FINANCIAL SERVICES AND GENERAL 

GOVERNMENT APPROPRIATIONS FOR 2009 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT 

APPROPRIATIONS 

JOSE

 ́

E. SERRANO, New York, Chairman 

CAROLYN C. KILPATRICK, Michigan 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida 

PETER J. VISCLOSKY, Indiana 

ROBERT E. ‘‘BUD’’ CRAMER, JR., Alabama 

MAURICE D. HINCHEY, New York 

ADAM SCHIFF, California 

RALPH REGULA, Ohio 

MARK STEVEN KIRK, Illinois 

RODNEY ALEXANDER, Louisiana 

VIRGIL H. GOODE, JR., Virginia 

JO BONNER, Alabama 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

DALE OAK, BOB BONNER, KARYN KENDALL, and FRANCISCO CARRILLO, 

Subcommittee Staff 

PART 5 

Page 

Election Administration ........................................................ 1 

Consumer Protection in Financial Services: Subprime 

Lending and Other Financial Activities ........................ 239 

Public Witness Testimony ..................................................... 387 

( 

U.S. GOVERNMENT PRINTING OFFICE 

42–322 WASHINGTON : 2008 


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COMMITTEE ON APPROPRIATIONS 

DAVID R. OBEY, Wisconsin, Chairman 

JOHN P. MURTHA, Pennsylvania 

NORMAN D. DICKS, Washington 

ALAN B. MOLLOHAN, West Virginia 

MARCY KAPTUR, Ohio 

PETER J. VISCLOSKY, Indiana 

NITA M. LOWEY, New York 

JOSE

 ́

E. SERRANO, New York 

ROSA L. DELAURO, Connecticut 

JAMES P. MORAN, Virginia 

JOHN W. OLVER, Massachusetts 

ED PASTOR, Arizona 

DAVID E. PRICE, North Carolina 

CHET EDWARDS, Texas 

ROBERT E. ‘‘BUD’’ CRAMER, JR., Alabama 

PATRICK J. KENNEDY, Rhode Island 

MAURICE D. HINCHEY, New York 

LUCILLE ROYBAL-ALLARD, California 

SAM FARR, California 

JESSE L. JACKSON, JR., Illinois 

CAROLYN C. KILPATRICK, Michigan 

ALLEN BOYD, Florida 

CHAKA FATTAH, Pennsylvania 

STEVEN R. ROTHMAN, New Jersey 

SANFORD D. BISHOP, JR., Georgia 

MARION BERRY, Arkansas 

BARBARA LEE, California 

TOM UDALL, New Mexico 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

STEVE ISRAEL, New York 

TIM RYAN, Ohio 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

BEN CHANDLER, Kentucky 

DEBBIE WASSERMAN SCHULTZ, Florida 

CIRO RODRIGUEZ, Texas 

JERRY LEWIS, California 

C. W. BILL YOUNG, Florida 

RALPH REGULA, Ohio 

HAROLD ROGERS, Kentucky 

FRANK R. WOLF, Virginia 

JAMES T. WALSH, New York 

DAVID L. HOBSON, Ohio 

JOE KNOLLENBERG, Michigan 

JACK KINGSTON, Georgia 

RODNEY P. FRELINGHUYSEN, New Jersey 

TODD TIAHRT, Kansas 

ZACH WAMP, Tennessee 

TOM LATHAM, Iowa 

ROBERT B. ADERHOLT, Alabama 

JO ANN EMERSON, Missouri 

KAY GRANGER, Texas 

JOHN E. PETERSON, Pennsylvania 

VIRGIL H. GOODE, JR., Virginia 

RAY LAHOOD, Illinois 

DAVE WELDON, Florida 

MICHAEL K. SIMPSON, Idaho 

JOHN ABNEY CULBERSON, Texas 

MARK STEVEN KIRK, Illinois 

ANDER CRENSHAW, Florida 

DENNIS R. REHBERG, Montana 

JOHN R. CARTER, Texas 

RODNEY ALEXANDER, Louisiana 

KEN CALVERT, California 

JO BONNER, Alabama 

ROB NABORS, Clerk and Staff Director 

(II)


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FINANCIAL SERVICES AND GENERAL 

GOVERNMENT APPROPRIATIONS FOR 2009 

WEDNESDAY, FEBRUARY 27, 2008. 

ELECTION ADMINISTRATION 

WITNESSES 

PANEL 1 

HON. ROSEMARY RODRIGUEZ, CHAIR, ELECTION ASSISTANCE COMMISSION 

HON. CAROLINE HUNTER, VICE CHAIR, ELECTION ASSISTANCE COMMISSION 

HON. GRACIA HILLMAN, COMMISSIONER, ELECTION ASSISTANCE 

COMMISSION 

HON. DONETTA D. DAVIDSON, COMMISSIONER, ELECTION ASSISTANCE COMMISSION 

PANEL 2 

WENDY, WEISER, DEPUTY DIRECTOR OF THE DEMOCRACY PROGRAM, 

BRENNAN CENTER 

SUSAN K. URAHN, PH.D., MANAGING DIRECTOR, STATE POLICY INITIATIVES, PEW CHARITABLE TRUSTS 

ARTURO VARGAS, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF 

LATINO ELECTED AND APPOINTED OFFICIALS EDUCATIONAL FUND 

JEFF MATTHEWS, DIRECTOR, STARK COUNTY, OHIO, BOARD OF ELECTIONS 

CHAIRMAN SERRANO’S OPENING STATEMENT

Mr. SERRANO. The Subcommittee will come to order. 

I welcome you to this hearing of the Financial Services and General Government Subcommittee. Today’s hearing is on election administration and will focus on the work we need to do to ensure 

that elections are secure, reliable, and accessible to all voters. 

This hearing is particularly timely, since we are well into the 

2008 primary season, and a little more than eight months away 

from the November general election. We are anxious to hear what 

our witnesses will say about how the primary elections have proceeded and what issues or concerns have arisen. Will these primary 

elections be indicators of election administration successes or failures in the general election? What are the potential problems that 

we may face in the general election? 

We also want to use this hearing to learn more about the issues 

facing the Election Assistance Commission, including the funding 

requirements that will help the EAC meet its mission. 

This is a small agency with a very big responsibility. The EAC 

has an important role in giving guidance and information, proVerDate Aug 31 2005 20:00 May 30, 2008 Jkt 042322 PO 00000 Frm 00001 Fmt 6633 Sfmt 6633 E:\HR\OC\A322P2.XXX A322P2

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viding regulatory authority over the National Voter Registration 

Act, and directing federal resources to support the conduct of elections at the state and local levels. 

More than $3 billion have been appropriated over the past six 

years to improve election administration and voting systems. Even 

with this commitment of federal resources, states continue to have 

critical unmet needs relating to ensuring that their elections run 

smoothly. The need is not more apparent than in the case of providing states with secure, reliable, and accessible voting systems. 

Touch screen, direct recording, electronic voting machines were 

purchased by many states using money they received through Help 

America Vote Act programs. These machines were touted as the 

answer to election officials’ prayers. Indeed, they offer the important benefits of accessibility and ease of use. But, unfortunately, 

concerns have been raised about the reliability and security of 

these machines. 

Many states and their voters have lost confidence in them. Some 

states are reviewing their voting system requirements and are 

scrambling to modify or replace their systems to increase public 

confidence. It may be fair to say that no voting system is going to 

be 100 percent perfect, especially considering human factors that 

go into operating our polling places. 

However, we should continue to strive for an election process 

that has a minimum of confusion and error and a maximum of accurate results. Finally, I strongly believe that the often intense debate over election issues is due to the passion we share when it 

comes to protecting our democratic process and guaranteeing the 

right of every individual to cast a ballot in a fair, open, and honest 

election. 

Our goal should be to ensure that we count every vote and make 

every vote count. I hope this hearing will help us to understand 

better how we can be more helpful to election officials in meeting 

that goal. 

Today, we welcome several witnesses who come before us to 

share their knowledge on election matters. On our first panel we 

have, from the Election Assistance Commission, Rosemary 

Rodriguez, the Chair of the Commission, as well as Commissioners 

Caroline Hunter, Gracia Hillman, and Donetta Davidson. 

On our second panel we will have Wendy Weiser of the Democracy Program at NYU School of Law’s Brennan Center for Justice; 

Susan K. Urahn, Managing Director for State Policy Initiatives at 

the Pew Charitable Trusts; Arturo Vargas, Executive Director of 

the National Association of Latino Elected and Appointed Officials 

Educational Fund; and Jeff Matthews, Director of the Stark County, Ohio, Elections Board. And we welcome all of our guests. 

We have a lot of material to cover and many people to hear from 

during this hearing, so I ask that each witness strictly—strictly—

did I say that enough? Strictly observe a five-minute maximum for 

their opening statements. Your complete written statements will be 

submitted for the record. 

Also, I just want to remind members of the procedures we established last year for questioning witnesses. We will observe the fiveminute rule, except for Mr. Regula—anything he wants. I will recognize those members who are in the room at the time the hearing 


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begins by seniority. Those members who enter the room after the 

hearing begins will be recognized in the order in which they arrived. I also intend to alternate between Democratic and Republican sides. 

We have two new members of the Committee, and I will have 

Mr. Regula mention their names. And with that, I turn to my 

trusted colleague. And I do not know how my party is going to feel 

about this, but on the list of people I wanted to retire from your 

side, you were not on my list. [Laughter.] 

You were not on my list. 

Mr. REGULA. I appreciate that. 

Mr. SERRANO. You are one of the nicest people I know, and it is 

a pleasure working with you. 

MR. REGULA’S OPENING STATEMENT

Mr. REGULA. Nice way to start the day. Thank you, Mr. Chairman. I think you have done a great job of summarizing the challenge that confronts us in this bill, and so I do not have much to 

add. I do want to welcome Mr. Bonner, who is a new member of 

this Committee. And I think you will find it very interesting and 

some rather challenging policy decisions that we have to make, 

starting with the one today. 

I would like to welcome also our witnesses from the Election Assistance Commission. You know, elections are such a great part of 

the American way that it is so important that people have confidence in the election process. And certainly voting is the method 

by which the American people select their representatives in government. And if democracy is going to thrive, we have to—believe 

in the integrity of the voting system, and that every vote counts. 

We have had a couple of elections back home where maybe it was 

decided by one or two votes, and people say to me, ‘‘By golly, my 

vote did make a difference.’’ You know, it is easy to think, when 

there are millions of people voting, that your vote does not matter, 

but once in a while you see an election where it hinges on one or 

two votes. And, therefore, it is important that people believe in the 

integrity of the system, and also that they participate. So that is 

what we are trying to do here is to create an environment where 

people will participate. 

It is amazing, there are over 100,000 polling places in our election system. And that is the challenge, to ensure that there is integrity in each of these 100,000, because for the people that use 

them that is their way to participate in our democracy. I look forward to your testimony and learning how you can, have been, and 

prospectively want to help maintain the integrity of the election 

process, and how we might improve it. 

And, Mr. Chairman, it is always a privilege to work with you. We 

have worked well together on issues last year, and I know that we 

will again this year. And it is kind of interesting—it is a sharp contrast. He is a big city boy from New York City, and I am a farm 

boy from Ohio. So you cannot get much difference in the way of 

background contrast, but we are here as a team. And we have done 

what everybody says should happen, and that is that we get along 

with each other and work together. So I look forward to the testimony. 


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Mr. SERRANO. Thank you. It has been an experience for me. I 

came to Congress thinking all food came from a supermarket. 

[Laughter.] 

And it was wrapped there, you know, in cellophane, and so on. 

I want to welcome Mr. Ruppersberger and Ms. Kilpatrick. Just 

to remind you, initially I said that we would recognize people in 

the order that they came into the room for questioning. 

And, you know, when I look at this group before us, this panel, 

I am always tempted to ask the question I have been asking for 

34 years in public office in New York. But I do not know if you do 

ballot placement. You know, New York has—the U.S. Senate runs 

up at the top of the ballot. Then, you have all of the local judges 

who cover the whole county of the Bronx come next. Then comes 

the member of Congress. 

And I have always said, ‘‘Why does the member of Congress not 

follow—the member of Congress follows the Senate in your state?’’ And in New York, if you have 15 judges running, who are usually 

supported by all three parties, or four parties, they appear because 

they cover the county. These are statewide—Hillary or Chuck, 

right? These are county-wide, and then this is district-wide. 

So I am always 30 percent less of the vote by the time they get 

down to me. I do not know. It is a conflict of interest if I ask for 

anything special. 

Anyway, we—— Mr. RUPPERSBERGER. Excuse me, Mr. Chairman, but it works for 

you. You are still here. [Laughter.] 

Mr. SERRANO. We should all be nice to Ms. Kilpatrick. The champions this year are probably going to be the Detroit Tigers and not 

the Orioles or the Yankees. But anyway. 

Our first panel is Ms. Rodriguez, Chair of the Commission. Then, 

we will recognize the Vice Chair, Ms. Hunter, followed by Ms. 

Hillman, and finally Ms. Davidson. 

Ms. RODRIGUEZ, welcome, welcome to all of you, and please. 

ROSEMARY RODRIGUEZ’S TESTIMONY

Ms. RODRIGUEZ. Good morning, Chairman Serrano, Ranking 

Member Regula, and all of the Subcommittee members. Thank you 

for asking us to be here today. 

This year we will elect a new President. Millions and millions of 

voters will go to the polls in November, and millions of poll workers 

will be there to help them. Election officials are working hard to 

get ready, and let me say this: we must be ready for a huge turnout. If primaries are any indicator, the turnout will be enormous. 

There must be enough ballots, voting machines, and poll workers 

to serve the rush that will surely show up in November. A contingency plan is also a must, because in elections things do not always 

go as planned. 

At the EAC, we are providing tools and information to assist 

election officials. Poll workers guides, information about how to design a ballot, and a series of management guides to help them effectively manage the entire process from voting system security all 

the way through ballot tabulation. 

While election officials have a lot on their plates, the EAC faces 

challenges of its own. Congress provided $115 million in new funds 


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to the states. Thank you for that. Can states use that to replace 

touch screen equipment? The Help America Vote Act, or HAVA, 

says that voting systems purchased with funds appropriated after 

2007 must be fully accessible. What systems are considered accessible to individuals with disabilities? 

Mr. Chairman, as you know, the EAC does not mandate, endorse, 

or recommend one voting system over another. It is the spirit and 

intent of HAVA that the states make voting system decisions based 

upon what will best serve the individual state. That is why I have 

proposed a reversal of EAC guidance. My proposal asserts that it 

is reasonable, pursuant to the Office of Management and Budget 

Circulars, for state governing jurisdictions to use HAVA funds to 

replace voting systems purchased with HAVA funds, as long as 

such funds comply with HAVA. 

Our Inspector General recently released a review of EAC’s operations and financial controls. Clearly, there are changes that must 

be made at the EAC, and the IG’s report provides us with a roadmap to make those changes. We have already gotten started, but 

we have much to do. These challenges have not stopped the EAC 

from fulfilling some of its most important mandates, including 

launching the Federal Government’s first voting system certification program, and issuing voluntary voting system guidelines. 

I am the Chair of this Commission, and I take this responsibility 

very seriously. I am very aware that what happens in 2008 will be 

on my watch. I assure you that the EAC will focus on its responsibilities under the law, and make sure that Congress and the public are fully informed about our activities. 

Thank you again for having us here today, for your support of 

the EAC, and for your support of the voters of America. We look 

forward to your questions. 

Mr. SERRANO. Thank you. 

Ms. Hunter. 

CAROLINE HUNTER’S TESTIMONY

Ms. HUNTER. Thank you. Good morning, Chair Serrano, Ranking 

Member Regula, and the other Subcommittee members. Thank you 

for asking us to be with you today. 

As Chairwoman Rodriguez mentioned, one of EAC’s mandates 

under the Help America Vote Act is the adoption of the voluntary 

voting system guidelines. The guidelines provide a set of specifications and requirements against which voting systems can be tested 

to determine if they provide all of the basic functionality, accessibility, and security capabilities required of voting systems. 

HAVA transferred this responsibility from the FEC to the EAC. 

The EAC adopted its first version in 2005, and we are in the beginning of the process to adopt the next iteration of the VVSG. HAVA 

clearly defines the process for adopting these guidelines. Our Technical Guidelines Development Committee and the National Institute of Standards and Technology, or NIST, provide EAC with an 

initial draft. 

Then, the EAC adopts the final version. However, the road to 

adopting a final version will include widespread input, public meetings, and public comments. As a matter of fact, we have already 


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scheduled a series of roundtable discussions with a wide variety of 

stakeholders. All of these discussions are open to the public. 

The EAC has implemented a very thorough, inclusive, and transparent public comment process. We have already begun the first 

comment period for the initial version and provided the public with 

a very user-friendly online comment tool. At the end of the comment period, the EAC will consider every comment and issue our 

own draft version. At that point, there will be another 120-day 

comment period. 

Again, the public will be able to submit comments as well as 

view every comment that has been submitted, and the EAC will 

continue to work with NIST throughout this process. 

The draft guidelines are a complete rewrite of the 2005 guidelines, intended to address the next generation of voting systems. 

They contain new and expanded material in the areas of reliability, 

quality, usability and accessibility, security, and testing. According 

to the Help America Vote Act, adoption of the guidelines at the 

state level is voluntary. However, states may formally adopt a 

VVSG, which would of course make these guidelines mandatory in 

those jurisdictions that choose to adopt them. 

We often get asked, ‘‘What value do voluntary guidelines provide?’’ The answer is simple: They provide a base level of conformity testing that election officials can rely on. States have the 

flexibility to apply the parts of the guidelines that make sense in 

their jurisdiction, or to not use them at all. 

The EAC is also operating the Federal Government’s first Voting 

System Certification Program. And let me address two issues that 

come up frequently. One issue is vendors paying labs directly. That 

is the way the process is working at this moment. The vendors can 

choose their own labs and pay the labs for the cost of testing. 

The EAC is not authorized to pay the labs. Some have argued 

that the EAC should do so, and the EAC should choose the lab to 

make them a little bit more a distance between the vendor and the 

lab. But the EAC is not authorized to do so. Any funds that we collect must be turned over to the Treasury, unless we have a specific 

authorization, such as an authorization to redistribute Section 102 

funds. To allow EAC to take this responsibility, it would require 

Congress to take action. As we have stated in the past, if Congress 

wishes to take this action, we stand ready to assist. 

The second issue I would like to bring up is that the Help America Vote Act did not give the EAC any authority over voting systems we have not certified. And at this point, as you know, the 

EAC has not certified any voting systems. So it is very likely that 

there will not be any systems in use during the 2008 election cycle 

that were certified by the EAC. And so, therefore, we have no authority to regulate those machines. 

Thank you very much. 

Mr. SERRANO. Thank you. 

Ms. Hillman. 

GRACIA HILLMAN’S TESTIMONY

Ms. HILLMAN. Good morning, Chairman Serrano, Ranking Member Regula, and members of the Committee. Let me begin by saying that I have the distinction of having served on the Commission 


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since it was established in 2003. Mr. Chairman, most local election 

officials are resource-challenged to plan and run their election day 

activities. As you know, EAC must provide a range of assistance to 

states. There are thousands of election officials who work the front 

lines in our quest for accurate, fair, and accessible elections. 

I will briefly describe some of our programs that provide assistance to their work. An urgent need is adequate numbers of highly 

trained poll workers. EAC has helped election officials tackle this 

challenge in two ways. We produced documents that provide effective and affordable practices for the recruitment, training, and retention of poll workers. These resource manuals are now in the 

hands of election officials. 

Secondly, Mr. Chairman, you and this Committee have recognized the value of preparing the next generation for community 

service at the polls. Since 2004, EAC has run two college poll worker programs and produced a guide for recruiting students. As a result, more than 3,000 college students and three dozen communities have joined the ranks of America’s champions of democracy. 

EAC also looks forward to the opportunity to directly operate the 

mock election program. This program will provide opportunities for 

high school students to have first-hand experiences with a mock 

election process. 

Equally challenging for election officials is the effective design of 

voting materials. You mentioned a design on a ballot. Ballot design 

flaws made front page news in 2000, 2006, and even this year during the California primary. Last year, EAC produced and distributed sample materials and best practices for effective designs. 

More details about these materials are provided on pages 11 and 

12 of our written testimony, but let me just quickly mention that 

the materials we produced are camera-ready images. I mentioned 

earlier that election officials are resource-challenged, and when 

EAC produces materials we try to do it in a way that is very affordable and practical for the election officials. The information is 

available in different languages, and we are hoping that it will 

serve as a useful resource to election officials. 

Once the election is over, Mr. Chairman, we need to know more 

than who was elected. EAC uses election day statistics to measure 

progress and improvement. We conduct a biennial election day survey, and the resulting reports include information about uniformed 

and overseas citizens voting, and registration under the National 

Voter Registration Act. 

As we work to fine tune our data collection efforts, we acknowledge the value of the $10 million in grant funding that was appropriated in this fiscal year. The grants will be awarded this spring 

for pilot projects in five states. Through this program, EAC and 

election officials will be able to explore the requirements, challenges, and solutions for collecting data at the precinct level. These 

results will be reported to Congress in June of 2009. 

Information about all of EAC’s programs, including our 2008 

grant programs, can be found on our website at www.eac.gov. The 

Help America Vote Act calls for significant improvements. Some 

simply take more time than others. EAC recognizes that challenges 

remain. 


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Mr. Chairman, I appreciate the Committee’s continued interest 

in accomplishments under HAVA and your continued support of 

EAC. I also look forward to continuing this dialogue and answering 

your questions. 

Thank you. 

Mr. SERRANO. Thank you. 

Ms. Davidson. 

DONETTA DAVIDSON’S TESTIMONY

Ms. DAVIDSON. Good morning, Mr. Chairman Serrano, and Ranking Member Regula, and Subcommittee. I thank you for this opportunity this morning. I am a former Secretary of State, and my priority is providing election officials with real-world tools and solutions to effectively manage their elections. 

Secure, accurate, accessible elections are a complex process comprised of many moving parts and many moving people. And they 

only work one time a year in some instances. We hear a lot about 

certain voting systems, if they are trusted. In fact, any voting system—a ballot box, a direct record, or a scan machine—can be compromised if you have two things, if you have access to that system 

and if you have knowledge of that system. 

I have spent my entire career in elections, and some things never 

change. Whether it is a voter using a paper ballot, a touch screen, 

details matter. It is just as important to make sure that voting 

equipment is working properly as it is to have procedures and welltrained people to control access to and maintain the equipment 

properly. 

That is why the EAC has established the Election Management 

Guidelines Program, which provides material to election officials to 

help them manage the entire process. So far, we have issued information on the following topics: polling places and vote centers, 

managing change in an election office, media and public relations, 

absentee voting and voting by mail, acceptance testing of the equipment, voting system certification, voting system security, poll workers, ballot preparation, printing and pre-election testing, new voting systems, and contingency and disaster planning. 

Let me speak briefly about the importance of the contingency 

planning this year. The turnout has been high, as we know. And 

in November, we expect a very high turnout. That is the great 

problem to have. But in the meantime, we must make sure that 

our election officials are prepared, that they have enough ballots, 

they have enough poll workers, they also have the voting equipment that they need to make sure that the record number of voters 

can move through the polling locations. 

Management material—as we call them, Quick Starts—have 

been distributed to more than 6,000 election officials throughout 

the nation. We continue to receive requests asking for more when 

they are conducting their training sessions. In the near future, we 

will have material about serving the elderly and the disabled in 

long-term facilities, military voting, and how to audit the entire 

election process. 

The EAC also has helped election officials assist with the language accessibility needs. Our language accessibility program is a 

very large portion of our new website, and we have translated it 


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into Spanish, as well as our voter registration is translated into 

Spanish. In May, the EAC will offer a glossary, just like the Spanish one, in five Asian languages, as well as provide website information in those languages, and the national form. 

All of this material from the EAC to help election officials manage their elections is free, at no cost, and we provide it to everyone. 

As a former election official who has watched the formation and 

the involvement and the evolution of HAVA very closely, the EAC 

is providing exactly the kind of assistance and support the law envisioned. 

Thank you. I look forward to your questions. 

[CLERK’S NOTE.—A single written statement was submitted for 

all four Election Assistance Commission witnesses. The statement 

follows:] 


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Mr. SERRANO. Thank you. I thank all of you for wonderful testimony, notwithstanding the fact that none of you spoke about my 

ballot placement problem in New York. We are going to take that 

up locally. 

IMPROVING ELECTION OPERATIONS

I just asked Mr. Regula how long he has been in public office, 

and he told us 49 years. And I have been in public office 34. I do 

not think that during my lifetime I have seen turnouts the way I 

have seen already this year. And I do not speak for Mr. Regula, 

but I venture to say he probably does not remember in recent times 

having this kind of turnout. And it does not look like it is going 

to stop. 

On the Republican side, there is obvious excitement. No national 

poll indicates that anybody is going to trounce the other person. On 

the Democratic side, there is the excitement of possibly the first 

woman or the first African-American President. Immigrants who 

have joined the ranks as American citizens, have found out that it 

is important, once they get the citizenship, to start voting. Students 

have not been excited—this excited—in my opinion, since the antiwar protests that brought me into politics. 

This is all wonderful, but this is scary. Are we ready? Or are we 

going to spend two weeks after an election trying to find out who 

the next President will be? So with that in mind—and I know you 

touched on some of these things, Ms. Davidson—what are the top 

priorities that need to be accomplished before November? And how 

are you working with the states, what role are you playing with the 

states, to make sure that these things are in place? 

On one hand, we have this excitement, which is good for the democracy. We cannot run the risk of having people upset at how the 

results came about or in doubt as to what the result has been. That 

would, I think, just do a complete turnaround of the excitement 

and hurt the democracy in a way that it cannot hurt. 

So what needs to be done before ’08, in your opinions? And what 

are you doing working with the states, and how far along are we 

in making sure that we get a good election operation, if you will, 

in November? 

Ms. RODRIGUEZ. I will start, if it is okay. 

Mr. SERRANO. Sure. 

Ms. RODRIGUEZ. The EAC is going everywhere. We are scattered 

all over the country, meeting with election officials, and promoting 

the contingency planning aspects of our programs. Commissioner 

Hunter was in Casper, Wyoming. Commissioner Davidson was in 

Kentucky last week. We will go anywhere in the country to train 

election officials on the importance of contingency planning. I think 

that is our big message this year—to expect record turnout and to 

prepare for it substantively, with enough ballots, machines, and 

poll workers. 

Mr. SERRANO. Now, I know that part of your role is to, as you 

deal with these issues, tell us, you know, we are going to do it right 

and everything is going to get done right. But if you were an advocate for better elections, what would you be fearful of right now 

looking at November? What do you think may not be in place that 

makes you nervous? 


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Ms. RODRIGUEZ. Well, again, I am from Colorado. I would—as an 

advocate, I would want my State to have the election plan in place. 

And there are several states who do not have a plan in place yet, 

because of uncertainty about the voting systems that their legislatures want them to use. 

Mr. SERRANO. Are there many states like that? 

Ms. RODRIGUEZ. I think there is—there is definitely a handful. 

Ms. HILLMAN. Mr. Chairman, if I might——

Mr. SERRANO. Sure. 

Ms. HILLMAN [continuing]. If I might just say that if I were an 

advocate, I guess there would be a couple of specific things. One 

would be how the state is implementing the statewide voter registration database, the voter registration lists, so that when people 

show up at the polls, or even before Election Day, they know that 

they are on the roll properly and they know which precinct they 

are to report to. 

I always encourage election officials to meet with the advocate 

groups early and often, so that each knows what the other is doing, 

so that election officials know the level of activity for voter registration and what kind of increase in voter registration to expect. And 

we certainly would hope, given some of the experiences in the recent primaries, that election officials would understand it is better 

to send more ballots, more materials to polling places, than to 

budget on last year’s turnout, because that is just not working 

right now. 

And, therefore, provisional ballots are being used in ways that 

they were not envisioned, which is, if you run out of a ballot, then 

you must use the provisional ballot. Unfortunately, some states 

and locals are not budgeted to have more machines, but certainly 

I would think that putting more machines in a polling place than 

previous would be one way to cut down on lines. 

Mr. SERRANO. Okay. Yes? 

BALLOT CONCERNS

Ms. DAVIDSON. I think there is one other issue that we all need 

to be prepared for, maybe a couple, is—one is the printing of the 

ballots. There is a lot of ballots being printed now, and we must 

make sure that there is enough printers, and that they can get the 

ballots to the election officials timely. 

That is one of the concerns—and make sure that there is a process put into place to make sure that the ballots’ timing bar has not 

slipped, so the ballots will read on election night, not holding up 

the process—as we have seen in some states—of getting results. 

And I will say that the more——

Mr. SERRANO. Now, you said there are ballots being printed now? 

Ms. DAVIDSON. No, no. 

Mr. SERRANO. Oh, okay. 

Ms. DAVIDSON. But, you know, that is the problem——

Mr. SERRANO. Because we do not know who is running yet. 

Ms. DAVIDSON. Yes, I was going to say, that is the problem. 

Mr. SERRANO. Certainly, on this side we do not know. 

Ms. DAVIDSON. If we had that magical ball, we would know the 

ballot, and we could print them now and would not have the probVerDate Aug 31 2005 20:00 May 30, 2008 Jkt 042322 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A322P2.XXX A322P2

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lem. As you are aware, the list of candidates and issues for a ballot 

come very late. So there is a very short timeframe to print ballots. 

That is our concern—is enough ballots could be printed immediately so that the election officials have them, and there is a process put into place to make sure they are printed correctly. And 

also, that the states really look at it and make sure that the design 

is properly done, so that voters will not miss an office, or whatever 

the case might be. 

Mr. SERRANO. Thank you. 

Ms. HUNTER. I think what we can do, to the extent we are able 

to, is help voters to determine in advance—and I think Commissioner Hillman mentioned this—where they are supposed to go on 

election day. And when they wait until the last minute to find that 

information out, they probably will get a busy signal, or they will 

have a bit of a hard time finding out that information. 

So I think we should help voters with a lot of great resources 

that are out there today, that were not maybe even four years ago, 

to determine where they are supposed to go on election day. 

Mr. SERRANO. Okay. I would hope that as we move forward here 

you keep the Committee informed of what new issues come up, so 

that we can all be part of this informational process. Your point is 

well taken. One of the biggest issues, I know, during all of the campaigns I have been involved in—the largest amount of questions is 

calling campaign headquarters, whatever, ‘‘Where do I vote?’’ You 

know, people—and things get changed, and they are not told that 

it was changed from the last place they went to. 

TRANSPARENCY OF EAC RESEARCH

Let me move on to—very quickly to another issue. In 2007, the 

EAC substantially edited a Commission research report on voter 

fraud and intimidation, changing an analysis that concluded that 

voter fraud is rare. After much criticism from Congress and others 

about the lack of transparency at the agency, the EAC released the 

original draft report to the Committee and directed its Inspector 

General to review its procedures. The IG’s report is expected in the 

near future. 

What changes to internal policies and procedures have been implemented or are being considered to ensure that EAC’s work, including work done by researchers on contract, is open and transparent? Will all research funded with tax dollars be available to 

the public? 

Anyone, or all. 

Ms. HILLMAN. Well, two things that we have done is we have 

changed the language we use. We will either accept or adopt a report, and they mean very different things. If a consultant is doing 

preliminary study for us and presents us with a report, we accept 

it. We post it on our website. It is available as presented to us for 

anybody in the public to see. 

Additionally, we are re-looking at how we, as a small agency, can 

incorporate the multitude of responsibilities for overseeing contracts. I mean, the Federal Government is replete, as you know, 

with requirements, and small agencies are often challenged to be 

able to follow all of those things through, so that we do not inadvertently take a misstep. 


rwilkins on PROD1PC63 with HEARING
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And the other thing is that we will use our Standards Board and 

our Board of Advisors frequently as sounding boards to help us as 

we work our way through how we approach research projects. 

Mr. SERRANO. Okay. 

Ms. HILLMAN. Anyone else? 

Ms. RODRIGUEZ. Just, Mr. Chairman, as the Chair, I do not ever 

want to be accused of burying anything again. And I think we can 

commit to you that we will not be subject to those accusations. 

