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S. HRG. 110–812 

KEEPING FAMILIES IN THEIR HOMES: HOW TO 

PREVENT FORECLOSURES 

HEARINGS 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

OCTOBER 17, AND OCTOBER 24, 2008 

Serial No. J–110–123 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

BENJAMIN L. CARDIN, Maryland 

SHELDON WHITEHOUSE, Rhode Island 

ARLEN SPECTER, Pennsylvania 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

STEPHANIE A. MIDDLETON, Republican Staff Director 

NICHOLAS A. ROSSI, Republican Chief Counsel 

(III) 

C O N T E N T S 

FRIDAY, OCTOBER 17, 2008 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1 

WITNESSES 

Casey, Hon. Robert P., Jr., a U.S. Senator from the State of Pennsylvania ...... 2 

Griffin, Barbara, Pro Bono Coordinator, Allegheny County Bar Foundation, 

Pittsburgh, Pennsylvania .................................................................................... 11 

James, Joseph M., President Judge, Court of Common Pleas of Allegheny 

County, Pittsburgh, Pennsylvania ...................................................................... 3 

McKeever, Michael T., Partner, Goldbeck, McCafferty and McKeever, PC, 

Philadelphia, Pennsylvania ................................................................................. 9 

Mullen, Sheriff William P., Allegheny County, Pittsburgh, Pennsylvania ......... 5 

Sullivan, Dan, Mortgage Foreclosure Prevention Specialist, ACTION-Housing, 

Inc., Pittsburgh, Pennsylvania ............................................................................ 6 

Williams, Dawn T., Director of Housing, Urban League of Greater Pittsburgh, 

Pittsburgh, Pennsylvania .................................................................................... 8 

A SUBMISSIONS FOR THE RECORD 

Griffin, Barbara, Pro Bono Coordinator, Allegheny County Bar Foundation, 

Pittsburgh, Pennsylvania, statement ................................................................. 22 

FRIDAY, OCTOBER 24, 2008 

STATEMENTS OF COMMITTEE MEMBERS 

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 25 

prepared statement .......................................................................................... 54 

WITNESSES 

Carmona, Hiram, Assistant Contract Administrator Housing Counseling ........ 47 

Casey, Hon. Bob, Jr., a U.S. Senator from the State of Pennsylvania ................ 26 

Dodds, John, Director, Philadelphia Unemployment Project ............................... 44 

Gould, George, Managing Attorney, Housing and Energy Unit Community 

Legal Services, Philadelphia, PA ........................................................................ 38 

Harrigan, Tania, Homeowner ................................................................................. 36 

Henderson, Cynthia, Homeowner ........................................................................... 37 

Hudson, Brian, CEO, Pennsylvania Housing Finance Agency ............................ 40 

Jackson-Smith, Deborah, Homeowner ................................................................... 35 

Jones, C. Darnell, President Judge First Judicial District of Pennsylvania 

Court of Common Pleas of Philadelphia County ............................................... 28 

Jones, Curtis, Jr., Member, Philadelphia City Council, Philadelphia Pennsylvania ...................................................................................................................... 32 

Rhaney, Eric, Homeowner ...................................................................................... 34 

Rizzo, Hon. Annette M., Judge, First Judicial District of Pennsylvania Court 

of Common Pleas of Philadelphia County .......................................................... 29 

Seldin, Stefhanie, Managing Attorney, Philadelphia Law Works/Philadelphia 

VIP ........................................................................................................................ 42 

Page

IV 

White, Michael, Pennsylvania Bankers Association city of Philadelphia ........... 45 

SUBMISSIONS FOR THE RECORD 

Carmona, Hiram, Assistant Contract Administrator, City of Philadelphia, 

Office of Housing and Community Development, Philadelphia, Pennsylvania ...................................................................................................................... 54 

Dodds, John, Director, Philadelphia Unemployment Project, Philadelphia, 

Pennsylvania, statement ..................................................................................... 56 

Gould, George, Managing Attorney, Housing and Energy Unit Community 

Legal Services, Philadelphia, Pennsylvania, statement ................................... 61 

Harrigan, Tania, Homeowner, Philadelphia, Pennsylvania, statement .............. 67 

Hudson, Brian, Sr., Executive Director and CEO, Pennsylvania Housing Finance Agency, Harrisburgh, Pennsylvania, statement ..................................... 68 

Jones, Curtis, Jr., Member, Philadelphia City Council, Philadelphia Pennsylvania ...................................................................................................................... 73 

Rizzo, Hon. Annette M., Judge, First Judicial District of Pennsylvania Court 

of Common Pleas of Philadelphia County, Philadelphia, Pennsylvania, 

statement .............................................................................................................. 77 

Seldin, Stefhanie, Managing Attorney, Philadelphia Law Works/Philadelphia 

VIP, Philadelphia, Pennsylvania, statement ..................................................... 82 

White, Michael, Pennsylvania Bankers Association, City of Philadelphia, 

Philadelphia, Pennsylvania, statement .............................................................. 85 

(1) 

KEEPING FAMILIES IN THEIR HOMES: HOW 

TO PREVENT FORECLOSURES 

FRIDAY, OCTOBER 17, 2008 

U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, D.C. 

The Committee met, pursuant to notice, at 9:35 a.m., in room 

321, Allegheny County Courthouse, 436 Grant Street, Pittsburgh, 

Pennsylvania, Hon. Arlen Specter, presiding. 

Present: Senators Specter and Casey. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Senator SPECTER. Good morning, ladies and gentlemen. The Senate Judiciary Committee will now proceed with this hearing on the 

unique programs here in Allegheny County to try to keep homeowners in their homes when faced with potential eviction under 

sheriff sales through a mediation program which has been devised 

by the Court of Common Pleas under the direction of the distinguished President Judge James and implemented by Sheriff William Mullen and supported by quite a number of pro bono groups 

in the community. 

I am pleased to be joined by my distinguished colleague Senator 

Casey, and we thank Judge James and the sheriff and others for 

coming in today on relatively short notice. And we have scheduled 

this hearing because of the problems faced nationally and, of 

course, locally on this eviction issue. 

It is a win-win proposition if we can structure these matters so 

that people can stay in their homes. The homeowner obviously is 

benefited by not being evicted and by an arrangement to save the 

home. The lender has the potential for benefit to avoid a lot of costs 

of eviction and to repossess property which may be reduced in 

value and in a very difficult housing market, and it is something 

to be avoided if it possibly can be avoided. And, of course, it has 

the benefit of protecting the taxpayers from welfare programs and 

other support programs. 

There are a number of agencies which are at work here. Pittsburgh and Allegheny County both qualify under the neighborhood 

stabilization grants and the Housing and Economic Recovery Act of 

2008, and there are a number of programs both on the Federal and 

State level which are potentially helpful. 

In discussing this issue with President Judge James, one of the 

critical points is to acquaint the homeowners with the availability 

of the program. And when foreclosure proceedings are initiated, 

2 

they are swamped with a lot of legal papers, which many people 

cannot understand and they discard. So it has to be a proactive effort to reach these people and tell them that they can get a 90-day 

stay and they can get assistance. 

Senator Casey and I are also looking at the issue of legislation 

at the Federal level. Legislation has been pending since last November to give bankruptcy courts some authority to move in, and 

we included in the economic recovery program some provisions to 

protect lenders who enter into these arrangements. 

We have a relatively tight timeframe here, and we want to proceed with dispatch, and in accordance with Judiciary Committee 

procedures, we have allocated 5 minutes to each witness to reserve 

some time for Senator Casey and me to ask some questions at the 

end. And now I am delighted to yield to my distinguished colleague, Senator Bob Casey. 

STATEMENT OF HON. ROBERT P. CASEY, JR., A U.S. SENATOR 

FROM THE STATE OF PENNSYLVANIA 

Senator CASEY. Senator, thank you very much. 

I want to thank Senator Specter for gathering us together today 

to talk about an issue that confronts not only Allegheny County 

and southwestern Pennsylvania, but the whole State and the country, and that is the issue of foreclosures and the strategies that 

many communities, including this county, have begun to put in 

place to prevent foreclosures, to keep people in their homes and 

thereby to stabilize neighborhoods and keep our economy moving 

in the right direction. 

Senator Specter has been kind enough to invite me here and to 

bring us together, and I know that he appreciates, as I do, Judge 

James and the sheriff and others who are here with us and spending the time with us to begin to hear some of the ideas that you 

have been implementing here in Allegheny County to prevent people from being thrown out of their homes. 

When you think about this in real terms, when we think about 

the economy that we are living through right now, the terrible financial crisis that has gripped the country, as complicated as it is, 

at its foundation it is rather simple. This started with the foreclosure problem, and that remains, I think, the central challenge 

in our economy. You could make a case for the freezing up of credit 

being another major challenge as well, but it did start with foreclosures. We have to keep our eye on the ball to bring that number 

down, which we see over and over again growing. The number of 

people in the United States, the number of families in the United 

States, every single weekday, the days that the courthouses across 

the country are open, almost 10,000 people every single day fall 

into foreclosure, begin that process of foreclosure. We have got to 

bring that number down. 

Here in Pennsylvania, even though we have been in a relative 

sense not as bad off as some States, like Nevada or California or 

Florida, for example, recently our numbers are getting worse. You 

know the numbers here in Allegheny County are getting higher. I 

know in the other end of the State, in Philadelphia, the numbers 

are getting higher. But statewide, in the month of August the foreclosure rate went up by 60 percent over August of 2007, and that 

3 

is statewide. That is a statewide number. So Pennsylvania is going 

to be faced with this challenge for a long time, and we have got 

to put in place steps that will work, and a lot of those steps don’t 

come from some smart guy in Washington. They come from people 

in communities like this and counties like this that have begun to 

take steps to deal with foreclosures. 

So I am happy to be here, happy to listen to the testimony and 

to ask questions, because we can learn a lot from you from having 

dealt with it directly, in a personal way and in a community-focused way here in Allegheny County, and I am thankful for that 

opportunity. 

Senator SPECTER. Thank you, Senator Casey. 

Senator Casey says the answers do not come from a smart guy 

in Washington. We are still trying to find a smart guy in Washington. 

[Laughter.] 

Senator SPECTER. If we are successful in finding one, maybe we 

will do a little better. But what is happening here on the county 

level is very encouraging, and our lead witness is the distinguished 

President Judge of the Court of Common Pleas, Judge Joseph M. 

James. I talked to Judge James last week, and he has expedited 

the organization of this hearing. 

We are very appreciative of your presence here, and as a general 

matter, it is 5 minutes, as I have said. And there will be time cards 

held up to give you notice when the time narrows and when the 

time ends. 

Judge James, this is an unusual procedure for you to be in the 

witness box and Senator Casey and I to be promoted to the bench, 

but thank you, and we look forward to your testimony. 

STATEMENT OF HON. JOSEPH M. JAMES, PRESIDENT JUDGE, 

COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PITTSBURGH, PENNSYLVANIA 

Judge JAMES. Thank you, Senator. Senator Specter, Senator 

Casey, being a witness is something I have tried to avoid in my 29 

years of being a judicial officer, but I am pleased to testify here 

today. 

When Senator Specter says that it was on short notice, we pulled 

this together in less than a week, and I would like to thank the 

staff of the Court of Common Pleas—Ray Billotte, the Court Administrator; Helen Lynch, the Deputy Court Administrator—who 

put this together working with Senator Specter’s staff. It was 

quick. I guess when you are a United States Senator, you can get 

things done in about 5 or 6 days. 

I would like to start off. This summer, I had a meeting with Bill 

Mullen. The sheriff of Allegheny County and a long-time friend of 

mine came to my office concerned with the home foreclosure problem within Allegheny County. We were well aware that the city of 

Philadelphia had started a program under the supervision of President Judge Darnell Jones, and I had spoken with President Judge 

Jones on a number of occasions. So we were looking to see what 

the problem was in Allegheny County, to identify it, see the magnitude of this problem, and then determine what type of project, if 

4 

any, we should endeavor to start here to deal with the particular 

problems of Allegheny County. 

So after the meeting with the sheriff in June, I endeavored to 

start to meet with various people who were involved in this. I met 

with Katherine Martin of the Neighborhood Legal Services; Tom 

Riley, Esquire, who is the chairman of the Real Property Section 

here in Allegheny County of the Allegheny County Bar. I met with 

ACTION-Housing and the members of their Mortgage Foreclosure 

Conciliation Collaborative. I met with lawyers representing numerous banks and lending institutions. I also met with Dan Onorato, 

the County Executive, and he gave me full support to deal with our 

Director of Court Records. Under our home rule, the Director of 

Court Records, most of you practicing law remember them as prothonotaries. We no longer have one here. But Kate Barkman is the 

Director of Court Records. And I also spoke and met with John 

Goryl, who is the Director of the Pennsylvania Housing Finance 

Agency. 

And so after these various discussions, we have decided let’s 

identify how many cases we actually have, how many home foreclosures are taking place. We started by identifying that we had 

approximately 400 actions in foreclosure taking place a month. The 

sheriff and I consulted, and the number is fairly stable, if not 

slightly down from 2007 numbers, which is unique to the Allegheny 

County housing market. So we looked at the magnitude of our 

problem. 

The problem we had initially was that of those 400 foreclosures 

a month, we were unable to identify which ones were owner-occupied residences and which were commercial, which were nonowner-occupied residences, and the other group, which would have 

been tax delinquencies. 

So meeting with Kate Barkman, she and her staff have agreed, 

first of all, that we will have an official designation for owner-occupied mortgage foreclosures, a separate identifying suffix MG; as opposed to general docket, it will be mortgage docket. We will be able 

to create a data base and know exactly how many of these are 

homeowner-occupied mortgage foreclosures. 

Now, the second thing was where along this continuum of the 

legal process is the best place to intervene, and, obviously, the further up the stream, at the very initial beginning is the place where 

you can intervene and create a workout, if you will, and the lender 

has not incurred additional costs—the legal costs, the costs of posting the property, and, of course, of legal advertising. 

So our plan here in Allegheny County, after meeting with a number of people—in fact, as recently as yesterday afternoon in my 

courtroom—we have created a program as follows: At the time of 

the initial filing of the complaint, the case will be identified as a 

homeowner mortgage foreclosure. It will have an important notice 

on it which will identify a single phone number, which is what you 

alluded to, Senator, that, in fact, the people are confused by getting 

papers, a central repository where they can make a call and ask 

for counseling. The existing counsel program created by the Pennsylvania Housing Finance Agency have agreed to provide counselors and pay for those counselors, and counseling will be made 

available. 

5 

If an owner avails themselves of the program, a 90-day stay in 

all proceedings will take place. Counseling will take place. A workout will be proposed, and they will go before a judge of the Court 

of Common Pleas for conciliation. The Allegheny County Bar Association, where the defendant qualifies, will provide pro bono, free 

lawyers for them to attend in a special appearance to appear before 

the conciliation judge. If it can be worked out, the case will be settled and discontinued. If it cannot be worked out, the stay will be 

lifted, and the case will proceed. So it is a simple solution to a difficult problem, and we think we will be much more effective by 

dealing with these cases at the very earliest stages of the legal proceedings. 

The banking community welcomes this and looks forward to it. 

The 90-day stay is not as disruptive as other stays, and it is not 

a stay across the board. The defendant must avail themselves of 

some counseling. 

Now, as you said, they get bombarded with literature, so by having a single number that they can call, an 800 number, then they 

can get help immediately, and people can explain to them what 

their rights are and their ability to get additional financing, get the 

HERO program set up by the State of Pennsylvania and the 

HEMAP program, also available for funding, and hopefully some 

additional funding available from the Federal Government which 

will be made available in the future as this bailout helps us. 

So thank you for coming, and thank you for calling attention to 

our efforts here in Allegheny County, and people here to my left 

can explain it a little bit further. But that is the outline. 

We have one last thing to do, and that is to centralize where we 

are going to have the single phone number. We have not decided 

where it is going to be. It could be the sheriff’s office. It could be 

the prothonotary’s office. It could be the bar association. We are finalizing that, and when that is done, we will put this plan in place. 

Senator SPECTER. Thank you very much, President Judge James. 

We turn now to Sheriff William Mullen, who has exercised 

unique sensitivity on a very, very difficult issue over and above the 

ministerial job of evicting people. So we appreciate what you have 

done, and we thank you for joining us, Sheriff Mullen, and the floor 

is yours. 

STATEMENT OF SHERIFF WILLIAM P. MULLEN, ALLEGHENY 

COUNTY, PITTSBURGH, PENNSYLVANIA 

Mr. MULLEN. Thank you, Senator Specter, Senator Casey, for 

coming here. I can give you a little bit of a historical perspective 

how we have come to this plan. 

