third from the bottom i spoke with a group of housing counselors who are on a conference call last week i believe mr mccarthy was in on the call and i thought it interesting that one of the comments made by folks on the phone is they felt that service rs were more willing to work out a five hundred thousand dollar mortgage in california than they were to work out seven seventy thousand dollars mortgage is in toledo or cleveland or dayton and they felt that they had prioritized which mortgages were really worth their time and energy they might bristle at that suggestion but i heard from too many people on that phone call and others so i think that you have to look at that chart that we posted up on that on those flights were third from the bottom say this really just going around cleveland that in dayton in akron you can see you don't really the charts prove it but if you just tour the neighborhoods i don't know whether it's this program or not but there is an evident decline i've been covering cleveland for twenty years the neighborhoods do not look like what they looked like two decades ago mr august you talked a lot about the counseling program this is a local counseling program it's my understanding helping ohioans figure out what's at stake what's involved what how they're babies or face to face counseling not not to call a number of face to face counseling which is congressman cummings pointed out is the most effective understand in your professional judgment years of experience with this years of being in tyler county years of the treasure of that county something as a conservative republican i believe and as they think we better off and instead of having this seventy five billion dollar program hundred sixteen thousand mortgage modifications done three million the goal but only hundred sixteen thousand done in one year might be just a little better off if we said that the goal of this crazy program let's take a few of those dollars and let local people help local people people  in ohio or in the case of d c here help them with some counseling help them deal with it on a local level versus this concept that we just have cell embrace around this town over the last year and a half big federal government with regulations and spending taxpayer dollars and doing all things and i think maybe that might be a little better approach i have seen two programs now one was a under the prior administration i've seen this program and obviously both of fallen short the only thing i can tell you is nothing beats face to face counseling times servicers that are responsive nothing works better than accounts for big clear big federal government programs administered by republicans are no better than big federal government programs a measure by democrats that's the problem so something on the local level done with a lot less dollars would be much better for the folks who are in a tough situation and frankly much much more respectful of the taxpayers across this country who are paying for the darn thing i'd love to avoid those layoffs on monday unfortunately a lot of people to be looking for help in cleveland to recognize ms kaptur thank you mr chairman for holding this hearing i'm really honored to join my ohio colleagues and i want to thank the panel for being here today what's left of democracy in this country we are helping to move forward by your presence and we are up against some pretty big forces what's happened in cleveland and in washington and everyplace else is the largest transfer of wealth in american history that has come from the equity from the heart of america and transferred to a group of people in some of the biggest banks in the world here in our country on wall street and down there in charlotte north carolina who have no conscience for what they have done in fact their bonuses this year will be bigger than well thank you so it's on the list the whole conversation about servicers and always irrelevant because you can't get at them they're cleverly sandwiched in between the big banks who have all the power and are making all the money despite every the unemployment rate in this country and people losing their homes and main street america you just can't get them and in fact by the servicers extending the servicing period they're making fees all the time so they're making more money out of your grief so they have no incentive even though it looks like camp gives them an incentive to try to settle for get it they're making more money through the tax code into servicing fees by letting the agony continue it's interesting we don't have a list of one hundred  hundred ten servicers are will ask let's call well to provide that for the record but we have to put the pieces of this puzzle together what didn't come out at most of the hearings in congress yet is the securitization process failed the banking system has been changed to not provide accountability and responsibility for those who created the damage very clever system it is so clever you have to have masters degrees in order to create probably p to create this kind of house of cards but they've done it masterfully we need to re store the mortgage loan process so springfield you're not dealing with somebody way out there but you've got an financial institution here in the nation's capital that you can deal with face to face and you have to go through some absentee councilor here and some group here but in fact that the prudent lending system of this country is restart and that's the real fight because the net yield of all of this over all the crisis that the american people are facing right now is that the biggest banks that caused this problem five of them now hold over forty percent of the deposits of this country it used to be thirty five thirty three they're going to get half five institutions are going to have that much power and they have that much power i was interested in what several of you recommended mr wilcox you're a giant my i thank you so much for what you're doing and don't lose faith because this is a process that should restore america or at least we have some hope of it happening if we do our job right and i want to thank our chairman he's got the courage of his convictions and he's trying to help us in a congress that's really locked down and not holding the kinds of hearings the stringfield we should have a thousand americans like you testify but this congress isn't meeting its responsibilities to the people and our people are suffering all over this country