Mr. SERRANO. Well, that is important. That was a pretty embarrassing situation for a lot of folks, and it was a very difficult situation. And it came on early in the work that you do, and it created 

a feeling that maybe we could not get the information we needed. 

And so that is something that we have to deal with, and I appreciate your comments. 

I will now recognize Mr. Regula, and after that we will make the 

Committee members angry by sticking to the five-minute rule. Mr. 

Regula? After Mr. Regula. 

Mr. REGULA. Thank you, Mr. Chairman. 

2006 ELECTION REVIEW

What was your impression of the 2006 elections? Did the process 

work? And did the advice that is available in these various publications prove useful in ensuring that the election process was done 

accurately and in a way that the public could understand it? 

Ms. DAVIDSON. Being a new agency, the 2006—really, at that 

time we were trying to get out and educate our public, as we know 

we should again this time. And, as you say, education is great, 

whether we educate you so you can help educate the public is wonderful. And we appreciate all of the help, because definitely getting 

the word out to the public is very important. 

But, in 2006, we did not have a lot of our work done. You know, 

there was some, but it was very small. We have done a lot since 

2006, and in 2006 it was started, in 2007 a lot of it was complete, 

and, as you have heard, by spring this year we will have a lot more 

of it even up. 

Our website is full of information that we hope—and we try to 

educate the election people, because many of our election officials 

come from small jurisdictions. Getting that information down to 

them, to that level, is very important. That is why we see such a 

need of education, whether it is the press—and last year we tried 

to educate the press. There is a lot of work that needs to be done, 

and having the agency being as new as it was in 2006 and trying 

to get out information, we feel we have made great strides of improving on what we had started in 2006 to make it better for 2008. 

POLL WORKERS

We saw problems that—we are never going to have a perfect 

election. We have over a million poll workers throughout the nation. And when we put it into a million people’s hands, human 

error is what we find is our biggest problem. So that is why we 

were so glad that we had the study, which took us over a year to 

do, on the poll workers, on educating of the poll workers. So that—

we are always hurting to get poll workers, number one. 

Mr. REGULA. Your studies show how we can get more. 


rwilkins on PROD1PC63 with HEARING
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Ms. DAVIDSON. They gave us great ideas, yes. We pulled in election officials that have been very successful in getting poll workers 

to recruit them from—whether it is from the corporate world, 

whether it is from the parties, whether it is from any organization, 

even a non-profit organization, how they can be of help and really 

serve as a poll worker. 

So we are trying very hard. Is it still a problem in our nation? 

Absolutely. We have it throughout the nation of trying to find poll 

workers, and we have election officials at the very last minute still 

scrambling to have enough. 

Mr. REGULA. Is it your experience that employers will help? It is 

kind of like jury duty. That they will encourage their employees to 

participate? 

Ms. DAVIDSON. In some jurisdictions, they are very willing to 

help. But in others, they have not been—the election official has 

not been as successful of getting the polling workers from the business world. 

ABSENTEE BALLOTS

Mr. REGULA. Absentee ballots—it is my impression at least that 

more people are voting absentee. Is that accurate? And maybe this 

contributes to the volume of voting, because it is easier to do it. 

Ms. DAVIDSON. If you are looking at me, I would be more than 

happy—yes, in a lot of states there is more absentee. There is more 

of a volume. But so far, absentee has not shown that it has turned 

out more of an increase in voters, but we do have more people voting absentee. A lot of the western states—California has gone to 

permanent absentee now. So in moving that direction in a lot of 

states, we see that the turnout of an absentee will be higher. 

Mr. REGULA. Do your guidelines help to preclude any voter 

fraud? Because there are always allegations that there is voter 

fraud in some jurisdictions. Do you think following the guidelines 

that you provide will help to preclude that happening? Any one of 

you that would like to——

Ms. RODRIGUEZ. I can attempt that. 

Mr. REGULA. All right. Madam Chairman. 

Ms. RODRIGUEZ. HAVA requires that at the point of registration 

identification is demonstrated by—at the registration point. And 

states have a variety of ways to match the voter with that voter’s 

record and polling place. Some states require identification. Some 

states require government-issued picture identification. Some 

states require, if the voter does not have that, something else. 

So it is a hodgepodge, again, like everything else in elections. It 

is a state-by-state requirement. The EAC has not issued ‘‘one size 

fits all’’ policy or guidance on identification. 

Mr. REGULA. Well, since obviously elections are local control, or 

state control, do you think we should have a greater amount of 

mandatory requirements coming out of the federal process? 

Ms. RODRIGUEZ. That would be your decision, Congress’s decision. 

Mr. REGULA. What would you recommend? 

Ms. RODRIGUEZ. I do not have a consensus position from the EAC 

at this point. 

Mr. REGULA. Thank you, Mr. Chairman. 


rwilkins on PROD1PC63 with HEARING
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Mr. SERRANO. Thank you. 

What is ‘‘permanent absentee’’? 

Ms. DAVIDSON. Permanent absentee is your name—once you require a ballot by absentee, your name stays on a list. And unless 

you fail to vote, they automatically send an absentee ballot to your 

home at that address, or until it comes back undeliverable, and 

then they take your name off of that permanent list. 

Mr. SERRANO. Thank you. 

Ms. Kilpatrick. 

Ms. KILPATRICK. Thank you, Mr. Chairman, and good morning. 

I like the female board I see in front of me. [Laughter.] 

We do not get that often here, so it is a pleasure to have you all 

here again this morning. Thank you very much for coming. 

STATE AND LOCAL ELECTION PREPARATION

This is perhaps—and your responsibility this year, since you 

were started in ’02, I believe, and then late—took a year or so before you got set up, we did not appropriate you properly, you did 

the best you can do, and I want to commend you for the job that 

you have done over these now five years. 

This election—what is this, the second—nine months away will 

really determine whether all that we have done since we have, you 

know, instituted the EAC and all is going to be what we hoped it 

would be. So I want to ask you that you ask us for absolutely everything that you need. 

I think, Ms. Hillman, your points were well taken, as one of my 

colleagues asked the question, you know, how do we get an accurate election—all voters can vote, and all votes be counted? How do 

you get the education started now in our local communities? And 

I think the Chair mentioned that some places do not even have 

plans yet. 

We have to be your partners in this, and we do not expect you 

to do it by yourself. But the voter registration lists—I mean, those 

are just absolutely necessary. Meeting with the advocacy groups 

often and soon, necessary. People need to know now where they 

vote, not in July, not in September, certainly not in November. 

What kinds of one, two, threes can we do, and as your partners, 

as members of Congress? We all represent 650-, 700,000 people 

apiece, and we need to be joined so that we might be able to help 

you get this done, because in a minute we are going to point at you 

guys when we in fact could have been much more helpful. 

The ballots themselves, the number of machines, we know now 

it is going to be more than ever, because of what we are seeing already this year, and as we go through the rest of the year I am 

sure. What kinds of things can we do now? Madam Secretary of 

State, you mentioned—and it is unfortunate, and I am a former 

state legislator as well, you cannot print the ballot until you know 

who the candidates are. 

So, okay, Presidential is one thing, but it also happens locally 

and statewide. Maybe we ought to have a cutoff period or something in the states. We have got to get real creative this year, and 

I hope for the rest of our lives, as more and more people come into 

the process and vote more and have our processes sped up. 


rwilkins on PROD1PC63 with HEARING
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What can we do together? Ask for it. I do not care what OMB 

said. I mean, you know, you have got to ask for it. [Laughter.] 

And we have got to help you get it. The appropriation is important. Getting it out to the states is more important. And seeing 

that every voter who wants to vote votes, and is counted, we will 

not blame you. They can blame me, not even the Chairman, I will 

take the rap for you. 

But we have got to make sure that there is enough machines and 

ballots, and even the structure of the ballots. Sometimes they are 

too difficult, you know. I am needing something. I am asking for 

something. And I do not know, I just want your opinion in general 

or anything that I can work on particularly, or we can work on as 

a caucus or the House and Senate. 

Ms. HUNTER. Madam Vice Chair, I think you bring up some excellent points, and I think we all agree with everything you just 

said. As you know, the Help America Vote Act is structured in such 

a way that the Federal Government has a role, of course, per the 

Help America Vote Act. 

But essentially many of the decisions that you discussed are 

made at the state and local level, because, of course, not every 

state thinks that there should be a uniform process, and different 

states have different requirements, different issues. For rural communities, there are completely different issues than for the Chairman’s jurisdiction in Brooklyn. So I think that is important to keep 

in mind. 

You know, the way that the Help America Vote Act has been 

working is that the Congress appropriated $3 billion, as you know, 

and now an additional $115 million for the states to spend essentially as they see fit. There are not very strict requirements on how 

they spend that money. 

And so what we are doing, as some of us have discussed this 

morning, is providing some voluntary guidelines for them to say, 

you know, with the money that Congress has appropriated to you, 

you might want to be creative on getting poll workers. You know, 

go to the local universities, do things differently, because we all anticipate high turnout, and you have to be prepared to have all of 

these things in place. 

So I think what we are trying to do is to provide that guidance 

that states may not have the resources to do the research themselves, to use that guidance to make sure their election runs as 

smoothly as they can. And all of us participated in some meetings 

here a few weeks ago in Washington with state and local election 

officials, and they stand ready. They understand that the participation levels will be greatly increased. They know the pressures on 

their jobs. Many of them, you know, live under a microscope that 

they never imagined in the past. 

So they are—I believe most of them are prepared, they are ready, 

and they are willing to do whatever it takes. 

Ms. RODRIGUEZ. I would like to add a couple of points. Election 

officials need help recruiting poll workers, and members of Congress have the identification with the voters and could be real leaders in that effort. 

The election officials need help with their appropriating authorities. County Commissioners sometimes cannot get the attention of 


rwilkins on PROD1PC63 with HEARING
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the legislature, and so a letter from a member of Congress with an 

appropriation request might tip the balance in favor of an election——

Ms. KILPATRICK. Give an example of that. 

Ms. RODRIGUEZ. Well, for example, in order to better serve the 

voters in a county, they might need some additional funds. And so 

if that local official had a member of Congress in their corner, I bet 

they would get the attention of the legislature better—better get 

their attention. 

Ms. KILPATRICK. So perhaps now members of Congress need to 

be working closely with their states and elected officials to vet out 

some of this and see where we might work and partner together. 

Ms. RODRIGUEZ. You stated my point exactly. 

Ms. KILPATRICK. Thank you. Thank you very much. 

Mr. REGULA. You might give us a guideline of how we can be 

helpful. Maybe that is one of the publications you ought to put out. 

Ms. HILLMAN. Well, and I would just add one thing, is to make 

sure that state legislators are more engaged in HAVA requirements, because often state legislators do not understand. And when 

the Secretary of State goes for an appropriation, like the 5 percent 

match that is required for the $115 million to be disbursed, and if 

state legislatures drag their feet and do not get it done, that means 

the state is delayed in receiving its funds. 

DEVELOPING NEW VOTING SYSTEMS

I would like to put one thing on the table in response to your 

question, and let me say, Congresswoman, thank you very much for 

recognizing those struggles EAC has and the work that we have 

been doing. But for the long term, but it—long term, all things are 

relative. Let us say if we look down the road to 2012, two things 

could very nicely come together. The Election Assistance Commission is working on, as was mentioned earlier, our guidelines for 

voting systems, the next generation. 

I think Congress can do a lot to end the concern and debate 

about what is a good voting system. The manufacturers need some 

incentive, some encouragement, to come to the table. And I think 

it would be appropriate for Congress to consider some funding for 

some innovations, so that the manufacturers will step up to the 

plate. My guess is in 2002 Congress thought we would be a lot further along with respect to what is an accessible machine and what 

is available in the market. 

And election officials can only purchase what is in the market, 

and they get scared when a manufacturer says, ‘‘If you want that, 

we can do it, but it is going to cost several thousand more.’’ So as 

Congress did, like with the orphan drug issue, the people who purchase voting systems, that is a relatively small constituency. 

But if Congress gave—put out some money for innovation, for research and testing, so that we can have the kind of voting systems 

that will well serve America, so that we will not have calibration 

issues, so that we will not have confusion over software, so that we 

will not have the kind of systems that cause people concern. 

Mr. SERRANO. Thank you. We have less than five minutes on a 

vote, so we are going to take a break—it is one vote—and come 

back and resume our questioning of this panel. 


rwilkins on PROD1PC63 with HEARING
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Thank you. 

[Recess.] 

Mr. SERRANO. Had we finished all of the comments on that last 

question? Yes, we had. 

Ms. RODRIGUEZ. I believe so. 

Mr. SERRANO. Yes. 

PAPERWORK REDUCTION ACT

Ms. HILLMAN. Well, there would have been one other thing, and 

it sounds mundane, but it is very important to us. The Election Assistance Commission is subject to the Paperwork Reduction Act, 

which means for any project we do where we have to collect information from the states, we have to go through that process, which 

adds 90 to 120 days to whatever project we do. 

So if this Committee today asks us to collect data available to 

them by April 1st, we probably could not do it unless we got total 

exemption. So we do request consideration that EAC, like the FEC, 

can be exempt from the Paperwork Reduction Act. It would allow 

us to meet the every two-year deadline cycles that we have to prepare for elections. 

Mr. SERRANO. That is a good point, and the Committee will certainly take that up. I think that’s only a fair request. I hope voting 

machines are not held under that provision, Paper Reduction. 

The Committee will now recognize the newest member of our 

Committee, the gentleman from Brooklyn, New York, right? 

Mr. GOODE. Right. 

Mr. SERRANO. That accent is from Brooklyn, New York, I assure 

you. Mr. Goode from the great state of Virginia. 

I’m sorry, Mr. Goode. With all due respect, Mr. Bonner was next, 

and I had promised him if he hurried back he would be next, the 

gentleman from Alabama. He also has a Brooklyn accent. 

Mr. BONNER. Thank you. 

I am sorry. I am a little winded. This is my first day on the Committee and my first day on the Subcommittee, and I am honored 

to join both. 

MILITARY AND OVERSEAS VOTERS

In many ways it is very appropriate that the question I might 

ask of this distinguished panel has to do with the brave men and 

women around the world who allow us to meet today in freedom. 

Many states face challenges to ensure that our service men and 

women overseas are able to effectively participate in the election 

process. 

My home State of Alabama alone has some 19,000 men and 

women in uniform who claim Alabama as their residence, and all 

50 states can make similar claims. These are men and women defending our freedoms and helping to spread the right to vote many 

times to oppressed people around the world, and they are practically prevented from having their votes counted in our own elections. 

GAO has suggested that the Department of Defense create a 

plan for future electronic voting. Our own Secretary of State in Alabama, Beth Chapman, would like to see Alabama participate in a 

pilot program with DoD to provide secure voting over the Internet 


rwilkins on PROD1PC63 with HEARING
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for members of our military and other Americans who reside overseas. 

I have been told that we are waiting on the Election Assistance 

Commission to help develop guidelines so such a program could 

work. Can you give us some thoughts about what we can do to ensure, especially, this year if we are looking at record votes being 

cast and counted here in our own country? How can we make sure 

that the people who allow us to stay free have their votes counted 

as well? 

Ms. RODRIGUEZ. Thank you. 

Commissioner Davidson. 

Ms. DAVIDSON. I will start with it, and I hope maybe others will 

add because I am sure I am going to leave something out that is 

very important. 

But we have dedicated a portion of our Web site to the military 

and overseas voters that we give links to whether it is the military 

branches, all of the military branches, to the Overseas Vote Foundation, which is a nonprofit, as well as NASS, and to other organizations that we can give information out about so that the overseas 

people know what their state laws are and how they can meet the 

needs. 

The other thing that we are doing, we are working with NIST 

in developing guidelines. We did a study that took a year and a 

half in doing the study about what works best throughout the nation, and I believe it was four or six states—I am not sure—that 

we did this study with. 

In doing that study, it is getting ready to come out, you know, 

best practices for the military and the overseas voting, and the 

other thing that we did is we did a study of the actual overseas 

and military, what did they like and how did they like to go about 

voting. In that, we have 5,000 individuals reply to that survey, and 

that survey, we are just getting ready to put that out. We have just 

received that in from the contractor. So it is being reviewed right 

now and we will get comments from our locals, as we always do, 

try to put it out to our states and get comments. 

So we are on the move in having NIST really develop those studies. They are moving forward to actually, first of all, make sure 

that they transmit the ballot over safely and be able to get it back 

safely. So electronic transmission, and then move into Internet 

itself because there are more issues in Internet voting than there 

is transmitting it and having them mail it back. 

But at least if we can eliminate the travel time of a ballot over 

and for them to be able to mail it back like most states are doing, 

then that is great. But we also are having states move forward and 

are actually transmitting it back electronically. 

So we have two states. I believe it is Arizona and Washington 

States that are registering people online if they have a driver’s license. That also helps them in the overseas voting because if they 

are registering them, they have moved forward where they are also 

looking into receiving the ballot back electronically. 

The security of that ballot is what we are most concerned about 

and making sure that individual has their right to the ballot and 

nobody else. So obviously we want to work as fast as we can, but 

make sure that we actually address all of the issues that we can, 


rwilkins on PROD1PC63 with HEARING
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and so we are moving forward, and we are working with the Federal Voter Assistance, Polli Brunelli, in doing this, and we are moving forward with her as well as with NIST. 

We have done an intergovernmental agreement with the two 

agencies. So all three of us are working together. 

Mr. BONNER. So is it safe to say that this Commission can give 

assurance to the military men and women that we are doing everything we can to ensure that their votes will count? 

Ms. RODRIGUEZ. Mr. Bonner, yes, it is a very high priority of this 

Commission to enable that. 

Ms. HUNTER. But I think I would like to just add that states are 

doing some of their own great ideas, and Florida is one of them. 

One of the counties there took it upon themselves to create a pilot 

program to allow voters to be able to vote actually overseas in certain locations, and I know the Secretary from Alabama is hosting 

a conference on this issue in the next two weeks. 

So I think while it is true that NIST is working on standards to 

be able to vote via the Internet. I hope States do not wait for that 

because it may take some time, and I think when you really look 

at the issue, as Commissioner Davidson said, the issue is the transmission of the ballots, and because the ballots are printed somewhat late in the process, you know, the election officials are unable 

to mail them until the ballots are ready, of course. 

And it is a very small window of time. When you just think it 

is only about mailing things, it seems so obvious that one of the 

best ways to fix it is through some kind of electronic transmission, 

and I think that we should be able to come up with guidelines for 

states that they can use to transmit these ballots securely. 

Ms. HILLMAN. Mr. Bonner, if I just might add that while the 

EAC has been asked to study the issue and come up with guidelines, I think we do have to acknowledge that the Federal Voting 

Assistance Program at the Department of Defense has enormous 

responsibility for helping states find the military personnel who 

have moved and what their addresses are, and so that is a big 

piece of this as well. 

Ms. DAVIDSON. Could I add one more thing? 

There is one problem that we have with it, is the federal law 

says that absentee ballots to the overseas and military is left on 

at that address unless they are notified, and as we know, our military move around a lot. We are getting a lot of those ballots back 

at the state and local level that is not addressed properly because 

the military has moved. So that is one of our problems of having 

correct information, and we are working with them trying to get 

that. 

Once we have better information, we may come back to you and 

say we definitely need some help in some law changes. 

Mr. BONNER. Thank you, Mr. Chairman. 

Mr. SERRANO. Thank you. 

Ms. Wasserman Shultz from the State of Florida, which you say 

is way ahead the rest of the nation. 

VOTER FRAUD AND INTIMIDATION REPORT

Ms. WASSERMAN SCHULTZ. Yes, we are, but that is after eight 

years of struggling to get to this point, and I might add that the 


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Election Assistance Commission was created as a result of the Help 

America Vote act, which resulted directly from the travesty that occurred in the presidential election of 2000. 

Madam Chair, my question is for you. My series of questions will 

be for you, and I would be happy to have any others chime in while 

you are out it. 

But, Mr. Chairman, I would like to ask unanimous consent to 

enter into the record a first person account by Tova Andrea Wang 

that was published in the Washington Post on August 30th of 2007. 

Mr. SERRANO. Without objection. 

[The information follows:] 


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Ms. WASSERMAN SCHULTZ. Thank you. 

Tova Wang and Job Serebrov were commissioned by the EAC to 

conduct a study about voter fraud and intimidation; is that correct? 

And my question is directed to you, Madam Chair. 

Ms. HUNTER. Okay. I am the Vice Chair, but I will be happy to 

answer your question. 

Ms. WASSERMAN SCHULTZ. No, I would like my question directed 

to the Chair. 

Ms. RODRIGUEZ. Yes. Yes, ma’am, that is correct. 

Ms. WASSERMAN SCHULTZ. Thank you. 

And they wrote this in partnership together to provide partisan 

balance; is that correct? 

Ms. RODRIGUEZ. Yes. 

Ms. WASSERMAN SCHULTZ. Their research found widespread 

agreement among administrators, academics, and election experts 

from all points on the political spectrum, that allegations of fraud 

through voter impersonation at polling places was greatly exaggerated, and that was in the draft that was submitted to your commission initially, correct? 

Ms. RODRIGUEZ. Yes. 

Ms. WASSERMAN SCHULTZ. After submitting the draft in July 

2006, Ms. Wang and her co-author were barred by the commission 

staff from having anything more to do with the project; is that correct? 

Ms. RODRIGUEZ. That is correct. 

Ms. WASSERMAN SCHULTZ. Okay. Why was that? 

Ms. RODRIGUEZ. I’m sorry. Why was? 

Ms. WASSERMAN SCHULTZ. Why were they barred from having 

anything more to do with the project after they submitted their 

draft? 

Ms. RODRIGUEZ. The EAC accepted the draft, and they at the 

time were classified as contract employees, and the EA——

Ms. WASSERMAN SCHULTZ. But why wouldn’t you want the expertise of the authors when you were going forward, moving forward 

with the production of the final report? 

Ms. RODRIGUEZ. As I was not there, I cannot accurately answer 

that question, but I can speculate, and——

Ms. WASSERMAN SCHULTZ. Is there someone who was on the commission who can answer that question as to why the authors of the 

report were barred from further participation after they submitted 

their draft? 

Ms. HILLMAN. I was on the commission. I would not agree with 

the terminology that they were barred. Unfortunately, several 

weeks went by after their report was submitted due to a staff person not prioritizing it and moving it along fast enough, and then 

their contract time had expired. 

Ms. WASSERMAN SCHULTZ. Okay. Ms. Wang’s account is that 

they were prohibited from any further participation in the report 

after they initially submitted the draft. Do you dispute that account? 

Ms. HILLMAN. I am not aware of anything in which they would 

have been prohibited or barred from participating. 


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Ms. WASSERMAN SCHULTZ. Okay. If you could verify that and get 

that information to the Committee for the record, I would appreciate it. 

Ms. HILLMAN. I do not know if there is information I can get you. 

I am just simply saying as a member of the commission I was not 

aware of anything that would have barred or prohibited them except for the fact that their contract had expired. 

Ms. WASSERMAN SCHULTZ. Okay. Well, according to them, they 

were specifically prohibited, and the chair of the commission acknowledges that. 

Who is Hans von Spakovsky, Madam Chair? 

Ms. RODRIGUEZ. Mr. von Spakovsky is, I believe—well, I do not 

know what his status is—a member of the Federal Election Commission. 

Ms. WASSERMAN SCHULTZ. Okay. Did he direct that Tova Wang 

be taken off the assignment at the time? Did he have any involvement in her removal or participation in the assignment? 

Ms. RODRIGUEZ. At the time he was on the EAC’s Board of Advisors, and I have seen E-mail from him expressing concern about 

her working on the project. 

Ms. WASSERMAN SCHULTZ. Thank you. 

Ms. RODRIGUEZ. But he certainly did not direct the operations. 

Ms. WASSERMAN SCHULTZ. But he did express vocal concern, and 

as a member of the EAC’s Advisory Board, about her participation. 

Ms. RODRIGUEZ. In the E-mail that I read, yes. 

Ms. WASSERMAN SCHULTZ. Okay. And six months after they submitted their preliminary findings, the EAC released a report, and 

it concluded that voter fraud was a matter of considerable debate, 

directly in contradiction to the draft report’s findings; is that correct? 

Ms. RODRIGUEZ. Well, I am going to ask Commissioner Hillman 

if she would. 

Ms. WASSERMAN SCHULTZ. Is that correct? Yes or no? The final 

report said there was a matter of considerable debate. The draft 

said the opposite, correct? 

Ms. RODRIGUEZ. That’s correct. 

Ms. WASSERMAN SCHULTZ. Okay. Thank you. 

And the commission still attached Ms. Wang’s name to the report, as well as Mr. Serebrov, correct? 

They were considered the authors, and it was reported as such. 

The report also—— Ms. HILLMAN. Excuse me. If I might, Congresswoman. 

Ms. WASSERMAN SCHULTZ. Yes. 

Ms. HILLMAN. No, the report came out as an EAC report. We acknowledged that the research work had been conducted by Ms. 

Wang, but they were not written as the authors. 

Ms. WASSERMAN SCHULTZ. Okay, but the findings were in direct 

contradiction to the authors, to the researchers, as you characterized them, to the researchers’ findings, and you still attached their 

names to the report. 

The report also excluded much of the discussion of voter intimidation that was in the draft, correct? 

If that is the case, then why? 

Ms. RODRIGUEZ. I am sorry. Will you repeat that question? 


rwilkins on PROD1PC63 with HEARING
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Ms. WASSERMAN SCHULTZ. The report also excluded much of the 

discussion of voter intimidation that was in the researchers’ findings. Why did that happen? 

Ms. RODRIGUEZ. I cannot really do justice with that, my response 

to that question. That is something I would like to supplement 

after learning about—— Ms. WASSERMAN SCHULTZ. Were you on the commission at the 

time that the report was released? 

Ms. RODRIGUEZ. No. 

Ms. WASSERMAN SCHULTZ. Okay. 

Ms. RODRIGUEZ. Oh, at the time it was released? 

Ms. WASSERMAN SCHULTZ. Yes. 

Ms. RODRIGUEZ. Yes. 

Ms. WASSERMAN SCHULTZ. Okay. Well, then you had a draft. You 

voted in favor of the release of the final report. You saw the draft 

which included the voter intimidation information and that was not 

included in the final report. Why? 

Ms. RODRIGUEZ. I was on the commission at the time that the 

draft was released at the suggestion of this Committee, but I was 

not on the commission at the time the revised or the EAC— Ms. WASSERMAN SCHULTZ. Is there anyone on the commission 

that can tell me why the information about voter intimidation was 

not in the final report? 

Ms. HILLMAN. I was on the commission, but, Congresswoman, I 

would have to go back because I am not sure which information 

you are referring to, and so my memory does not serve me to answer your question directly because I do not recall it that way. 

Ms. WASSERMAN SCHULTZ. That is convenient. If you could please 

get me the information for the record and make sure that we have 

it. 

Ms. HILLMAN. It is not a matter of convenience, ma’am. It is a 

matter of human being. 

Ms. WASSERMAN SCHULTZ. Okay. 

Ms. HILLMAN. I do not remember what happened two years ago 

verbatim. 

Ms. WASSERMAN SCHULTZ. There are a lot of human beings that 

come before congressional committees and have lapses in memory. 

What was Mr. von Spakovsky’s role during this time? Anyone 

who was actually on the commission. 

You have to forgive me for taking this a little bit personally. I 

am a member of Congress that represents the State of Florida. The 

HAVA Act is the direct result of the debacle that took place in 

2000. Your commission was created specifically to make sure that 

we protect the right to vote, that we enhance the right to vote, and 

that we make sure that every vote is registered and counted. And 

you produce a suspect report that was dramatically rewritten, that 

you acknowledge was dramatically rewritten compared to the authors’ draft that was submitted, and you are asking for a significant amount, millions of dollars, and the confidence of the American people, which is the purpose of your institution, and I am really not sure how you expect the American people and this Committee to give you those millions of dollars when you decided to 

make a report that should not have been politicized a totally political document. 


rwilkins on PROD1PC63 with HEARING
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Ms. DAVIDSON. Maybe I can add a little bit. 

Ms. WASSERMAN SCHULTZ. Please. That would be illuminating. 

Ms. DAVIDSON. When we asked for the report to be done, when 

we asked for it, we asked for a definition of what vote fraud and 

vote intimidation was. 

We also asked in the contract that as we went through it, you 

know, what we asked for in the contract was not what we got. How 

should we move forward in the study is what we asked for. We did 

not ask for a conclusion. 

There were 24 people who were interviewed in that report, if I 

remember correctly, 24 or 27. 

Ms. WASSERMAN SCHULTZ. Since you’re making that accusation 

or that suggestion, let me quote Job Serebrov, the Republican elections lawyer who was commissioned to co-author the report. He 

said, ‘‘Tova and I worked hard to produce a correct, accurate, and 

truthful report.‘‘

Mr. Serebrov wrote, referring to Tova Wang, a voting expert with 

liberal leanings from the Century Foundation and co-author of the 

report—he is a Republican elections lawyer from Arkansas—‘‘I 

could care less that the results were not what the more conservative members of my party wanted.’’ He added, ‘‘Neither one of us 

was willing to conform results for political expediency.’’

So you have your bipartisan authors who differ with the commission’s characterization of their work. 

Ms. DAVIDSON. You know, that is the reason why we put over 

40,000 pieces of documents up on the Web site. Everything that 

took place in that study—— Ms. WASSERMAN SCHULTZ. Unfortunately only after Congress 

forced you. 

Ms. DAVIDSON [continuing]. And the contract, and we would be 

more than happy to provide you a copy with a contract showing 

what they had actually signed to. 

Ms. WASSERMAN SCHULTZ. That would be great. 

Mr. Chairman, I know that my time is expiring because I hear 

you banging, but the discomfort that I have is that the EAC was 

formed to help determine what problems in our nation’s voting system existed, and that we can have a more accessible, fair, and accurate voting system. But I do not know how the commission can 

do that unless it finds some reforms for itself. 

I yield back. 

Mr. SERRANO. And the Committee understands that concern and 

has voiced that concern strongly last year because I do not think 

the Committee would be tolerant of that kind of behavior again. 

Mr. BONNER. Could I inquire of the Chairman? 

Mr. SERRANO. Yes. 

Mr. BONNER. Given that you raised this issue in your opening 

statement as a concern and the gentle lady from Florida has raised 

this question as well, would it be fair to ask—I know my time has 

expired—but would it be fair to ask if there is concern that the report was delayed for a reason, was there political pressure put on 

the commission by the White House or by members of Congress or 

by other people that might have influenced this? 

I know I am the newest kid on the block, but is that not an appropriate question? 


rwilkins on PROD1PC63 with HEARING
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Mr. SERRANO. Well, that is a fair question that has been asked 

in the past. People have denied that kind of situation, but it was 

not a pleasant thing that we had to deal with last year, and I can 

assure you that this Committee, both the Chairman and the Ranking Member, would not be happy with that kind of behavior again, 

and one answers as to what happened then. Still we keep asking 

those questions. 

But we are where we are now. 

Mr. Goode the newest member of the Committee from the great 

State of Virginia. 

Mr. GOODE. Thank you I appreciate it. 

Mr. SERRANO. With your Brooklyn accent. 

Mr. GOODE. I thank each Commissioner for being here today. 

STATE FUNDING UNDER HAVA AND STATE SPENDING

Let me ask a little bit about what you all have been spending. 

Since the inception of the EAC, how much federal money has been 

spent under HAVA? Six billion, seven billion, eight billion, nine billion? Just kind of ball park. 

Ms. HILLMAN. No, sir, I would say less than four billion. About 

3.2 billion went to the states directly as requirements payments, 

and it has been way less than four billion because the EAC has received less than 60 million in the four years, in the first four budgets. 

Mr. GOODE. So you spent 3.2 billion the first year in grants to 

the states to change or upgrade their voting equipment, correct? 

Ms. HILLMAN. There were three separate payments. One was 

early money for them to get their HAVA state plans together and 

then to be able to replace the punch card and the lever machines, 

and then the second largest set of requirements payments was sent 

out in 2004 and 2005. 

Mr. GOODE. How much do you say the states had to spend of 

their own monies and local governments to match or do upgrades? 

Ms. HILLMAN. I am not sure that we have that information, sir. 