Shortly after I came from Pittsburgh Police over to the sheriff’s 

office, I noticed that the sheriff sales had increased from 2006 to 

2007. At that time, reading about what was being forecast for the 

housing industry and how the bubble was going to burst, and reading some FBI publications about the fraud and corruption within 

home sales and getting mortgages, I thought that we should do 

some things to be proactive in case that would come here. 

The first thing that we did was when we served the writs, the 

foreclosure notices, we would send an informational booklet which 

was ‘‘Prevention of Mortgage Foreclosure, Tax Sale, and Other 

6 

Court Action.’’ That gives them financial and legal assistance by 

listing phone numbers and areas where they can contact people to 

try to save their home. There were several organizations included 

in that: ACTION-Housing, ACORN, the Urban League. 

There were other issues that we started. We started a website 

where people could come to the website, go through the various 

links to find help and maybe some ways to save their homes and 

stop the foreclosure process. We instituted a mortgage foreclosure 

hotline for people to call, which was manned between certain hours 

for people to call, where we would not be able to give legal advice, 

but certainly give them information on where to go to once they received the notice. 

What we did next was, you know, the sales sort of stabilized 

from 2006 to 2007. They actually decreased a little bit. But then 

I met with the Federal Reserve, I think in March of this year, to 

try to determine about the ARMs resetting. And I talked to them, 

and they told me that the ARMs would be resetting in Allegheny 

County between the next 5 and 12 months. I then checked to find 

out that the foreclosures and ARMs, or the adjustable rate mortgages, were 28 percent where the standard mortgage at foreclosure 

was 8 percent. So at that time, I thought there was maybe something else we could do to try to stay ahead of this curve and try 

to prevent people from losing their homes. And that is when I sat 

down with my staff and some of the lawyers, and actually some 

people from the mortgage business, and tried to come up with a 

plan to try to do something about maybe getting ahead of the curve 

and prevent some of these—you know, give these people some options. 

So then we came up with a plan about the conciliation process, 

and then, you know, I do not have much to do with this other than 

to be able to set the sheriff sales. I did not want to have a moratorium on sheriff sales because of the problems it would cause with 

the banking industry. I did not want to postpone them. I just wanted to try to get a conciliation process in place. 

So that is when I went over to see Judge James. He said to make 

a rough draft, put it on paper, and that is what we did. We put 

it on paper. We took it to Judge James, and he carried the ball 

from there. 

Thank you. 

Senator SPECTER. Well, thank you very much, Sheriff Mullen. 

We turn now to Mr. Dan Sullivan, a mortgage foreclosure prevention specialist with ACTION-Housing, Incorporated, in Pittsburgh. Thank you for coming in, Mr. Sullivan, and we look forward 

to your testimony. 

STATEMENT OF DAN SULLIVAN, MORTGAGE FORECLOSURE 

PREVENTION SPECIALIST, ACTION-HOUSING, INC., PITTSBURGH, PENNSYLVANIA 

Mr. SULLIVAN. Thank you, Mr. Specter and Mr. Casey, for arranging this. I just want to let everyone know that I am merely 

now just a representative of 12 different organizations that are 

working in Allegheny County. We represent advocacy, housing 

counseling, and legal services. We had met back in the beginning 

of September to discuss some of the conversations that we had had 

7 

with Judge James and Sheriff Mullen previously regarding mortgage conciliation to see where we could best fit into the solution. 

The organizations that I am representing cover the community 

outreach to get scared borrowers or borrowers who are not sure 

what conciliation means to them, to try to get them to answer the 

paperwork, to call up the 800 numbers. We represent the counselors who will help the borrowers provide financial documentation 

so a successful conciliation can be had. We also represent groups 

that provide legal services, pro bono attorneys to represent these 

borrowers at the actual conciliation so they get fair and equal representation at these discussions. 

I think when I look at certain economic projections of Allegheny 

County, this mortgage conciliation proposal is going to have an effect not just with the folks who are falling behind now, but, you 

know, for years to come in certain cases. We are going to see, based 

on estimates right now, an increase in foreclosure filings from 2007 

to 2008 if the numbers keep up. If they keep decreasing, we should 

be fine. But averages right now show that they are going to be 

higher than they were last year. 

I think within the last 10 years, there has been a 131-percent increase in mortgage foreclosure filings in the county. We are looking 

at a lot of subprime mortgages that Sheriff Mullen had just mentioned that are going to reset, have not reset yet, and there are 

about 52,000 subprime mortgages in Allegheny County that are 

going at a delinquency rate of about 30 percent, which is significantly larger than prime mortgages as a comparison. 

We are also looking at unemployment rates that are going to increase in Allegheny County. Last year’s unemployment rate was 

about 4 percent. This year’s projections could be up to 6 percent. 

So when you are looking at the borrowers, the citizens of Allegheny 

County, those projections are going to suggest that those subprime 

mortgages that they have, regardless of whether or not they are 

ARMs, they are going to start falling behind. Borrowers are very 

tight on their budget. You have got a lot of folks who are living 

paycheck to paycheck, week to week, to keep their mortgage affordable. And a conciliation is really going to have a positive effect with 

borrowers working out reasonable payment plans with mortgage 

companies. 

I think the largest issue that counseling and advocacy groups see 

now currently is getting timely responses from servicers regarding 

a modification request. Financials have been collected from the borrowers, income statements, debt information, and sent to these 

lenders for them to propose some sort of modification adjustment— 

either a rate decrease or principal balance reduction, something to 

that effect to help them out. 

We are looking at a turnover of somewhere in the range of 2 to 

3 months now for mortgage companies to come back and give us 

an adequate modification proposal. And that is just too long. It is 

after the Act 91. It is after the complaint has already been filed. 

The legal costs are escalating. And a mortgage conciliation at the 

time proposed by Judge James and Sheriff Mullen is perfect in that 

we can get these folks in before those fees have been assessed, and 

it is forcing everyone at the table to provide documentation up 

8 

front and expedite the process so that we can get quicker turnover 

and get more people to stay in their homes. 

I again want to thank both Judge James and Sheriff Mullen for 

how they have taken on this issue, and they have really sort of 

pushed it to the forefront, because we have an issue just currently, 

but there is going to be a continual bubble burst in Allegheny 

County. I do not think we are halfway through the woods. I think 

we just got to the beginning of the woods. And we are going to see 

foreclosure rates go up based on some of the data I shared. 

Senator SPECTER. Thank you very much, Mr. Sullivan. 

We now turn to Ms. Dawn Williams, Director of Housing for the 

Urban League of Greater Pittsburgh. Thank you for coming in 

today, Ms. Williams, and the floor is yours. 

STATEMENT OF DAWN T. WILLIAMS, DIRECTOR OF HOUSING, 

URBAN LEAGUE OF GREATER PITTSBURGH, PITTSBURGH, 

PENNSYLVANIA 

Ms. WILLIAMS. Thank you, Senators. Thank you for this opportunity. 

As Dan stated, I represent the Urban League of Greater Pittsburgh, and we are one of the collaborating agencies seeking to have 

some input into this conciliation process, wanting to express our 

support for this process, and to just outline the vital need for this 

process in this area, and even to advocate for that, for something 

like that across the Nation. 

Because of the inequity of bargaining position between lenders 

and homeowners, as Dan alluded to, it is vital that a third party, 

an impartial party—in this case, the court—step in to mediate favorable results that will make nonperforming loans perform and 

homeowners that are threatened with foreclosure able to hold onto 

the American dream of homeownership. If processes like these are 

not implemented—and we would even argue nationwide—there is 

going to be forum shopping on the part of unscrupulous lenders, 

and there could be possible negative business consequences for cities and municipalities that have the courage, as Allegheny County 

has, as Philadelphia County has, to address this issue systemically. 

The Government’s role in this crisis has already been recognized 

by Congress and the executive branch, and so the country knows 

that decisive action is required and has been taken to begin to 

avoid and to avert this meltdown. 

The action that is needed is for Government to step in also in 

the form of legislation to mandate that the two entities crucial to 

our economy—lenders and homeowners—sit down at a table with 

a level playing field. And that is what the conciliation process does. 

It brings the two entities together, the lender and the homeowner 

who may be afraid, who is most of the time afraid, who does not 

have enough information, does not know in a lot of cases how to 

represent themselves in a way that would get them the best benefit 

and be able to create a situation that is affordable for them over 

the long term. 

Once brought together, we would advocate, legislation this process, that parties agree to terms that will ensure long-term affordability for homeowners and a consistent income stream for lenders 

uninterrupted by foreseeable disruptions in performance caused by 

9 

too high interest rates, adjustable interest rates, balloon notes, and 

principal balances that far exceed fair market value. 

There are many things to recommend a conciliation process, but 

I just want to outline the importance of some of the ideas that were 

already raised. 

It is crucial that the process rely upon a centralized hotline so 

that people can call and know exactly where to call. There must be 

a network of counseling agencies to assist clients in reviewing documentation, proposing affordable loan modifications to lenders, 

with the ultimate goal of home retention and decreased foreclosure. 

And, finally, the significant role of volunteer and legal services attorneys cannot be underestimated in the success of this process and 

the production of meaningful results for constituents. 

Because of the many benefits for the homeowner, we would even 

advocate that this be implemented on a statewide level and that 

even it could be undertaken across the Nation. However, if the 

strong network that I have mentioned earlier, including a crucial 

role for housing counseling agencies and pro bono legal services, 

does not exist, this process becomes merely a sham and just one 

more hoop to jump through before foreclosure becomes a reality. 

If these underpinnings cannot be mandated, then another solution would be a nationwide moratorium on sheriff sales in order to 

for Congress to flesh this matter out and pass legislation that 

would give incentives to mortgage companies to negotiate meaningful workouts with borrowers and penalties for the failure to do so. 

Such legislation would need to provide substantive defenses for 

homeowners to foreclosure actions and, similar to the Truth in 

Lending Act and other consumer protection statutes enacted under 

the Commerce Clause, would have to penalize lenders that fail to 

comply with this provision. 

Now, these ideas I know seem ambitious and probably beyond 

the pale, but these desperate times are calling for decisive action 

and action that needs to be taken immediately. 

I thank you for your time. 

Senator SPECTER. Thank you very much, Ms. Williams. 

Our next witness is Michael McKeever, Esquire, a partner in the 

law firm of Goldbeck, McCafferty and McKeever, from Philadelphia. 

Thank you for traveling here today, Mr. McKeever, and we look 

forward to your testimony. 

STATEMENT OF MICHAEL T. MCKEEVER, PARTNER, 

GOLDBECK, MCCAFFERTY AND MCKEEVER, PC, PHILADELPHIA, PENNSYLVANIA 

Mr. MCKEEVER. Thank you, Senator Specter, and thank you, 

Senator Casey, for the invitation. I look forward to presenting at 

least some of the lender response, as our firm represents a number 

of mortgage lenders in foreclosure, bankruptcy, eviction, and related proceedings. 

We, too, share the desire to resolve loans on an effective basis 

and in a cost-effective and efficient manner. The program that has 

been proposed in Allegheny County is similar to the program that 

is in place currently in Philadelphia. I want to take some of what 

the other witnesses have stated. 

10 

Judge James and I think Mr. Sullivan and Ms. Williams have indicated, you know, we need to go out and acquaint the homeowners 

with their rights and with their responsibilities that are available 

to them. There is a lot of fear. There is a lot of concern and embarrassment. Homeowners are scared. That is why Sheriff Mullen’s office gets the brunt of the calls and the letters and the contact from 

homeowners. That is at the end of the foreclosure process. By the 

time a sheriff sale is scheduled, you are 14 to 18 months delinquent 

in your account. That is too late. It is not too late for everybody, 

but it is too late for a lot of the homeowners. That is not to say 

we will not work with them, but it is very late at that point to 

come up with an effective plan based on their current income and 

expense statements. 

One of the frustrations that we deal with on the lender side is 

that income and expense statement and those payroll records. I am 

not aware of many of the resolutions that our clients have entered 

into over the last year or more that could not have been entered 

into whether or not there was court intervention or legislative activity. The fact of the matter is effective communication among the 

parties is absolutely necessary, and every homeowner out there 

who is near foreclosure, in foreclosure, or threatened with foreclosure should sit down today and work through their financial 

plan—forget financial plan. That is too wordy. Work through their 

family budget. What do they make each month? What do they pay 

each month? Look to cut those costs. Take that responsibility. Then 

when they meet with a housing counselor or an attorney who specializes in foreclosure defense, they have a much better idea of how 

they can advocate for themselves and use those advocacy groups to 

push their plan ahead. 

It may be that those numbers show that they cannot afford 

where they are living, with or without the rate increases. Lenders 

are dropping interest rates. They are not doing it across the board. 

It has to be on a loan-by-loan basis, at least now under the current 

environment that we are in. They are dropping principal balances 

in certain cases. And I think we are going to see that increase as 

time goes on. 

It is clear that lenders lose money when a house is foreclosed 

upon, but they also lose money in delaying that process unnecessarily. The amount of time, money, and expense that lenders have 

put into creating programs and reaching out to borrowers over the 

last year is unprecedented. And, unfortunately, whether from fear 

or lack of information or lack of counseling, homeowners still are 

not stepping up as soon as they should. They are a couple of 

months down: ‘‘Oh, I can handle this.’’ The next thing they know, 

the foreclosure complaint is filed. It is moving along on a pretty 

quick track. It still takes 10 months in a State like Pennsylvania, 

but it moves quickly, and the costs continue to increase. 

One of the other elements of the Philadelphia program—and we 

have made the offer here in Allegheny, and we hope that it is embraced here—is to provide contact information for each of the law 

firms that represent lenders in foreclosure matters throughout the 

Commonwealth. The idea behind that is to avoid exactly what Mr. 

Sullivan had stated earlier, that idea that lenders are sitting on 

11 

perhaps effective workout agreements, and meanwhile the foreclosure is proceeding. 

I can tell you that our office will take that to our lender clients, 

and we will try to avoid the incurring of additional costs and expenses because the goal is the loan resolution first. And foreclosure 

is one of the alternatives, but certainly not the chief alternative for 

lenders. 

That communication is of paramount importance. The Philadelphia program is a pilot program. This program I assume will be a 

pilot program as well. Constant communication among all the 

stakeholders throughout the process is really, really important. 

And to the extent that that is part of the framework of the program, we look forward to supporting it. 

We also, again, will—I am glad that most of the—that the witnesses today, all of the witnesses today, were not engaged in the 

blame game. And it would be easy. We could spend hours talking 

about who is to blame. I have my views on that, and I think, frankly, everyone has a piece of this puzzle. And that does not solve the 

underlying issue. The underlying issue is how do we resolve this 

loan, and we resolve it through effective communication—a courtannexed program such as this is very important to promote that effective communication—and, again, to stress that the homeowners 

are their best and first advocates. They are the ones who need to 

step up, find that counselor that can help them, find that attorney 

that can help them, and put together a plan of action to resolve 

their loan delinquency in partnership with their lender. 

I thank you for your time. 

Senator SPECTER. Thanks very much, Mr. McKeever. 

Our final witness is Ms. Barbara Griffin, Pro Bono Coordinator 

for the Allegheny County Bar Association. 

STATEMENT OF BARBARA GRIFFIN, PRO BONO COORDINATOR, ALLEGHENY COUNTY BAR FOUNDATION, PITTSBURGH, PENNSYLVANIA 

Ms. GRIFFIN. Thank you, Senator Specter and Senator Casey, for 

having me here today. I am the pro bono coordinator for the Allegheny County Bar Foundation, which is the charitable arm of the 

Allegheny County Bar Association, and I want to talk to you just 

for a few minutes about the role of volunteer lawyers and other 

lawyers on behalf of the borrowers in this process that has been 

proposed by Judge James. 

First, let me say that I am very proud to work for and be a member of one of the most active and involved and strongest bar associations in the country, I would say. The Allegheny County Bar Association has almost 7,000 members, which means that about 80 

percent of the lawyers in Allegheny County are members of the bar 

association, and out of that number, about 750 attorneys regularly 

volunteer for one of the many pro bono programs that we operate 

here in Allegheny County under the umbrella of what we call the 

‘‘Pro Bono Center.’’ We have about 24 or 25 programs that provide 

a number of types of legal services to low-income people in need of 

legal help. And these programs also call upon volunteer law students, paralegals, legal secretaries, and in all we have about 1,000 

volunteers who are doing pro bono services for low-income individVerDate Nov 24 2008 12:18 May 05, 2009 Jkt 048815 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\48815.TXT SJUD1 PsN: CMORC
12 

uals here in Allegheny County every year. So those are the volunteers that I feel very confident we will be able to call upon to help 

address this problem and participate in this very important program. 