so your presence here today is very important because it's like water in a desert and so you're doing what you must do on behalf of many that are not being invited to testify by the other committees that should be a part of this the idea of principle loan modification should be done like that and if the securities and exchange commission and the accounting standards unethically are being rewarded and the only way that this changes is if conscious people in the press like mr shields you keep doing your job and it's true don't lose hope don't stay you keep doing your job and the stringfield you work with the community reinvestment group they're wonderful we have to keep doing our job and take this to america because the people are losing hope and we we haven't lost hope so this process really does work and on the good news front secretary geithner was before our budget committee yesterday and i would like to suggest to the chairman ohio could meet with him we take him up on that offer myself as chairman we are in touch with treasury and mr geithner's about this specific matter and i'm glad that he responded to you because i'm hopeful that he'll be similarly responsive to meeting with ohioans in the congress who want to see what can be done to try to save all these homes that are being threatened that and i represent people in those neighborhoods we all do but i come from a neighborhood like that the neighbor in slavic villages in my district i know the people lived in homes like that i know how people put their their entire life on the line to get that kind of a house what day and night to work there ain't fingers to the bone to be able to just have a little something to have a piece of that american dream which calls home o ship and then you see the big just crushing it it just it breaks your heart really does thank you all for being here with this testimony and it's really much appreciated we're going to go to the third panel thank you well the panels in transition i'm going to make the introductions of the credits of the individuals who are going to be before us they have quite a number of accomplishments and i think  that by the time they're seated i'll still be reading those accomplishments mr daniel barenboim is the chief program officer of the national community reinvestment coalition an association of six hundred community based organizations that promote access to basic banking services including credit and savings to create and sustain affordable housing and job development bombers responsible for coordinating  housing counseling intermediary participating in a neighborhood works foreclosure mitigation counseling program miss julia gordon senior policy counsel at the center for responsible lending a nonprofit nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices she specializes in legislative and regulatory policy issues related to consumer lending particularly mortgage lend and product development research commentary and views which are regularly cited by numerous major newspapers magazines and think tanks i would ask the witnesses stand the policy of our committee on over i ask that each of the witnesses give a brief summary of your testimony please keep this summary under five minutes in duration i want you to know that your complete written statement will be included in the hearing record mr baron bomb your first witness please proceed the activities currently underway to suggest improvement in this area solving the foreclosure crisis is critical to the economic health of this country since the onset of this crisis seven trillion household dollars wealth has been lost this loss of household wealth translates into reduced consumer spending depressed business activity lower gross national product lower property tax receipts and higher local and state budget deficits foreclosures not only impact individual homeowners but entire neighborhoods through declining property values increases and bad them and decay crime and vandalism and short the continued failure to adequately address this crisis multiplies the profound social cultural and economic injury of our  day to our nation the foreclosure tsunami has been further compounded by the highest unemployment rates in the last quarter century in a vicious cycle the record rates of unemployment and reduction in wages are now feeding continued foreclosures in the face of this great recession the bush administration encouraged the private sector to create the hope now alliance hope now alliance recorded three point one million loan workouts during two thousand and seven and two thousand and eight but two thirds of these workouts deferred or rescheduled borrower payments without lowering monthly payments meanwhile the foreclosure crisis worsens subsequently the obama administration created two programs the home affordable modification program and the home affordable refinance program unfortunately has been noted already both by the chairman and the ranking of the minority member these programs are not keeping pace the foreclosures that we're seeing today are written testimony that discusses in detail the origins of the crisis problematic non problem a nontraditional lending compounded by regulatory failure greed and malfeasance little or no p r lending or consumer protection oversight and serious safety and soundness lapses and analysis of the public information is available documenting the performance of each of the programs as in our written statements the experiences of our housing counseling network qualified housing counselors around the nation as well as the testimony of mrs patricia stringfield document the importance of hud counselors in this process however the magnitude of the foreclosure and unemployment crisis calls for a more proactive intervention and that means private a private partnership between both government  well as servicers investors securitize and others despite the best of intentions we are not seeing results in these programs because of their voluntary nature and a more and more considered mandatory approach should be taken yesterday the mortgage bankers association announced a voluntary unemployment bar a bridge to have modification programs that will help a limited number of bars experience temporary unemployment for a period of up to nine months it certainly will not address the preexisting problematic underwriting that occurred overvaluation were serve as a substitute for permanent principal reduction or other programs such as n p r s these