They were required to do a five percent match. Some states had reported what they had spent beyond that five percent, but that information is not required for states to report to us. So we do not 

get that. 

Mr. GOODE. What was the number one company in selling voting 

equipment to the states in terms of dollars would you guess? 

Ms. HILLMAN. I honestly do not know, sir. 

Mr. GOODE. Anyone? 

Ms. RODRIGUEZ. I do not know either. 

Ms. HILLMAN. The states purchase their own equipment, and I 

cannot tell you which company would have sold the most equipment to the states. 

Mr. GOODE. All right. So it would be depending on how much the 

states did spend, counting state money, federal money, and local 

money to make all of the voting machine changes and everything. 

It was more than four billion, ballpark, in less than six counting 

state money and local? 

Ms. HILLMAN. State money? Wow, if I am ballparking, I would 

say it was probably—just on what the state spent, not our operating budget——


rwilkins on PROD1PC63 with HEARING
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Mr. GOODE. Right. 

Ms. HILLMAN [continuing]. I would say maybe, maybe four billion, maybe. 

Mr. GOODE. Okay. Thank you, Mr. Chairman. 

Mr. SERRANO. Thank you. 

IG INVESTIGATION INTO VOTER FRAUD AND INTIMIDATION REPORT

Let me just remind folks that in my opening statement, I did 

mention the fact that the IG is due to come out with a report on 

this particular issue that you had brought up, and about the procedures that were in place that might have led to this situation. 

So there is a pending IG report coming out, we understand, soon. 

Mr. Cramer. 

Mr. CRAMER. Thank you, Mr. Chairman, and I apologize for having to be late to the hearing. I always like to be on time. 

But I wanted to be here as much to welcome my colleague and 

friend from Alabama, Jo Bonner, who happens to be from lower 

Alabama. I am from north Alabama, and we are part of the Alabama team, and I want to associate myself with the remarks of the 

Ranking Member and the Chair in welcoming Mr. Bonner to this 

particular Subcommittee and to the full Committee as well. 

Mr. SERRANO. Mr. Hinchey and I are from New York, just to let 

you know. 

Mr. CRAMER. I think I knew that, but thanks for reminding. 

Mr. SERRANO. We did welcome him. 

Mr. CRAMER. I know you did. I know you did, but unfortunately 

I was not here at the time, and I apologize for making you endure 

that. 

I want to give you the opportunity. I am a little late in jumping 

into your issues here, but I want to give you the chance to respond 

to the issues that Ms. Wasserman Schultz and my colleague, Jo 

Bonner from Alabama, were proposing. 

Was there pressure put on you in any way whatsoever? 

Ms. RODRIGUEZ. On behalf of the commission, I will thank the 

Chair for mentioning the Inspector General’s report. We voted 

unanimously to investigate that matter. We await. Nobody wants 

to see that report more than we do. I personally do not believe that 

there was external pressure. I do believe that the research was 

mishandled. 

Mr. CRAMER. How? 

Ms. RODRIGUEZ. Well, I have read all of the E-mails. I mean, she 

clearly wanted to continue to participate and contribute to the 

project, and it looked like there was not a lot of response. We may 

not have been clear in our Statement of Work in the parameters 

that we set down for a relationship. I know that we have learned 

a lot from it as an agency. 

I told the Chair that I do not want to ever be accused of burying 

things or mishandling things, and I speak for the commission. It 

was not where we wanted to be perceived by this body at the time. 

Mr. CRAMER. I would like the rest of you, please, to give a reaction to that. 

Ms. HUNTER. Sir, I was not on the commission at the time that 

this report was being dealt with, but I will say that I agree with 

the comments of the chairwoman. We anxiously await that report, 


rwilkins on PROD1PC63 with HEARING
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and from everything I can tell from the E-mails that I have read, 

there was no outside political pressure, and I believe Ms. Wang 

even acknowledged as such in the article that the Congresswoman 

refers to. 

I do not believe that there was any kind of political pressure in 

this regard, and I read the report several months ago, and from 

what I can tell, the conclusions that she calls research were based 

on interviews of approximately 26 people, and I do not know how 

you can draw sweeping national conclusions based on interviewing 

26 people. 

Thank you. 

Mr. CRAMER. And particularly the allegation that officials at the 

Justice Department were actively involved in the report throughout 

the process and even exerted some degree of editorial control over 

the new report. 

Ms. HUNTER. There were two members, I believe it was, of the 

Department of Justice who were on the Board of Advisors of the 

Election Assistance Commission, and they are required to be on the 

board pursuant to the Help America Vote Act. So in their capacity 

as board members, they did weigh in on a couple of matters, yes. 

Mr. CRAMER. Well, weighing in is one thing, but controlling, dictating, exerting pressure, you were not on the commission so you 

would not know that. I would like the rest of you to respond to 

that. 

Ms. HILLMAN. Certainly, sir. Let me say that we did have a 

member, a person from the Department of Justice who worked on 

the working group, the project under which Ms. Wang and Mr. 

Serebrov did the work, had the working group, and we did have 

someone from the Department of Justice who was on there. 

And our principal staff person on this project did consult with 

him periodically. What I would say as a member of this commission, two things. I personally never received any pressure from either side of the aisle with respect to the contents of the report, particularly not from the Justice Department. 

I was aware that expressions of concern had been raised; partisan expressions of concern had been raised with respect to Ms. 

Wang’s participation, but I was not aware and I did not receive any 

pressure. 

I do not believe our staff received any pressure. Irrespective of 

the participation of a representative from the Department of Justice on the working group, I do not believe the Justice Department 

put pressure on our staff to change. 

However, I do look forward to the results of the Inspector General’s report to tell me whether or not what I believed at the time 

I voted to release the information was correct or not. 

Mr. CRAMER. Well, it will be important for all of us to know what 

was spinning around. 

Yes, Ms. Davidson. Did you want to offer information? 

Ms. DAVIDSON. I agree with everything that has been said. I was 

chair during that time, and I asked because I brought it up, that 

I felt that we needed to go to the IG and ask for a report to be 

done. And my colleagues voted unanimously to back that. 

And so we all look forward to that. We expect it at any time. We 

really thought it would be here before now. 


rwilkins on PROD1PC63 with HEARING
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So as it moves forward, I took a pledge myself of saying if there 

was anything in that report we needed to change in our office, and 

we have already started changing how we work through our process of contracting. GovWorks does our contracting. We do not do it 

ourselves individually now so that it is actually out of our hands 

at the EAC. 

There is more of a protection there for the contractors as well as, 

you know, the Office of the EAC. So as we move forward, we are 

improving. 

We learned a great deal, as we said, and we moved forward to 

do a lot better job, but I never received any contact from the Justice Department, the White House, from any colleague on any side, 

a pressure of how I should vote. I never have. 

The only time I ever heard from the White House is that my 

name was going to be submitted to the Senate for a confirmation. 

That is the last time I heard from them. So I really feel in my review of the E-mails, I do not think the staff had any pressure put 

on them either, but we are anxiously awaiting for that report to 

find out if there was anything. 

Mr. CRAMER. Specifically, if I have any time left, the Department 

of Justice involvement, would you react to that? 

Ms. DAVIDSON. The Department of Justice, I was contacted twice 

with the Department of Justice. When I first came on I went with 

Ray Martinez to a luncheon, just a hello greeting. 

The second time after the report was done I got an E-mail from 

Hans von Spakovsky, which I know is up on the Internet, but I 

never responded to it, and that was after the report was done. 

Mr. CRAMER. Thank you, Mr. Chairman. 

Mr. SERRANO. Mr. Alexander. 

Mr. KIRK. 

Mr. KIRK. Thank you. 

VOTER VERIFICATION

I would like to sort of look at the past and look at the future. 

I remember when my predecessor was retiring, a nice, old gentleman came up to me and said, ‘‘I want to apologize.’’

And I said, ‘‘Why?’’

And he said, ‘‘I was the guy that stuffed the ballot in 1978 to 

make sure that your predecessor lost his first chance for election.’’

And later on he turned out to be a good Congressman, and so I 

just want to apologize because I think John Porter was a good guy. 

You know, I come from Chicago. We know these things, but it 

was a sort of disheartening moment to go through. 

With all of the money that you have, what about just assuring 

the American people also of the integrity of the process? 

And I want to take a moment to look forward. Is there an EAC 

policy on, you know, people convicted of federal felonies and to get 

that out to the states? Is there a policy on dead people, foreign citizens voting, people who we actually know were under the age of 

18, double jurisdiction voters, something we see a lot of, you know, 

voting in the city and then coming out and voting in another place? 

Anything on that to upgrade our standards and make sure in the 

work of the commission? 


rwilkins on PROD1PC63 with HEARING
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Ms. HUNTER. As Chairwoman Rodriguez mentioned earlier, the 

Help America Vote Act does have a verification requirement at the 

front end, when voters submit their voter registration form. So that 

hopefully will help in some respect to the concerns that you raise. 

Another thing is that the Election Assistance Commission has 

commissioned a study with the National Academy of Sciences, and 

we are hoping that that study assists states in doing proper matching procedures so that they are able to use their voter registration 

list and match it up against the records of persons who are deceased, for example, and to ensure that they are matching the 

proper people before that person is removed. 

But, of course, federal law does require that states have a list 

maintenance program, and unfortunately many states have not 

done that list maintenance, and so several states have come to us 

and said, ‘‘We need help in this regard. We would like some national standards.’’

And that is why EAC entered into the contract with the National 

Academy of Sciences. So we are hoping that what comes out of that 

contract will assist in some of the areas you have mentioned. 

Mr. KIRK. I would just think though we have a list of federal felons, the federal government. Has that ever been provided to the 

states? 

Ms. HUNTER. Not to my knowledge. 

Ms. RODRIGUEZ. The states have a variety of laws about felon 

voting and the rights of felons that we have no control over. 

Mr. KIRK. But no data assistance on that point? 

Ms. HUNTER. No. 

Mr. KIRK. The Social Security Administration obviously knows 

who is dead because you have got to stop the checks. 

Ms. DAVIDSON. Yes. HAVA requires the states now with their 

new voter registration systems to check with the Vital Statistics to 

make sure that they have the deceased off of their list. It also requires that they go through Justice to make sure they could meet 

their state laws, whether it is a felon or what the case might be. 

So HAVA has put in some requirements for the states with their 

voter registration systems to improve upon the areas that you are 

talking about. 

Mr. KIRK. I just say that because in my district, for example, two 

dead guys resurrected themselves. One dead guy voted or signed 

election petitions twice before the Super Tuesday elections. So the 

process of resurrection is very active in my area, and I was just 

wondering if there was any way you could help. 

Ms. DAVIDSON. Hopefully as the states move forward in developing of their statewide voter registration list and doing their process, we are hoping that that will definitely correct everything, and 

as we said, we are also doing the study and how they actually take 

names off the list. If there are duplicates within the state, as you 

mentioned, they could be registered in one location. 

So we are moving forward in trying to assist the states in the 

best practices. 

Mr. KIRK. This has more of a federal bent. What about a double 

jurisdiction voter? Happens to vote in the city, get on the train, and 

then vote somewhere else the same day. 


rwilkins on PROD1PC63 with HEARING
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Ms. DAVIDSON. Well, obviously that is one of the things that really is looked at after the election. If something like that has occurred, then any election, and it depends on their state and the 

state law whether it is sent to the District Attorney or whether it 

is sent to the judge at the county level, but election through the 

process of their state laws, those types of things are handled after 

the election and prosecuted instead of before. 

Mr. KIRK. But for the commission, no significant work on any of 

these five areas? 

Ms. DAVIDSON. As we said, it is being studied currently at the 

National Academy of Science. So those are all things that we are 

studying and making sure how the states are doing their statewide 

voter registration systems. 

Mr. KIRK. Have any of the studies been published since? Any action? 

Ms. DAVIDSON. Any action on the——

Mr. KIRK. I am looking for anything substantive that you have 

done on the subject where actual action has been taken besides just 

study? 

Ms. DAVIDSON. Well, the states are working on developing and 

some of them are already developed, the statewide voter registration. 

Mr. KIRK. No, no. I am thinking for the 37 million we gave you 

guys. 

Ms. DAVIDSON. Of what we have done? Well, we have——

Ms. RODRIGUEZ. A preliminary draft of the National Academy of 

Science’s study that Commissioner Hunter referred to will be available in April. 

Mr. KIRK. In April, and that is the first action. 

Ms. RODRIGUEZ. Yes, if you would call it an action. 

Mr. KIRK. Nothing else? 

Ms. RODRIGUEZ. I think if you looked at our authorizing statute, 

you probably wouldn’t find much for us in there. 

Mr. KIRK. Thank you, Mr. Chairman. 

Mr. SERRANO. Thank you. 

Mr. Hinchey. 

Mr. HINCHEY. Thank you very much, Mr. Chairman. 

RELIABILITY OF ELECTRONIC VOTING SYSTEMS

First of all, I want to thank you for your proposal to make it 

clear that states could use HAVA funds to purchase additional 

equipment if they have no confidence or less confidence in what 

they have already purchased. I think that is a very important step, 

and I hope that you will endorse it and make sure that those kinds 

of things are allowed to happen. 

The problem with the Help America Vote Act is it should have 

been the Help America Vote Accurately Act, because it is, in my 

opinion, undermining the accuracy of voting across the country. At 

the very least it has the very serious potential to do so, and I think 

there are many places where that is actually taking place, and we 

need to be very, very focused on this issue. 

We need to make sure that the elections in this country are reliable. If they are not reliable, then the people of this country begin 


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to become unhappy and uncertain with that reliability. We are 

going to see a major disruption in the whole political process here. 

So this is a very critical issue, and that Help America Vote Act, 

I think, has been a big mistake, particularly in the way that it is 

open to potential corruption of the election process. I am deeply 

concerned about that. 

Over the last period of time since the Act has come into effect, 

there have been several districts across the country that have reported specifically numerous problems with electronic voting equipment. These problems occurred in primaries in New Jersey, Georgia, South Carolina, and a few other places. 

There have also been several reports that have been issued, including a report by the Government Accounting Service. One of 

these reports states that state elections officials in California, Colorado, Ohio, Florida, Alaska, Kentucky, and a number of other 

places have been raising concerns about the security and the reliability of electronic voting machines. 

I want to ask why is it that the EAC is not taking a more aggressive, a more proactive stance in dealing with this issue, at least 

being a receptor or a sounding board for these actions. What are 

you doing? How are you responding to this? 

Ms. HUNTER. Congressman, two things that we have done, and 

I mentioned this in my opening comments. We are working on the 

next iteration of the voluntary voting system guidelines, and those 

guidelines will be for the future of voting. So that doesn’t answer 

your question. I understand that. 

Mr. HINCHEY. Yes, I know. That is right. That is fine. You can 

do that, but the point is we have got to deal with the situation now. 

Ms. HUNTER. Right. 

Mr. HINCHEY. And you have the evidence of problems and you 

have the states stipulating those problems telling you about their 

concerns. It is your job. It is your responsibility to deal with these 

issues and make sure that if there are problems in the voting system that they are corrected immediately. 

Ms. HUNTER. It is our responsibility to ensure that systems that 

have been certified by the Election Assistance Commission, you 

know, are properly maintained, that they work, that there are no 

problems. 

However, at this point there are no systems that have been certified by the Election Assistance Commission. So, of course, there 

is some lag time in between——

Mr. HINCHEY. Well, no, but there are systems that have been 

promoted, that have been pushed, in effect. 

Ms. HUNTER. Not——

Mr. HINCHEY. Oh, yes, they have. I am not saying that you did 

it specifically, but there has been a lot of pushing on these electronic voting machines, and a lot of people bought into them, and 

now they understand that there are serious problems associated 

with them. 

They are responding to these serious problems, and they are calling upon the responsible federal agency to try to do something 

about it. You are the responsible federal agency. 

What are you doing about it? 


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Ms. HUNTER. We have a policy that states that either a state or 

local election official can send to us their experience with voting 

systems and we post that on our Web site so that states can share 

information amongst one another to learn what problems they have 

had in other jurisdictions. 

So we are doing that as part of our clearinghouse role. 

Mr. HINCHEY. Very, very passive. Very, very relaxed, not with 

any intention to bring about corrections. 

Let me just ask you another question. I mean I see the answer 

to that question. The answer is no, you are not doing anything, and 

that is, I think, potentially tragic, and we are going to have to address that, and hopefully we will be able to address it to some extent within the context of the appropriations process. 

But let me ask you another. Are there currently any voting systems in the field that have been certified by the EAC? 

Ms. HUNTER. No. 

Mr. HINCHEY. No, none. Do you have any oversight? Are you examining them? Do you have any intention of issuing certifications? 

Do you have any intention of issuing concerns about the accuracy, 

the reliability of these systems? 

Ms. HUNTER. No. 

Mr. HINCHEY. No. 

Ms. HUNTER. I mean, we do not have the authority to do so, sir, 

and the only authority that we have is when a machine has been 

brought to the EAC for certification. There are eight systems right 

now that have been brought to the EAC for certification under our 

program. 

Mr. HINCHEY. Well, I would disagree with you on the first sentence that you just said there, that you do not have any authority. 

I think you do have authority. I am sure you have authority. When 

you see that there are problems, when people are bringing problems to your attention, when states are stepping forward and saying, ‘‘We have problems with these primaries,’’ when other states 

are stepping forward, when you have inspection agencies which are 

stepping forward, bringing all of this matter to public attention, I 

do not think there is anything that you can do to just relax and 

be passive about it. 

You have got to be more aggressive. You have got to step forward. You are the agency that was set up by HAVA to deal with 

these issues. 

Ms. HILLMAN. Mr. Hinchey, if I might add, on the issue of the 

machines, HAVA set the EAC up to be relatively small. I mean, 

heck, we were kicked to the curb the first year we were in existence——

Mr. HINCHEY. Right. 

Ms. HILLMAN [continuing]. Not being able to operate. 

People have very high expectations of what EAC can do, and earlier we were asked by Ms. Kilpatrick as to what do we need. If 

Congress wants EAC to be ready to go into the field to investigate 

problems with machines and to be able to come up with recommendations, then we need the staff and resources to do that. 

We have 30 people on staff, and quite frankly, with the many responsibilities and mandates we have, I would agree with you it 

would be great. I would also say to you, sir, I do not think the 


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states would agree that we have that authority because the states 

have been told, ‘‘You purchase the HAVA compliant equipment. 

You choose to purchase. You choose the certification process you 

want to go through, whether you are going to go through the national or your own state certification process. 

It is all voluntary, sir. So we can be aggressive, but my fear is 

aggressiveness on words without the authority to follow up is not 

going to produce the results that I hear you suggesting we need to 

see. 

Mr. HINCHEY. I am not suggesting that you be aggressive, and 

I know you were kicked. 

Ms. HILLMAN. No. 

Mr. HINCHEY. I know you were kicked to the curb, and I know 

who kicked you to the curb, and I know the effects that that has 

had. 

Ms. HILLMAN. No, I mean aggressive about following up, being 

able to follow up immediately. 

Mr. HINCHEY. You need to follow up. 

Ms. HILLMAN. Right, and we do not have the capacity. 

Mr. HINCHEY. If you want to put that follow-up in the form of 

aggressiveness, then please be my guest. 

Ms. HILLMAN. Well, we do not have the capacity. That is what 

I am trying to say. 

Mr. HINCHEY. Well, then you had better make that clear, that 

you do not have the capacity. You do not have the ability to do it, 

and you had better make it clear what the problems are because 

they need to be dealt with, and if you cannot do it, somebody else 

is going to have to. 

Mr. SERRANO. Thank you. 

We are running somewhat behind, and we have yet another 

panel to come. Let me finish up in two ways, by thanking all of the 

members for a fine line of questioning, thanking you for your presentations. 

But I am going to very loudly disagree with you. You do have a 

hammer. It is called a bully pulpit. If the New York Times and the 

Washington Post or the local Des Moines Gazette, if there is such 

a thing, publishes that you folks said something that is not right 

with the way to run the next elections, you have power beyond the 

power you think you have. 

If you would say to this country, especially now with the excitement surrounding this election season, that something does not 

look right, I do not think you realize how powerful that is and how 

people will start jumping through hoops to make it right. 

Secondly, you say you do not have resources, but we did treat the 

commission fairly, and this Chairman, along with the support of 

Mr. Regula, made sure that you were a priority. 

Ms. HILLMAN. Absolutely. 

Mr. SERRANO. And we fought some folks who wanted to cut you 

down to the bare bones. This Ranking Member and this Chairman 

did not. We gave you $16 million for the commission. We gave you 

$125 million to carry out some of your work with the states. We 

intend to try to be as helpful as we can. Again, you are a top priority for us. 


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So it breaks my heart when I have you as a top priority for protection and then you tell me you have no power. Use—I do not 

want a response on this. This is my farewell to you. [Laughter.] 

Mr. SERRANO. Use it. You have it. It is called the bully pulpit. 

Members of Congress use it all the time. What Mr. Hinchey just 

did in his questioning, what Ms. Wasserman Schultz did in her 

questioning did not necessarily change anything right now, but it 

will be reported on. It will be mentioned. 

I told you. You have the bully pulpit. Use it, but you have to 

have the intention and the desire to use it because what you have 

at hand, and I have always said this, you are a small agency probably that is going to become one of the most important agencies in 

our government because you have in your hands the ability to tell 

the country how to conduct fairer and more accurate elections. 

And if what we hear every day on TV from right wingers and left 

wingers is true, there is nothing more important to us in our democratic process and our electoral process. So go out there and raise 

hell. We will support you on behalf of a fair and accurate count. 

Thank you. 

Mr. REGULA. Mr. Chairman. 

Mr. SERRANO. Mr. Regula. 

Mr. REGULA. Is it your experience generally that the states are 

receptive? Because they do have the primary responsibility. Are 

they generally receptive to working with you to improve the process? 

Ms. RODRIGUEZ. May I? That varies from year to year. One of the 

organizations we worked with passed a resolution to do away with 

the commission a year ago. So when we do not have a heavy hand, 

they are very receptive. When we exert too much force, I think they 

are less receptive. 

Mr. SERRANO. Do not feel too bad about that. If you took a vote 

on whether to have a Congress or not, you might be surprised with 

the vote. But we are not going to ask that question. 

Ms. RODRIGUEZ. Thank you very much. 

Mr. SERRANO. Thank you so much. 

Ms. HILLMAN. Mr. Chairman, might I say thank you. I heard you 

say that you have got our back, and I want to thank you for that. 

Mr. SERRANO. Yes, we do. Of course, as Mr. Rangel would say, 

I am with you for as long as I can stay with you. [Laughter.] 

Mr. SERRANO. No, no. I am only kidding. We have your back. 

PANEL 2

Ms. HILLMAN. Thank you. 

Mr. SERRANO. Thank you so much. 

I want to thank the first panel for their testimony. We will now 

turn to our second panel witnesses, and we will try to at least get 

through opening statements before the next series of votes. 

This panel has Wendy Weiser from the Brennan Center for Justice. She will lead off. Then, Susan Urahn from the Pew Charitable 

Trusts, followed by Arturo Vargas from the National Association of 

Latino Elected and Appointed Officials Educational Fund, and Jeff 

Matthews from the Board of Elections in Stark County, Ohio. 

Mr. REGULA. There you go. 

Mr. SERRANO. Your district? 


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Mr. REGULA. Every bit. 

Mr. SERRANO. So since you are accepting the fact that he is from 

your district, let me say that I am a member of the NALEAO. You 

do not join. You are kind of born into it once you get elected, and 

we welcome everyone to this panel. 

We will hear from you first, Ms. Weiser. 

WENDY WEISER’S TESTIMONY

Ms. WEISER. Thank you, Mr. Chairman, Ranking Member, and 

members of this Committee for holding this important hearing. 

My testimony will address the oversight that is needed to insure 

that the EAC lives up to its charge and helps insure effective election administration this year. I have submitted detailed written 

testimony, and so today I will focus principally on the urgent need 

to reform the way in which the agency operates. I will hopefully 

briefly address also things we believe the commission can and 

should do this year to improve election administration. 

Mr. SERRANO. I should remind this panel also in case you were 

not in the room that your full testimony will go into the record, and 

we hope you stay within the five-minute rule. 

Ms. WEISER. Okay. 

Mr. SERRANO. Thank you. 

Ms. WEISER. The EAC is in charge of some of the most critical 

election administration tasks, from distributing much needed 

HAVA funds to the states, developing standards for voting systems, 

overseeing the certification and testing of voting systems, collecting 

data and conducting election reform research, and administering 

the federal mail-in voter registration form. 

And for our elections to run smoothly, it is essential that these 

tasks be executed well, and unfortunately there are now two major 

barriers to this happening. The first is the lack of adequate resources in the agency and the second is a lack of transparent operating procedures for virtually all of the agency’s operations. 

And as Commissioner Rodriguez mentioned, two days ago after 

I submitted my written testimony, the EAC’s independent Inspector General released an audit of the agency’s program and financial 

operations, and it bears quoting some of what the audit found. 

It found that the agency lacks policies and procedures in all program areas to document governance and accountability structure 

and practices in place. It lacks appropriate and effective internal 

controls, a clear organizational structure, and strategic plans. 

The audit documents in detail the fact that the EAC does not 

have any standard policies or procedures for virtually any of its 

functions, and this confirms our longstanding concern that the 

agency appears to function at times in an ad hoc manner without 

the transparency, consistency and accountability expected of a public agency. And these are serious failings and ones with significant 

consequences. They make the agency’s work less effective, and they 

undermine the public’s confidence in the agency. 

There are two incidents from last election cycle that illustrate 

the problem. The first is the one that was discussed at length in 

the questions and answers for the last panel concerning the EAC’s 

mishandling of the voter ID and voter fraud report, and for the reasons that this subcommittee has already elucidated, this incident 


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shook the public confidence in the agency because there was simply 

no good reason to withhold research on matters of public concern, 

commission from established experts with taxpayer dollars under 

statutory mandate to make available to the public studies on election administration issues. 

And worse, this was withheld at a time when at virtually all levels of government these issues of voter ID and voter fraud were 

being discussed, including in this House. 

The public mistrust was magnified not only by the conduct and 

what happened with the report, but also by the fact that the EAC 

had absolutely no policies or procedures in place for making the decisions that it made or managing its research, and its action, therefore, seemed ad hoc and arbitrary or to some even worse, designed 

to suppress information. 

And this controversy really could have been avoided if the EAC 

had in place fair and transparent, standardized procedures that everyone agreed on in advance that were subject to fair research protocols, but it did not. 

And another incident that similarly undermined public concern 

and I addressed at length in my testimony was the agency’s handling of its assessment of CIBER, one of the laboratories that accredited voting machines. This was another report that was withheld despite the fact that the agency had decided to not to accredit 

this agency and despite the fact that at least the State of New York 

was using that laboratory to test its voting machines. 

Now, while the EAC has taken some steps recently to address 

some of these issues, these deficiencies still infect virtually all aspects of the agency’s operations, and so we, therefore, urge this 

subcommittee to continue to provide oversight to make sure that 

the agency implements appropriate reforms, including those recommended by the Inspector General and in our testimony. 

But at the same time, we urge Congress to provide the EAC with 

sufficient resources to undertake this important task and to get its 

house in order and to fulfill its many essential statutory functions. 

The fact remains that the EAC’s work is critical to our elections, 

and it needs the resources to do that work effectively. 

Thank you. 

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Mr. SERRANO. Thank you. 

SUSAN URAHN’S TESTIMONY

Ms. URAHN. Thank you, Chairman Serrano, Ranking Member 

Regula, and other members of the Committee for holding this important hearing and inviting me to address some of the challenges 

facing U.S. elections. 

As Managing Director of the Pew Center on the States, part of 

the Pew Charitable Trusts, I oversee an initiative called Making 

Voting Work, which seeks to significantly improve the accuracy, 

convenience, efficiency, and security of U.S. elections. The challenge for state and local election officials, for those who control 

their budgets, and for policy makers in state legislatures and in 

Congress is to insure that elections reflect the way that American 

now lead their lives and take advantage of some of the advances 

that have transformed modern society, and that the answers to 

fundamental questions about the performance of elections can be 

answered with clarity. 

Elections today fail to reflect the convenience and efficiency that 

characterize other interactions that define our lives. If you move, 

your registration does not follow you. If you want to register on 

line, you cannot unless you live in Arizona or Washington State. 

If you want to vote at a polling place near your office rather than 

one near your home, in all but a handful of states you cannot. If 

you are one of six million military and overseas citizens, you are 

faced with a complex and conflicting set of state rules and regulations when it comes to requesting, receiving and returning ballots. 

And if you want information about any of this, how to register, 

where to vote, what is no the ballot, or if your vote is counted, it 

either is not available on line or, if it is, it is not very easy to find. 

Unfortunately, the field of election administration has too often 

been unable to muster the resources and the expertise needed to 

meet these challenges. Now, changing this dynamic will require 

testing improvements in how we run elections, building a body of 

evidence and sharing those results broadly to inform state and 

local policies. 

Make Voting Work with support from the JEHT Foundation is 

proud to be working in partnership with election officials, the private sector, academics, and others to test some of the most promising innovations in several states. Pew has invested $20 million in 

this arena to date, and this is only part of a multi-year, multimillion dollar commitment on the part of the board to really build 

the evidence base we so desperately need in this area. 

Now, given our limited time, I will highlight just one of our 

projects, and if the Committee will allow, we will put the full announcement of our first awards into the record. 

In Ohio, Kentucky, and Indiana, the Secretaries of State have 

joined together to test the use of change of address forms to improve the registration process, offer voters a convenient way to update their registration, and hopefully reduce costs to state and local 

governments. Recognizing that 40 million Americans move every 

year, the National Association of Secretaries of State has adopted 

a resolution at their national conference this month calling for an 

expansion of this approach. 


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Creating projects like this should encourage us to take an entirely new look at conventional practices and think about where we 

can transform the outdated elements of our election system. Field 

test experiments that point the way to a more portable registration 

system are an important step forward. 

But rather than applying Bandaids, it may be time to create a 

voter registration system where states would have a comprehensive 

list of all the voters. Registration would seamlessly follow those 

who move. Ineligible names could not be added to the list, and information would be managed reliably. 

And then we have the issue of data. Sound policymaking and effective management practices for elections are built on data, data 

that allow us to assess the performance of our election systems. 

Gaps in the EAC election day survey currently are so severe that 

it is nearly impossible to consistently monitor state compliance 

with key provisions of the NVRA and UOCAVA. We do not have 

a good handle on how many Americans are registered to vote, how 

many have been moved to inactive lists, or how many show up at 

polling places for each federal election. 

The EAC must assure that the election day survey meets the 

highest standards of quality data collection, and they need to take 

a leadership role in setting standards for the kinds of data we will 

need to collect over the next decade. With good data that reaches 

down to the precinct level, because that is the unit of analysis necessary for meaningful comparison, one could determine the impact 

of a new voting system on accuracy, whether any new early voting 

policy reduces election day stress, how the number, age, and training of poll workers relates to election performance, which voters 

take advantage of new registration methods such as online registration applications or change of address forms, how a new voter 

identification law affects an election. 

This kind of data would allow your committee to better evaluate the impact of the Help America Vote Act and the over $3 billion 

in federal funding. 

The Committee has taken a positive first step by funding $10 

million in new state data collection efforts to be administered 

through the EAC, and thank you, Chairman Serrano, for your leadership in securing this funding. Collecting information on the state 

of our elections is a critical element of EAC’s mandate to serve as 

a clearinghouse of information about elections in the states. 

We firmly believe that the five states that receive funding under 

this new program will set the gold standard for how to assess election performance, and we hope that requests for proposals receive 

the attention that they deserve from Secretaries of State and state 

election directors. 

However, the success of this pilot is also dependent on the EAC. 

The data collection program should receive the highest priority. 

They should insure that states receive the support they need to 

submit competitive applications and that participating states set 

aggressive data collection goals, including collecting high quality 

precinct level data. 

I urge the Committee to hold an oversight hearing this summer 

on the data collection program. At that point after the grants for 

the data collection program are awarded and the 2008 election day 


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survey is released, the Committee will be able to hear from the selected states about their plans and from the EAC on how they have 

refined the survey to insure that it collects the information needed 

to assess the performance of state election systems. 

Thank you again for the opportunity to testify today, and I look 

forward to future opportunities to talk about Make Voting Work, 

and welcome any questions you may have. 