I also want to say that luckily we are a close community here 

in Allegheny County, a little smaller than Philadelphia, so the bar 

association—I and really the bar association as a whole—enjoys a 

very good working relationship with members of the local bench, 

including and especially Judge James. And we also work very 

closely with other legal service providers, including our local Legal 

Service Corporation entity, which is called Neighborhood Legal 

Services Association, and along with organizations like the housing 

counseling agencies that are present here today. We started meeting with everyone very early on in this process, and I think that 

these relationships greatly facilitate the implementation of this 

kind of project here in Allegheny County. 

As Judge James described, what we envision is that volunteer attorneys will work very closely with the housing counseling agencies 

early on in the process to look at how a loan might be worked out. 

And as you know, by the time you get to foreclosure, there have 

been many attempts and notices to get these loans worked out. And 

you might think that all hope is lost, but what we have found in 

similar programs that are offering lawyers to low-income borrowers 

is that once there is a lawyer finally on behalf of a low-income borrower, who at this point has, you know, been barraged with information and really has not had anyone on their side, finally when 

this person that is finally there for them, the dynamics of the case 

change. The borrower is able to feel more comfortable. That fear 

factor, that shut-down factor often goes away. So we really think 

that lawyer participation on behalf of the borrower is essential to 

the success of this program. 

We have already laid the foundation for this type of project. We 

have something here in Pittsburgh called the ‘‘Pittsburgh Pro Bono 

Partnership,’’ which is a sort of consortium of mostly larger law 

firms, corporate legal departments, and even governmental legal 

departments and legal services entities. And we have had for the 

past couple of years an anti-predatory lending clinic, and that clinic 

has been focused just on loans that we have identified predatory 

lending practices. And that project has been staffed entirely by volunteer lawyers from the U.S. Steel Corporation and from the firm 

of Pietragallo Bostick & Gordon. And we will talk to them about 

expanding that project not only to loans where there is predatory 

lending, but to all of these loans that are participating in this conciliation process. 

We will represent the very-low-income borrowers. We can go up 

to—borrowers who have up to—whose incomes are up to 250 percent of the Federal poverty guidelines. Borrowers who may not 

qualify, who still have a higher income even though they are in 

trouble with their loan, we can use our lawyer referral service at 

the bar association to steer them to hiring a lawyer, maybe doing 

the conciliation on a flat-fee basis or something like that. So we are 

very confident that we will have the resources to mobilize an army 

of attorneys and get this process moving forward. And we are looking forward to continue working with everybody here. 

13 

Thank you. 

[The prepared statement of Ms. Griffin appears as a submission 

for the record.] 

Senator SPECTER. Thank you very much, Ms. Griffin. 

We now turn to 5-minute rounds of questioning by Senator Casey 

and myself, and we will begin with you, President Judge James. 

Where the conciliation efforts do not work, the question arises as 

to what could be the next step. Last November, I introduced legislation which would authorize the bankruptcy courts to take a look 

at the situation and not to affect the principal sum but to deal with 

the scheduling, with a heavy focus on variable rate mortgages. For 

example, people take out a mortgage not knowing that the rate is 

going to change. They may have a schedule of $1,200 a month, and 

then shortly thereafter, they find it balloons to $2,000 a month. 

What do you think about the authorization to the bankruptcy 

court to take a look at a misunderstanding or perhaps misrepresentation, or perhaps even fraud, to rearrange the schedule of payments to elongate them so that the lender gets the principal repaid 

and the agreed-upon interest but on a longer period of time to try 

to keep the homeowner in the home? 

Judge JAMES. The answer to your first question is that at the 

conciliation, if they are unable to reach an agreement, the case 

would go back onto the trial list, and an answer would need to be 

filed. The stay would be lifted. 

However, under our rule, the trial judge would have the opportunity to extend it. If the parties were close to settlement or needed 

an additional piece, the stay can be continued for a reasonable period of time for the workout. 

As to the question of bankruptcy, I would suggest that anything 

that makes the payments—or makes the ability of the borrower— 

gives them a greater ability to make payments that are reasonable 

would be helpful. But I have to confess to you, Senator, not only 

have I never practiced in bankruptcy law, I did not even take bankruptcy in law school. So my knowledge of the bankruptcy laws is 

slim and none. Perhaps someone here who practices would be better able to answer your question. But I would suggest that anything permits the homeowner to be able to make reasonable payments would be helpful for the conciliation process. 

Senator SPECTER. Well, Judge, you may not have been practicing 

in the bankruptcy field, but you might be appointed to the Federal 

bench. Then Senator Casey and I might recommend you. 

[Laughter.] 

Judge JAMES. I would have to do some studying, wouldn’t I? 

Senator SPECTER. Well, I am glad to hear you are not summarily 

turning it down. But that would put you in the bankruptcy field. 

Sheriff Mullen, if you had to give specific advice, say, to Ms. Williams and Ms. Griffin, who will be helping out the people who are 

threatened with foreclosure as to what to look for and how to be 

proactive—because there is a significant hurdle here, as I understand the practice, in acquainting the homeowners with their 

rights and their opportunities—how would you lay it on the line 

most effectively to see to it if the homeowners have not seen this 

on the evening news—and we appreciate PCN and the coverage 

here to try to get this word out. That is always a tough job. When 

14 

they go out into the field in a proactive way, what would your suggestion be as to effectively communicate opportunities to the homeowners? 

Mr. MULLEN. I think the biggest problem from what I have been 

told is that people refuse to look at the notices that they are receiving before this goes to foreclosure process, and it is difficult to get 

that information out. You know, we have advertised in the Pittsburgh Post Gazette when we do the sheriff sales about where to go. 

We take these brochures to each person that we serve. There is a 

Rule 91 that when we serve the papers to them, it tells them their 

rights. 

I think we may be able to do some public service announcements 

to try to get that message out before it goes to foreclosure. And I 

think we have been doing a relatively good job at that, but from 

what I have been told from these advocates to try to intervene, you 

know, people just are reluctant to admit that they are in that situation, much like a lot of people are reluctant to look at their 

401(k)s nowadays. 

Senator SPECTER. Judge James, do you have a comment on that? 

Judge JAMES. Yes. Through the use of the defined number that 

will be owner-occupied home foreclosures, we will be able to create 

a data base. And meeting with a number of the advocate groups, 

they were asking for this because they would like to do outreach 

to actually be able to contact people who have not responded to the 

800 number. 

I have also discussed this with the two law schools in Pittsburgh 

concerning use of clinical students, law students, to try to reach 

these people and explain to them that all they have to do is avail 

themselves of counseling and some help will be there. 

So the data base is really important to identify these people so 

that we can share it with various agencies that want to do outreach, which I think is a big part of this. 

Ms. Williams—and before turning to Senator Casey, one final 

question for the panel at this moment—you talk about mandating 

conciliation, and that can be done with State law. Why do you 

think a mandated conciliation would have a better opportunity for 

success than voluntary conciliation? 

Ms. WILLIAMS. Senator Specter, because of the inequity of bargaining position of the two entities, the lender and the homeowner, 

we are finding, as Mr. Sullivan had mentioned, that it takes awhile 

for the lender to get back to a mortgagor when they are trying to 

work out an agreement, even if they are represented by a housing 

counseling agency. 

So the mandate for the two entities to come together is necessary 

because both parties need to be present and both parties need to 

be able to negotiate the terms. When that does not happen, someone needs to step in—and in this case, it would be the court—to 

say that this is what must happen. 

And just to go back to your point that you asked Judge James 

about, I am a bankruptcy practitioner, so I was kind of sitting at 

the edge of my seat when you mentioned what you mentioned, because I am a former legal services attorney. And I would say that 

your proposal is right on point. The Bankruptcy Reform Act took 

away Section 1322(b)(5) of the Bankruptcy Code which gave the 

15 

court the ability to modify mortgages. So to proffer that legislation 

at this point I think is right on point, although I would differ with 

you on the principal balance issue. I think we should be able to reduce that as well, because many properties are underwater and a 

lot of properties are also in the inception of the loan; the fair market value is inflated. 

Senator SPECTER. Senator Casey. 

Senator CASEY. Thank you very much. 

I wanted to focus my initial question on implementation. I realize 

that you are beyond the point of just talking about this and theorizing about it, that you are actually implementing. And I guess I 

wanted to get a sense, after having listened to each of you and having listened to individuals in Philadelphia and actually having gone 

into a courtroom like this, about this size or a little larger maybe, 

full of people discussing and negotiating and trying to work things 

out between lenders and borrowers and advocates. And it was a 

roomful of—gosh, it must have been 150 people packed in, talking 

and working things out. 

But I think they are pretty far along in terms of implementation, 

and I wanted to get your sense, maybe starting with the judge, 

with regard to impediments to implementation, problems you are 

seeing, and things you might need help with. 

Judge JAMES. Well, actually, we are very fortunate, Senator, in 

Allegheny County—and Attorney Griffin pointed this out—that the 

relationship between the bench and the bar is very close. I serve 

as an ex officio member of the Board of Governors of the Allegheny 

County Bar Association, and a number of my judges are also active 

in the bar. So we are ready to go. 

One problem might be the funding of a central call system. We 

are trying to find out where we are going to place that. That seems 

to be the sticking point. The sheriff has offered the use of his offices. However, we think it should be closer to a counselor. It 

should be someone who actually has legal expertise and can discuss 

the matter and talk to the person. We would like to make it as simple as possible; that is, one call triggers the whole thing, rather 

than having people go to two or three different places. I think 

someone used the words ‘‘jump through hoops.’’ Under these circumstances, once they contact us, we want to bring them immediately into the conciliation, let them know that we need their financials, we need them to come to a conference, and that it is free 

of charge. 

So financing or where we lodge the central call system is the only 

sticking point, and that is the only thing we need right now for the 

implementation of it. Once we resolve that—and we hope to have 

that done, I think, by the first part of next week. Once we resolve 

that issue, we intend to create this. We need to do some training. 

We need to do some explaining to the counselors, the existing counselors. 

I should point out, Senator, we have decided to use the existing 

framework because we think it works fairly well. Philadelphia created some infrastructure and did some training, and the only training we are going to do is voluntary training of the lawyers, the pro 

bono lawyers, and some explanation to the debt counselors of who 

these people are and what is going on. But the communication and 

16 

the linkage is already in place, and so I think we can kick this off 

within a few weeks. 

I have been happy that we have not had a lot of roadblocks. Everyone seems to be trying to resolve it, including Mr. McKeever, I 

believe, whom I spoke to in June, I think it was. 

Mr. MCKEEVER. Yes, that is right. 

Judge JAMES. And the banking industry is also cooperating, and 

they think that this is worthwhile for them. 

So the answer to your question is if we could get some funding 

for a central call center or something like that, that is the only 

thing we are looking at. 

Senator CASEY. Well, let me say that I think when it comes to 

what the Federal Government has done and can do, in the ‘‘has 

done’’ category, there has been a substantial effort at the Federal 

level just in the recent past where we passed and the President 

signed into law Hope for Homeowners, which is a major initiative, 

that the legislation that dealt with Hope for Homeowners and 

other aspects of housing policy is the most significant piece of legislation of its kind in a generation. That was a very positive step forward. And in the recent Emergency Economic Stabilization Act, 

there was even more help and focus on Hope for Homeowners. So 

that is a good thing. 

Part of that, of course, is what you have all touched on, and some 

more than others: the issue of counseling. I and others pushed very 

hard in 2007 and 2008 to get $180 million into housing counseling, 

which we have already deployed. I think that money is already 

spent, one of the best expenditures of Federal dollars in recent 

American history. We got another $150 million for that same purpose. 

So I think in terms of what the Federal Government can do to 

help, counseling is a very significant part of that, but in the last 

minute I have, is there anything very specific, in addition to the 

funding on counseling—because I think that I and others have said 

to Secretary Paulson and Secretary Preston at HUD, you ought to 

make this a national program, or at least focus on it and experiment with it as a national program. Anything else that the Federal 

Government can do that it is not doing right now to make your program even better? 

Mr. MCKEEVER. Well, if I could speak to that, I will go back a 

little bit to the testimony I gave about the frustration that the 

lender side has about gathering the information from the bar. And 

I think that there probably are available technologies today among 

lenders, whether they are proprietary or shared systems, that 

maybe could be provided—or access could be provided to housing 

counselors and housing advocates so that you could gather the financial information electronically and work through a decision tree 

of available options that might be available from that investor or 

bank. And I think that that is something that perhaps would be 

a beneficial use of the Federal Government’s power in this situation. 

It is likely that the Treasury Department is looking at something 

like that, I would imagine. But in terms of streamlining the application process for loan resolution, I think that might be an avenue 

to pursue. 

17 

Mr. SULLIVAN. If I can echo Attorney McKeever’s sentiment, as 

frustrated as I know the lenders are about getting financials, it is 

as frustrating for counselors not getting their hands on financials. 

We cannot do our job successfully if borrowers cannot get us the 

documentation. So his suggestion would be really key for us, too. 

Senator CASEY. Thank you. 

Senator SPECTER. Thank you, Senator Casey. 

We have time for another round, and let me turn to you, Ms. 

Griffin, from your position as pro bono counselor for the bar association. How will you be proceeding to try to take this program that 

the President Judge and the sheriff have outlined here to make the 

maximum effort to get through to these homeowners who are 

frightened, have a lot of legal papers, do not understand them, but 

persuade them that they have to focus on it and come forward with 

the unique opportunity to save their homes? 

Ms. GRIFFIN. Right now, whenever a defendant is suited in Allegheny County, their notice has the phone number of the bar association, the lawyer referral service, and it says pretty clearly, you 

know, you have been served, you need to call—you know, you need 

to get an attorney. And often the bar association is the first stop 

for many defendants in these kinds of actions. And so what we do 

at the bar association, we sort of do a triage when they call that 

number, and if they are able to afford an attorney, then they go 

to one of the attorneys that is a member of the panel of attorneys 

at the bar association. And then if not, then we send them to the 

appropriate legal service provider in the community. 

So we have a lot of experience of steering folks in the right direction. I do feel that we are already a pretty well-known resource for 

the community. When I answer the phone calls at the Pro Bono 

Center, I often ask, ‘‘How did you hear about us? How did you get 

to me? ’’ And it is amazing that they say a variety of ways. Sometimes they find us on the Internet. Sometimes it is a State senator 

or a State rep. 

Senator SPECTER. So you think you can get through? 

Ms. GRIFFIN. I think we can get through. We have a marketing 

department. We can get out and do public service announcements 

also. But I think a lot of it is just going to be our network, our existing network of providers, and getting the word out and kind of 

referring people to the right place. 

Senator SPECTER. Mr. McKeever, let’s turn to the perspective of 

the home for the lender. I was concerned to see this morning’s USA 

Today saying that the bailout pushes mortgage rates up, and it has 

a couple of consequences from the legislation. One is with the Government borrowing $700 billion, it is going to tighten up the credit 

market, and the rates are already going up. But a second matter 

of greater concern to me is the report that bankers are looking for 

the Federal guarantee of up to $1.5 trillion on senior credit so that 

they can loan money to provide liquidity, which is very important, 

but they are not going to be looking to mortgages which do not 

carry that kind of a guarantee. 

What can Senator Casey and I do to make some modifications 

perhaps at the Federal level to see to it that all the money we are 

putting up goes to the homeowner? That is the man or woman in 

the chain which really needs the help the most. And the subprime 

18 

loans got us on this crazy spiral so that we cannot tell the banks 

what to do, but we can come close. And we have to be concerned 

that we do not nationalize the banks and destroy our free enterprise system. But what can we do to get that money out there to 

the mortgage market? 

Mr. MCKEEVER. Well, I think it is a very difficult problem that 

we are in because the mortgage service company, the lender, has 

some rights to make adjustments to the amount due and owing or 

change the payment schedule. But wholesale reductions create 

issues with the investor that they are servicing that loan on behalf 

of. They have a fiduciary duty to those investors, and, unfortunately, those investors are many of us. Almost all of us have a 

piece in that investment, whether you have a pension plan, a 

checking account, a savings account, or even an interest in a company. 

So to change that investment expectation—and, of course, that is 

one of the biggest issues regarding a bankruptcy cramdown or resetting the investment expectation—is that you may solve the problem temporarily, but what you may well create is a market—or reduce the market of the ability to sell mortgage securities in the future. 

It is not quite my area of expertise, but that is my understanding 

of why lenders find themselves in this difficult position of while it 

may make sense to make that reduction in a principal because the 

house price has dropped so dramatically, the investor has requirements, and the investor requirements require that the foreclosure 

be completed and the loss be taken at some other time. 

Senator SPECTER. A final question to Mr. Sullivan, with 30 seconds remaining. You commented about the successful mediation 

projects that you have been involved in. Could you give us the critical elements which have led to success, maybe some guidance to 

the mediators who are going to be looking at this on a much broader scale? 