help now model that we have suggested in our testimony to help them model originated in discussions with wall street users wall street's own reverse auction process to in fact promote the sale of a large group groups of large groups of  mortgages mortgage backed securities to treasury or another agency could also be for example other departments or could be hud but using the current market value of the and then passing those savings on to the homeowners so they have principal reduction and in turn selling those loans back thirty or forty year fixed rate loans to the private sector at little or no cost to the taxpayer authority for this program exists under the current tarp program exists under eminent domain and frankly it could be done with modest changes to the tax requirements if in fact congress chose to act in that direction as well we want to see loan programs of stablish for the unemployed such as h r forty one seventy three passed by the house as well as more broad interpretation principal reductions within the ham program substantial research documents that the most successful loans the loans that are not falling out of permanent modifications are in fact loans that have had principal reduction last week the administration announced one point five billion dollar initiative to target five states we agree with this committee that in fact a much more broad need is necessary there is no reason to focus on volume or size of loans over the quantity of modifications that are currently needed across our nation like in closing let me say that we also other improvements perhaps those improvements include greater transparency and reporting of data  good afternoon chairman ranking member jordan and members of the committee thank you so much for inviting me today to talk about the government's response to the foreclosure crisis we need a much more robust and effective plan to save homes and prevent unnecessary foreclosures over six million homeowners are now behind on their mortgages and at risk of foreclosure more than two million foreclosures have occurred in the past two years alone by twenty fourteen researchers predict that up to thirteen million foreclosures may have taken place this crisis has been particularly hard on african american and latino communities widening the already sizeable wealth gap between whites and minorities and wiping out entire formerly middle class neighborhoods the spillover costs are massive including lost property values even for homes current on their mortgages or erosion of the tax base and the increased burden  before i talk about the details of foreclosure prevention i want to refer to the many people who will try to convince you that this crisis was caused by public policies aimed at expanding the american dream of homeownership to all communities this claim is nothing short of outrageous and insulting every single bank regulatory agency has pronounced this allegation is false and there is no good data to back it up this foreclosure crisis was caused by toxic loan products that were sold to people for profit purposes and that preyed particularly on the communities that i've mentioned above most borrowers could have qualified for cheaper mortgages with less risky terms and the vast majority of these loans weren't even sold to first time home buyers these products were designed to become affordable within a couple of years so that mortgage brokers could refinance the same customers over and over again like mr enfield and receive a speech time wall street's appetite for risky loans was seemingly insatiable and lenders scrambled to deliver more loans to keep the money coming it's also not true that unemployment right now is the culprit rather than bad lending risky loans are approximately three times more likely to default no matter what the underlying economic conditions are where you live in fact during every other period of high unemployment in recent decades for closer rates remains essentially flat because people had a home equity that could cushion the blow in responding to this crisis in responding to this crisis the government so far has given the most help to the people who need it the least programs to lower mortgage interest rates and the homebuyer tax credits have helped support the housing market in the face of historic levels of defaults but haven't helped the people at highest risk of losing their homes as we've discussed already the centerpiece of the administration's foreclosure prevention efforts the home affordable modification program has not reached its potential a key obstacle impeding hamp success is that the private servicing industry has been either on able or unwilling to do the job they need to do originally the hand program was meant to be coupled with other legislative changes that would have backstop the program and provided other incentives for servicers to perform but those legislative changes did not occur as a result hamp is essentially a voluntary program where homeowners themselves still have no power control over their situation participating servicers routinely violate the program's guidelines and fail to convert performing trial modifications into permanent ones in a timely way homeowners are given very little information about how their loan modification request was evaluated and they have no independent appeals process of they believe their request was denied unfairly in our written testimony we've laid out a number of detailed suggestions for improving hamp what i want to focus on here is the importance of requiring servicers to reduce the principal balances for underwater homeowners being underwater is the most accurate predictor of default to read a fault on until mortgages are right sized on a routine basis is unlikely will seize the end to the cycle of reserve fault we also need action outside of ham to make camp work alarm requiring that servicers evaluate all homeowners for a loan modification prior to initiating foreclosure could give homeowners the right to fight their foreclosure of such an evaluation were not conducted it's also crucial to permit judicial modifications of mortgages on primary residences this solution costs nothing to the us taxpayer it's the only solution that cuts through the gordian knot of second lien securitizations negative equity and back  consumer debt finally we need commonsense rules that prohibit lenders from making loans that borrowers can't afford and we need an independent consumer financial protection agency if there's