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Mr. SERRANO. Thank you. Thank you so much. 

Mr. Vargas. 

ARTURO VARGAS’S TESTIMONY

Mr. VARGAS. Thank you, Mr. Chairman, Ranking Member Regula. Thank you for the opportunity to testify before you. 

The NALEAO Educational Fund has been at the forefront of efforts to insure that federal election reform enhances opportunities 

for full participation by all of our citizens. We believe that there 

must be a comprehensive effort involving federal, state, local, community based organizations and the private sector to eliminate barriers to voting and to promote voter engagement. 

Voters with a limited English proficiency continue to face barriers in obtaining information about voting and elections. We urge 

the Department of Justice to continue to vigorously enforce the 

Voting Rights Act language assistance provisions. We commend the 

EAC for publishing its glossary of key election terminology, and we 

recommend that the EAC conduct an assessment of how this glossary is being used. 

This will be important as the release of the Census Bureau’s 

American Community Survey, ACS, data approaches in 2010. The 

Voting Rights Act requires that the ACS data be used every five 

years to determine which jurisdictions are required to provide language assistance during elections, and that next determination will 

occur in 2010. 

It is likely that several jurisdictions will be subject to the VRA’s 

language assistance requirements for the first time, and the EAC 

will need to help them meet this challenge. 

When the Congress enacted HAVA, the legislation included provisions which required certain first hand voters to provide ID. Recently there has been an increase in state efforts to impose proof 

of citizenship and voter ID requirements that go far beyond the 

federal mandates. We believe that these measures make it more 

difficult for citizens to register to vote and greatly increase the risk 

that eligible voters will be denied the right to vote. 

We believe that EAC should take stronger action to discourage 

states from imposing proof of citizenship or voter ID requirements 

that go beyond the scope of HAVA. We are aware that Arizona has 

asked the EAC to amend the federal mail voter registration form 

to incorporate state specific instructions reflecting Arizona’s group 

of citizenship requirement. We urge the EAC to reject the request. 

We are also aware of the controversy over two reports commissioned by the EAC related to voter ID issues and voter fraud, the 

voter fraud one which was extensively discussed by the earlier 

panel and the members of the Committee. We are deeply concerned 

about the possibility that the election fraud reports’ conclusions 

were altered. We are also disappointed that the EAC did not adopt 

the report on voter identification, which found that Latino voters 

were ten percent less likely to vote in states that required nonphoto ID. 

We hope that the more comprehensive review that the agency 

has initiated will assess the impact of the more restrictive photo 

ID requirements imposed by some states, and we look forward to 


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the results of the review that will be conducted by the Inspector 

General. 

With regard to direct electronic voting systems, we believe that 

these hold advantages over older paper-based systems to insure 

that votes are accurately counted. DREs can be programmed to 

provide ballot screens in multiple languages where required, which 

is more cost effective and efficient than paper voting materials. 

DREs are also particularly useful for voters with disabilities because they provide them with the right to cast a vote privately and 

independently. 

We understand the concerns that voter verified paper capabilities 

are necessary to maintain public confidence, and we are pleased 

that manufacturers are developing new technology that will provide these capabilities for DRE systems. 

However, manufacturers should insure that the voter verified 

paper train technology meets HAVA’s accessibility requirements for 

persons with disabilities and for language minorities. 

Now, Latino voters face special challenges when they participate 

in the electoral process. They often do not have access to information about the basic mechanics of registering and casting the ballot. 

When jurisdictions do not have well administered election procedures, they often fail to maintain correct data about Latinos and 

their voter roles, and they fail to provide Latinos with election materials in a timely manner. 

Among callers to our national hotline during the past two general elections, we found that less than half of Latino registered voters reported having received any information from their election officials. We also found that voters who were not yet fully proficient 

in English were more likely to experience problems with obtaining 

information from their jurisdictions. 

Jurisdictions need to scrutinize every aspect of the registration 

and voting process to insure that there are quality control measures for effective election administration. States need to carefully 

examine their procedures for maintaining voter databases and 

processing DMV registrations to insure that all eligible registrants 

are added to the voter rolls in a timely manner. 

There should be an assessment of best practices providing voters 

with basic registration and voting information. We understand the 

EAC has undertaken a study of voter hotlines operated by election 

offices, and we urge the agency to conduct a more expansive study 

of overall voter education efforts. 

With regard to poll workers, we believe jurisdictions should provide more comprehensive training and specifically with regard to 

the needs and rights of language minority voters and those with 

disabilities and the nondiscriminatory application of voter ID requirements. The training should also cover HAVA’s requirement 

that voters be provided with the opportunity to cast the provisional 

ballot. 

Many callers to our hotline report not having been offered a provisional ballot or found that poll workers were not familiar with 

them, and in some cases our callers were not able to cast any ballot 

because of these problems. 

Finally, election officials should establish partnerships with 

CBOs that serve population groups who are under represented in 


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the electoral process. CBOs can provide invaluable assistance in 

nearly every aspect of election administration. States and localities 

can establish CBO partnerships by creating advisory panels or 

committees which include CBO representatives. 

Some jurisdictions, such as the County of Los Angeles, have ongoing committees that meet regularly with election officials, and 

this allows for troubleshooting of problems. We urge the EAC to 

conduct an assessment of best practices in developing and maintaining CBO and election official partnerships. 

Lastly, there is a need for a nonpartisan CBO voter engagement 

and education efforts in under representative communities. The 

traditional mobilization approaches of parties and candidates 

produce short-term increases in turnout among certain select 

groups of voters. They do not aim to create the long-term fundamental changes in voter attitudes and behaviors that are needed 

to insure that under representative groups become full participants 

in the electoral process. 

Only a few states offer HAVA funding to non-governmental 

groups for nonpartisan voter education. Most states tend to use 

HAVA funding for already established activities conducted by government agencies. Thus, the private sector, including corporations 

and foundations, should explore ways to generate more resources 

for nonpartisan CBO voter information and engagement work that 

targets under representative communities. 

As jurisdictions move forward with implementing HAVA, we urge 

the EAC to provide them with the guidance that enables them to 

embrace the opportunity to make significant improvements in the 

accessibility of election systems for Latinos in the nation as a 

whole. We stand ready to work with this Committee and the EAC 

in insuring that all of our citizens have access to the voting process. 

Thank you, Mr. Chairman. 

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Mr. SERRANO. Thank you, Mr. Vargas. 

Mr. MATTHEWS. 

JEFF MATTHEWS’ TESTIMONY

Mr. MATTHEWS. Good afternoon, Chairman Serrano, Ranking 

Member Regula, and members of the Committee. I am pleased to 

be here today to discuss a few election administration issues from 

the local perspective. 

Election officials in Ohio and elsewhere are a diverse community 

of individuals with one thing in common: a desire to serve the 

voter. Because of our diversity, I am not attempting to speak for 

the entire elections community, but to merely provide my own opinions based upon my experiences. 

The consensus after the 2000 election was that something needed 

to be done to improve elections in the United States. The Help 

America Vote Act was the result. Although it was crafted over a 

period of two years and provided much needed funds to upgrade 

equipment, the time frame for implementation was perhaps rushed 

as evidenced by recent appeals for another overhaul or new equipment. 

In Ohio, there was much debate about implementation and deployment, was delayed until November of 2005 due to the Ohio 

general assembly’s requirement of a voter verified paper audit trail 

on all direct recording voting equipment. 

In addition, Ohio requires the voter verified paper audit trail to 

be the official ballot of record for recount purposes. There have 

been some widely reported instances of problems with the printing 

of the voter verified paper audit trail due to paper jams or the 

paper being loaded backwards. This has raised questions about 

whether some voters could be disenfranchised because Ohio law 

does not specifically address this issue. 

However, all DRE equipment has a capability to recreate either 

a ballot image or another VVPAT. In Stark County, we have conducted nine recounts since deployment in 2005. These recounts 

have included candidates and issues. In every single instance the 

recount has verified the results from the official certification. 

Because the VVPAT was an afterthought and not part of the 

original design of the units currently deployed, any federally mandated voter verified paper audit trail requirements should go into 

effect only after the Election Assistance Commission has developed 

standards for the function and operation of this technology. 

Also widely reported was Ohio’s second round of testing of its 

voting equipment, which was federally and state certified prior to 

purchase. Ohio’s Secretary of State Jennifer Brunner commissioned 

a study, the evaluation and evaluation of election related equipment, standards, and testing report, known as EVEREST. It is a 

comprehensive review of all voting equipment currently deployed 

throughout the state. 

The Ohio study tested the systems for risks to vote security, system performance, including load capacity, configuration to currently certified systems specifications, and operations and internal 

controls that could mitigate risk. 

The $1.9 million study paid for using federal funds was structured to allow two teams of scientists, corporate and academic, to 


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conduct parallel assessment of the security of the state’s voting systems. The researchers in the Ohio study did not address the issue 

of probability of attack, leaving that to the determination of state 

and local officials. The researchers commented that with the lack 

of technical measures and voting system design, its integrity is provided purely by the integrity and honesty of election officials. 

Although I do not embrace all of the recommendations as the result of the EVEREST Project, I do commend the Secretary for a 

concern with election integrity. I have been asked for my reaction 

to the various studies conducted for the EVEREST Project. My 

thought are best reflected in the executive summary of the SysTest 

Lab’s risk assessment study of Ohio voting systems. 

Beginning with the fourth full paragraph on page 3, the solutions 

to election administration issues, voter confidence, and the security 

and integrity of elections are not to be found solely in technology. 

Regardless of the thoughtfulness and thoroughness of a design, the 

complexities and the costs associated with creating systems that 

are 100 percent secure solely on their own is unrealistic. 

True security is a combination of technology related security 

techniques and security measures found in thoughtful, well documented policies, procedures and processes for internal controls that 

are reflective of both a specific locality and a specific voting system. 

Ohio, like many other states, has a voter ID law which has been 

and is currently being litigated. For election data voting purposes, 

Ohio requirements are as follows: a current and valid photo identification that has an Ohio driver’s license, state ID, government ID. 

Photo identification must show name and address, although the address does not need to be current for the driver’s license. A military 

identification that would show a name and address, or a copy of a 

current utility bill, including a cell phone bill, a bank statement, 

a government check or paycheck, or other government document 

that shows the voter’s name and current address, including if it is 

from a public college or university. 

Voters who do not provide one of these documents are still able 

to vote by provisional ballot and then are given ten days to provide 

that information. 

Obviously, this debate is shaped by two contrary ideological positions: facilitating the ease of voting compared to the need to secure 

the election process. What is needed in all of these laws is to strike 

a balance between the right to vote with the state’s interest in securing free and fair elections. 

In conclusion, the EAC provides a valuable resource to state and 

local election officials. Real problems versus politically manipulated 

and reported problems demand and deserve our attention. The 

EAC is the best entity for the compilation of this data. 

If documented problems rise to a sufficient level of concern, then 

the EAC should inform Congress of these facts and help facilitate 

a remedy. These remedies if needed should be broad in scope, outlining goals and objectives and then implemented at the state and 

local level. 


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It is my opinion that the role of Congress should be to outline 

goals and objectives in election matters and not specifics because 

with the diversity of the election jurisdictions, it is very difficult to 

craft a one size fits all solution to very complex election issues. 

Thank you for your invitation to speak to you today. 

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Mr. SERRANO. Thank you all for fine presentations. 

We have five minutes left on a series, the first of three votes. The 

second vote is a five-minute vote, and the third vote is a fiveminute vote. So we will get back here as quickly as we can. We ask 

the panel to please stay so that we can join in the questioning. 

Thank you. 

[Recess.] 

Mr. SERRANO. While we were gone, we lowered all of your taxes 

and left Iraq, all in one. 

DISCRIMINATION AGAINST MINORITY VOTERS

We thank you for your patience, and we will begin our questioning now. Mr. Vargas, this nation has an unfortunate history of 

discrimination against minority voters. Long after enactment of the 

Voting Rights Act, forms of discrimination still exist. A survey of 

Latino elected officials and civic leaders by your organization found 

that over half of the respondents have either experienced voting 

discrimination or have witnessed it. 

What are now the most prevalent forms of discrimination against 

minority voters? Are sufficient election resources being directed in 

your opinion to jurisdictions that have these problems or that have 

low income communities? 

Is it a matter of not enough voting machines, well trained poll 

workers? 

What should state and local election officials do to prevent discrimination? And I know that a lot of folks, I think, in this country 

at times do not understand this, you know. I look at everything 

when I look at the Latino community based on my experience as 

someone who was born in Puerto Rico, and I find that that is different from folks who are born in other countries outside the U.S. 

and its territories because they in so many cases come from situations where voting was something that they had to fight the military to get or fight somebody else to get, and they come here and 

they know they have all of the rights in the world, but it does not 

take much. 

I remember in New York one year we had a situation with asbestos in the schools, and someone suggested—I cannot believe they 

suggested this—that we should have elections that year outside the 

school buildings because we use schools in New York City, as you 

know, in the school yard in a tent, and have the National Guard 

guarding the machines. 

I said, ‘‘No. Don’t you see they come from systems where the 

military stands around so that they do not vote? The last thing you 

want is the National Guard hanging around an election poll.’’

So what forms does this discrimination take, when it takes place 

takes these days? 

Mr. VARGAS. Thank you, Mr. Chairman, for that question, and if 

you like, I actually brought a copy of that study we conducted on 

discrimination. I could submit it along with my testimony for the 

record. 

Mr. SERRANO. That would be great. That would be great. 

[CLERK’S NOTE: The material is included following the opening 

statement of Mr. Vargas] 


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Mr. VARGAS. Certainly the implementation of voter ID and citizenship requirements has been uneven and in some cases poll 

workers without adequate training have been requiring certain 

proof of citizenship. 

Mr. SERRANO. Proof of citizenship. I want to make clear no one 

picks us up on that. 

Mr. VARGAS. Right, and individuals like yourself, sir. You know, 

whether you were born in Puerto Rico or on the mainland, you are 

a U.S. citizen by birth, and you do not walk around with passports 

necessarily. 

And so what we have seen though from calls to our hotline have 

been reports of people being asked to prove their citizenship when 

that is not being required in certain jurisdictions. 

POLL WORKER TRAINING

What we see as the most pervasive issue is the lack of appropriate training of poll workers who are not familiar with exactly 

what the requirements are of the law and see themselves as the 

last line of defense between democracy and voter fraud when, in 

fact, it is just people who are trying to exercise their right to vote. 

Many times folks are not aware that if their names do not appear on the voter rolls, they have a right to a provisional ballot, 

and poll workers do not advise them of that right. So many voters 

are, in fact, disenfranchised because they are sent away if they do 

not find their names on the voting rolls. 

So what we believe is most needed is adequate training of poll 

workers, that poll workers be fully advised of what the rights are 

of language minorities, that if a U.S. citizen comes into the polling 

place and they are not yet fully proficient in English, they do have 

the right to vote even though they may not yet speak English, and 

that is especially true for senior citizens who are naturalized U.S. 

citizens who do not need to show knowledge of English to become 

a U.S. citizen. They are over 65 years of age. 

In all of these instances many times people who are voting for 

the first time may be discouraged if they are not being given full 

assistance in the voting process. 

Mr. SERRANO. It is interesting what you are telling us because 

when people hear the word ‘‘discrimination,’’ they usually think of 

an aggressive desire to do some harm to you, and you are saying 

that most see this as not necessarily people not wanting these folks 

to vote, but not being prepared to really deal with them and know, 

for instance, that you do not have to ask for this or you do not have 

to ask for that. And you are right. They see themselves as the last 

wave. 

So training of poll workers, but that continues to be a problem, 

right? I mean, I find even in our area where people used to line 

up to work at the poll, now you have to go and find them. Is it in 

your opinion just a matter of lack of interest on the part of the citizenry? Is it that we do not pay them enough? 

Why are we not getting enough poll workers? 

Mr. VARGAS. Well, certainly there is a great disincentive to give 

up a full work day to work for only a nominal amount and to do 

a civic duty working as a poll worker. But one of the programs that 

we implemented a few years ago, which I think is something that 


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bears replication, is that we partnered at the NALEAO Educational 

Fund with the Secretary of State of California, who was at the time 

Bill Jones, and State Farm Insurance Company, where State Farm 

Insurance Company gave their agents the day off with pay to work 

as poll workers, and that was an incentive especially for those 

State Farm employees who could speak languages other than 

English so that they could go work. So they did not lose a day of 

pay. In fact, the company paid them still their daily salary. 

We had over I think it was a couple of hundred State Farm employees to work the polls. So I think there are some creative, innovative ways when we can have public, private, nonprofit partnerships to try to fulfill the need that we have for poll workers. 

Mr. SERRANO. That is interesting. Of course, you did not tell us 

that half of the voters switched to State Farm, right, right after the 

election? [Laughter.] 

VOTER FRAUD

Mr. SERRANO. The Brennan Center has always done a lot of work 

in this area, and I commend the work that you all do. I am very 

familiar with the work of the Brennan Center. How significant is 

the issue of voter fraud, in your opinion? 

What are some examples of voter fraud, but interestingly 

enough, what are some examples of things that some people perceive to be voter fraud and, in fact, are not? 

Ms. WEISER. Thank you. 

We have actually recently completed an extensive study on this 

topic called the Truth about Voter Fraud, which I have brought 

copies of, and we would be happy also to submit that to the record. 

Mr. SERRANO. Without objection. 

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Ms. WEISER. The question depends on your definition of the term ‘‘voter fraud.’’ Election misconduct is something that exists and 

there are problems. Vote buying exists. There have been ballot 

tamperings. There have been documented instances. 

But what we have been hearing a lot of noise about over the past 

couple of years has been a thing called in-person voter fraud, or impersonation fraud. We are referring to when an individual voter 

shows up at a polling place and pretends to be someone else on the 

voter rolls in order to vote in their place. And that is something 

that has been used to justify a range of restrictions on voting and 

most commonly voter ID, and that is something that we have found 

almost never occurs. 

We have done an extensive study of all of the documented allegations of voter fraud of that sort and found this is something that 

is extraordinarily rare and it, in fact, does not make sense. The 

benefit to the putative fraud feasor is very minimal. It is one marginal vote. The risk of getting caught is high, and the penalties are 

extraordinary, five years in prison and $10,000 in penalties. 

So, you know, according to our studies, which are consistent with 

virtually all other studies that are out there, including the study 

that was discussed this morning that the EAC Commission has 

found that this is something that is really not a problem in our 

elections today. 

Mr. SERRANO. And that is an interesting point because it would 

seem to me that if you are malicious enough to try to commit voter 

fraud, that one is so easy to get caught at and then the penalty 

is so severe. So why the complaint by some folks that there’s vast 

voter fraud going on in the country? 

VOTER INTIMIDATION

I mean, I think there was a problem in 2000 with counting votes. 

I have seen examples of voter intimidation. I remember a few years 

ago in New York City we had an election for mayor, and what happened was that on election morning pasted flyers showed up saying 

that immigration would be checking citizenship at the polls. 

Well, those of us especially in the Hispanic community know that 

even if you’re a citizen, there is still a chilling effect on immigration. The IRS and Immigration seem to upset all Americans, and 

so the idea that Immigration would be asking, which was not true, 

we feel and some people claim kept citizens away. It did not keep 

away the folks that were trying to break the law that day. 

And the other point here is that there are people who swear that 

undocumented aliens want to vote. If you know the behavior of undocumented aliens, the whole idea is to stay in the shadows of society. It is not to come and say, ‘‘Here I am. I am going to go on election day and be seen by the police and everybody and you can catch 

me.’’

That is not the point. In fact, it is just the opposite. They become 

citizens. They are registered to vote, and then you have to convince 

them to vote. 

So is voter intimidation an issue that’s stronger than voter fraud 

as we know it? 

Ms. WEISER. We would certainly say so. We agree that the phantom of in-person voter fraud has been used to try and justify a 


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range of restrictions on voting, some of which you mentioned, proof 

of citizen requirements, ID bills, but also unfair purges of the voter 

rolls, certain other uses of databases to restrict access to voting, 

and that is a real problem. 

And when there are real other threats to the integrity of our 

elections, voter intimidation, as Mr. Vargas had testified, is a significant problem that has been documented, especially by election 

protection hotlines significantly over the past two election cycles, 

and you know, there is also the threat of the security of our elections from the insecure voting systems that we have and the fact 

that we do not actually audit any of the audit records that voting 

systems have in place. 

Mr. SERRANO. Mr. Matthews, what do you look for? What are the 

complaints, when there are complaints, about the issue of voter 

fraud or voter intimidation or suppressing the vote if you get any 

of those complaints? 

What form do they take? 

Mr. MATTHEWS. Well, we did have one case prior to the Ohio 

voter ID law enactment where a father impersonated his son at the 

Board of Elections to vote. So it does occur, and in the environment 

when we are talking about one vote really counts, it may have been 

one situation, but it did occur. 

And I think you are in a position where you do not know the extent of it. I do not get many complaints about that. I do not get 

many complaints about intimidation. 

VOTER REGISTRATION

Mr. SERRANO. What do you get complaints about? 

Mr. MATTHEWS. Accessibility, long lines in the suburbs. Those 

are the kind of complaints that I receive. You know, I think there 

is some anecdotal information when four or 500 people show up 

and vote a provisional ballot on a presidential election and they are 

not even registered to vote. That may be election misconduct. There 

may be some walking around money out there. You know, you cannot prove that. Those are some things that some people raise as 

possibilities, but we do not see much. 

Mr. SERRANO. Well, let me ask you a question on that. I find traditionally in New York that people will register to vote. I mean, it 

happens much less now, but they will register, honestly register to 

vote wherever the voter registration drive is, and then that was not 

processed. So they go on election day feeling that they were registered, and yet they are not. 

Well, they are not lying about it. They honestly think that they 

are registered. So how up to date in Ohio do you feel are your voters’ rolls, as an example of one state? I mean it is unfair. You are 

the only person representing a state here, but maybe we can get 

some feeling of what is going on out there. 

Mr. MATTHEWS. Well, I think that we are very up to date with 

our voter rolls, not only new registrations but existing registrations. One of the laws that we have is an election notification. For 

our March primary we mailed a notification to every registered 

voter informing them of their poll location. 

Mr. SERRANO. Right. 


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Mr. MATTHEWS. So this serves two purposes, and it actually 

pleases both sides. We are informing people where to vote. We are 

also cleaning up our rolls if that notice is bounced back, and then 

we do a follow-up mailing that is forwardable to tell them to 

change their address, and that is done in plenty of time before the 

close of registration so they are not forced to vote a provisional ballot. 

Mr. SERRANO. Mr. Regula. 

Mr. REGULA. Thank you, Mr. Chairman. 

Mr. Matthews, you mentioned Ohio’s voter identification law. 

What are the characteristics of that? What is required? 

Mr. MATTHEWS. Well, a photo ID is ideal that contains an address. If it is a driver’s license, it is not required to be a current 

address. However, there is a number of other government documents, including utility bills that suffice for the identification requirement in Ohio. 

Mr. REGULA. Has it worked pretty well that you prevent, for lack 

of a better term, fraud? 

Mr. MATTHEWS. I think it has worked well. I think that through 

education most voters realize that it is required. I am not sure if 

it prevents fraud. I know that if you are required to show some 

form of ID then there is a verification process there. 

POLL WORKER RECRUITMENT AND TRAINING

Mr. REGULA. What is your experience in getting poll workers? I 

hear this complaint from many sources. 

Mr. MATTHEWS. Well, as has been mentioned, you need proper 

training of poll workers, and every year we seem either at the state 

or the federal level to add additional responsibilities and burdens 

to the poll workers, also not only through state and federal, but 

through the court system we add additional burdens to poll workers. 

And so what we are seeing is a huge turnover in poll workers. 

They are getting to the point where they do not want the responsibility. You have certain activists that are accusing them of being 

part of the problem, and so we have a tremendous turnover now. 

It is not only recruitment. It is retention. So you are constantly in 

a training mode. 

So, for example, they may not—it does not happen in Stark 

County, of course—but as Mr. Vargas said, you know, there are instances where they are not aware that in a federal election they 

are required to offer a provisional ballot if someone is not in the 

book. 

So the problem with the poll workers is multi-faceted. It is not 

just limited to the responsibilities. It is limited to the length of 

days. It includes the pay, and oddly, we have some people that are 

doing it for the money, and those are not necessarily the ones you 

want to be recruiting. 

Mr. REGULA. Do you have any experience where companies or 

firms of any kind will give their employees a day’s pay if they serve 

as a poll worker? 

Mr. MATTHEWS. Yes. As a matter of fact, we championed a state 

law that allowed public employees to do that, and I did that when 

I was president of the Ohio Association of Election Officials. I made 


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that one of my goals for the year that I was president, and we were 

able to pass it. 

Of course, the County Commissioners Association and the Municipal League and a few others watered it down a little, like we were 

going to bankrupt them, I guess, and we have reached out to various corporations. 

We also are extensively utilizing high school and college students. In some counties in Ohio, I have been told that ten percent 

of their poll workers are high school students. 

Mr. REGULA. Is there any minimum age required for poll workers? 

Mr. MATTHEWS. Ideally you would want an 18-year-old, but the 

Ohio law does allow a 17-year-old. 

Mr. REGULA. Seventeen is the cutoff then? 

Mr. MATTHEWS. As long as they are going to be 18 by the November election, yes. 

MOBILE VOTER POPULATION

Mr. REGULA. Another problem, I think, is we are a very mobile 

population. People are constantly moving in their job, and so do 

you find that difficult? People are moving in to establish their residence so that they are eligible for the next election? 

Mr. MATTHEWS. Yes. I was very excited about the pilot project 

that the Pew Charitable Trusts are in charge of with regard to 

Ohio, Indiana and Kentucky, I believe, where when they file a 

change of address with the Postal Service, which not everyone does, 

you know, when they receive their packet, they will receive voter 

registration forms. 

One thing that I have done locally with realtors is that when 

they are closing a home, they will hand over a couple voter registration cards also. 

Again, that does not touch everyone, and it really does not touch 

the most mobile of our population. You know, I think in presidential years you have various groups that are out registering people, and it is amazing. Over the summer leading up to a November 

general election, some people move three times because we receive 

three registrations at three different addresses, and it is not a case 

of fraud. It is a fact that they have moved because once someone 

registers in Ohio, we are required to mail them a notice. And if two 

bounce back and one is deliverable, then we know that is not a case 

of fraud and where someone is registering in multiple locations. 

Mr. REGULA. You heard Mr. Bonner talk about their problems 

with military personnel, and of course, our county doesn’t have the 

volume that they would in some locations. Do you have any problem getting the military people an opportunity to vote? 

Mr. MATTHEWS. Yes, we have the same frustrations I think that 

everyone has documented that sometimes even if we have an up to 

date address by the time we mail the ballot and it is delivered, 

they have moved on. 

For example, this year in a presidential primary election in Ohio, 

absentee balloting starts 25 days before the election. 

Mr. REGULA. Is it closed at a given time? 

Mr. MATTHEWS. It closes effectively the day before the election, 

for absentee. For mail-out purposes, it is the Saturday before the 


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election. But in a normal election, it is 35 days, but for some reason 

in a presidential primary it is 25 days, which makes it very difficult. That is our first mailing always, is the military and overseas 

ballots. They go out the first legal day, and everything that we 

have to that point. 

And the frustrating problem is that it is not getting forwarded, 

and then it is not being returned in time to be counted. They are 

given additional days, you know, after the election, but still, if they 

are not being delivered in the first place, it does not help. Something really needs to be done with that. 

Mr. REGULA. Tell us about the Pew program that Mr. Matthews 

alluded to. 

Ms. URAHN. Mr. Regula, it is a program, as was mentioned, 

where we include voter registration forms in the change of address. 

It gets included in that packet, which has 100 percent open rate. 

So even though everyone does not request one and get it mailed, 

when it does get out, it gets opened. And we are going to test 

whether that does, indeed, increase the chances that people who 

move will then update their voter registration forms. 

Mr. REGULA. Well, the objective would be to give more people the 

opportunity to vote even though they are moving around; is that 

correct? 

Ms. URAHN. That is absolutely correct. 

ONLINE ELECTION ACTIVITIES

And I might also point out we have another project also in Ohio 

where we are testing some online poll worker training to try to address some of the issues around poll worker training, and I think 

that some of the other experiments that ultimately are worth looking at is whether the precinct based approach which does require 

a very large temporary work force in terms of poll worker training 

might be supplemented or in some cases replaced by vote centers, 

where you would have the opportunity to have a smaller and possibly more professional poll worker staff because you would need 

fewer people. 

Mr. REGULA. I am interested. I think someone earlier said you 

could register online to vote; is that correct? 

Ms. URAHN. In some states you can. It is up to the states, indeed. 

Mr. REGULA. What is Ohio’s position? 

Mr. MATTHEWS. Ohio does not allow that currently. They want 

an actual signature on the document under existing Ohio law. 

Mr. REGULA. It would seem to me that that would open itself up 

a little bit to fraud. When it’s online, you are not sure who is 

inputting at the other end. How do you verify it? 

Ms. URAHN. In terms of the voter registration? 

Mr. REGULA. Yes. 

Ms. URAHN. Well, I think it may be less a problem in terms of 

technology for voter registration and getting a blank ballot, which 

I think the big challenge is, particularly for overseas voters than 

actually the returning of the filled out ballot, which is a significant 

challenge yet to be met. 

Mr. MATTHEWS. You would verify it the same way you would 

verify a regular registration. You would send a mailing to the address, and if it was a first time registration through mail, well, it 


rwilkins on PROD1PC63 with HEARING
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now requires ID anyway, and you would verify the signature that 

way, the name. 

HAVA FUNDING

Mr. REGULA. Have the funds thus far that have been made available to the group that are funded under the Help America Vote 

been adequate in your judgment? Do any of you want to comment 

on that? 

There has been some effort to give them more money. Do you 

think they are adequately funded to do their job? 

Ms. WEISER. We certainly support greater funding under HAVA 

to the states to implement the methods and changes that HAVA 

had required in voting technology both in terms of voting systems 

and the statewide voter registration databases. There is a lot that 

is not as effective as it could be. 

Mr. REGULA. Well, it would seem like people would make a decision on the state or as to what system they are going to use and 

then do it and not take the money to change the whole system over 

to something else. 

Ms. WEISER. Well, there are jurisdictions that are not changing 

their system as well, taking a position on the changing of systems, 

but even with existing systems, there are additional funds that are 

needed to make sure that they function properly, to make sure that 

states can actually appropriately audit them and maintain the systems, and to make sure that the databases have proper 

functionality. 

So there is a range of needs that states have that do not involve 

changing their systems as well. 

Mr. VARGAS. If I could add, sir, we believe one of the areas where 

additional funding would be helpful would be to educate the public 

about the mechanics of voting, how to register to vote, and then especially when there are new technologies being introduced at the 

polling location, how to actually use the polling machines. Many 

times people are intimidated when they go vote and all of a sudden 

it is a different system than the one they had been used to. 

So there is a need for ongoing public education. 

Mr. MATTHEWS. Mr. Chairman, may I comment on that? 

Mr. REGULA. Sure. 

Mr. MATTHEWS. I cannot speak to the funding for the EAC itself, 

but I would think that 3.6 billion funding on new equipment was 

a pretty substantial number. I think that before any funding for 

new voting equipment, I think that we ought to wait until standards are established so that when we spend the money the next 

time, you are spending it on equipment that meets the latest 

standards. 

One area where you could have additional funding is for the electronic poll book, and that is instead of someone coming to the polls 

and checking in manually with a paper-based system, you could 

have it electronic. You could have your entire county database on 

that electronic poll book so that if they showed up at the wrong location, you could direct them to the correct location. 

Sometimes lines are formed not because of too few machines but 

the check-in process, because we are dealing with an older crowd 

that is our poll worker group right now, and they are just not as 


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quick. That can be helped through equipment like electronic poll 

books. 

So I would not mind seeing funding for that, but I think until 

we develop standards on new voting equipment, we could change 

every two years. 

Mr. SERRANO. Mr. Matthews, as an interested Democrat, I am 

tempted to ask you if everything is in place for next Tuesday. You 

guys are up next Tuesday, right? 

Mr. MATTHEWS. Yes, Tuesday is going to be very interesting on 

many levels in Ohio. 