Mr. SULLIVAN. I think the most important piece was early intervention. Most of the successful modifications that I have been part 

of were borrowers who were 30 to 60 days delinquent and not, you 

know, 5, 6 months. It was key for the borrowers to get the financial 

documentation over to the counselors as quickly as possible and 

then us turning it over to the servicer. 

The longer the delinquency occurs, the harder it is to just work 

it out. It is just that simple. If I got someone who is 12 months in 

with all the legal fees and everything else that has piled up, the 

workout is almost unattainable. So the key is—and that is what I 

like about the conciliation proposal, is that it is early intervention. 

You are getting folks who would be 2 to 3 months behind. The filing has not been issued yet, so the attorney fee has not been attributed. Those are the kinds of workouts that I have seen most successful from my counseling perspective. 

Senator SPECTER. Senator Casey. 

Senator CASEY. Yes, two questions. One is—or I should say one 

follow-up on what Senator Specter was asking about before a question. Yesterday I sent a letter to Secretary Paulson which highlighted a number of concerns I had with the direction that he is 

taking now, and I have been very complimentary of his work, but 

19 

I have real concerns now that in the midst of this focus now on getting direct investment in banks, taking 250 of the 700 and directing it toward banks, which in concept is a good idea, but there is 

nothing in there for modifications of mortgages. And I said in part 

in the letter that financial institutions receiving significant benefits 

from Government investment or guarantees should agree to modify 

loans which they hold in their portfolios. And this is not some theory. The FDIC has done just that. The FDIC implemented a loan 

modification program that Treasury should look at in this context. 

It should adopt a lot of the same ideas that each of you have been 

not just talking about but advocating and implementing here in the 

county. 

I guess the one question I had was one of numbers, and I am not 

sure—a number of you have these numbers in mind or in front of 

you. But what is the projection for Allegheny County when you 

look at foreclosures or just default, mortgages heading in that direction? But let’s just talk about foreclosures, 2007 versus 2008, 

and then the projection for 2009, if any. Does anyone have that information? 

Mr. MULLEN. The figures I have, our figures are based on those 

foreclosures that actually are listed in the paper, which we have to 

do by judicial rule. I can give you the figures from the end of the 

year: from 2006, they were 4,727; and then 2007, they were reduced to 4,632; and for this year—and keep in mind that these 

have to be posted 2 months in advance, so this is for the entire 

year—4,450. So those figures have gone down consistently for— 

Senator CASEY. And 2008 is what? 

Mr. MULLEN. 4,450. 

Senator CASEY. Okay. To date, right? 

Mr. MULLEN. Yes, that includes the entire year because they 

have to be posted 2 months in advance. So, actually, they have 

gone down, you know, from 2006 to 2007 and continue to go down 

in 2008. 

Senator CASEY. Any projection for 2009? 

Mr. MULLEN. I do not know. Like I said before, you know, after 

consulting with their—talking to the Federal Reserve, they said 

that the ARMs resetting would be increased within the next 5 to 

12 months. And like I said before, those show a higher figure of 

foreclosure than the regular mortgages. 

Judge JAMES. And to amplify that, Senator, we are not able to 

differentiate how many of those are commercial or how many of 

those are tax defaults. They are all lumped in one group, and that 

is why it is really important that the Director of Records has 

agreed to identify owner-occupied structures. As this program goes 

forward, not only can we identify them, but we can actually see if 

it starts to go up, because we are going to be able to track the 

owner-occupied foreclosures, which is really important. I think it is 

an important factor. 

Mr. MCKEEVER. And although those numbers are large, I do 

think it is significant to look at the decrease from 2007 to 2008 in 

the—now, we are talking about sheriff sales scheduled, which I 

think is an indication that lenders are working with borrowers and 

borrowers are stepping up to work with their lenders to resolve 

things and taking them out of the foreclosure process, because we 

20 

saw similar things in Philadelphia where there was an increase in 

the foreclosure filings, but the number of sales has stayed relatively constant. And I think, again, it is an indication that there 

are—that these programs are working. 

Judge JAMES. There is about a 10-percent shrinkage from actual 

foreclosure filings to actual foreclosures, so about 10 percent of the 

complaints are being withdrawn. Either they are being settled or 

there is some procedural defect, and we think that there is 10 percent of the ones that they are settling early on even without court 

intervention. 

Mr. SULLIVAN. I would just suggest this as a concern: that in 

2001 and 2002, there was about a 1-percent national and local increase in the unemployment rate. At that time, the foreclosure filings—not sheriff sales notices, but the actual filings itself—increased by 25 percent. So if projections by the Bureau of Labor are 

accurate, and we are going from 4 percent to 5.5 to 6 percent locally and nationally, you are also going to see a spike again in the 

foreclosure filings. 

But, I mean, both Judge James and Attorney McKeever, who 

represented, correctly I think, that there is at least more workouts 

being attained early on, because the sheriff’s own numbers are decreasing while, generally speaking, we are still on pace for about 

4,700 filings for the year. 

Ms. WILLIAMS. And I would just submit that because a lot of 

times in Allegheny County it has been touted that there are not as 

many foreclosures as compared to the other areas across the country, I would just caution that we realize the population density and 

compare that to the number of foreclosures; and when you look at 

those two, you will see that it is still significant, and that we 

should really be moving toward getting these issues worked out. 

And there will be some that will have to go to foreclosure, but our 

goal would be to eliminate those numbers significantly. 

Senator CASEY. Thank you very much. 

Thank you, Senator. 

Senator SPECTER. Well, thank you very much, President Judge 

James and Sheriff Mullen, for initiating this program, and I thank 

all of you for coming in. I believe this has been a very, very important hearing because it goes to the core problem of keeping people 

in their homes, and that is where the full problem got started, and 

that is the critical factor. 

We have moved a great distance from there when Senator Casey 

and I very reluctantly backed this $700 billion bailout program, 

and we did not do it to save Wall Street. We did that to save the 

ripple effect which would have drastic consequences for the economy on credit to small business, student loans, and more evictions. 

In a free enterprise society, people have the right to take risks 

to make money, but if they use bad judgment and those risks turn 

out to produce losses, they ought not come to the Federal Government for a bailout, which ends up with the taxpayers. And we have 

seen a critical situation on Wall Street with highly sophisticated 

kinds of commercial paper which no one understands. You have 

these derivatives, which are extraordinarily complicated, and you 

have these credit swaps, which are even more complicated. And 

21 

there is talk about some $62 trillion involved in these derivatives, 

which makes $700 billion look like a small sum of money. 

So we are wrestling with this issue, and there is going to have 

to be some regulation on operations like Fannie Mae and Freddie 

Mac. And, again, in our line of work in the Congress, we have to 

be careful we do not overregulate as we did with Sarbanes-Oxley. 

So it is a delicate matter. 

But to the extent that there is action at the local level, that is 

best. If you take the matters right here to the county level, it is 

best—not to Harrisburg and not to Washington. So what is going 

on here is very, very important, and Senator Casey and I have an 

eye out to what we can do at the Federal level to supplement what 

is going on here. 

A wrap-up, Senator Casey? 

Senator CASEY. Well, thanks, Senator Specter, and I want to 

thank the panelists here, especially Judge James for the use of 

your courtroom, the use of this courtroom, as well as your participation in leading this effort at the county level in a big county like 

Allegheny County, taking on a tough issue and not just waiting for 

some solution to arrive from Washington, but helping us to point 

to good models at the local and county level that can be, I think, 

replicated not only throughout this region but throughout the State 

and throughout the country. So we are grateful for your advocacy 

and for your willingness to take on a tough problem and try to 

solve it. 

Thank you very much. 

Senator SPECTER. Well, that concludes the hearing. Thank you 

all. 

[Whereupon, at 10:45 a.m., the Committee was adjourned.] 

[A submission follows.] 

22 


48815.001
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48815.002
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48815.003
(25) 

KEEPING FAMILIES IN THEIR HOMES: HOW 

TO PREVENT FORECLOSURES—PART II 

FRIDAY, OCTOBER 24, 2008 

U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC 

The Committee met, pursuant to notice, at 10:00 a.m., at the 

Philadelphia Court of Common Pleas, Courtroom 653, Philadelphia, 

Pennsylvania, Hon. Arlen Specter presiding. 

Present: Senator Bob Casey, Jr. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Senator SPECTER. The hearing of the U.S. Senate Judiciary Committee will now proceed on the program at issue at the Court of 

Common Pleas in Philadelphia County to try to keep people in 

their homes and not to be evicted through sheriff’s agencies. 

I am joined by my distinguished colleague, Senator Bob Casey— 

to courtroom—spend so many days a few weeks ago as an Assistant 

District Attorney, and then as—walk down the hall—which had for 

years been the District Attorney’s office, and walked through the 

corridor where there had been a sheriff’s cell room which went upstairs. This was before the—and all of the big—murder cases were 

tried there, where they had a lot of security problems. 

In 1968, there was a beginning program on CBS. You may have 

heard about it: it was called 60 Minutes. I would—Mike Wallace 

was the coordinator and we had a major investigation that year 

about—young boys in the sheriff’s cell room at—taking them to 

Holmesburg. Mike Wallace was in that back room filming, and an 

Assistant D.A. named Allen Davis and myself. It was the first investigation into brutality in prisons conducted in the United States 

and it was featured on 60 Minutes. Later when they went back for 

the highlights, they chose that as one of the highlights. 

Well, ex-D.A.s are allowed up to 3 minutes to reminisce in this 

room, but only 3 minutes. 

This hearing involves a matter of great importance to the city of 

Philadelphia and has very serious application on the national level. 

Last year, there were over—was higher than the national average. 

Under the very effective leadership of—Darnell Jones and Judge 

Annette Rizzo, a program has been initiated here which I think 

has—national model. The—in some detail, but it is what I would 

characterize as a win-win situation where people can stay in their 

homes by—mortgages and that obviously helped the—and the lenders are assisted in not having the cost of foreclosure and taking 

26 

over property which is greatly depreciated in value, and the neighborhood is benefited by not having a house foreclosed. The tax rolls 

remain—the city is not confronted with greater fiscal—cutback in 

services. 

The program received considerable national acclaim. There have 

been inquiries on it from Miami and Chicago and Prince George’s 

County, Maryland,—Texas, and Florida, and New Mexico, and is 

quite a tribute to the working here of our colleagues who have 

come up with this kind of a program. 

Senator Casey and I had a similar hearing last week in Pittsburgh and Senator Casey, I, and others in the Congress have been 

prepping the Treasury Department—to—authorized to the most 

basic level to keep people in their homes. We’ve taken steps for 

$250 billion of infusion of capital into banks. Well, that’s fine. 

We’ve worked through bailouts of major companies, Bear Stearns 

and AIG. 

But we think we need to deal with the people who really -and 

we’re making some progress. The FBI—are now starting to look at 

the issue of guaranteeing mortgages. That would be a big step forward. The current fiscal crisis started with the mortgage problem 

and it ought to be addressed head on. But in the interim, it is really very gratifying to see a community like Philadelphia and the 

leadership of the Common Pleas Court digging into this issue with 

very—program that can keep people in their homes. 

I now defer to my distinguished colleague, Senator Casey, who 

has many important committee assignments in Washington. He 

is—as an ex officio of the Judiciary Committee, which is not too 

bad for a first termer. 

[Laughter.] 

Senator SPECTER. Senator Casey. 

STATEMENT OF HON. BOB CASEY, JR., A U.S. SENATOR FROM 

PENNSYLVANIA 

Senator CASEY. Senator Specter, thank you very much. I want to 

thank Senator Specter for having us here in Philadelphia today 

and to be, as he mentioned, a member of the Judiciary Committee 

for a brief period of time. He’s allowed me to do this every couple 

of weeks and then I have to go back to my other committees. But 

I am grateful for this opportunity. 

I wanted to thank the witnesses who were here with us today 

who have been, shall I say, in the trenches: Judge Jones, Judge 

Rizzo, and so many others, whether as part of the Court of Common Pleas, Mayor Nutter and his work at the city at the municipal 

level, the people who are advocates who are in the lending community, advocates for homeowners, so many people coming together 

and working night and day to make sure that this program works. 

What we know is the Philadelphia Residential Mortgage Foreclosure Diversion Program is now becoming one of the best programs of its kind in the country, as Senator Specter mentioned. 

And I’ll tell you, we need it. When you look at the numbers just 

yesterday, when you look at third quarter 2007 to third quarter 

2008 nationally, foreclosure filing is up 71 percent. In Pennsylvania, third quarter 2007 versus third quarter 2008 is up 73 percent. 

27 

So Pennsylvania as a whole has had a real spike in the number 

of foreclosures from last year to this year, so we need it badly. We 

know the challenge here in Philadelphia. I saw a chart today where 

Philadelphia was number 68, I think, out of the top 100 Metro 

areas. I hope that number continues and I hope we keep getting 

closer to 100, which means we’re not as bad off. But we know the 

numbers here are too high, as they are in lots of parts of Pennsylvania. 

This program is already succeeding. We know that. We also 

know that a lot of counties have been trying to replicate this program throughout Pennsylvania. We want to push that very hard. 

Back in July of this year, I wrote to Housing and Urban Development Secretary Preston and I sent a copy to Treasury Secretary 

Paulson, urging them to consider this program as a model for other 

cities and regions in the country to replicate and to emulate. 

In August of this year, we had a roundtable session here in this 

building with Judge Jones, Judge Rizzo, and other participants 

from across Pennsylvania and throughout Philadelphia about the 

program and how to replicate this in other counties in Pennsylvania. Since that roundtable in August, we’ve had a great response 

from counties from western Pennsylvania, from Allegheny County 

out in the west, to my home county, Lackawanna County, throughout the Lehigh Valley, and throughout the region. 

In September of this year, again, I urged Secretary Paulson and 

also urged Chairman Bernanke, chairman of the Federal Reserve, 

to consider this program as a model nationwide for foreclosure prevention efforts. I’m happy to be here again today to listen to important testimony. 

Here’s the final point I’ll make. We are now at a point where 

there are 10,000 foreclosures every single weekday in America. We 

have to do everything possible to do more at the national level to 

prevent foreclosures, and this program is one of the best ways to 

do that. Thank you very much. 

Senator SPECTER. Thank you very much, Senator Casey. 

We will now proceed with our very distinguished panel of witnesses. In accordance with Judiciary Committee policy, witnesses 

will be allotted 5 minutes. We ask that everyone observe the time 

because we have many witnesses and we want to have some dialogue with Senator Casey and myself asking some questions. So, 

the light will signify green when 5 minutes begin, yellow when 

there’s a minute left, and red on the interdiction to stop. 

We will not bang the gavel—Chief Justice Rehnquist—President 

Judge Ed Becker had once commented that Chief Justice 

Rehnquist so enjoyed interrupting lawyers, that he’d interrupt 

someone in the middle of the word ‘‘if’’. 

[Laughter.] 

Senator SPECTER. Short of that, we do want to keep on time because we have time constraints and we hope to conclude the hearing by 11:30. 

It is a pleasure to be in the courtroom of President Judge C. 

Darnell Jones. He’s had a very distinguished career and is not long 

for these premises. He is—soon to the Federal courthouse, where 

Senator Casey and I had recommended him to the participant. 

Judge Jones was so warmly received, that he had—on Tuesday. 

28 

The Judiciary Committee—confirmation on Thursday. The Senate, 

which hasn’t confirmed any judges in a long time, confirmed him 

on Friday. 

[Applause.] 

Senator SPECTER. Thank you for your hospitality today in his 

courthouse, and thank you for your innovations on this important 

program. We look forward to your testimony. 

STATEMENT OF HON. C. DARNELL JONES, PRESIDENT JUDGE, 

FIRST JUDICIAL DISTRICT OF PENNSYLVANIA, COURT OF 

COMMON PLEAS OF PHILADELPHIA COUNTY 

President Judge JONES. Thank you very much. Good morning, 

Senator Specter and Senator Casey. 

As President Judge of the Court of Common Pleas and Chair of 

the Administrative Governing Board of the First Judicial District, 

I welcome you and the Committee as you continue to supply muchneeded support to help an ever-increasing population in our communities. 

Senators, your presence signifies that we in the First Judicial 

District are on the right track locally and nationally, and most assuredly underscores the need for us to continue what we have 

begun. 

Senator Casey, we sincerely appreciate your letter to the Secretary of Housing and Urban Development acknowledging and 

praising the First Judicial District’s program and urging them to 

support its implementation nationwide, as well as chair the roundtable to which you referred earlier. Senator Specter, that you would 

bring this Committee to this venue to investigate this problem and 

find solutions therefor is truly magnificent and well and deeply appreciated. 