nothing else that we've learned from this thank you chairman because then it's ranking member jordan and distinguished members of the subcommittee for the opportunity to participate in today's hearing my name is ronald paris and i am the president of auckland financial corporation at auckland we share your sense of urgency to find a lasting solution to our nation daunting foreclosure crisis a crisis that threatens millions of families with the loss of their home what is not alone originator we did not make the bad mortgages that are causing the problem but as a loan servicer we are doing everything we can to fix them we were the first in the industry to adopt a comprehensive loan modification program one that provides homeowners in distress lower mortgage payments that are both affordable and sustainable and result in greater cash flow for investors than for foreclosure are proud to have saved well over one hundred thousand homes from foreclosure since the onset of the mortgage crisis through loan modification port's the administration's program we believe it as well does it we believe it is a well designed response to the mortgage crisis even so almost to your year in the hamp too many homeowners facing foreclosure are having difficulty getting their loans modified in our view this is due mainly to a lack of sufficient capacity and expertise in the industry to handle the volume one is invested over one hundred million dollars in r and d to build our own loan servicing technology our platform is both scalable for high volumes and incorporates behavioral science research for effective customer communication using technology we have been able to convert trial modifications to permanent modifications at a rate that is ten to twenty times higher than the big banks in the program but the key metric for long term success is the redefault rate according to a recent industry report three month redefault rates on hand have ranged from eighteen to thirty three percent through our technology advantage we have kept our redefault rates to below five percent as part of auckland's continuing commitment to make camp a success we would like to share with the subcommittee some of our recommendations for a program enhanced first the required debt to income ratio ratio should be lowered to below thirty one percent one out of every for hip applications is rejected for failing to meet the standard usually these are families struggling with higher household expenses for food clothing and education instead use a flexible residual income broach to determine a payment that the homeowner can actually afford alternatively there should be either an across the board twenty eight percent or a sliding scale d t i that varies based on the number of dependent on the b tax return second principal reduction modifications are needed to overcome the negative equity problem this is a primary driver of defaults on mortgages and re defaults on modified mortgages eleven point three million mortgages in this country or twenty four percent are currently underwater and these numbers will likely grow in auckland experience negative equity increases the chance of a redefault by one point five to two times accordingly approximately fifteen percent of all of our loan modifications have involve some element of principal reduction hamp already addresses principal forbearance but there is no provision for principal forgiveness we believe step principal forgiveness is best that is incremental principal reductions over time so long as the loan remains current third additional funding should be made available for housing counseling groups grassroots organizations like n here today aesop in ohio home for us a national council of la raza and so many others around the country are providing much needed homeowner outreach and counseling we urge financial support for any hud certified counseling organization assisting homeowners through a successful permanent modification underhand fourth and last underperforming hamp servicers should be required to outsource to performing servicers whether for lack of effort or just an inability to handle the volume too many banks are not producing the results needed to achieve program goals treasury should be empowered to redirect servicing to those with a proven track record and available capacity to execute trial modifications and convert them to permanent solutions let me conclude by thanking you again for inviting me to testify today and asking that my full written statement be entered into the record thank you and it is so ordered and i thank you mr penton you may unprecedented number of weak mortgages in two thousand and eight approximately fifty percent of outstanding single family mortgages were weakened prone to failure with two thirds being the result of federal programs how did this happen in one thousand nine hundred five the federal government issued its national homeownership strategy that required the use of flexible and alternative lending in quote an unprecedented public private partnership to increase home ownership to record high levels over the next six years with this national policy in place the lending equivalent of gresham's law took place weeks lending drop out good turning to the administration's home affordable modification program i'd like to recall hamps original goal  still is posted on their website to help as many as three to four million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over a long term the treasury department has consistently painted rosy scenarios regarding camps progress and an apparent desire to post big numbers early on the concept of a trial modification was in traduced borrowers were allowed to enter a trial without qualifying on the basis of income this was unfair to borrowers who had no chance to qualify many will be worse off than if they had been given a quick no and encouraged a final turn of housing as a result the hamp pipeline became hopelessly clogged with the lion's share of the blame in my opinion falling on treasury the january two thousand and ten hamp report contains a statement that strange credulity that noted quote the program is on pace to meet its overall program goal of providing three to four million homeowners the opportunity to stay in their homes close quote that was not the goal the truth is hampshire has been a spectacular failure when measured against that goal in the first eleven months has been one hundred sixteen thousand homeowners who receive permanent modification