Mr. SERRANO. Yes. I would say, and in Texas, too. 

PORTABLE VOTER SYSTEM

You know, I am intrigued by the thought of voting near work 

rather than having to go back. You know, we lose so many voters, 

I think, because they have to leave early in the morning. There is 

a problem checking in, but they are coming back after nine o’clock 

at night, and even though New York has long hours, from six in 

the morning to 9:00 p.m., there are still some people who get 

caught up in that. 

And then I am very intrigued by the thought of in the same way 

that we have a Social Security card, to have a voter card that allows you to vote wherever you are at that point, where you’re living 

in that jurisdiction without having to register everywhere. You go 

from one building to another and you have to re-register. 

But I am reminded by the smart folks back here that states have 

those rights and they take very seriously the desire to run their 

own system. So how realistic is it that we can reach a time here 

when we have some kind of universal, you know, voting ability, if 

you will, in this country? 

Yes. 

Ms. URAHN. I think it is entirely realistic that ultimately you 

could reach the point of having a portable registration system. I 

think part of the challenge is that the field has been appropriately 

from the election official’s standpoint very focused on the next election, and it is a difficult field that is a resource poor field and it 

is a difficult field within which to take a long-term look. 

It is part of the luxury that we have, is really taking a look beyond the 2008 election, looking out to 2012 and trying to find ways 

for states to begin to test some of these innovations and really understand what works, what does not, and how it works and how 

to help the states begin to implement these things. 

Mr. SERRANO. Well, we have a database for Social Security card. 

I am speaking to Mr. Vargas now. Can you believe I am talking 

about national cards here, you know? That is another issue. 

[Laughter.] 

Mr. SERRANO. We have wherever we go in this country with our 

Social Security number, it works. How much thought has gone into 

the possibility of establishing a system where you could go with a 

voter registration card anywhere in the country and then you kind 

of have to sign up with that community, right? You just cannot 

walk in and say, ‘‘I am voting in his district today when I was in 

the Bronx last week.‘‘


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How does that work? You could only vote in the area where you 

are residing. Would that be the plan? 

Ms. WEISER. The Brennan Center is actually currently studying 

this exact question as to how to move towards a system of more 

universal voter registration where the government takes a more affirmative responsibility for making sure that all citizens are registered and can vote. And there are a range of different options 

that we are considering, that we do not have a final set of recommendations, but some things that make us hopeful that this is 

really available in the near future or might be available in the near 

future. 

For one thing, the massive technological advances that were 

brought by the statewide voter registration databases; the experience in many states with election day registration; the work that 

Pew Charitable Trusts is funding to experiment with portable registration. I think that we are a lot closer to that day when voter 

registration does not serve as much of a barrier than we were just 

a few years ago. 

And we would be happy to share our work with the Committee 

as soon as it is complete. 

Mr. SERRANO. Please. We would like to see that. 

Mr. VARGAS. Mr. Serrano, I think we should be very cautious 

about trying to replicate a voting system based on the Social Security system. While you may think it works, it does not work for everybody necessarily, and I know of many of your colleagues who 

continuously get constituent complaints about their names not 

being accurate on the Social Security Administration rolls and because of some snafu and some bureaucratic snafu. 

We would not want somebody’s right to vote be denied because 

of some bureaucratic snafu. 

Mr. SERRANO. Right, but we have that problem now. Obviously, 

any system we put forth we would have to look at what we have 

in place now and see how it can be adjusted, and certainly Social 

Security cards are not perfect. In fact, there are other people on 

Lou Dobbs every night who tell you how they are not perfect in another way. 

But my point is, for instance, I have never understood the notion 

in New York, and I am sure it happens in a lot of states, that if 

you do not vote in four elections in a row—I believe that is what 

the law still is—you lose your registration. 

Well, no. If voting is that important a right as a citizen, then I 

should have from the day I turn 18 to the day I die, and I should 

not lose it because I chose not to vote for four years where I was 

out of the country and so on. Yet I know the records have to be 

kept of people. 

So my question is: how do we deal with those two issues in that 

case, for instance, and how do we deal with the possibility of having the ability to register once and then you vote the rest of your 

life anywhere you go in the country? Is that possible? 

Yes. 

Mr. MATTHEWS. I am not sure that that is possible, but if I may 

touch on a couple of points you have raised earlier about voting 

anywhere, voting near work. Keep in mind that if you are going to 

have a vote center concept like that, you need to be looking at techVerDate Aug 31 2005 20:00 May 30, 2008 Jkt 042322 PO 00000 Frm 00193 Fmt 6633 Sfmt 6602 E:\HR\OC\A322P2.XXX A322P2

rwilkins on PROD1PC63 with HEARING
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nology capabilities versus paper based systems because as long as 

we are precinct based system, you know, we are voting on those 

issues and those candidates that are localized to where we reside, 

and to have a vote center that has every single ballot style available for that jurisdiction, for that county, let’s say, is impossible. 

That is usually called a Board of Elections, but as far as a vote 

center concept, this is primarily a case where you can really use 

the technology of the DRE because you can have every ballot style. 

And so I would embrace a vote center concept if it included that 

component. Otherwise I am not sure how that would work. 

Mr. SERRANO. Well, let me tell you a little bit of it. Mr. Regula 

is part of my mischievous ways. The whole idea of creating havoc 

on all the pundits who tell you who voted where, can you imagine 

if all the people from the South Bronx voted at work in the middle 

of Manhattan and then it would look like Mr. Nadler’s district 

voted the way the South Bronx used to vote all the time? 

I mean, those guys would go crazy on TV that night. That would 

be nice. [Laughter.] 

Mr. REGULA. I think it would be difficult for the very reasons 

that Mr. Matthews points out because you have got to have a local. 

An anchor is where you live, and if you have a vote center next to 

your factory, it seems to me it would be hard to keep track of 

things. 

Mr. MATTHEWS. You could do that if you were online and you had 

the technology to make it happen, but a paper-based system does 

not work, in my opinion. 

Mr. SERRANO. It would just wreck polling. I love that, and the 

big CNN maps where they say, ‘‘How is the other one?’’ No, they 

do not know how they voted, and that is good. 

Well, listen. This is an ongoing issue. If there is something dramatic about this or sad, it is that the greatest democracy on earth 

may have committed the sin New York City committed with a subway system. It was running well. It worked well, and no one 

thought it needed any repairs, and all of a sudden a few years ago 

they realized that it needed a lot of help. 

I think for so long our voting system, our democracy has worked 

well and people just took it for granted and did not pay attention 

to it. Now we find that there are many issues and many problems 

that threaten, in my opinion, the very democracy that we all love 

and are sworn to protect. 

And so I can see no greater issue in terms of protecting our 

rights and securing our future right now than making sure that we 

get accurate counts, that we open the system up to everybody who 

is eligible to vote, and to encourage people to vote. 

This year may be the beginning of that if the numbers hold in 

terms of the young people that have been voting, and there will be 

a demand on the system like we have never seen before in November, but it will be a healthy demand, young people saying, ‘‘Yes, I 

am not cynical. I want to be part of this society. This is my country, and I want to protect it by casting my vote.’’


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So we all are challenged to make sure that this takes place, and 

I certainly thank all of you for your input and for your worthy information that we will use as we go along, and we thank you for 

your involvement today. 

And this hearing is now adjourned. 


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(239) 

THURSDAY, FEBRUARY 28, 2008. 

CONSUMER PROTECTION IN FINANCIAL SERVICES: 

SUBPRIME LENDING AND OTHER FINANCIAL ACTIVITIES 

WITNESSES 

PANEL 1 

DONNA GAMBRELL, DIRECTOR OF THE COMMUNITY DEVELOPMENT 

FINANCIAL INSTITUTIONS FUND, DEPARTMENT OF THE TREASURY 

LYDIA PARNES, DIRECTOR OF THE BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE COMMISSION 

PANEL 2 

MICHAEL D. CALHOUN, PRESIDENT, CENTER FOR RESPONSIBLE 

LENDING 

JANET MURGUIA, PRESIDENT AND CEO, NATIONAL COUNCIL OF LA 

RAZA 

CHRIS STINEBERT, PRESIDENT AND CEO, AMERICAN FINANCIAL 

SERVICES ASSOCIATION 

GREG LOBO JOST, DEPUTY DIRECTOR, UNIVERSITY NEIGHBORHOOD 

HOUSING PROGRAM (ALSO REPRESENTING THE NEIGHBORHOOD 

ECONOMIC DEVELOPMENT ADVOCACY PROJECT) 

CHAIRMAN SERRANO’S OPENING STATEMENT

Mr. SERRANO. The Subcommittee will come to order. Good morning to everyone. We waited until exactly 10:00, because as you 

know these hearings are covered by international television networks. Okay. [Laughter.] 

We just started on time. It is covered in New York City, it is covered in Ohio. [Laughter.] 

Today we will explore an issue that touches upon several of the 

agencies under the jurisdiction of this Subcommittee, and that is 

consumer protection. The consumer protection issue has been in 

the spotlight in a number of ways in recent months, and this Subcommittee has followed the issue closely. Today we will continue to 

look at this issue and focus specifically on financial services. 

All consumers are at risk of being victimized by financial predators. However, it is often our most vulnerable populations who bear 

the brunt of these crimes. Each year countless working class parents who are struggling to achieve the American dream tragically 

have their hopes of upward mobility crushed by the practices of 

dishonest businesses. 

While their plight often goes unrecognized, the enduring housing 

crisis has opened the eyes of many Americans to their struggles, 

and made us all aware of the devastating effects such exploitation 

can have on the strength of our economy. 


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The impact of subprime mortgages on borrowers continues to receive much attention, and this Subcommittee will examine this 

topic. Consumer protection concerns are not limited to subprime 

mortgages, however. There are numerous other financial services 

being offered that have generated worries over the fair treatment 

of consumers. 

Examples include certain loan products such as refund anticipation loans, or payday loans, accompanied by excessive rates of interest, credit or debit cards with hidden fees, and illegal or abusive 

debt collection. In many cases, the problems are in the way financial products are marketed, such as the cases of inadequate or misleading disclosure of credit terms, or the advertising of so-called 

credit repair programs making false promises. 

With regard to mortgage lending, alternative mortgages, in many 

cases, have been a vehicle for bringing the dream of home ownership to many families who would otherwise have not qualified for 

a mortgage. But as we have seen, many local housing markets have 

floundered in the past couple of years. The median price of a single-family home fell in 2007 for the first time in at least four decades. 

At the same time, hundreds of thousands of subprime loans are 

resetting to higher interest rates, and many of the holders of these 

loans are unable to refinance or sell their homes due to the weakening housing market. Foreclosures and late payments rose in January to the highest level on record. 

The rise in foreclosures has had implications not just for families 

losing their homes. Whole neighborhoods have seen declines in 

property values and tax base as a result of being near foreclosed 

homes. In New York City, for example, 400,000 homes are experiencing or will experience devaluation as a result of being located 

near foreclosed homes. 

In addition, minority communities have been, and will continue 

to be, hardest hit by the foreclosure crisis, since these communities 

received a disproportionate share of subprime loans in recent years. 

In 2006, 52 percent of the home loans that went to African-American families and 41 percent of the home loans that went to Latino 

families were subprime loans. 

I am deeply concerned that many borrowers in these communities were steered specifically toward subprime loans, even though 

the borrowers in many cases were fully qualified to receive conventional loans. Minority communities have also been disproportionately affected by other forms of financial fraud or deception. A 2005 

Federal Trade Commission survey found that Hispanics and African-Americans experience more fraud. In September 2007, the FTC 

charged telemarketers who were promoting advance fee credit 

cards with deceiving more than 30,000 Spanish-speaking consumers. 

The Treasury Department has begun to address the issue of foreclosures, most notably in the HOPE NOW Initiative. Under this 

voluntary initiative, participating mortgage loan companies are 

agreeing to institute five-year interest rate freezes for certain families faced with the prospect of foreclosure. While many people in 

the Treasury Department have worked extremely hard on this initiative, I am concerned that: one, the proposal is still a voluntary 


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initiative; and, two, a great many borrowers who are facing foreclosures are not eligible. 

Just how many imminent foreclosures are not addressed by this 

initiative? Secretary Paulson himself has acknowledged that we 

have not yet seen the worst of the foreclosure crisis. We must continue to explore what options exist to minimize the numbers of 

foreclosures that will take place in the future. 

Joining us today to discuss these issues are two panels of experts. On the first panel we have Donna Gambrell, the Director of 

the Community Development Financial Institutions Fund, or CDFI 

Fund, at the Treasury Department, and we welcome you. Both the 

Treasury Department as a whole, and the CDFI Fund specifically, 

have been involved in these issues. 

Also on our first panel is Lydia Parnes. Am I pronouncing that 

correctly? 

Ms. PARNES. It is [pronounced] Parness. 

Mr. SERRANO. Parness. 

Ms. PARNES. Yes, thank you. 

Mr. SERRANO. I said it was Parness, and I was still——

[Laughter.] 

And English is a second language to me. Director of the Bureau 

of Consumer Protection at the Federal Trade Commission. The 

FTC has been very active in the area of consumer protection in financial services. We will be joined later by a second panel of nongovernment witnesses. 

Before I recognize the panel, I want to recognize a man whose 

name I have never misstated, Raphael Regula. [Laughter.] 

Mr. Regula. 

Mr. REGULA. Well, that is better than Ragula. [Laughter.] 

Mr. SERRANO. That happened yesterday, right? 

Mr. REGULA. Right. [Laughter.] 

MR. REGULA’S OPENING STATEMENT

Thank you, Mr. Chairman, for holding this—what I think is a 

very important hearing on consumer protection. The subprime 

lending downfall in the United States over these past few months 

has resulted in extraordinary market volatility, but also uncertainty and hardship to homeowners and communities across the 

country. 

Mortgage lenders and brokers seem to have resorted to disturbing practices of predatory lending in many cases, yet distinguishing valid subprime lending from predatory does not appear to 

be clear-cut either, as valid subprime lending has allowed many 

Americans to own a home that otherwise never would have. 

PANEL 1

I hope the witnesses today from the Federal Trade Commission 

and the Treasury will give light on this distinction and help us understand what went wrong and what needs to be changed in terms 

of regulation of the financial services industry. 

Mr. SERRANO. Thank you, Mr. Regula. 

I will remind the witnesses that we will adhere strictly to the 

five-minute rule. Your full statement will be in the record. The less 


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you speak to us, the more we can ask you questions. Ms. Gambrell, 

you will go first. 

DIRECTOR GAMBRELL’S TESTIMONY

Ms. GAMBRELL. Thank you. Good morning. Chairman Serrano, 

Ranking Member Regula, and members of the Subcommittee, my 

name is Donna Gambrell, and I am the Director of the Department 

of the Treasury’s Community Development Financial Institutions 

Fund. 

I am part of Secretary Paulson’s senior leadership team in the 

Office of Domestic Finance, which is leading the Department’s efforts in addressing the housing market issues. I am pleased to be 

here this morning, along with my colleague from the Federal Trade 

Commission, to testify on subprime lending and consumer protection. 

As you requested, I am going to focus my remarks on the HOPE 

NOW Alliance, other efforts to address preventable foreclosure, and 

Treasury’s main financial literacy and education initiatives. HOPE 

NOW was formed on October 10, 2007, as an alliance among nonprofit counselors, servicers, investors, and other mortgage participants, to maximize efforts to reach at-risk homeowners and help 

them stay in their homes. The American Financial Services Association, which is represented here today on your second panel of 

witnesses, is one of the many HOPE NOW members. 

Let me first briefly highlight the accomplishments of HOPE 

NOW, since its formation over four and a half months ago. HOPE 

NOW membership has grown from less than 60 percent of the 

subprime mortgage servicing market to 94 percent today. Today 26 

servicers are represented. The nationwide foreclosure prevention 

hotline, 888–995–HOPE, has been publicized and expanded. Daily 

call volume has increased from 625 in the third quarter of 2007 to 

4,500 today. 

Since last November, HOPE NOW servicers sent one million letters to at-risk homeowners. Early results show a 21 percent response rate, up from just 2 to 3 percent before HOPE NOW existed. 

Homeowners who had previously avoided contact are now calling 

for help, and over 200,000 additional letters are being sent every 

month. Today all HOPE NOW servicers are contacting subprime 

borrowers 120 days before their interest rate resets. 

The American Securitization Forum—a HOPE NOW member— developed a framework called the ASF Framework to streamline 

refinancing and loan modifications for subprime ARM borrowers 

whose rates reset between January 1, 2008, and July 31, 2010. It 

is estimated that up to 1.2 million homeowners could benefit from 

the ASF Framework. 

In the second half of 2007, the industry provided loan modification and repayment assistance to an estimated 869,000 homeowners. Coincident with the formation of HOPE NOW, the assistance rate in the fourth quarter doubled over the rate in the third 

quarter. Of the 869,000 homeowners assisted, 545,000 were 

subprime borrowers. 

Most recently, the HOPE NOW Alliance announced that its 

members would participate in outreach efforts called Project Lifeline. Under this initiative, HOPE NOW Alliance members agree to 


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reach out to the most vulnerable homeowners who are 90 days or 

more delinquent. Homeowners who respond may qualify for a 

pause in the foreclosure process while a loan modification is considered. 

This initiative is targeted to reach not only subprime borrowers, 

but all 90-day delinquent homeowners nationwide, with a step-bystep approach to find individual solutions to individual problems. 

We look forward to seeing the results of HOPE NOW efforts on a 

monthly basis, in the coming weeks, and we will be monitoring the 

progress of the initiative very closely. 

In addition to the HOPE NOW efforts, solutions in mortgage 

counseling and financial education are being developed to help 

homeowners avoid foreclosure. Through the Financial Literacy and 

Education Commission, known as FLEC, Treasury plays an active 

role in improving the nation’s level of financial literacy and education for people across our nation. 

The Commission includes 19 other federal agencies, including the 

FTC, which is also represented here today. In addition to FLEC, 

Treasury coordinates the President’s new Advisory Council on Financial Literacy. Through these channels, consumers can find information related to home ownership and retention, including how 

to avoid foreclosures, how to access credit reports, how to build better credit, and how to save for the future. 

To boost housing counseling efforts, the Neighborhood Reinvestment Corporation, or NeighborWorks America, is administering a 

new foreclosure mitigation program. NeighborWorks has just recently awarded $130 million to applicants who plan to provide 89 

percent of their services in areas of greatest need. 

Due to the CDFI Fund’s experience working in distressed communities and with homeowners, I am serving on the 

NeighborWorks Advisory Committee to assist the organization in 

implementing this important new program. 

Mr. Chairman, thank you for holding this important hearing 

today and for allowing the Treasury Department to testify. This 

concludes my formal statement, and I would be pleased to answer 

any of your questions. 

[The information follows:] 


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Mr. SERRANO. Thank you. 

DIRECTOR PARNES’ TESTIMONY

Ms. PARNES. Chairman Serrano, Ranking Member Regula, and 

members of the Subcommittee, I, too, appreciate the opportunity to 

speak with you today about the Federal Trade Commission’s efforts 

to combat unfair, deceptive, and other illegal practices in the consumer financial services industry. 

First and foremost, the Commission is a law enforcement agency 

with wide-ranging responsibilities, including consumer financial 

issues. We enforce Section 5 of the FTC Act, which prohibits unfair 

or deceptive acts or practices, as well as over half a dozen consumer credit-related statutes. The Commission’s authority, however, does not extend to banks, thrifts, and federal credit unions, 

which Congress has exempted from the Commission’s jurisdiction. 

The FTC does have jurisdiction over non-bank federal entities. 

The Commission investigates and prosecutes those who violate the 

law. We do not audit or supervise these financial institutions. 

Mortgage lending has long been a Commission priority. In the 

past decade, the agency has brought 21 actions focused on the 

mortgage lending industry, alleging that mortgage brokers, lenders, 

and servicers have engaged in unfair or deceptive acts and practices. These cases have collectively returned more than $320 million to consumers. 

Today the Commission is announcing new actions to protect consumers from foreclosure rescue scams. This week we filed a case 

alleging that a company called Safe Harbor contacts homeowners 

guaranteeing to save their homes from foreclosure. Instead, the 

company allegedly entices consumers into a second mortgage or 

home equity line of credit, on unfavorable terms, without fully disclosing the costs, risks, and consequences of doing so. We filed two 

other cases under seal this week alleging similar unfair and deceptive practices. 

In conjunction with these cases, we are rolling out a related consumer education effort—a fact sheet on how to avoid foreclosure 

rescue scams, a series of radio PSAs in English and Spanish, and 

warnings about these schemes which we will place in the classified 

ad sections of English and Spanish language community newspapers. 

Our cases and consumer outreach are part of a larger partnership to combat mortgage foreclosure rescue scams. Commission 

staff are leading or participating in seven task forces around the 

country to tackle the problems of increasing foreclosures and related fraud. Let me mention two other recent initiatives in the 

mortgage lending area. 

First, the FTC last fall warned over 200 mortgage brokers and 

lenders, and the media that carried their ads, that their advertising claims may violate federal law. The Commission is investigating a number of these mortgage advertisers and will continue 

to monitor these claims. 

Second, the Commission has been active in a new interagency 

subprime lending project. As part of this project, the FTC, the Federal Reserve Board, the Office of Thrift Supervision, and state regulators are jointly conducting compliance reviews and investigaVerDate Aug 31 2005 20:00 May 30, 2008 Jkt 042322 PO 00000 Frm 00248 Fmt 6601 Sfmt 6602 E:\HR\OC\A322P2.XXX A322P2

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tions of certain financial entities with significant subprime operations. 

The Commission, likewise, has been active in its efforts to protect 

consumers of non-mortgage financial services. Yesterday, the FTC 

announced consent agreements with three internet payday lenders 

who advertised the costs of their loans without disclosing their annual percentage rate, in violation of the Truth in Lending Act. This 

violation makes it far more difficult for consumers to comparison 

shop between payday loans as well as between payday loans and 

other short-term forms of credit. 

Consumer education also is a key to protecting consumers in the 

financial services marketplace. The FTC has more than 50 creditrelated educational brochures, and we use innovative methods to 

get our messages out. For example, we created—and I have here—

an English and Spanish language guide to help organizations working with Hispanic communities to educate consumers about their 

rights. 

We have partnered with local agencies to give financial education 

presentations at senior centers and other community-based organizations, and just this month the U.S. Postal Service distributed our 

identity theft brochure to the 121 million U.S. households. 

Protecting consumers from unfair and deceptive acts and practices in the financial services market is, and will continue to be, a 

top priority for the FTC. The Commission appreciates your consideration of its views, and I look forward to your questions. 

Thank you. 

[The information follows:] 


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Mr. SERRANO. Thank you so much. Thank you both for your testimony. 

TREASURY’S OFFICE OF FINANCIAL EDUCATION

Ms. Gambrell, could you please talk about Treasury’s Office of 

Financial Education? And, specifically, please discuss the issue of 

foreclosure prevention scams that are sweeping the country in 

which homeowners are offered the opportunity to ‘‘fix’’ their loan in 

some way. What is Treasury doing in terms of financial education 

to combat these scams? 

Also, could you please talk more widely about what Treasury’s 

Office of Financial Education is doing in the area of subprime 

mortgages, both for families facing foreclosures as well as helping 

future borrowers to avoid the same problems? 

Ms. GAMBRELL. Thank you for your question, Mr. Chairman, and 

that is a very important question. The Treasury Department has 

been dedicated for a very long time to looking at issues related to 

financial education, and specifically how to reach out to those populations that are most in need of that education. 

As you know, the Office of Financial Education is comprised of 

20 federal agencies, including the Treasury Department. It was 

formed specifically not only to develop a national strategy that is 

addressing financial education needs, but then to take that strategy and really put it into action. There are about 32 calls of action 

that are part of the Financial Education Office’s national strategy. 

Twenty-two of those come under the leadership of the Federal 

Government to spearhead, and those include working with community organizations on the ground to conduct the financial education 

workshops, to ensure that consumers are very well aware of predatory lending tactics, which as you know can be devastating to both 

communities and to individuals, and a number of other actions specifically addressed to consumers. The office just recently received $400,000 in appropriations to 

look at two areas specifically in the area of financial education, one 

targeted to elementary and high school students, because, again, 

certainly getting that education at an early age is perhaps one of 

the most effective ways to ensure that people understand not only 

the cost of credit but how to plan their financial future. The other 

$200,000 is going to be dedicated to predatory lending initiatives. 

That particular initiative is still in a conceptual discussion and 

framework right now. Dan Iannicola, who is the Director of the Office of Financial Education, however, would be happy to provide additional details to the Committee about specific efforts going forward. 

I can tell you that, certainly, on this FLEC Committee there are 

member agencies that again have long been dedicated to the financial education effort, either individually or as part of the Financial 

Literacy Education Commission, and will continue to do so. 

Mr. SERRANO. I am sure you meant that $200,000 is dedicated 

against predatory lending. 

Ms. GAMBRELL. Yes. Did I say ‘‘for’’? I hope I did not say ‘‘for.’’

Mr. SERRANO. You said ‘‘for.’’

Ms. GAMBRELL. For fighting against——

Mr. SERRANO. I hang on every word. [Laughter.] 


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Ms. GAMBRELL. Thank you for the correction. 

PREDICTING THE HOUSING CRISIS

Mr. SERRANO. You know, a general question, which some people 

would think is better asked of some folks on Wall Street. In fact, 

maybe they are the ones who have to answer it, but I want to ask 

everybody today. How come we did not see this coming? Or did we 

see it coming and not pay attention to it? I mean, it seems to have 

hit the country like—you know, like a lead balloon. It threatens our 

economy. It is, you know, creating havoc on American families everywhere. 

It is, in so many neighborhoods, as you know, as we all know, 

hurting people who just got into accomplishing the American 

dream of owning a piece of the pie, if you will. Did we see it coming 

at all? Could we have stopped it? 

Ms. GAMBRELL. Well, I think that is a complicated question. Certainly, I think when you look at the statements that Secretary 

Paulson has made he first mentioned the housing crisis back in December of 2006. I think, of course, in hindsight it is always easier 

to wish that you were on this issue much earlier, but we feel encouraged by the early progress, the efforts that are being put into 

play now. And I think we need to look at all of the strategies, all 

of the approaches, as tools, if you will, that can be resourced, be 

considered resource, and use—— Mr. SERRANO. So we did not see it coming? 

Ms. GAMBRELL. Well, I cannot answer specifically to that, but I 

think that, again, there were—we were certainly looking at this 

issue and had been studying the issue for a while. 

Mr. SERRANO. Right. To you the same question: was there any 

sign of this coming, or that we all missed, and Congress, and at 

the local level, and everywhere else? 

Ms. PARNES. I think I share my colleague’s view that that is a 

really—it is a hard issue. I would say from the perspective of the 

Commission, you know, as a law enforcement agency, we saw kind 

of specific issues with specific companies. We did not see a prevalent practice across the industry that would flag this for us. 

And I think it is probably just because of the way the market 

was—prices were going up, interest rates were down, consumers 

when they, you know, kind of hit the higher interest rate time in 

their mortgages they were able to get other mortgages, they were 

able to refinance. I just do not think that we were able to kind of 

guess what would happen. I think it was really hard to crystal ball 

that. 

Mr. SERRANO. You mentioned materials and work that you do in 

languages other than English. 

Ms. PARNES. Yes. 

Mr. SERRANO. How many other languages do you deal with? 

Ms. PARNES. We translate our material into Spanish pretty regularly. I mentioned this is one of our guides that is in Spanish and 

in English, and it is, you know, all in the same brochure. 

In terms of getting our materials into other languages, what we 

do is we get it out to community-based organizations who are then 

able to translate it into the appropriate language for their community. 


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Mr. SERRANO. Let me ask you a question. When you advertise, 

you give advice on TV, for instance, or on radio, do you pay for 

that? Does the Commission pay for that, or does that go on the 

public advertising, you know, that these stations do as—— Ms. PARNES. Yes, they—— Mr. SERRANO [continuing]. Their part? 

Ms. PARNES. Exactly. We use public service announcements. 

Frankly, it is much harder to get PSAs on television. We are pretty 

successful in radio PSAs, and we use that very regularly. 

Mr. SERRANO. Yes. I do not want to take too long on this. Mr. 

Regula, I remember years ago you saw a regular number of PSAs 

on different issues all the time on TV. And now you have to be up 

at 4:30 in the morning, which I did as I was reading all of this 

stuff, to watch them. And I know it is all business, but you wonder, 

you know. Maybe that is a question we should ask the FCC when 

they come before us, you know, why this time it is not being done. 

Mr. Regula. 

DEFINITION OF SUBPRIME MORTGAGES

Mr. REGULA. Ms. Gambrell, what percentage of subprime—well, 

first of all, define a subprime loan for me. 

Ms. GAMBRELL. Well, I think there are probably a number of 

definitions that are in the lexicon right now. Certainly, when we 

look at subprime lending we look at whether—the characteristics 

of subprime lending. It can be a high-cost loan. It can be one that 

we would look at the terms and rates of that loan. It may carry 

certain amortization features. 

There is not—there are a lot of characteristics. I—— Mr. REGULA. Is this a recent phenomenon, or have there been 

subprime loans for the last several years? 

Ms. GAMBRELL. Well, there have been—the subprime loans have 

been within the communities for a number of years, yes. 

Mr. REGULA. Why all the excitement now? Is it because the real 

estate market got depressed, and a lot of these were predicated on 

an increasing value of property? 

Ms. GAMBRELL. Some of the concern, a large part of the concern, 

quite honestly, is that in many of the subprime loans people were 

signing on the dotted line and not fully understanding the nature, 

the rates and terms of those loans. They may not have been either 

clearly explained in the disclosure, which is why the Treasury Department is very happy to see the Federal Reserve Board tackling 

this issue through the proposed amendments that they are making 

to Regulation Z, which covers the HOEPA Act, as well as Truth in 

Lending. 

Basically, what that proposal says is that—it is asking whether 

or not there needs to be credit lending standards for mortgage 

products, especially for high priced loans, to make sure that the advertising is very clear, and to make sure that the disclosure requirements are very clear to the borrower, which can be a win-win 

in the end I think for not only the lending, the financial services 

industry, but certainly for the consumer as well. 

Mr. REGULA. Do most of these loans have a reset provision? 

Ms. GAMBRELL. I believe they do, but I do not know the extent 

of, in terms of numbers, what that might be. 


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IMPACT OF SUBPRIME ON CREDIT MARKETS

Mr. REGULA. Is the subprime crisis spilling over into the credit 

card field? 

Ms. GAMBRELL. Well, you know, what we are seeing, of course—

and we are monitoring that very closely—we would—in fact, we 

want to be sure that as we look at not only the housing market, 

that we are looking at all sectors of the industry. 

And even in that housing market we are focused not only just on 

the subprime sector but also on all at-risk homeowners, which is 

why in the HOPE NOW Alliance we have expanded the efforts to 

target not only those subprime borrowers but at-risk homeowners 

within that population, regardless of whether they are 60 days delinquent on their payments, 90 days, and, in particular, making 

sure that everyone is receiving some sort of notification to reach 

out to their services and to counselors 120 days before those mortgages are reset. 

Mr. REGULA. I can see it spilling over. I go by the used car lots, 

and they have big signs out, ‘‘No credit, bankrupt, fighting with 

your wife, come in and see us.’’ [Laughter.] 

‘‘We will give you a loan.’’ They make it so attractive, I am sure 

people are getting taken in. 

Question: If the housing market were actually to continue to go 

up—the values, prices, and such—would we still have a subprime 

crisis? 

Ms. GAMBRELL. That is a great question. And I would have to 

rely, quite honestly, on the economists who work with me to answer that question. I do not know if I could answer that question 

in a comprehensive way that would satisfy your question. 

Mr. SERRANO. Forgive me for—would not the folks who run into 

the second problem, which is the problem where your first set of 

payments were a certain amount, and then it breaks out to an 

amount that you did not expect, that problem would still be in 

place, even if the market was different, right? 

Ms. GAMBRELL. Well, again, I think with the HOPE NOW Alliance one of the things that they are looking at is a fast-track process, and I think we have to look at all of the loan products that 

are part of this subprime market. Part of that fast-track process is 

to actually refinance to put people in fixed rate, 30-year mortgages, 

or to modify those loans so that the starter rate is extended for another five years. So the reset, in fact, could change, depending on 

the workouts that are actually completed through the work that 

the servicers are doing with the consumers. 