The genesis of our program was a resolution introduced in our 

City Council, supported by our sheriff, and made legal, feasible, 

and highly effective through the diligence of Judge Annette Rizzo, 

Administrative Judge D. Webster Keogh, Supervising Judge Esther 

Sylvester, and a number—a large number—of court support personnel. 

The First Judicial District recognizes how vital home ownership 

is to the stability of any city. We know that neighborhoods and 

lives, locally and nationally, are on the brink of social and financial 

ruin due to the problem of the growing number of residential foreclosures. 

We are acutely aware of what does and what does not work. In 

this instance, the foundation of our successful program is the cooperation between the court and the private bar, public interest 

bar, lender bar, and social agencies. Our program simply could not 

work without them. 

Last night, I attended a town meeting in my neighborhood in 

East Oak Lane. More than one resident lamented that the by-product of having a home next door in foreclosure would be broken windows, and undesirables using it for crime and other illicit behavior. 

Add to that, when this occurs, other residents on the block and the 

blocks on either side abandon their homes. The tax base and vital 

services decline, and the downward spiral of once vibrant cities becomes uncontrollable. 

29 

We thank you, Senator Specter and Senator Casey, for your valiant efforts to assist the Nation in this much-needed and very successful program, as evidenced, by the way, Senator Specter, by 

your op-ed letter which appeared this morning in the Philadelphia 

Inquirer. Again, on behalf of the First Judicial District and the citizens of this Commonwealth and this country, we sincerely thank 

you. 

[The prepared statement of Judge Jones appears as a submission 

for the record.] 

Senator SPECTER. Thank you very much, President Judge Jones. 

We have just been joined by a distinguished visitor, the Chief 

Justice of Pennsylvania, Ron Castillo. 

Chief Justice Castillo. Good morning, Senator. 

[Applause.] 

Senator SPECTER. The Chief Justice has been heard to say that 

his most distinguished position, among many others, including the 

elected as District Attorney of Philadelphia, was his service as an 

Assistant District Attorney. 

Chief Justice Castillo. Absolutely. 

Senator SPECTER. I’m glad to have that admission on the record. 

Thank you for joining us, Chief Justice Castillo. 

Chief Justice Castillo. It wasn’t under oath, though. 

[Laughter.] 

Senator SPECTER. But it was said in open court. 

[Laughter.] 

Senator SPECTER. Our next witness is Judge Annette M. Rizzo, 

who has been the driving force behind this very unique and important program. 

Judge Rizzo, we welcome you to the hearing. The floor is yours. 

STATEMENT OF HON. ANNETTE M. RIZZO, JUDGE, FIRST JUDICIAL DISTRICT OF PENNSYLVANIA, COURT OF COMMON 

PLEAS OF PHILADELPHIA COUNTY 

Judge RIZZO. Thank you. ‘‘Build it and they will come! ’’ Senator 

Specter, Senator Casey, Councilman Jones, elected officials, Chief 

Justice Castillo, judicial colleagues, and distinguished members of 

the bar and community. A special thanks to you, Senator Specter 

and to Senator Casey, for bringing to the forefront our actions in 

Philadelphia to stem the burgeoning rise in residential foreclosures 

in our local community. 

Our efforts here have been publicized in a variety of media outlets which span the country, and even the world. Just yesterday we 

were in conference and there was a TV crew there from Sweden for 

their national TV to film what our activities were. Requests have 

come in from numerous jurisdictions within the Commonwealth 

and across the Nation, which see us as a national model for early 

and direct resolution of foreclosure matters. 

Senator Specter, Senator Casey, our mission here in Philadelphia 

is very simple: early intervention in the legal path to foreclosure 

and ultimate sale of owner-occupied residences, with the hope that 

homes may be saved one address at a time. 

First and foremost, I want to share with you what the First Judicial District’s Pilot Mortgage Foreclosure Diversionary Program. It 

is not about entitlements, it is not about give-aways, support of 

30 

delay tactics, unwarranted breaks, abuse of legal process, coercion 

to make deals, or the abrogation of any legal rights. What it is 

about, is about setting the stage to promote good-faith negotiations 

for parties to come to the table responsively, with the hope of borrowers remaining in their homes. 

Our program was established in the spring of this year in response to our Sheriff, John Green, canceling the entire Sheriff’s list 

in April of this year. He really was the catalyst for this program 

to kick off. His actions came on the heels of our City Council passing a resolution to request that our sheriff and President Judge 

Jones declare a moratorium on residential sales. In quick response, 

Judges Jones and Keogh took affirmative action by establishing our 

present program. 

To understand what we are now in the present, one has to understand what we were in the past. The true genesis of our current 

program, which became fully operational in just 7 weeks, actually 

began in 2004. At that time, Sheriff Green had taken the step at 

that point to also cancel the sheriff’s sale list for a given month. 

He then came to the court to seek injunctive relief to have a moratorium declared by the courts. 

I was the judge sitting in the program at the time which heard 

the matter. It was before me, and though I did not grant the direct 

relief sought, I did establish what would amount to be the prototype of the program we now have, taking time to look at cases and 

homeowner situations on a micro basis and foster the opportunity 

for lenders and homeowners, through counsel, to negotiate favorable resolutions. Success was seen with many of the homeowners 

based on newly available State funding criteria, being the HEMAP 

program. 

Now the Sheriff—came before me and argued to the court that 

the Sheriff’s sale system was ‘‘Fundamentally broken’’ and needed 

to be fixed. I challenged them and the consumer and lender bar to 

work together ‘‘to fix it! ’’ Such was the birth of the Mortgage Foreclosure Steering Committee, which has been in force for some 4 

years. During that time, meeting on a monthly or bi-monthly basis, 

the group has come together to tackle several procedural fixes to 

the local foreclosure process. Though advocates on opposing side of 

the issue, we have come together to make the process work, such 

as working on the reduction of advertising costs in the foreclosure 

process. 

Now, let’s fast-forward to 2008. This group was primed to face 

the present challenges and move swiftly to form our diversionary 

program. It has been chaired by counsel to the Sheriff, Ms. Lasia 

Kuzma, with member stakeholders who were on all sides of this 

issue, including representatives of the consumer bar, the lender 

bar, housing counselors, the Office of Housing and Community Development, our Sheriff’s office, the Philadelphia Bar Association, 

and other related community groups, some of whom are present 

today. At this point I would just ask them to stand and be recognized. 

[Members of the audience stood to be recognized.] 

Judge RIZZO. Thank you. 

[Applause.] 

31 

Judge RIZZO. Senators, I never miss an opportunity to openly acknowledge their efforts. 

There are two major criteria of our program, and they’re simple. 

That is, only cases in foreclosure which deal with residential 

owner-occupied properties are part of the program. The regulation 

put into force by Judge Jones and Judge Keogh indicate that no 

property of that like, owner-occupied residential, can go to Sheriff’s 

sale without the scheduling of a conciliation conference. 

The intent of our ‘‘Day Forward Program’’ is, at the moment a 

complaint in foreclosure is filed, a notice comes from the court to 

have a conciliation conference scheduled. Our hope then is to put 

the homeowner in what I affectionately call ‘‘the chute’’, to get 

them into housing counseling as quickly as possible so when the 

conference comes up with the hope and help of pro bono counsel, 

the conciliation conference can be fruitful, that is, with the lender 

bar. That is our intent. Our intent has always been early intervention so that there are less arrearages that we’re likely to find for 

homeowners, and that the property will be in a better state. 

The program as well, just from a statistical standpoint, has seen, 

from April to September, some 1,500 cases coming through, with 

about 63 percent of homeowners participating, and of that, successes in approximately 490 properties where we have seen some 

type of settlement of the case or resolution wherein they did remain in their property, a postponement so either deals can be 

worked out or deals have been made out. 

With that, we have to give great credit, of course, to the fact that 

creative solutions are given to what would be standard problems. 

We will have the opportunity to hear from several homeowners 

today about their stories and how they have been impacted in a 

positive way from our program. 

The most frequently asked question to me is: how did you get the 

lenders to ‘‘buy in’’ to the program? The question is most simply 

answered: because they helped create it. I do believe, Senators, in 

this discussion of a national model, there has to be the suggestion 

that those who live under the rules of a program must have buyin to help develop it. That, I believe, is a key success of the program we have here. 

In addition, to stage such theater in the courtroom requires coordination of housing counselors, volunteer lawyers, and our beloved judge pro tems, extensions of our court who are senior members of our bar who volunteer their time and have to this point 

given in-kind services which amount to almost $50,000 of fine legal 

advice from retired judges, senior chancellors, and other very, very 

prestigious members of our bar. 

It’s a collective effort and the true spirit of the program. Senator 

Casey, you got to see that energy. I believe you even were pushed 

aside to make sure that some particular counsel got to his client. 

It all takes cooperation and coordination, both among the bar, the 

courts, and the local officials, but also our Mayor, our City Council, 

and, of course, leadership within our courts and our wonderful, 

wonderful court administrators. 

In sum, we continue to be a pilot program with a capital ‘‘P’’. We 

are evolving as a living process as we gain more experience with 

these cases. Our mission, however, never waivers. We are here to 

32 

provide the micro focus to citizen homeowners and lenders in the 

hopes of achieving as many performing mortgage agreements as 

possible for the sanctity of these individuals, their families, and our 

community. 

With the continued support and input from our valued stakeholders and the commitment of the wonderful members of the court 

and our First Judicial District staff, we are encouraged that our efforts will continue to be fruitful. We invite other jurisdictions within our Commonwealth and across the country to partner with us 

in this endeavor, and we avail ourselves for that purpose. 

Senator Specter, Senator Casey, we appreciate the radar that 

you have placed on our program. Your interest and outreach to 

other jurisdictions has put a real face to the current national—no, 

let’s say international—debate. We applaud you for not forgetting 

that the undercurrent of the mammoth financial challenges now 

facing us as a Nation begin with a Tania Harrigan, a Jean Ruffin, 

an Arlene Richardson, an Eric Rhaney, individuals who you will 

hear from, and the countless others like them. 

Senator Specter, Senator Casey: build it and they will come. 

Thank you. 

Senator SPECTER. Thank you very much, Judge Rizzo. 

[Applause.] 

[The prepared statement of Judge Rizzo appears as a submission 

for the record.] 

Senator SPECTER. The next witness is Councilman Curtis Jones. 

Thank you for joining us, Councilman Jones. We look forward to 

your testimony. 

STATEMENT OF CURTIS JONES, JR., MEMBER, PHILADELPHIA 

CITY COUNCIL 

Councilman JONES. Good morning, Senator Specter, Senator 

Casey, and members of the Judiciary Committee. My name is Curtis Jones, Jr., and I am a member of the Philadelphia City Council, 

representing the Fourth Council District. 

I actually represent Senator Specter; he is one of my constituents, and I am honored to serve you, as well as share with this 

Committee my perspective of how the city of Philadelphia has been 

able to help stop mortgage foreclosure sales in a process of helping 

to create a Mortgage Foreclosure Diversion Program. This is the 

first of its kind in the Nation. 

I have also shared this information on our program with all of 

the Presidential candidates. The importance of the Philadelphia experience is two-fold. First, it is provocative, and second, it is collaborative. In January of this year, I introduced a City Council ordinance that passed unanimously, Resolution 08–90095, which authorized the Council’s Committee on Housing, Neighborhood Development, and Homelessness to hold hearings on the issue of foreclosures. 

This resolution anticipated the scheduled re-set of over 2 million 

subprime adjustable rate mortgages, ARMs, over the ensuing 18 

months, which would create an economic tsunami of foreclosures, 

if not preventive measures taken. 

The hearing was held February 21, 2008 and brought together 

advocacy groups such as the Philadelphia Unemployment Project, 

33 

ACORN, Community Legal Services, bar—and representatives 

from our courts and our sheriff’s office. The one weakness in the 

hearing was that there were no representatives from the lending 

community present. 

In the—weeks, that led to a second council resolution, number 

08–0331, which called upon the sheriff and the Court of Common 

Pleas to impose a moratorium on residential foreclosure sales in 

Philadelphia. Thus, this began a meeting of the lenders that 

brought them into the process. It was our belief that if lenders and 

borrowers could agree to convert unaffordable loans into performing ones, it would create a win-win scenario. This would occur 

by keeping homeowners in their homes, preventing deteriorating 

neighborhoods, and sparing lenders the cost of both time and 

money for mortgage foreclosure sales. 

I view this action taken by the Council as the beginning of a 

relay race. I would be remiss if I did not acknowledge the 

groundbreaking work of my colleague, Councilwoman Marian 

Tasco, who has been a champion against predatory lending practices, who recognize the role of these unscrupulous loans, and how 

they created a crisis in both her District, my District, and in the 

city of Philadelphia. 

The race was run, and vigorously run, by those who are in a relationship with us. Also, the courts, the sheriff’s office, the mayor’s 

office also were—at the time. The court was successful in creating 

and implementing a residential mortgage foreclosure diversion program, which I believe can be replicated throughout the Nation. 

The pilot also, in most cases, has brought reworking loans back 

onto the books. The—of our city, if replicated, could pave the way 

toward rebuilding communities ravaged by foreclosures in our 

country. The biggest problem we face, Senators, is fear. People 

won’t open the mail, won’t realize that they’re in trouble, and won’t 

seek help. 

Congress recently passed legislation that will deal with this pilot 

program in Philadelphia and could be replicated on a national 

level, bringing bar owners and lenders together in a court-ordered 

process that could re-work loans that could not only help Main 

Street, but help to save Wall Street. 

Other financial mortgage foreclosure diversion programs should 

be expanded to a Federal level. I would suggest that there be a national suspension of foreclosures throughout our Nation for the 

next 90 days. This would allow the agencies to develop help, to 

allow the agencies to develop programs that could be brought to 

local levels and create a win-win scenario for citizens in this country. 

The bottom line is that if we do help create this win-win scenario, it will help Wall Street and help Main Street. I believe that 

what was done here today can be replicated throughout the Nation, 

and I urge you to bring that process forward. 

Thank you. 

Senator SPECTER. Thank you very much, Councilman Jones. 

[The prepared statement of Curtis Jones appears as a submission 

for the record.] 

Senator SPECTER. At the suggestion of Judge Rizzo, some of the 

homeowners have been invited in today. Judge Rizzo suggested 

34 

that this would be a good spot to hear from them, on a limited 

basis, trying to adhere to a one-minute time limit. 

So, Judge Rizzo, you may proceed. 

Judge RIZZO. Yes. Thank you. Thank you, Senator Specter. 

We are blessed with the attendance of certain homeowners who 

have been through various conference phases of our program in 

this early offering, and want to share with you and the Committee 

some of the successes that they personally have experienced, but 

not only that, what had brought them to the point of having a situation such as this come into the court. 

Before we go to our witnesses at table, I’d like to reference a 

Jean Ruffin in the audience, who is accompanied by Ian Phillips 

from ACORN. Jean was one of the true success stories when—Senator Casey visited. The mortgage commitment that she had from 

GMAC, based on a hearing and understanding the underpinnings 

of it and her situation as a senior in a residential home, which she 

had been in for many, many years, GMAC took the step to forgive 

the entire loan. 

So, it is a success story to keep a woman who has had her homestead for many, many years there in residence with her family, so 

for that we always like to talk about Ms. Ruffin. She likes to come 

and participate, due to her gratefulness for the program. Ms. 

Ruffin. 

[Applause.] 

STATEMENT OF ERIC RHANEY, HOMEOWNER 

Judge RIZZO. We have at table some other homeowners who have 

gone through the recent process, and I would like to start with Eric 

Rhaney, who is first, to speak just briefly about his experience. 

Senator SPECTER. Thank you for joining us, Mr. Rhaney. We look 

forward to your comments. 

Mr. RHANEY. Good morning, Senators, panel. My name is Eric 

Rhaney. I’m a union construction-laborer for Local 332. I’ve been 

a member for some 20 years. I live on West Oak Lane. I’ve been 

in my home for 40 years. My mother brought me in, raised me 

there. Later, we purchased the property. I assumed the property in 

1986. How I got behind in my mortgage, I was hurt, job-related, 

unable to collect Workman’s Comp. 

During the same period of time, I went through, and continue to 

go through, a separation with my wife. That kind of messed up my 

funding. I’m also getting custody of my two children right now, so 

I’m having to pay a lawyer as well. Also, I didn’t qualify for unemployment until February of 2008, and by that time it was too late 

for me to try to talk to the mortgage company. 

Eventually I did manage to borrow some money and I ap- proached my mortgage company, Citicorp, with $15,000. They refused the $15,000 because they wanted $16,000. During this time, 

I was working with the housing counselor, Tony Grant, from the 

Housing Association Information program, and he introduced me to 

this court and got me through all the hard work and late nights. 