subtract expected rita faults and you might end up with seventy five thousand homeowners who are safe in foreclosure about two percent of the goal i also i predicted ultimately hampel only need a small percentage of a three to four million foreclosure goal the same read a definition of program goals applies to heart treasuries refinance program it was to help forty five million homeowners shut out from refinancing because their current loan to value was above eighty percent through december two thousand and nine fannie and freddie have completed one hundred ninety thousand refinances less than five percent of their goal not a problem making home affordable two thousand and ten january two thousand and ten report now takes credit for four million refinances of all types regardless of l t v treasury promised transparency what we get are disingenuous progress reports when it comes to program goals this committee and the american people deserve an honest assessment of what happened har can do why is the problem so intractable we're facing more challenging situation than ever because credit standards were severely compromised by federal policies prior to the onset of current prices what delinquent borrowers in the housing it needs history  that provides quick answers and fast decisions this will allow shot the shadow inventory of millions of the faults of loans that cannot benefit from modification to end up in the hands of qualified homeowners late last month treasury  process which would help meet the goal of providing quick answers and fast decisions will hopefully put an end to no doc trial modifications unfortunately the changes do not take effect for three more months one last note in ms caldwell's testimony noted that two billion dollars in savings have already been rest recognized by half participants and administrative action has kept interest rates at historic lows but i think we must be honest there is no free lunch tens of millions of americans many pensioners living on their savings many your constituents are suffering a real suffering a real loss of income due to these low rates households in this country own eleven trillion in fixed assets many are now earning about two percent less than previously that's over one hundred to two hundred billion dollars a year in lost income and ten of billions of dollars in lost taxes thank you and look forward to your question thank you is to pay no there's no such thing as a pre launch but apparently there's multi billion dollars in bonuses for bankers who got tarp so we have to figure out that squares with folk wisdom i heard mr gordon correctly talk about the root of the crisis and i think we should be clear that this foreclosure crisis started well before the current administration came into office and it is rooted in policy decisions that created the largest asset bubble in american history an eight trillion dollar home mortgage bubble sort of call this crisis a subprime crisis would miss the point the bubble was created by federal reserve policies that kept interest rates low for the explicit purpose aoun home prices to inflate knowing and expecting and tacitly encouraging that homeowners would use their rising home values to supplement stagnant wage income using  house as an a t m wasn't a product of greedy and irresponsible homeowners it was a product of a shrewd but ultimately disastrous government calculation and policy and american workers have been the biggest losers in this crisis so far they're the ones who've been thrown out of the workplace in large numbers had their hours reduced their benefits cut they're the ones who've been forced to give up their family homes endure bankruptcy and the of public foreclosure proceedings so labeling this crisis subprime crisis would really be blaming the victims the crisis was not caused by people who lost their homes and their life savings or jobs in a reputation it was caused by people who perpetrated what i think is kind of a hoax responsibility for the crisis and repairing the damage falls on every person and every institution including past and current representatives of both members of congress of both parties in congress rather as well as the last administration and this current administration now is the responsibility who should have been and are responsible for assuring the ethical and financial integrity of our banking and monetary system now mr barron by you mention in your testimony the role of credit rating agencies in influencing loan servicer behavior making them to be more inclined to act in delinquent loans first by foreclosing then modifying it and only as a last resort regulate or monitor their credit rating agencies in this nation and the way the system worked in fact did work toward incentivisation of profit and simply of whatever paper was presented before those rating agencies they actually even call themselves publishers of information rather that in fact reviewers of that information is also led to significant their lending issues because if you look at many of the aaa ratings of those attack the second lien program but no service have used it i had heard that bank of america has now signed up for it i don't exactly know what that means but as far as i know no one has yet camp is working at all do you think it's a thing it's a pretty bad program i mean you think like i do you think the track record of hamp is clearly underperforming what we need to do to get ahead of this crisis ok so here's a little confused because in your testimony you said federal policies had nothing to do with contributing to the mess that we got and so the government had nothing to do with contributing to the mess we got in even though the track record  government trying to fix it is pathetic the federal dollars i'm referring to in that section are there's been a lot of talk about how the community reinvestment act and other policies in fact i think mr  mentioned this earlier are somehow responsible for the toxic loan product when in fact for the most part the loans made under c r a were safer loans and ended up having a much better performance profile subsidized generally they're running a thirty seven percent delinquency rate on a three hundred million dollars portfolio third federal suspended the program and because of its poor performance do you agree with my statement i made  with here from my earlier question is how well we can get him to comply with what the inspector general wants him to do on that on the original no doc won't