Mr. REGULA. It seems to me these ought to have a big sign that 

alerts people to the fact that there is a reset provision. 

Ms. GAMBRELL. And that is why the——

Mr. REGULA. There is a period when this is the rate than this 

is what you have the for rest of the mortgage. 

Ms. GAMBRELL. Yes. 

Mr. REGULA. Now people do not look carefully, and the credit 

card industry in particular will tell you, ‘‘No card, come on in, we 

will give you one’’—your first payment will be 6 percent, and then 

it jumps to 18 or 24 or whatever. 


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And payday loans are a recent phenomenon, too. I never saw 

those before. 

Ms. GAMBRELL. Well, the payday loans are a recent phenomenon 

perhaps to many on the American landscape. You have seen various forms of payday loans in communities for many years. Some 

of them are called shark loans, if you are familiar with that, certainly. So, again, with payday lending, we want to make sure that 

the consumer really does understand that there are alternatives, 

that there is a traditional financial services component that they 

can use, that they can go to. 

And I think, as you said, Congressman Regula, that the disclosure requirement and understanding what people are signing and 

what they are actually committing to is extraordinarily important. 

It is really at the top of the list in terms of what the Federal Reserve is looking at, but certainly Treasury very much supports 

amendments that would in fact make it clear, make those disclosure requirements clear to the public. 

CONSUMER EDUCATION

Mr. REGULA. I might ask, do you think more education of consumers starting early in the public school—elementary as well as 

secondary—would be helpful? 

Ms. PARNES. Absolutely. I think that giving consumers information to protect themselves is certainly a better proposition than 

having the FTC or any other government agency come in after 

there has already been a problem. And, you know, it is one of the 

things that we have been working on with the Treasury Department, with other partners in government, and with folks on the 

state level. 

We have gone into some states and offered material to community colleges. We have gone in, we have done training classes in 

high schools. We prepare consumer education material that is 

geared to high school and college age students. So absolutely—— Mr. REGULA. Are education institutions receptive? 

Ms. PARNES. Yes, they are. They are very responsive, particularly, you know, colleges have been very responsive. First-year college students are bombarded with credit card offers, and colleges 

have been very responsive in terms of putting our consumer education material into the—in their bookstores when, you know, kids 

are out there buying the first week of school, and they get our brochure. 

Mr. REGULA. Have you tried getting this material to the unions 

and let them distribute this to their members? 

Ms. PARNES. That would be a terrific source. I do not know if we 

have actually reached out to unions, but that would be an excellent——

Mr. REGULA. That is where part of the problem is. 

Ms. PARNES [continuing]. Excellent way to go. 

Mr. REGULA. Other than conventional agencies, maybe people 

that get loans ought to get a brochure warning them, because when 

you go in to get a loan they have got a mountain of paperwork, and 

most people are not going to ever take time to read it and be alert 

to it, read the fine print if you will. 

Mr. SERRANO. Thank you, Mr. Regula. 


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You know, Mr. Regula had asked a question—my next question, 

which was exactly what we discussed. You know, we know—some 

of us know—that in certain communities, especially poorer communities, there have been very innovative ways of moving money 

around, legally, but, you know, lending money, and so on. 

But the subprime thing, it almost looks as if someone invented 

a new way of lending money, and no one checked to see if that was 

okay. It appears that way. It might be that subprime mortgages 

may have been around for a while, but if you ask the average 

American, you say ‘‘subprime,’’ they will say, ‘‘Oh, that is a new 

way of lending money.’’ They do not see it as something that just happened to create a 

problem, which would lead us to ask the question eventually, ‘‘So 

when somebody comes up with a new way of lending money, who 

checks to make sure that it is a proper way, so that it does not create the problems we have now?’’ Ms. Kilpatrick. 

THE CDFI FUND AND SUBPRIME MORTGAGES

Ms. KILPATRICK. Thank you, Mr. Chairman. And forgive my tardiness. We have three meetings I am trying to cover at the same 

time. I certainly want to be here to discuss this crisis with you 

guys, and thank you very much for your service and for representing and taking care of many of the people that we represent. 

We thank you very much. 

Last year when we got our budget for ’08, and President Bush 

was asking $54 million, give or take, and our Committee—I want 

you to know, and I know you probably do, we upped that to some 

$92 million, and hopefully you were able to take care of many more 

people, and your program is more efficient, and all of that. 

So I wanted to acknowledge our Chairman and Ranking Member 

and this whole Committee, as well as the full House. 

Ms. GAMBRELL. Thank you. 

Ms. KILPATRICK. They were able to sustain that, almost doubling 

what was asked for. 

This year, the ’09 appropriation, unfortunately it is much lower 

than $54 million—almost half of that I understand. And hopefully 

we will do better by that, because I think that the Community Development Financial Institutions——

Ms. GAMBRELL. Right. 

Ms. KILPATRICK [continuing]. Bad timing. You have a poor 

record—you have a good record of taking care of America, and I 

want to make sure you can do that. 

Part of your portfolio is the subprime. Some of your portfolio—

what percent of it is that subprime? And you do—you know, 

subprime has not always been a bad word, just in the last two, 

three, four, maybe five years. What percent of your portfolio is 

that? 

Ms. GAMBRELL. When you say ‘‘my portfolio,’’ Congresswoman, I 

am sorry. 

Ms. KILPATRICK. As you work with subprime—do not you work 

with subprime customers? 

Ms. GAMBRELL. Actually, what the CDFI Fund does is its mission 

is really to expand the capacity of financial institutions that are 


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specifically serving low-income communities. Some of those CDFIs, 

in fact, are involved in conducting foreclosure counseling for 

subprime borrowers and others, quite honestly. It could be home 

ownership counseling. It could be credit counseling. It really runs 

the gamut. 

So our mission is a little broader in terms of the constituents 

that—the stakeholders that we serve. 

Ms. KILPATRICK. Do you serve communities all across America? 

Ms. GAMBRELL. All across America. 

Ms. KILPATRICK. In all 50 states? 

Ms. GAMBRELL. In all 50 states. 

REASONS FOR FORECLOSURES

Ms. KILPATRICK. I see. Okay. Then, when we talk about the problem that we have—and I heard some of my colleagues—the Chair 

and the Ranking—bring it up, why foreclosures? What are the reason for foreclosures? You know, obviously, prime and predatory 

lending. This Congress tried to tackle that pretty effectively I think 

over the last decade. Loss of jobs? I mean, other kinds of things, 

or is it the one single reason for the foreclosures, I mean, is——

Ms. GAMBRELL. I think you see a variety of reasons. And certainly one of those could be a loss of employment. It could be longterm illnesses. Sometimes, as unfortunate as it is, people end up 

buying more house than they can afford, but may not realize it at 

the time, and sometimes are not necessarily anticipating changes 

in life that may happen and have not always been able to secure 

enough of a cushion to prepare for that. 

So there are a variety of reasons of why people go into foreclosure. The interesting I think, though, is that when you look at 

the foreclosure starts versus those that are actually sold, the foreclosure sales, that that number is very different. Less than 50 percent of the people who actually go to the foreclosure sales, there is 

a less than 50 percent rate of those sales. 

So through that process, people are constantly trying to work out 

that foreclosure issue. They are working with counselors. They are 

working with community organizations. They are working with 

their church organizations and others. And now I think what 

Treasury has really encouraged through this HOPE NOW Alliance 

is that the servicers, the financial institutions, and others who can 

speak directly to those consumers be part of this alliance to work 

directly with them as well, to do workouts, refinancings, loan modifications, and other plans that may present alternative solutions 

for that homeowner. 

Ms. KILPATRICK. Which is going to take—it is going to take all 

of us, 400, 535 of us, being more actively involved in it. 

Ms. GAMBRELL. Absolutely. 

Ms. KILPATRICK. I think we offer ourselves for that, at least this 

Committee, as we try to educate, you know, getting other resources. No doubt at it. Once you get the resources, there has got 

to be an education portfolio that—

Ms. GAMBRELL. Yes. 

Ms. KILPATRICK [continuing]. Development financial institutions 

have. 


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EDUCATING AT-RISK HOMEOWNERS

Ms. GAMBRELL. And, Congresswoman, if I may, I think part of 

that education also is really encouraging that at-risk homeowner to 

pick up the phone to reach out. It is devastating to know that you 

may be in the position of losing your home. It is very difficult to 

do that kind of outreach and say, ‘‘I need assistance.’’

But, again, one of the things that we have been encouraging is 

for homeowners to pick up that phone and to call that 800 number, 

which again is 888–995–HOPE, to make sure that they are connected to foreclosure counselors who, again, can assist them with 

some options or put them directly in contact with servicers. So it 

also becomes the homeowner’s responsibility, too. We want to make 

sure that the homeowners understand that they play an important 

part in this role. 

Ms. KILPATRICK. They pay ‘‘the’’ part, as a matter of fact, who get 

the ball rolling in the entire process. 

And in consumer protection, what kind of education programs do 

you see? I know you see a lot of problems. You also had some resolve for some of that? 

Ms. PARNES. We do consumer education across the board in the 

financial sector. And as I mentioned, we also—the FTC is really 

primarily a law enforcement agency, and that is our focus. And so 

one of the things that we have seen with the recent increase in 

foreclosures are scam artists trying to take advantage of consumers 

who are facing foreclosure. So there has been an increase in what 

we refer to as foreclosure rescue scams. 

And we announced a case today that we filed against a foreclosure rescue scam. We have other cases that we filed under seal 

this week, and that we will be releasing soon, and yet additional 

investigations that we have. 

Ms. KILPATRICK. That is very good, and I would like you to have 

some PR on that to let America know that we catch you from time 

to time. [Laughter.] 

Prohibit those who want to become scam artists, because that is 

a very bad situation for everyone to be in. And I think the more 

we hear that we catch them, hopefully the more unlikely we will 

be hearing—

Ms. PARNES. Absolutely. And if I can also mention, we have 

done—in these regional task forces that we have been participating 

in throughout the country on foreclosure rescue scams, there have 

been outreach conferences that we have held in a number of states, 

and we have really reached thousands of consumers who have come 

to these essentially town hall meetings to ask questions and tell us 

about issues that they are facing. And that has been a very effective way of getting the word out as well. 

Ms. KILPATRICK. Do you have a way of communicating with us 

all of those—I mean, are we on your websites? Do we have to go 

to yours? Is there some automatic legislative assistance between 

the two that can keep us connected? 

Ms. PARNES. We do. In fact, I know that many of you have links 

to the FTC on your own websites. And we can make sure that you 

do, and if you do not we will get in touch with your office. 


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Ms. KILPATRICK. Okay. So nobody calls to say, ‘‘It is coming, let 

us do this, let us mobilize this.’’ Ms. PARNES. Oh, we do. We absolutely do. We had—what I am 

remembering is we had a forum about a year ago in New York, and 

we had—members of Chairman Serrano’s staff attended. And 

whenever we do these forums, we reach out to the Congressional 

offices. 

Ms. KILPATRICK. Thank you. We would like to be a part of it. 

Thank you both. We appreciate it so much. 

Mr. SERRANO. Thank you, Ms. Kilpatrick. 

The Chair would like to note that this is Mr. Bonner’s second day 

on the Subcommittee. He has been bright and early to both. He is 

on his way to getting the gold pen at the end of his term. [Laughter.] 

Mr. Bonner. 

SCOPE OF THE PROBLEM

Mr. BONNER. Thank you, Mr. Chairman. 

And thank you, ladies. Ms. Kilpatrick just asked a question referring to the housing crisis. The question I am going to ask you in 

just a minute refers to the housing crisis, and yet sometimes we 

are all guilty of throwing terms around like ‘‘crisis’’ and not necessarily knowing the damage that we may be doing to the confidence of those who are not in crisis. 

So I guess my first question is: could you kind of help me at least 

understand what we are talking about in terms of the number of 

people in this country—you know, a few months ago it seemed, certainly a couple of years ago, we were bragging about the fact that 

there was record home ownership, and in certain demographics in 

America there was even higher than ever expected home ownership. My home State of Alabama, for instance, we were proud to 

be one of the highest home ownership among African-Americans in 

the 50 states. 

So can you kind of put it in perspective for me. I am not saying 

there is not a crisis. But what is the status of the people who are 

in foreclosure? And how does it compare with any recent chapters 

in American history? Not the Great Depression, but any recent 

years or decades, if you could. 

Ms. GAMBRELL. Are you directing it to me? 

Mr. BONNER. To either one or both. 

Ms. GAMBRELL. Well, I think to try to put this into context, what 

we are looking at, what the Treasury Department is looking at, of 

course, is—and, again, this is why the Treasury has tried to be 

very active in this area. There are 1.8 million subprime ARM resets 

that will be occurring in 2008/2009. 

The HOPE NOW Alliance servicers have estimated that about 

600,000 of that number people may not be able to afford that reset 

rate of their mortgage. And so we, again, I think are looking at efforts that can get ahead of the problem and really try to address 

those issues. How do you help those consumers who may in fact be 

facing those resets? How can you put them in different plans, different workout plans, etcetera, etcetera? 

Of the numbers that we have—the HOPE NOW Alliance 

servicers have also looked at, they have also identified about 1.2 


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million homeowners who may in fact be able to reapply for the fasttrack process that would allow for refinancing, loan modifications, 

and other types of strategies to assist those homeowners. 

So, again, I think the real question here is not so much how big 

is the crisis, but what can we do to address those thousands of 

owners in fact who may be at risk, who with some flexibility may 

be able to stay in their home with assistance from the financial 

services industry, from the servicers, and others, who are involved 

in this effort. 

Mr. BONNER. And I think that begs the followup, and that is, is 

there a recent paradigm in the last 20 or 30 years where we had 

a similar crisis? And, if so, what was the prescription to get us out 

of that situation then that we might look to to get us out of the 

situation we find ourselves in today? 

Ms. GAMBRELL. Well, in many ways, I think what we are doing 

now is perhaps even more aggressive in some ways, again, because 

we are really trying to reach out directly to the at-risk homeowner. 

We are, of course, still monitoring the progress and looking at the 

early progress of those efforts, but also are open to any ideas and 

strategies and approaches that others have as well, because, again, 

I think the issue is: how quickly can we get on top of this problem? 

And how quickly can we address it and make sure, again, that 

those homeowners are paying reasonable mortgage payments and 

are able to stay in their homes? 

Mr. BONNER. And just an opinion based on the conversations already taking place, I think education is one of the key ways of 

doing that. The Chairman, the Ranking Member, the Vice Chairwoman have all talked about—and you all have responded to—in 

terms of trying to get the public service announcements to be our 

ally in this. 

But not a day passes, I do not think, that any of us do not get 

inundated with offers of free money. Of course, there is no such 

thing. 

Ms. GAMBRELL. Right. 

BANKRUPTCY LEGISLATION

Mr. BONNER. Let me get this question in, if I might. Obviously, 

there are many groups that we are looking to to assist us through 

this housing crisis that we, as a nation, are facing. But we also 

must consider what effects and what result will come from our actions to help some that might have a negative impact on others. 

Again, in my home State of Alabama, and I am sure throughout 

all 50 states, many families and homeowners, especially in rural 

areas, rely on their community banks in their own hometowns, and 

yet most community bankers have not made the subprime loans 

that other financial institutions have. And I for one, and I am sure 

I am not alone, would be concerned that our actions in the Congress, such as the bankruptcy legislation that is now being considered in the Senate, could put community bankers in jeopardy, and 

perhaps some out of business. 

If bankruptcy judges are allowed to modify the terms of all first 

mortgages in Chapter 13 proceedings, then the increased risk borne 

by community bankers would make home ownership out of reach 

for many people, and much more expensive for others. 


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So my question is: if you look into your crystal balls that none 

of us have, how, in you view, would the Senate legislation undermine the community banker? And, secondly, how would such legislation undermine the effectiveness of Congress and the administration’s efforts to work on programs such as the HOPE NOW Alliance? 

Ms. GAMBRELL. Congressman, Treasury is studying this issue, 

and, of course, as you know, most of our efforts recently have been 

focused on HOPE NOW. This is an area that falls within the jurisdiction of the Department of Justice. Unfortunately, I am not able 

to give you an official position today, because we still are studying 

the impact. 

It is a billeted balance—again, as you have talked about, and I 

think one of the things that Secretary Paulson has stated is that 

we need to be very careful in looking at both sides of the issues. 

On the one hand, consumer protection is one thing that we are all 

advocating for, and we want to be sure is in place. On the other 

hand, we want to make sure that there is not a constraint in terms 

of access to credit and some of the unintended consequences that 

can happen with any steps that go forward. 

So all I can, unfortunately, offer you today is that we certainly 

are studying that, and we will continue to study the legislation and 

other legislation that is being put forward. 

Mr. BONNER. Mr. Chairman, I look forward to my gold star. I will 

try to earn it by the end of the year. Thank you. 

Mr. SERRANO. You went over your five minutes. We kind of took 

it away for——

[Laughter.] 

You know, in watching last night’s late sports news, I found out 

that the Orioles are having a very good three days in spring training. That is the reason for Mr. Ruppersberger’s glow that you see. 

[Laughter.] 

With that glow in front of me, I recognize the gentleman. 

Mr. RUPPERSBERGER. You know, he is a good man, but he is a 

Yankee fan, and I am Orioles fan. And we have been down, and 

you are bullying me right now. [Laughter.] 

Mr. SERRANO. I am telling you that I root—it is the Red Sox I 

never——

Mr. RUPPERSBERGER. We are rebuilding. 

Mr. SERRANO. I should not say that. I get this room from a guy 

from Massachusetts, so I——

[Laughter.] 

Mr. RUPPERSBERGER. I am sorry I am late. I commute from Baltimore, and the traffic was terrible as it is. Sometimes it is, sometimes it is not. Do you have any jurisdiction in traffic engineering? 

[Laughter.] 

And I see also, Ms. Gambrell, that you went to Towson University. 

Ms. GAMBRELL. That is correct, sir. 

Mr. RUPPERSBERGER. So you know the route that——

Ms. GAMBRELL. I absolutely do know it. 

Mr. RUPPERSBERGER. The first thing I—and just a couple of quick 

questions, and I think Ms. Gambrell first—and, by the way, can we 


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call Mr. Bonner ‘‘rookie’’? Would that be appropriate? No? We cannot call him a rookie? Okay. 

Mr. SERRANO. No, he has been around a while. 

Mr. RUPPERSBERGER. No, I mean on the Committee. 

Mr. SERRANO. Oh, on the Committee. 

Mr. RUPPERSBERGER. He came in with me. [Laughter.] 

COUNSELING AND OUTREACH

As far as the issue with respect to your program of CDFI Fund, 

part of—a lot of us who represent districts that are lower income— and Baltimore City, to give you an example, eastern part of Baltimore County—and a lot of times that we see that a lot of people 

that need help are not getting access to banks, because banks and 

the credit unions just are not there. 

And I am wondering, you know, do you have any plan how we 

can improve that education and reaching out? I used to be—I was 

in local government for about 17 years, and one of the major issues 

was reaching out, helping people with home ownership, trying to 

counsel. Do we have any plan there? 

The other thing I want to ask you, another question, there is always a battle at budget time, but with the cuts that are taking 

place—and there is a lot of the issues, and we have to have priorities, the war, and those type of things—what areas do you feel 

that you will have to cut, or are you getting signals from the administration that you think you will have to cut? And what impact 

would those cuts have, and how are you going to deal with them? 

Ms. GAMBRELL. Thank you, Congressman. Let me answer the 

first question for you. I think certainly when you look at the type 

of outreach that needs to take place in communities we have to— I always say we have to kind of think outside that box and go outside the lines, the parameters of those traditional ways in which 

we have done outreach. 

The public-private partnerships are extraordinarily important. 

That means banks working with local governments, agencies working with city government as well, can be a very effective way to 

reach those, for example, who are in the lower income categories, 

and who may be using those city services or those local services, 

but also presents a great opportunity for people to really understand that they do not have to resort to high-cost providers, that 

there are other ways in which they can get that access to credit, 

that there are traditional ways in which the financial——

Mr. RUPPERSBERGER. One of the things—I know Harbor Bank, 

you work very closely with them. They are doing a good job. 

Ms. GAMBRELL. Yes, Harbor Bank is excellent. 

Mr. RUPPERSBERGER. There are a lot of people that we are not 

getting to. 

Ms. GAMBRELL. Right. 

Mr. RUPPERSBERGER. Now, do you think it is more of the responsibility of the local government to reach out using——

Ms. GAMBRELL. You know what? I think in this environment it 

is everybody’s responsibility. And, again, we have seen local government participate, but we have also seen a large—certainly, with 

Harbor Bank, has been a great advocate and working with church 

organizations, faith-based organizations, non-profits, schools. I 


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think everybody has a responsibility and everybody has a role to 

make sure that consumers certainly understand that there are a 

number of options that are available to them to make good financial choices. 

Mr. RUPPERSBERGER. Okay. Are you getting any pushback from 

the industry at all, the industry players about what you are doing, 

your program? 

Ms. GAMBRELL. No, not at all. In fact, they have been extraordinarily supportive. And, again, because we—our stakeholders are 

primarily community development financial institutions, these are 

folks, including community banks, that are working in the community, including rural areas, but primarily low-income areas to create affordable housing programs, jobs programs, small—encourage 

small business development, and others. They have been extraordinarily supportive. 

LAW ENFORCEMENT

Mr. RUPPERSBERGER. Okay. From the FTC point of view, we have 

had a lot of issues. And if this question has been asked, just tell 

me, and I will not go any further. But we know that there has been 

a lot of issues, and it seems that a lot of times the mortgage brokers or whatever have been targeted. And when you really look at 

the whole picture, it goes from A to Z. I mean, in the beginning 

it looked like they were caught, and it seems a lot of state legislation is focusing on dealing with the brokers. 

And sometimes if you do that, and you take away a broker’s incentives, then they will not go sell, and then you have just a monopoly with the banks. And I think it is good to have those checks 

and balances between the credit unions, the banks, and also the 

brokers. 

From your perspective, have any actions or have any other areas 

as it relates to lending institutions—have you focused in that regard on where we need to go with this type of a crisis that we are 

in right now? 

Ms. PARNES. Well, the Commission, as I had mentioned, our jurisdiction, as you know, is somewhat limited in this area. Congress 

excluded banks, thrifts, credit unions. And we are looking at it 

from a law enforcement perspective. We are primarily——

Mr. RUPPERSBERGER. Oh, you are looking at it from——

Ms. PARNES. Absolutely. 

Mr. RUPPERSBERGER. Okay. Tell me about it. 

Ms. PARNES. We are a law enforcement agency, and we have a 

history of cases that we have brought against mortgage brokers, 

against servicers, against—you know, we go through the entire financial transaction. We have brought cases against debt collectors, 

if consumers are in financial trouble, and owe, and their debt is, 

you know, referred over to a debt collector. 

So we do law enforcement in, you know, kind of the whole——

Mr. RUPPERSBERGER. What is your jurisdiction? Do you have the 

ability to indict or to arrest? 

Ms. PARNES. No, we only have civil—civil law enforcement authority. But——

Mr. RUPPERSBERGER. And where do you bring those? Administrative courts or——


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Ms. PARNES. We can bring them administratively before the 

Commission, but most of our cases we bring in Federal District 

Court. 

Mr. RUPPERSBERGER. What do you think we need to do to help 

in this situation? I mean, that is a very broad question, but I have 

only five minutes, so——

MORTGAGE DISCLOSURE REFORM

Ms. PARNES. Right. It is a broad question. I mean, I think that 

from our perspective we will continue our law enforcement. We will 

continue to work with other federal agencies. One area that I 

would focus on—our Bureau of Economics did a study about maybe 

a year ago on mortgage disclosures and found that the disclosures 

were confusing to consumers in the prime market. 

They do not understand exactly what they are signing when they 

go to closing. And it is more confusing for people who are in the 

subprime market. So one of the things that I—that we thing that— that the agencies in this area should focus on, and possibly Congress, is mortgage disclosure reform. 

Part of the issue I think is—that we are facing now is that consumers did not really understand that their loans would be reset, 

that they might get big balloon payments. And I think they did not 

understand it because there is a lot of paper that you are looking 

at when you are going to close on a mortgage. 

Mr. RUPPERSBERGER. Let me just stop here because my time is 

up. One comment that I am going to make—and you do not have 

to answer—I am very concerned that sometimes we, as legislators, 

federal, state, and local, overreact to situations. And I am concerned about too much overregulation, if it affects those people that 

need help the most. 

In other words, when sometimes we come in to regulate, then 

they will not lend in subprime areas. They just will not do it. So 

eventually the people that are trying to help that need help do not 

get help because the banks will not do it, or the mortgage brokers 

will not do it, because they feel so overregulated. 

So I think it is—I hope you are looking at that to make sure you 

advise financial services committees, and things like that, on what 

really the end game should be to help those individuals. 

Mr. SERRANO. Thank you. 

The Chair would recognize the distinctive, charming, debonair, 

bilingual, Mr. Kirk. 

Mr. KIRK. Muchas gracias, Sen ̃ or. 

SCOPE OF THE PROBLEM

Just to get a perspective, I have been looking at this a lot, studying it a lot, and, ironically, as a Republican came to the same conclusion as Chairman Dodd on this issue over on the Senate. My understanding—we are trying to get a scope of the problem. 

My understanding of the rough numbers are these. The value of 

homes in America, $20 trillion. Value of home mortgages in America, $10 trillion. Values of ARM subprime mortgages, $1 trillion. 

Value of subprime mortgages, 90 days late or more, $300 billion. 

You talked about how we had roughly 600,000 borrowers in deep 

distress, and I understand the average loan size for them is 


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$150,000, so that would mean you have an urgent $90 billion problem, 1.8 million homes in jeopardy. 

So looking at the overall situation, the good news is 97 percent 

of mortgages are okay, and 3 percent are not. And my understanding is the situation we faced in 1934 was 52 percent of mortgages were 90 days’ arrear or more. So this problem is 15 times better than the Great Depression, but still a $90 billion urgent 

problem and a $300 billion six-month problem. You can see why it 

is destabilizing the market. 

For HOPE NOW, I just had my staff call the number to do a reality check, and got a two-minute answer. So that is good, and I 

understand you are up to 4,000 a day in calls. But according to The 

Wall Street Journal, we have had only about 10,000 people actually 

helped by HOPE NOW in December and January. And if we take 

the 1.8 million mortgage holders who are resetting in the next six 

months, and you have 130 working days, that means your call volume, if they were to be helped by HOPE NOW, would go from 

4,000 a day to 14,000 a day, to handle the problem. 

I understand we have got about 2,200 foreclosures per day happening right now. I am worried, though, that we are not getting the 

full scope of the problem, because the Journal also reports FDIC 

is bringing back retired employees, because we are facing 100 bank 

failures in the next six months. And Fannie Mae just reported a 

$3.6 billion loss for the fourth quarter of last year. And if you look 

at the balance sheet, it is income insufficiency on their loans for 

Fannie Mae right now. 

So my question is this: it would appear that more aggressive action is necessary, because you have made a start, but at 4,000 a 

day you are running at around 25 percent the rate you should be 

running to handle this problem. And given the size of the capital 

problems, etcetera, we have an urgent $90 billion problem, and a 

long-term $300 billion problem. 

HOME OWNERS’ LOAN CORPORATION

When I look back, you know, you were asked, you know, what 

other times have we taken federal action to really correct this problem? And I see two key examples, which is the RTC and the Homeowners Loan Corporation. 

And Alex Pollack, who is the former President of Federal Home 

Loan Bank Board for Chicago, and then Alan Blinder, a great economist, both say that we ought to restart the Homeowner’s Loan 

Corporation. And I particularly favor that, because I think it was 

a brilliant federal intervention in buying distressed mortgage securities for 1934, 1935, and 1936 only, and then managing the portfolio. 

My understanding is we have about 600,000 foreclosures a year 

anyway in a good economy, so you managed the portfolio, and then 

they repaid President Eisenhower the full capital, plus a $14 million profit, in 1953, and closed the institution. And so it was a key 

short-term federal instrument. We did not make the Federal Government the number one mortgage purchaser in the country permanently. And we effectively eliminated the panic-pain premium of 

what was happening to the housing market in the mid-1930s, 

which is where so much damage is caused. 


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So can you describe, what is your thinking on where I and especially Chairman Dodd are going? What is your thinking on where 

Alex Pollack and Alan Blinder are going? And it dramatically affects this Committee, because what we are calling for is a $10 billion appropriation from this Subcommittee in this year to get this 

rolling. 

And I do say, while rebate checks are politically popular, the 

market is destabilizing on the mortgage issue alone, and so a reassurance of this size and this nature, it would appear to me, would 

be the wise course. But give me your thoughts. 

Ms. GAMBRELL. Congressman, thank you for your question. The 

Treasury Department is studying the proposal on the loan corporation that is being, of course, studied throughout the country right 

now. And we are looking forward to learning more about the proposal. 

I think you also know that we are open to new ideas, new perspectives. The administration has—and the President has said that 

it opposes a federal bailout, and so I think Treasury needs to look 

very closely at the proposal, be able to comment, give its suggestions and recommendations on what it believes will actually help 

address some of these issues. 

Of course, when we look at the solutions, we want to make sure, 

again, that we are targeting the at-risk homeowners. And even the 

plans that we have in place now are not targeted to investors or 

speculators. So I think it is going to be very important for us, as 

we go forward, in the Department and certainly throughout this 

country as we look at these different proposals, to make sure that 

whatever proposals are adopted are in fact ones that are addressing those at-risk homeowners. 

Mr. KIRK. I would just say, Mr. Chairman, that with the term 

‘‘bailout’’ politically charged, and in the case of the HLC intervening in the Depression Era mortgage market, which was 15 

times worse than this, is the U.S. taxpayer was repaid capital with 

a profit. So there was no bailout. It was the panic premium that 

we eliminated. And when a lender forecloses and takes an illiquid 

asset and no functioning market, you go to zero on the value of the 

asset. 

The HLC entered in—my read on what Alex Pollack has told us 

is that generally the lender took a 20 percent hit, not a 100 percent 

hit. The restructured security benefitted the family who remained 

in the home. And by the way, the local school district and the town 

kept the taxpayer in the home. And the neighbor did not have a 

boarded up piece of property depressing their property value, and 

it turned out not to be a bailout at all. It eliminated a panic, a penalty, that the market was creating. 

SERVICEMEMBER LOANS

Let me just—one last thing. I am worried about our active duty 

military as well on the scam side. We understand that the VAbacked loans for military have gone from around $250,000 loans to 

less than $120,000, a real drop. And that is rated because the VA 

limit is still set at $417,000, which it provided now an opportunity 

for scammers to come in to offer military families these adjustable 

rate and unstable marketing provisions for active duty military. 


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Has the FTC looked into this? We looked particularly at the surrounding and military base market, and protecting military families. 

Ms. PARNES. We actually do have a program geared to the military. We work very closely with both the JAG and their financial 

counselors on almost all military bases, and we work with them. 

It is actually one of the reasons that we initially got into payday 

lending, because we heard that there were all of these payday lending outfits that were setting up right outside the military bases. So 

we are very focused on that. 

I do not know if we have heard specifically of this issue, but I 

will check on that. 

Mr. KIRK. Thank you. Just it looks like the VA loan limits are 

out of date, which is—— Ms. PARNES. Okay. 

Mr. KIRK [continuing]. Giving an opportunity for the scammers, 

and so forth. 

Ms. PARNES. Okay. 

Mr. KIRK. Thank you, Mr. Chairman. 

Mr. SERRANO. Thank you. Thank you. 

Something either wonderful or scary is happening today on this 

panel, and that is the Republicans are asking exact or similar questions as the ones I have in mind. [Laughter.] 

I do not know what that means. But, you know, you bring up an 

issue when you say ‘‘bailout’’ that I brought up, and amongst the 

four or five things that could cause me trouble in my own Congressional district, this is one of them. And that is when Mrs. Rivera 

or Mr. Smith have asked for $60 in food stamps, maybe people 

have said, ‘‘She needs food stamps because of her lack of personal 

responsibility, and it got her to that point.’’ Unfair as it is, that is 

the statement. 