He just got me through with this. 

Judge RIZZO. Mr. Rainey, just to assist in this, you were in conference just recently, as of yesterday. Is that correct? 

Mr. RHANEY. Yes, Your Honor. 

35 

Judge RIZZO. Yes. Okay. And actually a deal was struck yesterday with the help of a volunteer lawyer from Philadelphia VIP, 

Dan Siegel. 

Mr. RHANEY. Dan Siegel, yes. 

Senator SPECTER. So Mr. Rainey, you came into the program that 

Judge Rizzo administers. Then what happened? 

Mr. RHANEY. Well, we struck a deal and I’m supposed to start 

my mortgage payments in December. 

Senator SPECTER. You say you struck a deal and you’re still in 

your home? 

Mr. RHANEY. Yes. 

Senator SPECTER. Okay. That’s a good story. 

Judge RIZZO. Yes. 

Senator SPECTER. Next, Judge Rizzo? 

[Applause.] 

Judge RIZZO. Again, with the competent help of our housing 

counsel and our volunteer counsel. But let’s hear also from Cynthia 

Henderson. 

Ms. HENDERSON. I’m sorry. Can we go to the next witness? 

Judge RIZZO. We can. Deborah Jackson Smith. Please. 

STATEMENT OF DEBORAH JACKSON-SMITH, HOMEOWNER 

Ms. JACKSON-SMITH. Good morning. Good morning, Senator 

Casey, Senator Specter. 

Senator SPECTER. Good morning. 

Senator CASEY. Good morning. 

Ms. JACKSON-SMITH. Thank you very much, Judge Jones, and especially Judge Rizzo. I want to thank you for being here. I’m a 

homeowner as well. I’ve been in my home for approximately 20, 25 

years. I am now in foreclosure. I originally started, in 1999, to have 

home repairs done and there was so much paperwork that had 

taken place, I was signing this, signing this for the home repairs, 

that I really and truly was not told what I really and truly was 

signing. I was just happy with getting the home repairs done. 

Down the line, the home repairs fell through. The roof collapsed. 

It just was a disaster. I tried to make arrangements for them to 

come out to repair the home. Throughout the years, things just escalated, and escalated, and escalated. I’m paying them. I’m paying 

them. Before you know it, now I’m being told I have, now, another 

loan, another banker that has now taken over this loan. 

Originally it started with the home repair service, then it became 

a bank. Then from the bank it became another bank, and then another bank, and during this time the interest increased, increased, 

increased. During this time I became a single parent of two, divorced. My job. I no longer had it after 13 years. I became in arrears. During this time, I’m trying to still pay, trying to still struggle and pay. Before you know it, boom. Now I have a letter that 

is sent out to me that— 

Senator SPECTER. Did they then proceed for eviction? 

Ms. JACKSON-SMITH. Yes. 

Senator SPECTER. And you became part of Judge Rizzo’s program? 

Ms. JACKSON-SMITH. Judge Rizzo’s program. And I want to say— 

Senator SPECTER. And what happened? 

36 

Ms. JACKSON-SMITH. And from this I’ve had—thank goodness, I 

was introduced to PUP, which is the Public Unemployment Project, 

and I was introduced to a counsel by the name of Pamela 

Kinnebrew and Thurston Hymen, and the director, John Dodds. 

They have now introduced me to Judge Rizzo’s program, which is 

the Foreclosure Diversion Program, which now has helped me. 

Senator SPECTER. You’re still in your home? 

Ms. JACKSON-SMITH. I’m still in my home today because of this 

program. 

Senator SPECTER. And you’ve worked out arrangements through 

Judge Rizzo’s program to work it out? 

Ms. JACKSON-SMITH. Yes. We are now in the process of that. I’ve 

had one—I’ve come to one conference. I’ve had one conference. Now 

what has happened is that, from that conference, we’re going back 

again and we’re going to be handling this outside of court because 

the bank did not have all of their paperwork correct on the day. 

Senator SPECTER. But you’re on your way to solving it? 

Ms. JACKSON-SMITH. Yes. Yes. It’s a good program and I want to 

say thank you. 

Senator SPECTER. Judge Rizzo, let’s see the next witness. 

Ms. JACKSON-SMITH. Yes. 

Judge RIZZO. Okay. Thank you. All right. 

Tania Harrigan. 

STATEMENT OF TANIA HARRIGAN, HOMEOWNER 

Ms. HARRIGAN. Good morning, Senator Specter and Senator 

Casey. Thank you for taking time to hear our testimonies. My 

name is Tania Harrigan, and I’m also a member of the Philadelphia Unemployment Project. I reside in south Philly and I’ve been 

in my home for 8 years. I refinanced my mortgage because I needed 

renovations done after we bought the home. The broker came to my 

home and my interest rate was 9.75 percent. Our trouble began 

when my husband got laid off of work. We became behind in our 

mortgage and filed for bankruptcy. Our bankruptcy was dismissed 

because we could no longer afford the bankruptcy. 

I came to PUP and my counselors were Pamela Kennebrew and 

Thurston Hymen, directed under the fellowship of Johnny Dodds. 

I’ve learned about the Foreclosure Diversion Pilot Program, which 

afforded me to have reconciliation with Judge Rizzo and able to obtain and stay in my home. 

I was able to get a modified low interest, which went from 9.75 

percent to 7 percent. The mortgage payments were reduced from 

$437 to $411. If it wasn’t for the diversion program, I would have 

been facing a sheriff’s sale on November 4th. 

Senator SPECTER. Were you able to come to a figure that you 

could pay and stay in the house? 

Ms. HARRIGAN. Yes. 

Senator SPECTER. And you’re in your house now? 

Ms. HARRIGAN. They were able to work out a figure which would 

afford me to stay in my home, to have a place to live, and still continue to pay my mortgage payments. 

Senator SPECTER. So you have a place to live and you’re paying 

your mortgage payments, and it’s all because of the program you’ve 

worked through with Judge Rizzo? 

37 

Ms. HARRIGAN. Yes. I thank God for Judge Rizzo for having great 

compassion, taking this in her bosom and just being able to live it. 

Senator SPECTER. Thank you. Thank you very much for your testimony. 

Is there another witness, Judge Rizzo? 

Judge RIZZO. Our last witness, just briefly, would be Deborah 

Jackson-Smith to share her comments. I’m sorry, I apologize. Cynthia Henderson. I apologize. 

STATEMENT OF CYNTHIA HENDERSON, HOMEOWNER 

Ms. HENDERSON. Good morning, Senator Arlen Specter, Senator 

Casey, staff officials, and staff. I’m honored, first of all, to have the 

opportunity to speak on behalf—on my own behalf, as well as for 

some others, particularly my friends and family who find themselves in this very challenging position. Thank you for taking the 

time to listen. 

I’m here to share with you the benefits and/or advantages I received from the HACE program, H–A–C–E, which, after some research I did, which was begun by ACORN, which is another housing counseling agency in this city, helped me to navigate some of 

the bill, if you will, with the foreclosure program. 

As a teacher, I had an inkling to do some research and got it. 

This is what was given to me by LeAnn Washington—couldn’t really understand all of the bill that was supposedly passed. After several encounters with the helpful people at HACE—beginning with 

Marybell Rosario, I was able to unravel some things concerning my 

home after facing the ARM. 

I’m sure you’re familiar with the adjustable rate mortgage. My 

home became problematic—divorce settlement and using my TSA— 

tax sheltered annuity—my mortgage changed from Challenge Financial Investors in Florida to Wells Fargo M&A Bank, which did 

not include, by the way, the tax and insurances. 

Judge RIZZO. Ms. Henderson, could you share with the Senators 

your experience in our program? 

Ms. HENDERSON. Yes. 

Judge RIZZO. That would be great. 

Ms. HENDERSON. I was allowed to propose—help to have a proposal written for me from Brendy Lopez and I was able to come 

down and meet with the attorney and Judge Anne Rizzo, who was 

phenomenal in helping to sort through some of these things. I’d 

still have to get a fixed rate and the adjustable ARM, we’re still 

negotiating. I am still in my home. 

Senator SPECTER. You are? You say you are still in your home? 

Ms. HENDERSON. Yes, sir. 

Senator SPECTER. And have you worked out an arrangement 

through Judge Rizzo’s program to stay there? 

Ms. HENDERSON. Yes, sir. We’re still working on some things because—simply because— 

Senator SPECTER. You’re still working on it, but you think you’re 

on your way to getting it worked out? 

Ms. HENDERSON. Yes, I do, sir. I’m very confident of that. I’d like 

to have this not as an option, but mandatory for—situation that 

have had catastrophic effect on their lives—illness, medical situaVerDate Nov 24 2008 12:18 May 05, 2009 Jkt 048815 PO 00000 Frm 00041 Fmt 6601 Sfmt 6601 S:\GPO\HEARINGS\48815.TXT SJUD1 PsN: CMORC
38 

tions, because if I did not seek the help that’s there, I may not 

have known. I’d like to see something in place for people who are— 

Senator SPECTER. We’re going to come to that in our—Judge 

Rizzo, do you have one more final witness here? 

Judge RIZZO. Not at this point with respect to our homeowners. 

Senator SPECTER. Let us proceed with the final witness from the 

people who have been helped. 

Judge RIZZO. Thank you. 

Senator SPECTER. Who is the witness, Judge Rizzo? 

Judge RIZZO. We will then go to George Gould, who is with Community Legal Services. He’s managing attorney. 

STATEMENT OF GEORGE GOULD, MANAGING ATTORNEY, 

HOUSING AND ENERGY UNIT, COMMUNITY LEGAL SERVICES, PHILADELPHIA 

Mr. GOULD. Thank you very much, Senators Casey and Specter, 

for holding the hearing here today. My name is George Gould. I am 

the managing attorney of the Housing and Energy Units at Community Legal Services in Philadelphia. 

Our office has been substantially involved in the problems of 

mortgage foreclosures for many, many years. In addition to having 

represented thousands of individuals in mortgage foreclosure cases, 

our office has also been involved in numerous broader issues to try 

to confront the serious problems that foreclosures cause in this 

country. 

For example, in 1983, working with the Philadelphia Unemployment Project, PUP, John Dodds, sitting next to me, and the local 

sheriff, we were able to obtain through the Common Pleas Court 

a postponement of sheriff sales on owner-occupied properties for almost a year until our State legislature passed the Homeowners 

Emergency Mortgage Assistance Program, HEMAP, a program 

which provides substantial foreclosure relief to homeowners facing 

financial problems because of the country’s economic recession. 

In 2004, we again petitioned the Common Pleas Court with the 

sheriff to postpone foreclosure sales, which Judge Rizzo mentioned, 

which again led to the resolutions of hundreds of cases. Out of that 

case, the Honorable Annette Rizzo, Judge of the Common Pleas 

Court, instituted the Mortgage Foreclosure Steering Committee 

which created a court-supervised dialog between foreclosure attorneys and consumer attorneys and advocates. 

In March of this year, President Judge Jones and Judge Rizzo 

convened an emergency meeting of the committee and informed the 

committee of the framework of the proposed residential diversion 

program. The committee has since had substantial input into the 

formulation and implementation of the diversion program. 

Our office, along with the Philadelphia Legal Assistance, PLA, 

our sister agency, which also provides legal services to low-income 

persons, have continued to play an important role in the program. 

We have been actively involved in the training of the counseling 

agencies, private attorneys recruited by VIP, and JPTs, judge pro 

tems, who preside over the conciliation conferences. Our office also 

represents individual homeowners involved in the process and we 

continue to play an active role in the steering committee’s involvement in the implementation of the program. 

39 

The Residential Mortgage Foreclosure Diversion Program is a 

bold and creative measure taken by our local Common Pleas Court 

under the strong leadership of Judge Jones and Judge Rizzo to address this most pressing problem. 

There are numerous problems in communication between lenders 

and homeowners. Homeowners have often had great difficulty in 

trying to communicate with lenders or mortgage loan servicers regarding their mortgage problems. Under-staffed servicers of mortgage loans also had difficulty in trying to communicate with the 

homeowner, who was often overwhelmed by their circumstances 

and sometimes not able to adequately deal with the problem on 

their own. 

The project created by our court helps to resolve many of these 

issues. It brings together both parties in a structured and organized way to help bring about a resolution of the issues. By postponing the sheriff’s sale and setting up a conciliation conference 

presided by a judge pro tem, it gives the homeowner an opportunity, with the help of professional counseling and attorneys, to 

try to resolve their problems. 

However, unlike the past where many of the problems were solely related to the financial circumstances of the homeowner, today 

we are faced with situations where the mortgage itself is often 

predatory and unaffordable, one that must be modified to become 

affordable and a performing loan. 

The pilot created by the diversion program is a major step forward, however, it is not one without cost. Monies are needed to 

fund the counselors and foreclosure hotline operated by PLA that 

takes calls from homeowners and connects them with counseling 

agencies to help them prepare a financial analysis and suggested 

modification or work out other loans, VIP, and our office and PLA 

to help provide individual representation. 

While the Housing and Economic Recovery Act of 2008 provided $30 million for legal assistance to homeowners facing foreclosure, 

the law had been recently interpreted to preclude any funding for 

legal assistance after a foreclosure action has been filed in court. 

This must be changed. 

In addition to these resources, what has also proved to be extremely effective is outreach to the homeowner. What we have 

found is that the time the person is in foreclosure, they receive numerous mailings and are often very confused. If someone can literally go to their door, knock on it, and explain the program, this 

has been extremely helpful. Many groups, including ACORN in this 

city, have been extremely effective in getting people involved and 

getting people to participate in the program. 

The program has been successful because it brings people together who often would have great difficulty or not even communicate with each other, but the program has some limits. For example, while clearly it is in the lender’s interests to modify the loan 

so as to create a performing loan, situations occur because of the 

mortgage servicer’s contract where resolutions are not achieved 

even though— 

Senator SPECTER. Mr. Gould, how much more? 

Mr. GOULD. Just about a minute. 

Senator SPECTER. Thank you. 

40 

Mr. GOULD. Where resolutions are not achieved, even though it 

would be in the financial interest for the investor to do so. This is 

so because some of the servicers’ contracts create incentives for 

servicers to foreclosure—they will be reimbursed their fees—rather 

than to modify a mortgage, which will create no additional compensation for them. 

The recently passed financial rescue plan provides the Federal 

Government with the tools to make major inroads in the foreclosure problem. The Federal Government must take steps to obtain some of these mortgages and modify them to become affordable. By obtaining these mortgages, the government has the ability 

to make these loans affordable by reducing principal and interest 

rates and turn them into performing loans. 

Another alternative would be for the Federal Government to take 

over the servicing of these loans, or the Federal Government should 

require any bank it invests in—this is under the recent bail-outbill—it adopt procedures that systematically modify loans. 

Senator SPECTER. Mr. Gould, your additional minute is now up. 

Mr. GOULD. Excuse me? 

Senator SPECTER. Your additional minute is now up. 

Mr. GOULD. Okay. Anyway, we strongly urge the passage of legislation also allowing the modifications of mortgages within the 

bankruptcy process. Thank you. 

Senator SPECTER. Thank you very much. 

[The prepared statement of Mr. Gould appears as a submission 

for the record.] 

Senator SPECTER. Our next witness is Mr. Brian Hudson, the 

CEO of the Pennsylvania Housing Finance Agency. 

Welcome, Mr. Hudson. You have 5 minutes. 

STATEMENT OF BRIAN HUDSON, CEO, PENNSYLVANIA 

HOUSING FINANCE AGENCY 

Mr. HUDSON. Thank you, Senator Specter and Senator Casey. 

Thank you for the opportunity to speak to you today, and thank 

you for your support of affordable housing. I applaud your efforts 

to keep Pennsylvanians in their home. I also want to applaud 

Judge Rizzo, Judge Jones, and Councilman Jones. 

PHFA was created in 1972 to provide safe, decent, affordable 

housing for Pennsylvanians. I would like to talk this morning about 

our foreclosure preventions. You heard the acronym HEMAP, 

Homeowners Emergency Mortgage Assistance Program, which was 

created in 1983 as a result of the downturn in the steel industry, 

which quickly spread throughout the Commonwealth. 

HEMAP is funded by the general assembly. The requirement is 

that the homeowner has to be in default or in foreclosure through 

no fault of their own. In most cases, the homeowner receives a foreclosure notice after they are 60 days delinquent, which is known 

as an Act 91 notice. Applications may be made at any of the 100 

counseling agencies that we have throughout the Commonwealth. 

If approved, the Agency will pay a partial or full mortgage payment 

on behalf of that homeowner for up to 24 months, and HEMAP 

would also serve two separate mortgages, if need be. We can be in 

no less than a third lien position. 