get documentation i mean it just highlights and underscores when you travel down this road you end up making things worse were done in the second quarter just before hamp got ramped up and there was a growing tide of those heavily growing tied into interest rate reduction much like camp since then the down let me offer the observation that i don't think servicers can do principal write down many servicers have business with the five biggest banks that caused this mess to begin with coupled with the changes in the bank back through the ninety's the change prudent lending to securitization and the local banks holding a portion of those loans and we moved incapacity character collateral and collectability there's no collectability and so how do you do the loan work out how do you do the normal accounting changes that's where i want to go by using the f c c and the involved given loans i don't think we can get it through the servicers i think camp is proving that we can't do it so we need to be able to do what we did back in the eighty's we need to be able to work out those loans get the assets and liabilities to balance on those books and there's going to have to be some real estate write down we're going to have to get down to some level within the banking system and it's not happening and i wanted you to comment on that i want you to comment on two things for me one is your view of servicers being able to solve this problem to hand even as you write down and if you were to recommend to the president how to rearrange what he's doing in order to get at this real estate crisis that we don't millions of bacon across this country how would you tell him to would you tell him to bring into his office the oval office all these agencies so we can get at the value of real estate and loan workouts where we can get them done so i want you to comment on the principal write down who can actually do it and  don't believe the servicers and then what would you say to the president to get to where you want to go and help us to move the housing market to a more positive and keep people in their  homes i think that's an excellent question and i'll respond quickly to allow each of the panelists their opportunity right now there's an overreliance and balloon payments by servicers across this country so really there is no principal reduction rightly what we are hearing from the investor community is that they are ready to begin some serious principal reductions and to paraphrase they are ready to take their share of the haircut that's necessary to correct the marketplace but the system right now is loaded with conflicts for example you noted earlier that a majority of the seconds or hold by the banks the same banks that operate the majority of the servicers in this nation conflict number one conflict number two is some of the accounting rules that we've been discussing in this presentation and before this hearing as well issue number three we have to get beyond the blame game everyone is at fault there is shame blame shared blame here and if we are going to move ahead we need to ensure a meaningful regulatory structure that embraces the community reinvestment act for what it has done in responsible lending for community reinvestment we need to embrace a strong consumer financial protection agency and we need to work with responsible services and lenders who are willing to do business in the way that is required to bring trust back to the market that you spoke to earlier we are not going to see global investors or pension funds or others buy in the secondary market into those minimum requirements are made last one more point that i'd like to make is that we do need to focus on the harp program as well ultimately who owns that four hundred billion dollars of risk right now it is not the private sector it is the taxpayer what a wonderful way to go about in fact reaching seventy percent of the outs tanding mortgages in fact reducing the risk associated to the taxpayer through principal reduction we have the power to do that through evident domain or through the power of congress seem quite able to do a principal reduction there are principal reduction is happening they're just not happening for the securitized and what percent are represented of the portfolio of securitized loans  you know that's a benz on the service or so but but in terms of the trouble quite a lot of them are securitized the places where the portfolio loans are doing the most principal reduction zip with respect to payment option arms which for the most part are so underwater not only because they're located in some of these highest price decline states but also because they had negative amortization built into the loan these loans are very poorly served by by hand  hamp hamp can't really help them for a variety of structural reasons so it you know it's clear that the problem does have to do with these conflicts of interest and i completely agree with you that not all of the banking and securities regulators that need to be at the table seem to be at the table rowing in the same direction with the treasury's program i know the folks at treasury you know despite my concerns about the under performance of the program i know th trying their best but there needs to be a team approach here and we already know that the prudential regulators have not had a history of putting consumer interest at the top of their agenda  know that's why it's so important to have an independent consumer protection agency but most of all this is why it's so important to do things like change the bankruptcy code i mean ultimately you need someone to just who has the power to cut through all of this regardless of the various interests and conflicts involved we already have a system set up in this country for that entire bankruptcy system does just this principal residence mortgages are the only type of debt that can be restructured your second home mortgage can be your yacht can be but but not the home that you live in and have ma life for your testimony i want to thank all the witnesses this is the domestic policy subcommittee joined by my colleague congresswoman kaptur and we've had a full hearing today with many members of congress testifying and or rather participating i'm congressman dennis kucinich chair of domestic policy we are going to continue our work on this issue and we are going to continue to work for a serious program of principal reduction in order to help keep people in their arms thank you very much