But when the same person or someone else bought a house that 

they maybe could not afford, the country is now asked to bail them 

out or to do something else. Now, I know that the difference is that 

one is a question of a human being having more to eat, which is 

dramatic enough. The other one has repercussions throughout the 

economy, and a lot of people were duped and are totally innocent. 

But it is just interesting how some of these issues play against 

each other and they are seen differently, because, yes, there were 

people who were duped, but it was also in a way—I am now going 

to get into real trouble—part of this ‘‘me’’ generation where you 

have to have a bigger place than the person next to you in some 

cases, you know, and that also got people into messes. 

Of course, that—I do not know how you regulate that. What we 

have to do is make sure that the ones who honestly went out there 

to be part of the American dream that we keep talking about do 

not get hurt, which brings me, Ms. Gambrell, to the HOPE Program. 

LIMITATIONS OF HOPE NOW INITIATIVE

You say there are 1.8 million people who are in danger right 

now, we see as being in danger. 

Ms. GAMBRELL. 1.8 million reset——

Mr. SERRANO. Reset. 


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Ms. GAMBRELL [continuing]. Resetting of the loans. 

Mr. SERRANO. Now, the HOPE Program will cover certain folks, 

but it does not cover other folks whose mortgages reset before 2008, 

and so on. 

Ms. GAMBRELL. Correct. 

Mr. SERRANO. So what will we do to deal with their issue? And 

I want to be—notwithstanding my other sarcastic comments. I 

want everybody covered and protected. How do we deal with those? 

Ms. GAMBRELL. I think, again, you have to look at all of the different approaches that are being used and all of the different tools 

that are being used, the organizations that are being involved—

that are involved as well in trying to address this issue. As I had 

mentioned earlier, NeighborWorks America was just recently 

awarded $130 million to housing and foreclosure counseling agencies across this country to help those agencies as well deal with the 

problems on a local level. 

The Treasury Department is focused, looking ahead at the current situation, but also looking ahead at what potentially may arise 

as well, Chairman Serrano. But I do think, again, we have to look 

at all of the remedies that may be available, if it is not from Treasury, then through other means and organizations as well. 

Mr. SERRANO. Thank you. 

FTC V. MORTGAGES PARA HISPAN ̃ OS

The FTC recently had a case that included—that was the FTC 

v. Mortgages Para Hispan ̃ os—that is Mortgages for Hispanics——

[Laughter.] 

Dot com, that is dot com. [Laughter.] 

And I often wonder, what happens if a person was named Dorothy Com? Could we call her Dot Com? [Laughter.] 

But what was that case about? I understand that was the case 

of a mortgage broker who allegedly promised one set of loan terms 

verbally in Spanish, but had customers sign English-only closing 

documents with different, less favorable terms. Of course, that goes 

into the whole area of cheating the consumer, but it is specific to 

this issue also. What happened there? 

Ms. PARNES. Right. Well, that is exactly right. The outfit was 

pitching its services to——

Mr. SERRANO. And that was their actual name? 

Ms. PARNES. Yes. Yes. 

Mr. SERRANO. They did not even have an English language alternative name? 

Ms. PARNES. That was their name. That was their—that was 

their name. And they were obviously pitching their service, their 

product, to Hispanics. They did business in Spanish. They would 

sit down with consumers and explain the entire transaction in 

Spanish, and the actual loan documents had different, less favorable terms, and those documents were all in English. 

Certainly, I mean, that is——

Mr. SERRANO. It was blatant. 

Ms. PARNES. Yes, a very blatant scam. 

Mr. SERRANO. What is going to happen to them now? Will you 

refer them to the——


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Ms. PARNES. Well, no, we have actually taken action against that 

company, and that case has been resolved. Unfortunately, as in 

many—as in at least some of the cases we bring, most of the money 

was gone. We were able to get a judgment for $250,000, which was, 

you know, the extent of consumer injury, but the individual only 

had $10,000. 

We have accountants who look very carefully at the ability of our 

defendants to pay up, and that is all we could get, so we got 

$10,000 from this individual. 

Mr. SERRANO. Did they go to jail? 

Ms. PARNES. We do not have criminal authority. 

Mr. SERRANO. Well, I know you cannot send them to jail, but can 

you refer it to someone——

Ms. PARNES. Right. 

Mr. SERRANO [continuing]. Who would? 

Ms. PARNES. We do. We do refer these cases. We have actually 

a Criminal Liaison Unit, CLU, that works very closely with U.S. 

Attorneys Offices. And when there is conduct—we talk to AUSAs 

throughout the country and try and get them interested in cases. 

And sometimes it is harder, because some of these cases are—just 

fall below the threshold that a U.S. Attorneys Office needs to be 

able to get an indictment and get a conviction. 

Mr. SERRANO. Mr. Regula. 

SPECULATORS

Mr. REGULA. In your judgment, what percent of the subprimes 

are speculative versus people who really want to get that first 

home? I am talking about the second home people, people who are 

in the subprime on the basis of growing value of real estate. It 

seems we have got two groups here. We have got people who want 

honest to God help and then we have got those who were playing 

the market, and yet probably expect us to ‘‘bail them out.’’ What 

is your evaluation of subprimes? 

Ms. GAMBRELL. Congressman, I do not have those specific numbers, but I can certainly get those for you. And you are right; there 

is a tier certainly of speculators and investors that are involved in 

this entire discussion. Unfortunately, I just do not have the figures 

with me today. 

Mr. REGULA. Well, I do not think it is our job to get them out 

of a bad judgment anymore than if you buy a stock and it goes 

down. 

Ms. GAMBRELL. And Treasury supports that as well. 

Mr. REGULA. But you do not offhand have any——

Ms. GAMBRELL. I do not have them with me today, but we can 

certainly get them to you. 

[The information follows:] 

SUBPRIME DATA ON INVESTORS AND SECOND HOMES

Some estimates suggest that about 8 to 9 percent of subprime loans were made 

to investors or those who bought a second home. Based on readily available data, 

of the estimated 1.8 million active subprime adjustable rate mortgages resetting in 

2008 and 2009, roughly 160,000 are investor/2nd homes. However, this data may 

underreport the true number of homes bought as an investment, since some homeowners claimed second or investment homes as primary residences to obtain easier 

financing. 


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Mr. SERRANO. We do not know how to single them out as such, 

do we? Because I fall where he falls. A person who was duped into 

buying a house, especially their first home, I know families in the 

Bronx—for instance, I was telling Mr. Regula—where the brother 

and the sister, you know, are both married and everything, bought 

together, you know, they moved into this two-family house because 

they could afford the $3,000 a month that they split, and that was 

tough. 

And then, when the first reset came in, they cannot afford it. 

They lost it. That person I want to do whatever we need to do to 

help, and to get at the people who did that to them. But if a person 

already had a house and was buying one for the weekend, you 

know, I am not—I do not think I should be worried. Well, if there 

are criminal acts involved, of course I have to be worried. But I 

think you know what I am saying. We are here to protect those 

who were hurt, not those who were playing the market and took 

a chance. 

We have votes going on now. You have been a wonderful panel. 

We have a second panel coming. So we will submit the other questions for the record, and we will excuse this panel and thank 

you——

Ms. GAMBRELL. Thank you. 

Mr. SERRANO. And congratulate you on the work you do. We 

know this is difficult. We will be staying in touch with you to see 

how together we can help folks who need help, and I thank you 

also for your work with Spanish-speaking folks throughout this 

country. 

Ms. PARNES. Thank you, Chairman. 

Mr. SERRANO. Thank you so much. 

We have three votes, a 15-minute, a 5, and a 5, and then after 

that we will come back. So it is roughly 20 minutes. 

[Recess.] 

Mr. SERRANO. We will reconvene. 

We may not be joined by a lot of members because the House decided to call it quits before the big storm comes. Political storm. 

[Laughter.] 

Mr. SERRANO. There are a couple of bills on the floor that are, 

you know, causing some drama. 

PANEL 2

We will now proceed to our second panel of witnesses, and we 

apologize for the delay. We had three votes over there. We lowered 

taxes, right? 

Mr. REGULA. Did we? I thought we increased it. [Laughter.] 

Mr. SERRANO. Wow, there is a change here. 

Michael Calhoun is president of the Center for Responsible Lending, a nonprofit research and policy organization which works to 

protect home ownership and to eliminate abusive financial practices. Janet Murguia, an old friend, not old in age. 

Ms. MURGUIA. Thank you. [Laughter.] 

Ms. MURGUIA. Will you get that on the record, please? [Laughter.] 

Mr. SERRANO. Old in service. 


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Is the president and CEO of the National Council of La Raza, the 

largest national Hispanic civil rights and advocacy organization in 

the United States. Among many other efforts La Raza has also 

worked to increase home ownership and to eliminate predatory 

lending. 

Chris Stinebert is president and CEO of the American Financial 

Services Association, the national trade association for the consumer credit industry. The association has nearly 350 active members ranging from large national financial services to small, independently owned consumer finance companies. 

And last but not least—yesterday you had someone from Ohio, 

right? I have someone from the Bronx. 

Mr. REGULA. Where’s that? 

Mr. SERRANO. Last but not—the Bronx? 

Mr. REGULA. Yeah. 

Mr. SERRANO. It is where we buy all of the stuff you grow on 

your farm. [Laughter.] 

Mr. SERRANO. I told him when I first met him I thought everything just came from the supermarkets. I did not know it came 

from the farm. 

Mr. REGULA. We are working on him. [Laughter.] 

Mr. SERRANO. Last but not least, Greg Lobo Jost is deputy director of the University Neighborhood Housing Program and a member of the Board of Directors of the Neighborhood Economic Development Advocacy Project in the Bronx, New York, USA. 

Mr. Lobo Jost is active in creating, financing, and preserving affordable housing for the residents of the northwest Bronx and the 

16th Congressional District represented by that charming and debonair Congressman Serrano. 

Thank you all, and we are very much appreciative of your time 

with us. We really do appreciate it. We again apologize for the 

delay, and we will start with Mr. Calhoun. 

MICHAEL CALHOUN’S TESTIMONY

Mr. CALHOUN. Thank you, Mr. Chairman and Ranking Member 

Regula and members of the Committee. 

Mr. SERRANO. And for a moment we will remind everybody that 

all of your testimony will go into the record. That is our nice way 

of saying please keep your statement down to five minutes. 

Thank you. 

Mr. CALHOUN. Thank you for your invitation today. As you mentioned, the Center for Responsible Lending is an affiliate of SelfHelp, which is a subprime mortgage lender. We are also a CDFI. 

We have been making first-time home loans to borrowers who did 

not qualify for conforming loans for more than 25 years. 

Over the last five years we have made $4 billion of financing 

available for first time home buyers in 48 states across the country. 

We actively participate in the secondary markets, and prior to my 

current position as president for Center for Responsible Lending, I 

headed up those programs for Self-Help. So I have personally been 

involved in those lending endeavors. 

I am going to address three things very quickly here and try to 

respond to questions that have come up from the previous panel, 


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and those are, first, what is the scope and depth of the current 

mortgage crisis or situation. 

Second, what were the causes that got us here? What were the 

types of loans? Why are so many of them going bad? 

And then third, very quickly, what are some of the remedies? 

On the scope, to be clear, many industry experts in our own projections are that over the next two years more than two million 

families will lose their homes to foreclosure, not enter foreclosure, 

but actually lose their homes. That works out to more than 20,000 

per week, and that is an accurate reflection of what is happening 

right now in the market. 

Depending on how long this hearing lasts, probably several thousand additional families will lose their homes as we speak here 

today, and when we get into the questions, I can talk about some 

of the specifics. Some of the numbers you heard before were about 

small segments of the families at risk, not the overall picture, and 

those numbers, for example, are from Moodysresearch.com. They 

are a leading housing economist. Our numbers, core logics, they are 

pretty close to consensus numbers in the market. 

That is obviously causing great disruption not just in the housing 

market, but in the whole economy as recent GDP figures certainly 

confirm today. 

Let me tell you about the typical loan that got us into this. The 

typical subprime loan which you have heard is this so-called 

subprime hybrid ARM where you had a fixed rate for two or three 

years, usually two, and then the rate went up. It had some notable 

features. 

One, the rate could not go down. So those borrowers, while their 

rates may not go up as much with the current Fed rate going 

down, their start rate would not go down. 

The start rates were referred to as teaser rates, but that is a little bit of a misnomer. The average initial rate on these mortgages 

was about eight and a half percent, not a bargain rate of some of 

the one or two percents that you heard in some of the crazy ads. 

There were other factors that made these loans so risky, which 

were that they were underwritten so that the initial payment could 

be up to 55 percent of the borrower’s gross income, not even take 

home pay, but gross income. They did not look at whether the borrower could even afford the increased rates. 

Half of the loans had no documentation of the borrower’s income, 

and one of the most critical factors and one of the real gimmicks 

that we’re paying the price for now is that three-fourths of these 

loans had no escrow for taxes or insurance. It was a way to make 

the monthly payment look lower to the borrower, but then it creates this crisis when your taxes come due, and that actually is triggering a lot of the foreclosures. 

To be clear, Ms. Gambrell was talking a lot about the rate resets. 

Over half of these foreclosures are happening before the reset because what had previously happened was borrowers were able to 

refinance even before the reset, for example, when they got their 

tax bill. But now with decreasing housing prices, that refinance escape option is no longer there. 

Let me talk about the remedies. First, we have supported and 

participated in the HOPE NOW programs, the various AFSA ProVerDate Aug 31 2005 20:00 May 30, 2008 Jkt 042322 PO 00000 Frm 00304 Fmt 6601 Sfmt 6602 E:\HR\OC\A322P2.XXX A322P2

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grams. We support all of those, and they are critical, and they will 

make a difference. 

In our view, they will not be enough, not for lack of will and not 

for lack of good intention, but because of structural obstacles that 

are built into the market today. This isn’t like when your local savings and loan made your loan. If you had problems, there was 

somebody you could go down the street and talk to. 

Today not only are these loans sold into the secondary market. 

No one owns the whole loan. They are sold into different slices of 

the rights to cash flow for these mortgages. For example, they even 

sell separate securities that are funded just by the prepayment 

penalties on the loan. That’s the only thing that funds that class 

of securities. 

So it is a little bit like sending cattle to the slaughterhouse and 

then deciding after the fact you want to put it back together and 

move the cow to a new pasture. It is very, very hard to do. 

There are a couple of other structural obstacles that we have not 

been able to overcome. Over 40 percent of these mortgages have 

second mortgages in addition to the primary mortgage. To modify, 

you have got to satisfy both of those liens in some way, which is 

extraordinarily difficult to do. Just the logistics of it, the first mortgage holder is saying, ‘‘Why should I take a discount to benefit the 

second mortgage holder?’’ and the second mortgage holder saying, 

‘‘Why should I get out of the way to benefit the first mortgage holder?’’

You have a couple other structural obstacles. Servicers generally 

are not paid to do modifications. Industry figures are it costs about 

$750 to $1,000 for the work to carry out a modification. Foreclosures are sent to third parties who carry them out, and those 

costs are reimbursed. 

And finally, not surprisingly, the threats of lawsuits where security holders have told servicers that if you modify these mortgages, 

you may hurt the value of my securities. Not all classes will be affected equally, and those classes have threatened to sue servicers 

if they do too many modifications. 

Recent numbers are if you look at, for the subprime hybrid 

ARMs, which have been the worst performing loans, that for the 

fourth quarter there were about ten foreclosures for every loan 

modification, and that is not, again, due to lack of will, lack of effort. It is these structural obstacles. 

So what do we support? One that has been mentioned here 

today, and I want to be clear about the details of it, is a modification to the bankruptcy code to allow a court ordered modification 

if, and only if, the lender and servicer do not offer their own modification. That is an eligibility threshold that you have to get past. 

I would note we did the exact same thing in the mid-’80s when 

we had a very similar crisis in the farm world where farm prices 

appreciated rapidly and then deflated and the farmers could not refinance their loans. This exact same approach was used. It did not 

raise the cost of credit. It saved a lot of family farms. 

I want to thank you again for holding this important hearing, 

and I would be happy to answer any questions that you have. 

[The information follows:] 


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Mr. SERRANO. Thank you. 

Before we go to Ms. Murguia, I want to thank you because I 

think you quickly put in place how these things worked, and we 

have been trying to find that out all day, and you made it clear 

how it was that people were invited to participate, if you will. 

I also for the record want to state that we had finished the last 

panel dealing with the issue of people who had the American 

dream, you know, destroyed for them or are in danger of having 

it and those who bought a second home or a situation where, you 

know, maybe we should be concerned, but we should not necessarily be involved in what is bailing them out versus the ones 

who were hurt. And it was made clear to us by a person from 

Treasury on my way out the door that the HOPE Program takes 

that into account. It deals with primary residents as an issue rather than people just speculating on what was a great market at that 

time. 

JANET MURGUIA’S TESTIMONY

Ms. MURGUIA. Good morning. Thank you. 

My name is Janet Murguia. I am president and CEO of the National Council of La Raza. AT NCLR, we have been committed to 

improving the life opportunities of the nation’s 40 million Latinos 

for the last four decades. In fact, this year we are celebrating our 

40th anniversary as a very American institution in this country. 

I would like to thank Mr. Chairman Serrano for inviting me and 

all of us to participate this morning. We do appreciate your very 

diligent work on behalf of Latino families, and I thank you for 

being a champion on funding for CDFIs and for opposing many 

damaging anti-immigrant amendments, and thank you for bringing 

attention to this issue today. 

NCLR is deeply concerned that a generation of Latino wealth is 

under attack, and the status of the Latino middle class is in danger. NCLR has been working hard to plug gaps where mortgage 

lenders fall short. 

Through our housing counseling network we serve more than 

30,000 borrowers every year. Later this year NCLR plans to launch 

a campaign to prevent foreclosure among low income families. We 

understand what it takes to build wealth in Latino and immigrant 

communities. 

Today’s hearing is very timely. Household debt, foreclosures and 

report of fraud are on the rise. We must protect consumers in addition to improving the quality and quantity of credit available to all 

families. 

This morning I will briefly discuss the major barriers that open 

our community to abuse, areas where consumer protection fall 

short, and recommendations for congressional action. 

Let me begin by saying that all Americans rely on financial products to help them reach the middle class. Safe and affordable credit 

is necessary to buy a car or home. Unequal access to credit has perpetuated the wealth gap between minority and white households. 

Latino borrowers are unique. For example, 22 percent of Latinos do 

not have enough information in their credit file to produce a FICO 

score. This is compared to only four percent of whites. 


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About 35 percent of Hispanic families do not have basic checking 

or savings accounts. Many Latinos rely on abusive payday loans 

and check cashiers to pay their bills and make ends meet. 

Most creditors do not look favorably on such characteristics. In 

fact, many Latino families are steered to more expensive credit 

cards, car loans, and home loans even when they have good credit. 

Allow me to give three examples. Credit card issuers look at 

credit scores, the number of credit cards a family has, and their 

combined card balances when pricing credit. Many Latinos do not 

even have credit cards. This means that regardless of whether they 

pay all of their bills on time, when they do get a card, it is more 

likely to be an expensive one. 

In fact, Latinos are twice as likely to have a credit card interest 

rate higher than 20 percent as white borrowers. Similarly, discrimination in auto financing costs Hispanic borrowers hard-earned 

money. One report showed that 57 percent of Hispanic borrowers 

were charged inflated interest rates compared to 40 percent of 

white borrowers. 

And it is the same story with mortgages. Our families are more 

than twice as likely as whites to receive certain high-priced, highrisk loans that are now going into foreclosure at record rates. This 

pattern of abuse is troubling considering the rate at which Latinos 

are entering financial markets. Hispanic credit card use is increasing. Latino home ownership hit an all time high in 2006. 

This is a good sign for our community. However, we are concerned that their gains are being eroded by financial predators. Despite the evidence, consumer protections have not kept pace with 

demand. I would like to share with you three areas where consumer protections fall short. 

Shopping is nearly impossible. Most credit transactions are not 

transparent. Consumers do not have the tools or the information 

to determine what they are really paying for credit. Borrowers get 

expensive loans even when they have good credit. Taking into account a borrower’s history of timely rent and utility payments is 

seen as a burden. So instead, lenders push Latino and minority 

borrowers into pricey loans. 

Third, borrowers are trapped into cycles of debt. There are few 

options for borrowers desperately seeking relief from high interest 

rates and abusive fees. Many turn to balance transfers or mortgage 

refinances, but for most families this does not bring relief; just 

more debt and fees. 

Compounding the impact of these gaps in protections, reports of 

fraud are on the rise. The FTC found that Hispanics are more than 

twice as likely to be victims of fraud as whites. The current mortgage crisis shows the impact of predatory lending expands far beyond targeted communities. 

Congress must act, and I am going to offer just briefly four recommendations as I close. The Federal Reserve and other regulatory 

agencies must issue stronger rules against predatory and unfair 

practices. Congress should investigate abusive auto loans through 

oversight hearings and studies. 

Federal agencies, credit card issuers, and local consumer protection agencies should partner with local community organizations to 

raise awareness of financial scams. 


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And finally, Congress should create a financial counseling program to provide financial advice to low income families. We believe 

it is important for Congress to act. We appreciate you all looking 

at this issue now because there is no question that, while some of 

the regulators earlier today talked about looking backward and 

saying that it was hard to look in hindsight at this, we know, for 

instance, that Latino foreclosure rates are going to peak in ’09 and 

2010. There is no excuse for us to not take action now knowing 

that this is going to be on the horizon. 

So we appreciate your looking at this and welcome the chance to 

talk to you later about it. 

Thank you. 

[The information follows:] 


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Mr. SERRANO. Thank you. 

Mr. Stinebert. 

CHRIS STINEBERT’S TESTIMONY

Mr. STINEBERT. Good morning. My name is Chris Stinebert, and 

I am the president and CEO of the American Financial Services 

Association. 

AFSA’s 350 member companies include auto finance companies, 

credit card issuers, mortgage lenders, industrial banks, and other 

financial services firms that lend to consumers and to small businesses. We do not represent or try to represent the payday lenders 

in our association. 

Let me state from the outset that we share Congress’ concern 

about the growing number of homeowners who are having difficulty 

making their mortgage payments. Not only do foreclosures affect 

individual borrowers and their communities, they also affect mortgage lenders who lose, and I think Mike Script says $40,000. Mike 

and I were talking that the average could be up to 65 or $70,000 

on every single foreclosure that a lender makes today. 

So today I am going to limit my remarks to four major issues. 

First, in today’s tight credit market, liquidity remains the key to 

providing credit. To maintain liquidity, policy makers should avoid 

imposing new mandates and policies and regulations for mortgage 

lending that create uncertainty for investors, especially if applied 

retroactively. 

Second, I would like to emphasize the importance of the voluntary nature of the partnership efforts between lenders and consumers who face financial difficulty. 

Third, I will focus on the growing importance of consumer understanding of lending products in general and mortgage products specifically through personal finance education programs. 

And, fourth, the possible use of federal resources to encourage atrisk borrowers to contact their lenders to learn what assistance is 

available to them. 

Let’s start with certain market liquidity, which is the key to 

lenders’ ability to provide affordable credit to consumers. Many borrowers with less than perfect credit have found it extremely difficult to get a mortgage or to refinance their home. The Federal Reserve’s recent rate cuts have improved liquidity and made credit 

more affordable, but maintaining liquidity remains a primary concern for investors, both foreign and domestic. 

Investors rely upon certainty and stability. Proposals that impose 

new terms and conditions on existing mortgage contracts would 

make investors even more resistant to reenter the credit market. 

And legislation that would allow bankruptcy judges to rewrite 

mortgage contracts on primary residences would do just that. 

A better course of action is to provide an open and voluntary 

pathway for borrowers and lenders to work together. Mandating 

workouts, on the other hand, would only serve to restrict credit. 

AFSA believes the right way to provide relief is through the current outreach campaigns that are now underway. As Treasury 

talked about this morning, AFSA is a founding member of HOPE 

NOW Alliance. Fourteen HOPE NOW servicers responsible for 

more than 33 million home loans, or about 94 percent of prime and 


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subprime mortgages, reported that in the last half of the year 

545,000 subprime mortgage holders were helped in the second half 

of the year. So far 324,000 prime borrowers have been helped as 

well, for a total of 869,000 prime and subprime homeowners. 

All too often distressed homeowners do not contact their lender. 

They will not open letters. They do not answer phone calls. If they 

only understood that the sooner contact is established between the 

homeowner and the mortgage servicer, the sooner a workable solution can be found. 

As this Committee considers how to best appropriate funds, we 

strongly encourage you to augment the private sector’s efforts to 

convey this important message. A major part of any solution must 

include financial literacy. We learn things in school that we never 

ever use, and yet very few students ever receive any formalized instruction or personal education on personal finance, lessons that 

would be used every single day of their lives. 

It is time to prepare the next generation of financial services customers with a clear understanding of the lending process and the 

savings process, just everything involved with consumer education 

and begin at a very early age. 

One example is AFSA’s Education Foundation’s personal finance 

curriculum, MoneySKILL. More than 80,000 high school students 

have enrolled in this Internet-based course, which is available free 

of charge for anyone. 

And finally, it is worth noting that this hearing comes at a time 

when Congress is considering proposals to stimulate the housing 

sector. One way Congress can directly help at-risk borrowers is by 

creating a temporary home ownership tax credit. Not so long ago 

Congress offered this type of tax credit to homeowners in the District of Columbia, and it was extremely successful. 

A national tax credit would encourage home buying activity, stop 

the slide of home prices, reduce the current existing inventory of 

homes, and get America out of its housing slump faster than imposing any new regulations that might affect the next time we are 

down the road. 

Thank you for this opportunity to participate today, and I look 

forward to answering any questions you might have. 

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Mr. SERRANO. Thank you. 

Mr. Jost. 

GREG LOBO JOST’S TESTIMONY

Mr. LOBO JOST. First I would like to thank Chairman Serrano, 

Ranking Member Regula, and the other members for inviting me 

here today to testify. 

I am speaking today on behalf of the University Neighborhood 

Housing Program. We are a 25-year-old nonprofit housing group in 

the Bronx working to create, approve, and finance affordable housing throughout the Bronx, and I am also on the board of directors 

of the Neighborhood Economic Development Advocacy Project, and 

both of our groups, we put together different maps to help kind of 

illustrate different things that are in the written testimony that I 

submitted if you wanted to follow along and look at any of those. 

Without a doubt there is a need for stronger consumer protections in financial services, especially in low and moderate income 

communities of color that in the past were victims of redlining. The 

Bronx is entirely too familiar with redlining, as this practice led to 

the borough’s notorious incendiary reputation. 

While the Community Reinvestment Act has helped immensely 

to turn around the fortunes of places like the Bronx, the residual 

effects of redlining have led to abusive lending practices often referred to as reverse redlining. 

Traditional banks continue to have a relatively small branch 

presence in our neighborhoods, opening up the door to fringe financial institutions. For instance, it is three times as hard to find a 

bank branch in the Bronx as it is nationally, and in fact, our borough’s many Puerto Rican born residents are much more likely to 

find a bank branch back on the island than they are in the Bronx. 

And within the borough they are obviously concentrated in higher 

income areas. 

One way in which the Subcommittee could address this shortage 

of financial institutions is by funding the CDFI Fund to promote 

the growth and expansion of community development credit unions. 

We have two such credit unions in the Bronx, and they serve their 

communities well, but they obviously are not reaching a lot of 

neighborhoods. And it is these same neighborhoods that are specifically targeted by subprime and predatory lenders. 

At UNHP, we have performed outreach, intake and referrals to 

many struggling Bronx homeowners over the last decade. More recently, many of those calls have come from new homeowners who 

never could have afforded their home, and others, many of whom 

are senior citizens, have owned their homes for a long time and can 

no longer afford them because of an unsavory refinance. 

Our own research has shown that in 2007, the majority of Bronx 

homeowners going into foreclosure were not the victims of 2/28 or 

3/27 ARMs resetting. I think it was about 65 percent of the loans 

going into foreclosure last year were less than two years old. 

This exemplifies the extent of atrocious underwriting in recent 

years, where huge numbers of loans were made without regard to 

the borrower’s ability to repay. The proliferation of the securitized 

secondary market has made this all possible through its blatant 

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rected, and in order to truly protect consumers, currently Senator 

Dodd’s bill, S. 2452, stands out as the best bill to help fix our broken mortgage system. 

The House equivalent H.R. 3915 contains certain strong protections for consumers, but falls short of the Dodd bill on the critical 

issue of assignee liability, something which gives distressed borrowers recourse against the current holder of their loan so they can 

effectively fight foreclosure. 

On the funding side, our neighborhoods need more counselors 

and legal services. Sadly, we have had to scale back our outreach 

efforts for homeowners because there are no counselors who have 

the time to see them in the Bronx. There are only two in the entire 

borough right now, and this is a borough of over 1.3 million residents, and these two individuals and their two respective agencies 

have no chance of keeping up with the growing tidal wave of foreclosure that is coming their way. 

We also need consumer protection against the exorbitant interest 

rates that come with refund anticipation loans. Once again, it is 

the same neighborhoods that are targeted, and the financial effects 

are devastating as tens of millions of dollars meant for low and 

moderate income families struggling to literally pay the rent are 

being siphoned off every year just in our area. 

Again, it is these same communities where households receive 

and depend upon the earned income tax credit that these loans are 

targeted and flourish. And, in fact, the federal government is subsidizing tax preparation companies and their national lender partners by allowing them to take advantage of folks living on the edge 

who are desperate for cash. 

Congress can change all of this by requiring the IRS to band refund anticipation loans on Earned Income Tax Credit dollars. Congress can also act by ending federal preemption of state laws that 

would, in effect, do away with such predatory loan products. It is 

no wonder that at least in New York only national banks make 

these loans. State laws and banking regulations prohibit such high 

interest rates. So only banks not subject to these rules can offer 

such predatory products. 

Another big problem is bank accounts containing federal benefit 

income, like Social Security and veterans benefits being improperly 

frozen by predators. Federal banking regulators should require 

banks upon receipt of a garnishment notice to make a determination whether an account contains exempt federal benefit funds, and 

if it does, the bank should refuse to honor the restraining notice. 

Currently the fixed income residents who have had their accounts frozen improperly are subject to bounced check fees and 

even eviction as they are unable to make payments because of 

these improperly frozen funds. 

And that is all I have to say, and thank you again, once again, 

for having me here. 

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Mr. SERRANO. Thank you. 

Before we go into the order of questioning, I just wanted to ask 

you a question. I always say that we members of Congress assume 

that we know all of the subjects. That is because no one dares to 

ask the question that people would laugh at. 

So let me ask the question of the day that people will laugh at. 

When the local tax preparer gives you a refund anticipation loan, 

is that from their own funds or do they work with somebody else? 

Mr. LOBO JOST. Yes, they work with another bank, an outside 

bank, and I do not know all of the banks that do it, but it is only 

national banks that do not come under state jurisdiction. HSBC, I 

think they have some new leadership, and they are deciding that 

the new leadership does not think that this is a good loan product. 

Mr. SERRANO. Getting out of the business. 

Mr. LOBO JOST. Yes, they are going to stop offering that. 

WALL STREET

Mr. SERRANO. Okay. Mr. Calhoun, in your testimony you state 

that Wall Street has played a major role in the subprime mess by 

encouraging subprime lenders to ignore whether their customers 

could actually afford the loan. What, if anything, do you believe 

Congress should do to address this issue and what might the Appropriations Committee specifically do, and tell us how Wall Street 

did that. 

Was this high level meetings they had or was it just a behavior 

pattern that began to grow? How did they encourage people to do 

this? 

Mr. CALHOUN. It was financial incentives. There is a well known 

quote that was in the financial trade press from the president of 

a subprime lender, and he put it this way. He said, ‘‘Wall Street 

will pay me more to do a no documentation loan than they will pay 

me to do a fully documented loan. Which do you think I am going 

to do?’’

Mr. SERRANO. Explain that to us. How does that work? 

Mr. CALHOUN. How it works is that it sort of happened from both 

ends. For example, a broker typically makes higher fees for considerably less work on a no doc. loan, where there is not documentation of the income, and again, most of these loans were to people 

with just regular salaried jobs. They’ve got a W–2. You know, these 

are not self-employed folks who have to dig up extensive tax 

records, and what most of them did not realize is they paid a heavy 

premium. Usually in the subprime market if you did not bring in 

your W–2, you might get your loan a little faster, but they raised 

the interest rate on the loan a full percentage point. 