41 

Homeowners are only required to pay, at a minimum, $25 per 

month. Act 91 specifies that the home has to be the principal residence, and it has to be through no fault of their own. The qualifying criteria is that the homeowner must show the ability to resume its mortgage payments within 24 months. The average 

HEMAP model is about 11,000. To give you a comparison, the average cost of foreclosure runs about $35,000. 

The Homeowners Emergency Mortgage Assistance Program is an 

example of how State government has, for a quarter century, successfully put its financial resources into helping homeowners, having saved 41,000 Pennsylvania homes from foreclosure, which is 

170,000 separate individuals, to avoid the loss of their home. The Commonwealth has appropriated $239 million since incep- tion of the program. We have lent $430 million under this program. 

Repayments total approximately $240 million. HEMAP is recognized by Harvard University for two consecutive years as a top innovation in American government. A number of places have begun 

to duplicate the HEMAP program, Delaware and North Carolina, 

to name a few; 19,500 have fully repaid their loan to the Commonwealth. 

But HEMAP was not designed to deal with our current crisis 

that we find ourselves in now, so I want to talk about some initiatives that we launched over a year ago: two refinance products to 

refinance homeowners who were in trouble. 

The first one is called REAL, Refinance Through an Affordable 

Loan. That’s for those homeowners who are just beginning to slip 

in their mortgages. They are no later than two late payments, just 

realizing that they’re struggling with their mortgage. We have over 

80 lenders’ networks throughout Pennsylvania that will help underwrite that loan on behalf of PHFA, and then we will service 

that loan in-house and we will buy that loan from that lender. 

We will do up to 100 percent loan-to-value for the REAL program. But REAL doesn’t cover all of the problems that we’re having, so we created another product called HERO, Homeowner Equity Recovery Opportunity. Now, this is for those homeowners who 

are clearly upside down in their mortgage, they were loaned more 

than the property’s value. In that case, PHFA will negotiate on behalf of the homeowner with the lender to do a reduced mortgage 

and assign that mortgage to PHFA. 

Again, we will do 100 percent of the loan-to-value. We do a new 

appraisal for the property and then have that loan assigned to 

PHFA. Over overriding criteria is, can we improve the financial situation of that homeowner? PFHA is going to the table with HERO 

to negotiate on behalf of that homeowner. In some cases, we are 

just beginning to see some of the lenders step forward. If not, lenders are willing to do modifications. We just want to make sure that 

homeowner stays in their home. 

PHFA has put aside about $21 million so far. We’ve helped 170 

homeowners in both REAL and HERO stay in their homes, and we 

are doing a direct mailing to over 20,000 Pennsylvanians that have 

adjustable rate mortgages, to have them come in and seek the help 

of either HERO, REAL, or get through the counseling network. We 

have a state-wide counseling network of over 120 agencies designed 

to analyze these loans and see if they fit for REAL or HERO. 

42 

What are the issues? A recent survey showed that Pennsylvania 

has 194,000 subprime mortgages. Of those total subprime mortgages, 132,000 were fixed rate that are at 15.3 percent delinquent, 

and 63,000 are adjustable rate mortgages, or ARMs, at 24 percent 

delinquent. So we’re targeting those ARMs to get those people into 

our counseling network to see if we can get them refinanced into 

a HERO or REAL loan. 

Many services or lenders are very slow and reluctant to negotiate 

and restructure their loans for fear of being held liable by investors. The service will allow them to modify their loans and— 

Senator SPECTER. Mr. Hudson, how much more time will you 

need? 

Mr. HUDSON. I’m just about done, Senator. Thank you. We will 

help restructure them. Establishing a reserve fund as a National 

Housing Trust Fund that the Senators have endorsed would be 

helpful to conserve the lost reserve. I hope this brief review of the 

programs being offered to the citizens of Pennsylvania will assist 

Congress and the members of the Senate in its efforts to hardpressed homeowners. 

Thank you very much for the opportunity today. Please, my best 

wishes, and your continued service is needed and appreciated. 

Thank you very much. 

Senator SPECTER. Thanks very much, Mr. Hudson. 

[The prepared statement of Mr. Hudson appears as a submission 

for the record.] 

Senator SPECTER. Our next witness is Ms. Stephanie Seldin, 

managing attorney for the Philadelphia Law Works/Philadelphia 

VIP. 

Thank you for joining us, Ms. Seldin. We look forward to your 

testimony. 

STATEMENT OF STEFHANIE SELDIN, MANAGING ATTORNEY, 

PHILADELPHIA LAW WORKS/PHILADELPHIA VIP 

Ms. SELDIN. Thank you for having me. Good morning, Senator 

Casey, Senator Specter, and distinguished witnesses and audience 

members. As the Senator said, I am managing attorney at Philadelphia VIP, and a member of the Mortgage Foreclosure Steering 

Committee. 

VIP’s mission is to promote equal access to justice for the poor. 

We work to secure pro bono civil legal services for more than 1,000 

low-income individuals and families annually, and have done so 

since our inception in 1981. 

We created the Philadelphia foreclosure rescue effort to recruit, 

train, and provide private lawyers to represent low-income homeowners attending the conciliation conferences. During the conciliation conferences in June, July, August, and September, VIP attorneys assisted 233 clients. VIP volunteers provided approximately 

$325,000 in free legal services to homeowners in just four months. 

One hundred and fifty private practitioners from mostly smalland medium-sized law firms or solo practices are helping homeowners negotiate affordable workouts to avoid foreclosure through 

the diversion project. I want to express my appreciation to the 

Philadelphia Bar Association, Chancellor Michael Pratt, Business 

Law Section Chair Steve Foxman, and Mike Balent of the Real 

43 

Property Section for their untiring efforts to promote and support 

this effort. 

However, VIP needs help to continue to provide that service. Our 

volunteers are representing two, three, or four clients and cannot 

take on any more. Even with 150 volunteer lawyers, we still need 

more attorneys to sign on, particularly from the large law firms. 

VIP enjoys extraordinary relationships with the large law firms 

of this city. They have told us they want to participate in the Mortgage Foreclosure Diversion Project, but their hands are tied by conflicts of interest because many large law firms represent lenders, 

or they want to represent lenders. 

The American Lawyer magazine reported that pro bono efforts 

across the country are stymied because of the conflicts issue mentioned by Senator Specter in your op-ed in today’s Philadelphia Inquirer. 

The New York Federal Reserve recently asked 10 banks to provide conflict waivers to their outside counsel to allow them to participate in a New York City Bar Association Mortgage Foreclosure 

Pro Bono Project. Five of them said yes and sent their firms’ waivers, only five, and only for the New York City Bar Association effort. 

We need all banks involved in residential mortgage lending, especially those receiving bail-out money from the Federal Government, to not only allow, but to encourage, their outside counsel to 

participate in pro bono opportunities to negotiate affordable workouts everywhere in this country. 

I am asking the Senate Judiciary Committee to help make this 

happen, and I am encouraging the Pennsylvania Bankers Association to endorse my proposal today. 

The second way you can help grow this pioneering project is to 

invest resources. First, we need money for the attorney experts 

who are providing valuable expertise and mentoring to VIP attorneys. Those experts are the legal services attorneys at Community 

Legal Services and Philadelphia Legal Assistance. Most of the VIP 

volunteers knew nothing about mortgage foreclosure until they 

came to a training led by CLS’s Beth Goodell. 

Second, I want to endorse more funding for housing counselors 

who work hand-in-hand with our volunteers to help keep homeowners in their homes. 

Third, VIP wants to measure the success of this program, but 

frankly we do not have the expertise or the staff to do it. I request 

funding for an evaluation of the diversion project to be implemented by the Fels Institute of Government in collaboration with 

VIP and the Court of Common Pleas. VIP reached out to John 

Kromer, an expert in neighborhood recovery, from the—Fels Institute at the University of Pennsylvania to help us not only measure 

the impact of our work, but also to summarize and promote this 

effort nationally. 

Finally, VIP’s management of this new initiative is a significant 

investment of time and resources on an already tight budget and 

overworked staff. With the 233 mortgage foreclosure clients, we 

have increased our capacity by over 50 percent with no new staff. 

Please consider using some of the new money that was spoken 

of at yesterday’s Senate Banking Committee hearing where SenVerDate Nov 24 2008 12:18 May 05, 2009 Jkt 048815 PO 00000 Frm 00047 Fmt 6601 Sfmt 6601 S:\GPO\HEARINGS\48815.TXT SJUD1 PsN: CMORC
44 

ator Casey was to support the Mortgage Foreclosure Diversion 

Project and to implement new projects across the country so other 

jurisdictions can benefit from Philadelphia’s success. 

I conclude by applauding President Judge Darnell Jones and 

Judge Annette Rizzo for their extraordinary vision and hard work 

on this exceptional collaboration. Also, thanks so much to the 

amazing staff at the FJD, and to my colleagues on the Mortgage 

Foreclosure Steering Committee, including the lenders’ representatives. Together we are doing groundbreaking work. 

Senator SPECTER. How much more time do you need? 

Ms. SELDIN. That’s it. I’m done. 

Senator SPECTER. Okay. Thank you. 

[The prepared statement of Ms. Seldin appears as a submission 

for the record.] 

Senator SPECTER. We now turn to Mr. John Dodds, Director of 

the Philadelphia Unemployment Project. 

Thank you for joining us, Mr. Dodds. We look forward to your 

testimony. 

STATEMENT OF JOHN DODDS, DIRECTOR, PHILADELPHIA 

UNEMPLOYMENT PROJECT 

Mr. DODDS. All right. I’ve been asked to be brief, so I will be 

brief. 

This program has really made a difference for homeowners in the 

city of Philadelphia. Our organization has been doing these cases 

since the inception. Just real briefly, of 55 cases that we have handled since back in June, 27 of those have had their mortgages 

modified, 13 have had the modification in process, which is 73 percent of these homeowners that have programs—modified loans. 

These are all homeowners who were severely behind on their 

mortgages, were already scheduled for sheriff’s sales, so we think 

that’s a fairly incredible solution but it will be difficult to become 

a national model. The only concern that we have is that the interests of the servicers of the loans are not the same as the interests 

of the investors or the homeowners. Very often, financially, they do 

not have that same financial interest. 

I think what’s key, and I think Sheila Bair from the FDIC is 

starting to talk about this, is that we somehow step in and do the 

modifying of these loans. If we’re going to go to a national program, 

I don’t think the services are set up to handle the volume we’ll 

have. I think we really need the government to take a step to say 

that it’s in the interest of the investors of the financial institutions, 

of the families, and the homeowners to have performing loans. 

It’s very unlikely that with the current situation with loan 

servicers in this country that that will happen. It’s working in 

Philadelphia because we’re the first, but I don’t know that it’ll happen nationally. I think it’s very important that the Congress and 

the government find a way to modify these loans, make them performing loans that work for everybody. That’s going to be a step 

that we need to take beyond the current program. So, I thank you 

very much. 

Senator SPECTER. Well, thank you very much, Mr. Dodds. 

[The prepared statement of Mr. Dodds appears as a submission 

for the record.] 

45 

Senator SPECTER. We now turn to Mr. Michael White from the 

Pennsylvania Bankers Association. 

Mr. White. 

STATEMENT OF MICHAEL WHITE, PENNSYLVANIA BANKERS 

ASSOCIATION 

Mr. WHITE. Thank you, Senator Specter and Senator Casey, for 

this opportunity to meet with you today. My name is Michael 

White. I’m a senior vice president at VIS Financial, a financial 

services company that does bank insurance investment and mortgage services, based in Wyomissing, Berk’s County, Pennsylvania. 

I’m here today in my capacity as a member of the Pennsylvania 

Bankers Association’s Credit Access Task Force Committee. 

The PBA’s members include 186 commercial banks, savings institutions, trust companies, and their affiliates in Pennsylvania, from 

the smallest to the largest. Elected officials, regulators, lawyers, financial institutions, and homeowners share a common goal in preventing home mortgage foreclosure wherever possible. 

Effective home mortgage foreclosure prevention starts long before 

a homeowner ever misses a single payment. In fact, it starts long 

before a home is purchased. Home buyer and financial education 

are key components to any mortgage foreclosure plan. Many loan 

programs that require home buyer education have seen favorable 

results in reducing mortgage delinquency. 

As a member of the board of directors of Neighborhood Housing 

Services of Reading, I have seen firsthand the benefits of budget 

counseling. October 16th was ‘‘Get Smart About Credit Day’’. 

Twenty-five hundred bankers visited schools across our Nation to 

teach credit management skills to elementary and secondary students. 

Since 2003, over 400,000 students have been reached through 

this volunteer banker program. Bankers invest their time to educate kids because we firmly believe that good credit management 

is best learned early in life. That being said, the values of living 

within one’s means, guarding assets, and saving for the future are 

best exemplified at home. 

Other witnesses have outlined foreclosure prevention from their 

perspective as judges, attorneys, government administrators, and 

housing advocates in their communities. I speak from my 23 years 

as a commercial bank mortgage lender. I lend through federally 

and State regulated financial institutions. My institution and other 

members of the PBA are highly regulated and examined at either 

the State and Federal levels. Strong and solvent banks are critical 

to the health of our local communities. Bank officers and employees 

live where they work. 

The banking industry has every incentive to treat our customers 

and our communities well, and has absolutely no reason to do otherwise. As commercial banks and savings institutions, we depend 

on our customers’ financial well-being. Risky lending or mistreatment of borrowers would expose us to negative scrutiny not only 

from our regulatory agencies, but also from our shareholders and 

the communities in which we operate. 

My institution is not a mortgage loan investor in the sense some 

investment banks were, nor are we a stand-alone mortgage loan 

46 

company or broker. Non-bank lender-brokers or investors are primarily interested in selling mortgages to generate fees or commission and that has differed markedly from commercial banks and 

savings institutions. 

Bankers understand that some of our borrowers will face tough 

financial times and need our assistance working through them. If 

there’s one message I could leave here today, it’s that homeowners 

who foresee difficulty coming their way must contact their lenders 

immediately. 

If they wait until they have missed one or more payments, their 

lenders’ ability to help them has been greatly diminished. Some 

lenders will reach out to customers even prior to the assessment 

of late charges, while most lenders will make contact by phone and 

mail upon payments exceeding the grace period, which is typically 

only 15 days. Reputable lenders such as PBA members are anxious 

to work with their troubled borrowers to avoid foreclosure and will 

actively continue to attempt contacting the borrower through available avenues. 

Those customers that have made contact and responded to lenders will often begin the process of evaluation of their particular situation and potential solutions. Some strategies that banks use are 

skipping payments, extending payments, accepting reduced payments, refinancing the current loan, modifying the current loan 

rate, or terms. 

In addition, an additional solution to avoiding foreclosure may be 

the liquidation of the home. Although we would always prefer to 

keep the homeowner in the property, there are situations where 

selling the property and benefiting from the equity do make sense. 

Most lenders will work with borrowers who are actively attempting 

to market their homes in an effort to satisfy their mortgage. 

If the home value exceeds the amount remaining due on the 

mortgage, the homeowner may want to ask the lender to agree in 

writing not to seek further collection remedies and grant a reasonable period of time to find alternative housing and vacate the 

premises in an orderly fashion. Some lenders may be able to work 

out an orderly exit, even where proceeds of the sale will not cover 

the amount of the remaining mortgage. 

There is other assistance available. Borrowers who anticipate 

payment issues can also work with reputable local credit counseling organizations. Pennsylvania Housing Finance Agency is here 

today and discussed the longstanding and highly regarded statewide Homeowners Emergency Mortgage Assistance Program, 

known as HEMAP, which can provide relief for many homeowners. 

A newly launched— 

Senator SPECTER. Mr. White, how much more time will you 

need? 

Mr. WHITE. Thirty seconds. The newly launched Hope for Homeowners program, which was created by Congress to help those at 

risk of foreclosure to refinance into more affordable, sustainable 

loans, is also available. 

Although mortgage foreclosure is a bank’s last source for repayment of a loan, banks would prefer to work toward a solution that 

avoids the foreclosure process. That said, banks also have an obligation to follow safety and soundness regulations and make atVerDate Nov 24 2008 12:18 May 05, 2009 Jkt 048815 PO 00000 Frm 00050 Fmt 6601 Sfmt 6601 S:\GPO\HEARINGS\48815.TXT SJUD1 PsN: CMORC
47 

tempts to limit their losses that may negatively impact the institution, its depositors, and shareholders. 

Foreclosures not only affect borrowers and lenders, but also the 

community. It is in everyone’s best interests to have a program 

that provides an equitable solution for all parties in a cost-effective 

and expeditious timeframe. 

Thank you very much for the opportunity to appear before you 

today to share the banking industry’s perspective on this critical 

issue, and I stand ready to answer any questions you may have regarding my testimony. Thank you. 

Senator SPECTER. Thank you, Mr. White. 

[The prepared statement of Mr. White appears as a submission 

for the record.] 

Senator SPECTER. Our final witness is Mr. Hiram Carmona, Assistant Contract Administrator, Housing Counseling, for the city. 

Thank you for being here today. The floor is yours. 

STATEMENT OF HIRAM CARMONA, ASSISTANT CONTRACT ADMINISTRATOR, HOUSING COUNSELING, CITY OF PHILADELPHIA 

Mr. CARMONA. Good morning, Senator Specter, Senator Casey, 

and members of the audience. My name is Hiram Carmona and I 

oversee the city of Philadelphia’s Housing Counseling program. 

I want to talk briefly about the costs associated with this program and the resources that the city has put into it. First of all, 

as you may know, the city of Philadelphia funds the largest and 

longest-standing housing counseling program in the Nation, for 

over 30 years. This year, the city supports 29 housing counseling 

agencies, with $3.6 million of CDBG funds. In order to meet the additional number of homeowners facing foreclosure, we have put an 

additional $700,000 of City funds into the housing counseling program, for a total of $4.3 million. Even though we might think that’s 

a lot of money, to tell you the truth, we need more. 

The city of Philadelphia has established a hotline. It’s called 

‘‘Save Your Home, Philly’’ hotline, which is managed by the Philadelphia Legal Assistance Corporation. The number of the hotline is 

215–334–HOME. It’s an easy number to remember. We have put 

additional resources to fund the hotline—the way that the program 

works, homeowners will get letters from the court telling the homeowners to contact the hotline. Homeowners must contact the hotline. They will get an appointment with the housing counselor. The 

housing counselor then will meet with the client and they both attend a conciliation conference. So, the hotline is a crucial part of 

the whole program. 

Another important part of the program is the outreach. The City 

has been able to do outreach through our Neighborhood Advisory 

Committees—we call them NACs—through housing counseling 

agencies, and other City agencies. The outreach program has been 

very successful in making sure that homeowners attend the conferences. In fact, we did a comparison of the successes and we 

found that 73 percent of the people that are contacted door-to-door 

attend the conferences; 43 percent of those that were not contacted 

attend the conferences. So face-to-face contact with the homeowner 

is definitely an important part of the program. We’ve heard some 

48 

stories of all the successes, so I really don’t want to get into it for 

lack of time. But in conclusion, I do want to recommend that the 

diversion program be replicated throughout the country. 

Now, on the resources for the diversion program, I want to say 

this, that unfortunately the Housing and Economic Recovery Act of 

2008, as it stands now, cannot be looked upon to assist with the 

implementation of the programs throughout the country. I would 

recommend, and the city of Philadelphia would like to see, an 

amendment to the Act to allow funding for the implementation of 

diversion programs throughout the country. 

I know that Judge Rizzo mentioned over 200 home have been 

saved. We had 4 days of conferences last week. We had another 

day of conference yesterday. It’s over 300 homes saved since the inception of the program. Just to let you know, the crucial role that 

housing counselors have with the program, we have over 700 cases 

still being negotiated. So the housing counselors are doing a lot of 

work and that’s how we’re going to make the program successful. 

We just want to make sure that we replicate it. I would ask you 

to provide funding to replicate this throughout our great Nation. 

Thank you. 

Senator SPECTER. Thank you very much, Mr. Carmona. 

[The prepared statement of Mr. Carmona appears as a submission for the record.] 

Senator SPECTER. President Judge Jones, we will now turn to the 

questioning by Senator Casey and myself. We will have 5 minutes 

as well. 

President Judge JONES. Yes, sir. 

Senator SPECTER. The suggestion was made by Councilman 

Jones about having a national moratorium legislated by Congress. 

I think Congress does have the authority to do that. But the question that Councilman Jones raises in my mind is as to whether it’s 

better to have an act that came out of Washington or to rely upon 

State governments where States may have different kinds of problems, or even beyond that, to rely on innovative programs like the 

one which was initiated here in Common Pleas Court. What do you 

think? 

President Judge JONES. Well, initially, Senator, it has been our 

experience—and I say ‘‘our’’ meaning Judge Rizzo and myself—that 

we would not want to interfere with the contractual relationship 

between parties, recognizing that the mortgage is a contract, on a 

scale that would allow or would encourage the undermining of the 

intent of the two entities to bargain for a mortgage. 

That having been said, to me it is most important that the local 

municipalities and the State-level governments be sufficiently funded to be able to implement the kind of program that we have, and 

we know, frankly, by reason of our budgets here in the city of 

Philadelphia, and perhaps the one state-wide, we simply don’t have 

enough money to be able to do that. That’s why I think there’s a 

call upon the Federal Government to put some funds into this process. 

But in terms of control, I, frankly, think that no one knows better what needs to be done than those of us who are at the local 

level. 

49 

Senator SPECTER. Judge Rizzo, a big issue has been bringing the 

homeowners to the table. They’re inundated with letters, documents, and legal papers in a very, very confused state. 

What is the best way to approach this? To what extent have you 

structured proactive matters so that people like Mr. Gould and 

other counseling services, Ms. Seldin, will go out and look for them 

and sort of bang on their doors, to grab them by the scruff of their 

neck and bring them in to help them help themselves? 

Judge RIZZO. Well, in that situation I think there’s been a description of the process. To get the people in the chute, the outreach is critical. I call it hand-to-hand combat, people going into 

neighborhoods, knocking on the door, handing a cell phone to a 

homeowner that— 

Senator SPECTER. In a lot of neighborhoods, it is hand-to-hand 

combat. How about that? 

Judge RIZZO. I can tell you, that’s right. But we appreciate the 

fact that when people come in befuddled and hopeless on many occasions, we have an infrastructure that can address those issues 

through our wonderful housing counselors, through our Community 

Legal Services groups, and other volunteer lawyers. But we have 

to get them there. That’s my point: build it and they will come. 

We have to do the outreach that actually gets the process started, and it’s one of education and hopefulness that may lead to some 

success of them remaining in the home, or, as I may affectionately 

say, a graceful exit, where there is control of how they will leave 

the property in a dignified manner and then have to look forward 

to what that next phase will be in terms of their living relationship. In many respects, Senator, I call that a success as well. 

Senator SPECTER. Councilman Jones, there has been a concern 

about predatory lending practices, people being loaned money 

which they cannot afford to repay. The bankers have not been concerned to get a down payment, at least to some extent, to go 

through the financial status of the individual with other obligations 

to see to it that they can make the payments. Bankers have relied 

upon the guarantees of Fannie Mae and Freddie Mac. 

To what extent do you think that this has arisen because of overreaching by the lenders? 

Councilman JONES. Well, clearly, I think I wouldn’t say either 

party was trying to be overtly predatory. It’s by virtue of rate of 

return that people saw an opportunity, where people had bad credit, they could charge more, and took advantage of that in a business model. 

Where we are now, however, is where can we get to a win-win 

scenario. When you mentioned about the moratorium on the sheriff’s sale, what that moratorium did was bring all parties to the 

table. That is why we suggested that maybe a national moratorium—and also, Senator Obama agrees with that notion and has 

said it publicly, because what it does is get all parties to the table 

earnestly to work it out. So no matter how we got there, it will 

take good will to work it out. That’s what I hope to do, whether 

at a Federal level or at local levels’ discretion. 

Senator SPECTER. Before turning to Senator Casey, on the same 

question, Mr. White, I appreciated your comments about education, 

letting people have information and instruction as to what is realVerDate Nov 24 2008 12:18 May 05, 2009 Jkt 048815 PO 00000 Frm 00053 Fmt 6601 Sfmt 6601 S:\GPO\HEARINGS\48815.TXT SJUD1 PsN: CMORC
50 

istic. What do you suggest should be done in the future to guard 

against even the semblance of a predatory practice, where the lenders—and you represent lenders—would be under some sort of a 

code, or perhaps even a statutory obligation, to see to it that the 

borrowers are counseled so that they know what the realism is on 

repaying the loans. 

Mr. WHITE. Yes. I think that there are several programs out 

there that have home buyer education required based on either 

credit level, income level. As I say, my work with Neighborhood 

Housing Services, which we work with low-and moderate-income 

people, our delinquency rate is less than 1 percent because of home 

buyer education and specific financial budget counseling. 

Senator SPECTER. If yours is less than 1 percent, where are these 

foreclosures coming from? 

Mr. WHITE. Well, that’s just for the loans in Neighborhood Housing Services of Reading. That’s a fairly small pool of loans. Obviously, the foreclosures are coming from a national level. But we 

have found that education has definitely made an impact on the 

performance of loans, at what level that’s going to be implemented. 

A lot of the credit criteria have been established by, and are established by, the GSEs, so Freddie, Fannie are establishing the 

credit criteria under which most of the lenders operate, even in the 

conforming sector. Those credit criteria may have to tighten up, 

and a component of that I would recommend would be the educational criteria. 

Senator SPECTER. Senator Casey. 

Senator CASEY. Thank you very much. I was listening to Judge 

Rizzo and was reminded of the day we were here for the roundtable 

in August. We had a roundtable, which was very productive. We 

had people from all over the State. Then we went across the hall, 

or on to a different floor. We went into a courtroom. Judge Jones, 

I’m not sure what courtroom that was, but it was yours. So we 

went in and I was watching this program live. I mean, with all the 

intensity of courtrooms across the country, except a lot more people 

gathered in that courtroom. 

The reason I’m telling the story, to give you a sense of the intensity, I was in the back, or to the side of the room. I sat down, or 

I was standing there—I forget which—and there was a counselor, 

I think, there. She was very intense about her work. She wanted 

to make sure that they had a modification and had it coming together. I was standing there. She looked at me and said, ‘‘Sir, I 

have a counseling session going on here. Please move.’’ 

[Laughter.] 

Senator CASEY. So it gives you a sense of the intensity of that 

effort. That’s good news. I didn’t mind being shoved aside for the 

good of the order. 

But I wanted to get a sense of the numbers. My numbers—I 

want to read this so I get it right. Judge Rizzo and Judge Jones 

can correct me if I’m wrong. But to date, nearly 230 properties 

have been saved from sheriff’s sale, and an additional 200 properties have been postponed after conciliation conferences due to 

reasons—and then it lists the reasons. Is that right, the numbers 

that I— 

51 

Judge RIZZO. Basically, going through September—we didn’t 

crunch our numbers yet for October—of the 1,500 homes, 230 we 

note as being saved outright by having the sheriff’s sale stayed. 

Senator CASEY. Two hundred thirty out of 1,500? 

Judge RIZZO. No, it’s more reduced. It was the people who came 

in, which would be another 700; 230 were saved, but another 330 

homeowners were permitted to remain in the household because 

postponements were by agreement of lenders to have a window of 

time in which further loan modifications or other agreements could 

be worked out. They could be forbearance agreements. They could 

be forgiveness for a brief period of time. 

What we found in these conciliation conferences is that, on a 

micro basis, again, creative ideas are brought forward that really 

are pertinent to this particular home situation. So, various things 

are crafted, whether it’s a down payment and then there’s, say, a 

lapse of a couple of months before they catch up, or waiting for certain benefits which would kick in for the certain homeowners. So, 

creativity abounds. But we do consider homeowners who have postponements of sale as a success and an opportunity to give time to 

work things out. 

Senator CASEY. A really simple thing for me, and I think for others who aren’t as involved in the work day to do, what percent 

would you categorize as successful? I realize that’s a broad term. 

But can you put a number on that, an estimate? 

Judge RIZZO. Well, I believe, Senator Specter, in your outreach 

letter to the other jurisdictions, to president judges, for which we’re 

ever grateful, it’s a figure of approximately 80 percent. That figure 

constitutes success in various forms. Of the homeowners who 

availed themselves of the program—we did have those who failed 

to appear for whatever reason, had vacated the property, gave up 

hope, or did not avail themselves for whatever reason or follow 

through—those numbers reflect an average of approximately 80 

percent, 78 percent, who have gotten some success from the program of either outright sale, loan modification, or postponement so 

that deals could be worked out. There is that small percentage as 

well, which I mentioned, of graceful exit, which I do see as a success in situations which really means that the person has got to 

move on. 

One, in particular I think of, there were two disabled adults in 

the property. The lender gave a significant amount of time in 

which they had to vacate, and also provided $4,000 in moving costs 

for them, to assist them in that graceful exit with dignity and compassion. 

Senator CASEY. I couldn’t help but note in the testimony, the 

word kept coming back over, and over, and over again, and I’m 

glad it did because it’s getting to the point: counselors, or counseling. Counseling, counseling, counseling. It’s so successful across 

the country. 

I was one of the leaders in the Senate to insist upon getting $180 

million of Federal money that’s already been spent. I think it was 

spent this spring. We got another $150 million. We’ve got to keep 

getting money, tens, if not hundreds of millions more, for counseling because it works. It’s a good an expenditure of taxpayer 

money as you can think of to keep people in their homes. The 

52 

Treasury Department told us that even in the subprime context, if 

you get counseling even in subprime, don’t have a problem. So for 

those who are making policy in this country, whether it’s us in the 

Senate, whether it’s the House, or whether it’s State government 

or municipal government, counseling dollars work real well. Councilman Jones, I appreciate the fact that you’ve been an advocate for 

that, as well as Councilwoman Tasco, and so many others who 

have pushed hard on this. 

Finally, my time is up, but I wanted to to commend—I won’t ask 

them a question, but I did want to commend the people who were 

here giving personal witness. You are courageous to be here and 

to tell your own stories. I want to make sure I got all the names 

right: Jean is here, We met Jean in August. Eric, Deborah, Tania, 

and Cynthia. Anyone else? Any first name that I missed? 

[No response]. 

Senator CASEY. Thank you very much for your personal witness 

and telling your own stories. 

Senator SPECTER. Thank you, Senator Casey. I believe that 

you’re really on to something here, Judge Jones, Judge Rizzo. We 

appreciate your coming in. I think Senator Casey is exactly right. 

When we’ve heard from the people who have gone through the 

process, the expression is widely used, it puts a human face on the 

nature of the problem. We are wrestling with this at the national 

level. 

Senator Casey is on key committees, Banking and Housing & 

Urban Development, and I’m on the Judiciary and Appropriations. 

The proposals that we’re talking about now to have the FDIC or 

the Federal Government come in and guarantee mortgages, I have 

some doubt about because it just may encourage what happened 

before with the guarantees of Fannie Mae and Freddie Mac, where 

people didn’t take the individual responsibility, as you are doing 

here. You’re putting the people who loaned the money and the people who borrowed the money into a room and you’re trying to work 

it out. 

If the Federal Government is going to solve all the problems by 

saying we’ll take care of it, there is no incentive to try to work it 

out. There may be, and doubtless are, some cases where you can’t 

quite close the gap. It’s very close, but you can’t quite close the gap. 

Now, there, I think the Federal Government has a role. But I believe we ought to operate out of Washington only as a last resort. 

We are all concerned about the national debt and the deficit, but 

we put greater emphasis on the daily problems of people being 

ousted from their homes, evicted, just very, very seriously. So we 

thank you for what you’re doing here. I am enormously impressed 

with all the inquiries that have come to you from all over the country. Senator Casey and I can give it some greater publicity. There 

are people here from Financial Times in London, I understand, 

Reuter’s, and—like dropping a pebble in a pond and it spreads out. 

It’s really very encouraging to see this kind of innovation coming 

from this courthouse and our State. 

Senator Casey, closing comments? 

Senator CASEY. Very briefly. I want to thank Senator Specter for 

bringing the Judiciary Committee to Philadelphia for this critically 

important issue to our Commonwealth and our country. 

53 

[Applause.] 

Senator CASEY. I do want to thank Judge Jones and Judge Rizzo 

for having us here in this courtroom, and all of our witnesses. 

[Applause.] 

Senator CASEY. Judge Rizzo, you had mentioned, and I failed to 

mention in my opening comments when I was summarizing all of 

the parties that are represented here, and I probably missed some, 

but I failed to mention Sheriff Green and his early leadership on 

this. We are grateful for his work. 

We have a long way to go, but today it is clear that a lot of the 

good ideas come from communities across the country. All the answers are not, everyone knows, in Washington. So we’re grateful to 

be here to learn more and to hope that this becomes the model for 

the rest of the country. We’re going to work hard to make it so. 

Thank you very much. 

[Applause.] 

Senator SPECTER. Thank you very much. That concludes the 

hearing. 

[Whereupon, at 11:36 a.m. the hearing was adjourned.] 

[Submissions for the record follows.] 

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