Well, that extra percentage point went part to the mortgage 

broker, part to the lender, and part to Wall Street. And so at least 

in the short run everyone was making more money. 

Well, now that these loans are foreclosing, everybody is getting 

hurt by that practice, but that is an area where I do think our federal regulators are moving the so-called ability to repay, and I 

think there is consensus within the financial industry that loans 

should not be made when there is no reasonable ability for the person to repay the loan absent winning the lottery. 


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Mr. STINEBERT. Not to disagree, but to give a little bit of a not 

just product specific or reasons, but more of a macro reason for why 

Wall Street was so amenable to this product is it really goes back 

to the dot-com buzz and all of this money left dot-coms and was 

looking for a home. Real estate and dirt has always been the most 

reliable, stable thing that you could put investments into. 

You had a huge amount of investments coming from overseas 

where savings in China and in India were looking for investments. 

Where do you invest it? You invest it in the United States, which 

is the most stable, safest market to invest in, and real estate being 

the most stable of those markets. 

So you had huge amounts of capital that were available. Now, 

that caused other people to put together programs and to look at 

buying deeper certainly into the subprime area than they ever had 

before, but it started with the huge availability of funds that were 

not there previously. 

RATING AGENCIES

Mr. CALHOUN. And we would agree that there was a glut of 

worldwide capital during this time, and then the other thing that 

needs mentioning is the guardian of the security of this was supposed to be the rating agencies. They were supposed to look at 

these loans and evaluate their credit worthiness. 

They were also in a difficult position. They are paid by the companies issuing these securities, not by investors, and there was a 

lot of pressure to grade these as triple A securities. If you had $100 

million of loans, you would get $80 million of triple A securities. 

It is more profitable the more triple A securities you get. 

So, for example, at one point they ignored whether a loan had 

a second mortgage or not. If you had an 80 percent loan with a 20 

percent second mortgage, the rating agency treated that the same 

as an 80 percent loan where the borrower had put 20 percent 

down. 

Well, most lenders think that there is a real difference in those 

loans. 

Mr. STINEBERT. I think we would all agree that everyone was 

lured by the steady appreciation of homes and had a dependence 

on that it would continue 

Mr. SERRANO. Thank you. 

Ms. Murguia, when was the last time I called you Ms. Murguia? 

[Laughter.] 

Mr. SERRANO. Janet. 

Ms. MURGUIA. I do not know, Mr. Chairman. 

STEERING PRACTICES

Mr. SERRANO. As I told the first panel, I am deeply concerned by 

the fact that it is minorities who have been overwhelmingly hurt 

by this mortgage crisis. It appears that in many instances mortgage companies aim their dishonest practices directly at minority 

communities. I would like to ask you about the practice known as 

steering, in which mortgage loan officers have a personal financial 

incentive to steer applicants toward loans that are not necessarily 

in the best interest of the applicant. 


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A Wall Street Journal article last December reported that more 

than half of the people who received subprime loans during 2005 

had credit scores that would have qualified them for prime loans. 

So could you please comment on the practices of the mortgage 

loan industry and the financial incentives given to loan officers. 

What needs to be done to address this issue? What should we be 

looking at over here? 

And you just happen to have a La Raza wire? 

Ms. MURGUIA. No. Look. The steering practice is one that we 

have been very concerned about, and you know, we understand 

that our research and analysis, there are different factors that we 

are looking for in predatory lending legislation, but on the antisteering provision, you know, you should not be able to put families 

in more expensive and risky loans simply because they walk into 

the wrong bank branch and maybe only sell subprime loans or 

have nontraditional credit profiles. 

So bankers and brokers should be obligated to sell loans that 

families can afford to repay, and we think there needs to be more 

Wall Street accountability, too, because Wall Street played a role 

in funding some of these poor loans. 

But we have to make sure that there are the right protections 

in place and accountability in place with these financial institutions so that they are not allowed to move people into these bad 

loans. Obviously we are seeing the result of that here today in 

terms of where we have seen this foreclosure crisis. 

HOPE NOW PROGRAM

You know, I wanted to comment briefly on the HOPE NOW 

Project because while it is commendable and outreach is great and 

appropriate, you know, what we have seen is that calling the 

servicers does not necessarily guarantee assistance either. We 

know that the Wall Street Journal reported that only nine percent 

of borrowers who called HOPE NOW got a workout, and that which 

includes the repayment plans and modifications. 

So servicers cannot keep up with the demand, and we need a 

streamlined approach that would automate how for many of the 

most vulnerable families. 

Anti-steering provisions would help in terms of ahead of time, 

you know, affirmatively looking at what could be potential problems. You know, we sponsor a home ownership counseling network 

program that has been in place for ten years. We know that prevention programs like that keep us out of this problem. 

But when there is no accountability and all of these measures 

are voluntary, I would argue that while it is commendable that 

they are voluntary, that is not good enough knowing what we know 

now, especially when it comes for us where we are able to document and show research of what the implications are going to be 

for Latino families. 

So even when you talk about educating a future generation of 

borrowers, that’s commendable, too, but, Mr. Chairman, Mr. Regula and Mr. Bonner, Rome is burning. We know that there are 

problems right now, and for us to not take specific measures, 

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teria, that we can take now because we know we are going to be 

bumping up against this. 

You know, people have talked about it as tsunami. We have gotten the warning wave here, and we know that it is coming again, 

and it is going to hit, in particular, certain families, and we should 

not just rely on voluntary measures. 

We can look at anti-steering and home ownership counseling efforts that prevent that, but we need to take specific measures now 

that allow these families to have some relief. 

Mr. SERRANO. Well, that was my next question for Mr. Stinebert. 

We know that the HOPE Program is voluntary, an agreement. So 

how much of a solution is it, and what more needs to be done by 

us? 

Mr. STINEBERT. Well, it is voluntary in nature, and yes, they are 

not 100 percent participating, but I would say 94 percent of the 

lenders and servicers involved in the industry in mortgage 

subprime and mortgage market is pretty good participation for any 

voluntary program. 

And working with the Treasury Department and what they are 

trying to do is take, as you pointed out earlier, you have taken people that were investors and others that were looking at flipping 

and second homes and tried to look at those people and not necessarily put together programs that are going to help those people. 

There are other people that can certainly go into a reset and we 

are very knowledgeable about what they had gotten into and certainly have the finances and the income available to make those 

payments, and then, as was pointed out to us earlier, there are 

about 600,000 that are going to be coming up for reset in the next 

year that truly need help, and we are really trying to focus our efforts on those people that not only need help, but that will benefit 

from help and stay in their homes. 

I think when you talk about alignment, and you talk about how 

we got into some of this mess earlier on, there was not necessarily 

the alignment that there is today with the lenders and the incentives that they have in order to prevent a foreclosure or keep a 

homeowner in their home and what you had before. 

Right now everybody has parallel alignment. They have all of the 

same incentives. We also have the same goals to have as few foreclosures as we possibly can because a foreclosure, as we said, costs 

much more than a workout or an extension or a modification is 

going to cost to keep that person in their home. 

STEERING PRACTICES

And to address a little bit on the steering issue, we should not 

forget that some steering has certainly benefitted, whether it be 

Fannie Mae or Freddie Mac or even Congress who wanted to encourage lending in certain areas, wanted banks and others to put 

some incentives so that people would go into those areas and specifically go into markets that were perhaps under represented and 

gave incentives specifically for that purpose. 

Of course, steering, no one condones steering, of putting a person 

in a mortgage that is not as good as one they might qualify for, 

steering away from a prime mortgage product into a subprime 

product. That is not what we are talking about. 


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But some steering course has been encouraged by home ownership groups and community groups throughout the country to try 

and increase participation in certain areas. 

Mr. SERRANO. Well, you, Mr. Stinebert, seem to look at the glass 

as half full, and that is fine. But there has been steering that has 

hurt people and created major problems. Wouldn’t you agree to 

that? 

Mr. STINEBERT. I agree. When steering has occurred and in many 

cases I think it was mentioned this morning. As much as lenders 

would like to cite mortgage brokers and all of the things that they 

have done to possibly steer homeowners or borrowers into certain 

products and misrepresentation, I think that they were working as 

representatives of the industry. There are many, many good brokers out there, and there are others that did this. 

FINANCIAL LITERACY

Well, we know that there are many cases that we all know of 

where abuses have occurred. We are certainly not trying to defend 

those abuses. But one of the primary areas, and I think we can all 

agree on talking about fixes and solutions or areas that need to be 

worked on, is the area of financial literacy. It is an abomination, 

quite honestly, that most people can get through high school and 

have never had one course or one hour of instruction on financial 

literacy or personal finance. 

Yet they take course after course of things that they will probably never use again in their entire life, but they do not spend five 

to ten minutes talking about financial literacy. If there is an area 

that we can all improve upon the—— Mr. SERRANO. I am finally in total agreement with you. I totally 

agree with that. I agree. 

I have a couple more questions, but I am going to ask Mr. Regula 

to. 

JUDICIAL MODIFICATIONS TO MORTGAGE LOANS

Mr. REGULA. Thank you, Mr. Chairman. 

The idea that is kicking around the Senate that gives bankruptcy 

judges the ability to reform mortgage I think would set a very dangerous precedent because if that were the case, where do you stop? 

The bankruptcy judge would be substituted for a negotiation between the borrower and the lender, and as a matter of principle, 

I think that to be bad business. What do you think, Mr. Stinebert? 

Mr. STINEBERT. I think when people look at it, I think it looks 

as if it would be helpful to current people who got into a bad situation and might go into bankruptcy. 

But I think when you look down the road and you look at the 

cause and effect of changing the bankruptcy law in this way would 

actually result in, it would definitely result in more expensive loans 

at a higher interest rate. 

Now, we can sit here and debate on how much higher, whether 

it be one percent or 100 basis points or 200 basis points as some 

have indicated, but it is definitely going to be an increase in interest rates. Now, why? 

It is pretty simple. If you are going to have to sell these loans 

to investors and they have no idea what they are buying because 


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some third party down the road can change the terms and change 

the contracts, then you are not really buying contracts, are you? 

You do not know what you are buying. 

So therefore, investors would shy away from these products. It 

would definitely increase the loans. We talk about, and I think Michael mentioned that in the farm and in vacation homes and second homes, that judges are allowed to do this. Well, there is a reason why the interest rates are 100 to 150 basis points higher for 

each of those loans, too, and part of that is because they can do 

this. 

Now, if you want to strap future home buyers with that penalty 

to help the current people that might have problems, I think it is 

very short sighted of Congress to consider it. 

Mr. REGULA. Wouldn’t it also result——

Mr. CALHOUN. If I may add just quickly, very briefly, that independent folks who have looked at this come to far different conclusions. Moody’s has looked at this specifically and concluded, number one, that it would not raise the cost of credit going forward, 

and number two, that this one measure would save nearly 600,000 

families that we are talking about right now from foreclosure. 

They regard it as the most important measure that can be taken 

right now—this is Moody’s—that would protect families from foreclosure and stabilize the housing market and the whole economy. 

Jack Kemp has come out and written editorials endorsing this for 

the same reasons, that it would help the economy. 

Because the key is this is a very targeted provision. It is only 

available if the borrower can show that the house would otherwise 

be foreclosed on. And so the choice is not foreclosure. It is not one 

of these deals where I can go into bankruptcy and say, ‘‘I just want 

a better deal.’’ You have to demonstrate to the court that this 

house would be foreclosed upon unless I got a modification. The 

modification is limited. If the lender offers one, then you are not 

eligible. 

And then you have to complete a five-year plan before you get 

to keep the modification. If you do not complete the plan, the lender gets to foreclose with their full lien. They lose nothing. So we 

are a lending—— Mr. REGULA. What are the elements involved in your plan? 

Mr. CALHOUN. There are IRS guidelines that say this is your living allowance. Every penny above that has to go to pay your creditors. You can not get any additional credit during that five-year period without specific court approval. It is a very onerous plan, and 

this provision is not changing the 2005 bankruptcy code. 

And one of the ironies is here we actually—there was a period 

from the 1978 enactment of the bankruptcy code through 1993, 

when we actually had an experiment in this country. But a third 

of the districts in the country interpreted the 1978 law to say mortgages could be modified. 

And it was not until 1993 that the Supreme Court looked at it 

and said, ‘‘No. We believe the law is that you cannot modify the 

mortgage.’’

But the key is rates did not go up in 1978 when that was enacted. There was not a difference in rates or availability of credit 

in the different jurisdictions depending upon whether they have 


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this narrow modification available and rates did not change after 

the decision. 

Again, borrowers cannot walk in and say, ‘‘I want a two percent 

mortgage.’’ They have to pay at or above the prime rate on the 

mortgage. There are very tight limits on this. 

I agree if you said the judge can come in and rewrite any mortgage for no good reason that would be very adverse to the economy 

and to the mortgage market, but we are a lender. We have a billion 

and a half dollars of loans outstanding that would be subject to this 

provision. So we believe in it both for protecting borrowers in general and as a good provision for us as a lender. 

Mr. REGULA. Mr. Stinebert, do you want to comment? 

Mr. STINEBERT. Well, I think, Michael, to be honest you have to 

point out that in Moody’s and in his testimony there were four others that testified exactly the opposite to what Moody said. They 

were the only ones that said that it would not be a substantial increase in interest rates. So there was definitely disagreement there. 

Mr. REGULA. Somebody has got to pay, and if the judge is going 

to modify my mortgage, then the next person that gets the mortgage is going to have to pay a little more to make up that loss. 

Mr. STINEBERT. I think you have to ask yourself if you are an 

investor would you purchase mortgages that you do not know 

whether you have a contract with. 

Mr. REGULA. Well, that is right. 

Mr. STINEBERT. Now, I know there have been lots of modifications and somewhat compromises to make this more palatable to 

people, and as much as that is appreciated, many people certainly 

in the House and in the Senate remember those ten years of negotiations and sometimes contentious issues that were to have the 

bankruptcy laws that we have today, and it was, I think, very 

smart that originally when they excluded mortgages or at least primary residents from being able to allow a cram-down, that it has 

resulted in lower interest rates for all consumers, and that is 

across the board. 

Even though you look at trying to do this and isolate it as they 

have to subprime and others, you are bringing uncertainty into the 

marketplace. It is making it less stable, and it is already not that 

stable as it is. We do not need to introduce new criteria into it. 

Mr. REGULA. Wouldn’t every court be a little different depending 

on the disposition of the judge? Would there be any guidelines as 

to what Court A in New York could do versus Court B in Texas 

in terms of modifying this mortgage contract? 

Mr. STINEBERT. Congressman, that is one of the major concerns, 

is that it would be uneven as far as——

Mr. REGULA. I would think so, depending on the judge. 

Mr. SERRANO. Mr. Bonner has come back when most Members, 

Mr. Chairman, went home to take care of their district needs. He 

came back. He is working on his gold star in attendance. 

Mr. Bonner. 

Mr. BONNER. Mr. Chairman, I would like to also apologize. The 

reason I go over my five minutes is because I am from Alabama. 

It takes us a little bit longer to get our words out. So I apologize 

to my distinguished, debonair, and what were the other words you 

used? Handsome, brilliant Chairman. [Laughter.] 


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Mr. SERRANO. I did not say handsome. You say handsome. 

Mr. BONNER. And I mean it, too. 

Mr. SERRANO. Yes. Well, try thinking in Spanish and speaking 

in English. 

Mr. BONNER. Yes, sir. 

Mr. REGULA. You have got to move up about three chairs. 

TAX CREDITS FOR HOMEBUYERS

Mr. BONNER. This is a great panel, and I know that you see more 

empty seats than you see seats filled, but your advice and your testimony today is very timely and also very insightful to all of us because we are all looking to try to come up with a solution. 

Ms. Vernon, there is a tsunami out there. I live on the Gulf 

Coast. We know more about hurricanes than tsunamis, but the 

point is it is a serious matter. 

Mr. Stinebert has offered one possible solution based on the D.C. 

model, and I thought in your written testimony you elaborated a 

little more. If you could give us a little bit more food for thought, 

and then if we could get the three other panelists to comment on 

that, if we could get a unanimous agreement just among the four 

of you, I think that would be helpful. 

Mr. STINEBERT. Well, if for a moment you would take your focus 

off of the foreclosure issue, just as that as a separate issue, we all 

realize that families are losing their homes, and that is a terrible 

thing. But what I think everybody can agree upon is that the only 

way this is ever going to end is when the housing market stabilizes. The housing market stabilizes when people out there which 

can purchase a home decides that the depreciation or the decline 

in home prices has bottomed. 

And as soon as they know that basically the depreciation has hit 

its bottom, that is the best time to buy because then prices are 

going to go up again. So the sooner we can hit that bottom, the 

sooner that people can start purchasing homes. The sooner that 

people that are possibly entering foreclosures have an exit plan. 

I mean, let’s face it. The exit plan that people bought into those 

homes was not only refinancing, but they could always resell their 

home in a matter of weeks before. So it was not necessarily difficult 

for them to sign on the dotted line on a mortgage. Number one, 

they could refinance tomorrow. If that did not work, they could sell 

it the next day and possibly make a profit. 

So we need to give an exit plan to people that possibly could be 

entering foreclosures, and the best exit plan I have heard of focuses 

on the housing industry of giving a tax credit to anybody who purchases a home, not just subprime, but all purchasers of a primary 

residence. 

It worked in Washington, D.C. when they did it, and there is no 

reason why it cannot work around the rest of the country. It is a 

stimulus that I think would really work as opposed to some of the 

other stimuli that are being discussed. 

It would put money in people’s pockets immediately, something 

that would encourage people to purchase homes tomorrow, and we 

could start getting back to where we need to be as far as housing 

being a good resource, if not the best investment, a good investment for people to make. 


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Mr. BONNER. Any other panelists have any opinion about that? 

Ms. MURGUIA. Well, I think I would have to claim a conflict of 

interest since I am looking at buying in the District right now. 

[Laughter.] 

STABILIZING THE HOUSING MARKET

But that is officially for the record disclosed in the area of transparency. 

But look. I think we all agree that there are important steps that 

we can take to stabilize the market, and we should be doing that 

if that is going to help in the long term or midterm. But what you 

have heard, I think, from a lot of us on this panel is there are immediate priorities and steps that we should be taking, and you 

know, I would argue that allowing them to be completely voluntary 

is not going to get us there, and if we are not specific about some 

of those steps, and we can make them targeted, I think we can 

show that those would have more immediate impact in dealing 

with this really. 

But you know, tax credits, can they be helpful in stabilizing the 

market? Of course they can, but I am not sure that is going to provide the immediate relief that we know we need right now. 

Mr. CALHOUN. I think we agree on the problem, and that is that 

you need to stabilize the housing market, and it is good ol’ supply 

and demand. It makes sense to work at it from both sides. The 

most cost effective way is to reduce the number of houses, additional houses, that you are dumping on the market. 

I mean, I think everyone agrees it is a lot, lot more efficient economically to keep someone in the house if that is feasible, and it 

is not for all of these folks facing foreclosure by any means. It is 

a lot more efficient to keep someone in the house than to go 

through foreclosure, have that house be vacant, subject to depreciation and damage, and then try and get a new owner in there. It 

just takes a lot more money at a time when money is particularly 

scarce. 

HOUSING AFFORDABILITY

Mr. LOBO JOST. One thing that kind of complicates it in the 

Bronx and throughout New York City where we still have really 

high housing prices is there is a huge affordability problem and 

people living in the house even before the whole foreclosure crisis, 

you had people who, like, it is typical for people to pay half of their 

income on their mortgage and on renters as well. 

So you know, we are not at the point where the prices have really dropped yet, but we are still seeing a lot of foreclosures. So in 

terms of stabilizing, I guess New York City is as stable as it is, but 

it is still an issue. I mean, there are still people losing their homes 

even with prices staying where they are because we do not have 

the population that has the income to afford the prices at what 

they were because these homes for a typical Bronx residence were 

never affordable at the price they were selling at because the prices 

went up so dramatically, so quickly. 

So you know, it is kind of tough for me to say anything more 

than that other than that the people are not going to be able, at 

the prices that they are now, people are not really going to be able 


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to afford them unless we can bring down some of the other costs 

of owning a home. 

That is one of the things that we have been kind of working on, 

but that is kind of outside of the whole mortgage area. 

Mr. BONNER. Thank you, Mr. Chairman. 

Mr. SERRANO. Thank you. 

And I share your comments and your concern because, you know, 

I live right there on the grand concourse near Yankee Stadium, 

and there are a few buildings that are co-ops, and you used to be 

able to get an apartment for $50,000. The same apartments now 

are selling for $300,000, and so they are not being bought by any 

of the folks that are there. New folks are moving in. 

That is fine. I do not have a problem with that, but there is 

something wrong with the fact that the folks who were there who 

would like to buy the apartment in the building next to them cannot. 

I was just telling Mr. Regula. He was amazed. On 164th Street 

in the middle of the South Bronx with everything that you read 

about it, although we never see it because we love the place, but 

you know, an apartment just sold for $525,000, a two bedroom 

apartment, and that is ridiculous. That is before the new stadium 

goes up, you know, and values just shoot up. 

MORTGAGE SERVICING

One question that I had, I was in a mortgage for the last 15 

years where I started paying out to one company and every couple 

of years somebody would write to me and tell me that I had now 

somebody else to make the check out to. What is the incentive for 

these folks selling the mortgage? 

You end up over the life of a mortgage, you know, having six different people or organizations, companies that you end up paying 

to. What is the incentive, anyone on the panel, for selling these 

mortgages off? Is it just a matter of taking the money up front and 

they then go collect the mortgage? 

Mr. CALHOUN. I think it is a reflection. Servicing is sold, I mean. 

When it is transferred, the company giving it up is paid something 

for it, but it is a reflection of two things that are relevant here. 

One is just there has been consolidation in the financial services 

industry. Much more a few large lenders were controlling so much 

of the business. 

And the other that is very relevant here is that servicing is a 

very high volume, low margin business. You don’t get paid a lot to 

service a loan, and you have to have a huge volume of it to make 

it profitable. And that, unfortunately, is a challenge here because 

the servicers are not set up to do these widespread modifications, 

and asking them to take on that extra work onto a very thinly profitable business is a challenge. 

There have been improvements, but, for example, a typical ratio 

would be you might have one employee per servicer or case worker 

for every 450 mortgages. Now if a significant percentage of those 

are in distress now, that is just very difficult to respond even with 

the best of intentions and the greatest effort, and that is one of our 

concerns about the voluntary modification. 


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The system was not set up to handle this, and unfortunately 

there are a lot of characteristics of the system that make it very 

difficult for it to respond to this crisis. 

Mr. SERRANO. I wanted to make a comment on what Mr. Bonner 

has said, and Ms. Murguia knows this well. There are folks here 

who are listening to this testimony or that testimony that goes into 

decisions that we make on the bill. You should never see empty 

chairs as a sign that no one is listening. Trust me. Everyone is listening in more ways than we care to think about. 

MULTIPLE FAMILY HOMES

Mr. Jost, I am wondering on the number, on the record keeping, 

if something is missed here. When we say 1.8 million families 

stand to lose their homes, does that take into account the fact that 

in some communities, I know for a fact a couple of folks in the 

Bronx, where two brothers married with children will jointly buy 

a house, a two-family home. So if they lose that home, it is really 

two families that lost their home. 

I mean, I know this is just numbers, but are we changing the crisis in terms of numbers by not taking into account the fact that 

some people have doubled up in buying homes? 

Mr. LOBO JOST. I mean, I do not know. I cannot speak outside 

of the Bronx, but definitely there are a lot of cases like that, a lot 

of immigrant families who buy two and three family homes together and share it amongst themselves, and you know, multiple 

families living in one home, and we have a lot, as you know, two 

and three family homes. 

So I do not know if there is any data. I do not think there is any 

data on that, but you could definitely assume that in certain areas 

where that is common that you are talking about more families 

that are going to be affected by this. 

Then there is also the issue about rent. People who are renting 

in the apartments as well could be forced out in the case of a foreclosure as well. I think that has become a big issue as well. 

Mr. SERRANO. In other words, this would be where I buy a house, 

a two-family house, and I rent one of the apartments to help me 

pay the mortgage, and then when I lose it or I am gone, that person also cannot rent there any longer. 

Mr. LOBO JOST. Right, depending on what happens. I mean, if 

they are going to sell ahead of time, then it depends on the new 

owner, but potentially they could be thrown out. But if it does go 

into bank-owned REL, then the person has generally been kicked 

out. 

REFUND ANTICIPATION LOANS

Mr. SERRANO. Talk to me about these refund anticipation loans. 

You know, from day one when I saw that I said, ‘‘Is this really, you 

know, of benefit to the community? Is this something that should 

not be taking place?’’

How do some of these loans work? And how much of a problem 

is it in areas like the Bronx? 

Mr. LOBO JOST. I mean, it is definitely targeted as you can see 

on some of the maps like in certain neighborhoods, and these are 

the same kind of low income neighborhoods that get a lot of money 


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through the Earned Income Tax Credit, and I think that that is 

partly why they are targeted there, because, you know, low income 

people really count on that money from their tax return, Earned 

Income Tax Credit, as part of their income. 

People generally speaking are really maxed out, and they are 

paying their rent or they own a home and that’s half of their income right there. And so they have got very little leftover money, 

and you know, it is right after Christmas time. You are probably 

spending a little bit extra if you want to have presents and do 

other things for the holidays, and so then in January you have got 

to pay these bills, and so you need the extra cash to kind of pay 

off some of these debts. 

And so the idea, obviously it is changing a little bit. I do not 

know in terms of we are working to get the word out. It used to 

take longer to get your refund back, but now I think with E-file 

and everything it is quicker, but still there is the idea like, well, 

we need to go to these places and get the money as fast as possible. 

A lot of people go and file their taxes as soon as they get their 

W–2s and they want to get the money like in hand right away. And 

I do not think they understand because it is such a short-term loan 

like what the interest rate is. I mean, these are often like 600 percent interest rate loans. 

Mr. SERRANO. Six hundred? 

Mr. LOBO JOST. Yes, if you annualized it. So obviously that is 

why that would not be allowed under New York State banking and 

lending regulations, but like I was saying, they are targeting areas 

where people are getting the Earned Income Tax Credit because 

they get bigger refunds. So there is more money to be made off 

those people’s tax returns even though they are very low income 

people. They are going to get a bigger check back because of the 

credit, and so that is a bigger slice of the pie that they can take 

out and make more money off it. 

Mr. SERRANO. Have you heard of any anticipation loans having 

to do with the tax rebate that Congress and the President just approved? 

Has anybody—oh, did I just give somebody an idea for a scam? 

[Laughter.] 

Mr. REGULA. I am sure they thought of it. 

Mr. SERRANO. I cannot believe I thought of that. 

Mr. LOBO JOST. Well, last year they were doing these holiday 

loans, which was pretty much like a refund anticipation loan, except they were offering them in December so that you could do your 

Christmas shopping based on your tax return from the year before 

and then maybe some pay stubs, and so they were for a longer 

term, but this was just another horrible product. 

There was some organizing work done against them, and they 

decided they were not going to offer any more. So I do not know 

if they are going to try to do something on these. 

Ms. MURGUIA. Mr. Chairman, you highlight sort of scams that 

people can encounter at the front end. I would just point out still 

that, you know, fraud and these kind of scams are out there now 

at the back end in the sense that I think one of the testimony we 

heard earlier today offered an example of a help line that is very 

similar to the HOPE line that we have, and it is called 


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www.hopenowusa.com. It sounds a lot like the HOPE Alliance 

number. It is nothing to do with the HOPE Alliance number, and 

they have been found to have been, you know, in the zone of these 

predatory practices and saying, ‘‘Oh, okay. We will take your loan,’’ and these folks are vulnerable to that. 

So you know, scams are out there on the front end, but we are 

seeing them still in this sort of zone right now as people are trying 

to get legitimately. We talked about those families that do take the 

steps to try to reach out and get help can oftentimes find that there 

is fraud at the very end. 

I just want to make sure, and it is not just because we represent 

a network of community based organizations, but you really want 

to focus on those types of outlets for recourse for help in these communities where people are trusted and accredited, you know, community based organizations that are going to be able to reach out 

and work with those individuals or families that need that help because it is rampant in terms of what we are seeing now because 

every is seizing on any type of scam idea that is out there, and we 

are seeing it now in terms of how these sort of help lines are being 

established. 

Mr. SERRANO. Mr. Stinebert. 

Mr. STINEBERT. On tax anticipation loans, because we have members that do those, and most of the ones that I have talked with 

that do them only do them because they do tax preparation work, 

and they would not get anyone to do their tax preparation work if 

they did not offer those loans. 

We have a current chairman of the board who made the remark, 

‘‘We would like to get out of the business entirely and just do tax 

preparation, but if I did that, we would never have anybody come 

in for tax preparation.’’

So it is——

Mr. SERRANO. But he had them coming in before. 

Mr. STINEBERT. What I meant to say is if there is ever an area, 

I mean, they are gaining like two to three weeks on their money. 

It really is crazy that people would demand that type of a loan to 

gain two or three weeks on their funds, but it is being done by millions of people, and the whole area of education, once again, is just 

key to stopping refund anticipation. 

TAX PREPARATION SERVICES

Mr. SERRANO. Okay, but here is where I am going to disagree. 

As this map shows, unfortunately, I have hardly any banks in my 

district, and it saddens me personally because I started out as a 

banker. I worked 12 years for Manufacturer’s Hanover Trust, and 

when I did, there was a bank on 138th Street near Willis Avenue, 

for those of you who know the Bronx, and across the street was 

Bankers Trust, and down the block was Banco Popular, and Ponce 

de Leon Savings and Loan was somewhere else. And then you had 

another branch for each one of these on 149th Street and 161st and 

Yankee Stadium in the Sombi area. I mean banks were all over the 

place. 

In fact, if you misbehaved they would send you to the other 

branch. You know, that was not as fun as the other branch, you 

know. Coney Island was big. 


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But now there are no banks. Yet there are these tax preparers. 

I remember ten years ago, 15 years ago, they were full of people 

waiting in line because these folks are not going to go to some accountant downtown. They do not have access to them, nor can they 

afford them. 

So the suggestion that if they stop giving out these loans, people 

would stop going to them, I do not buy that, not from you, not from 

them, because where are they going to go? To Park Avenue or 

Madison Avenue for a big accountant? No, they are going to go to 

the same place. It is just that they have found a way to get 600 

percent interest rates on them. 

And I will tell you, I know these things are covered by laws, but 

if I could just waive this and get rid of something, it would be the 

ability of these folks to do that. And your point on the Earned Income Tax Credit, you are right. That is hitting the American taxpayer because this is a program, a great program, where some folks 

who pay taxes assist folks who are hurting, to get some money. 

So when you scam them, you are hurting me. This is not money 

that we printed somewhere. This is money that I pay, that you pay 

so that someone else could be helped. You know, it is like stealing 

from Medicaid. It is no different in my opinion, you know. 

Mr. CALHOUN. Mr. Chairman, on that concern. 

Mr. SERRANO. Sure. 

Mr. CALHOUN. We have been involved in this. We have worked 

in trying to limit and reduce these refund anticipation loans, particularly when they are targeted to Earned Income Tax Credit taxpayers. I think this is what Chris is referring to because we have 

heard this in our negotiations with them. 

For example, a household would say that if they unilaterally stop 

this, it is not that the families would quit going to tax preparers, 

but they would go down the street to Jackson Hewitt, for example, 

if Jackson Hewitt kept offering the refund anticipation loans. 

And so it is a situation and there are similarities, parallels here 

with the mortgage industry where in the absence of almost any 

regulation, I mean, the mortgage world particularly at the rich nation level is almost the Wild Wild West over the last five years. 

In the absence of any regulation, the worst actors drag down the 

whole market. Not only do they disadvantage borrowers. They have 

an unfair advantage over those lenders who try to act responsibly. 

For example, we had lenders, one of the leading ones, who stated, ‘‘Do not pay yield spread premiums to your brokers. It creates 

a conflict of interest and causes you to pay more than you should 

for your loan.’’

Well, the brokers came to originate three-fourths of the subprime 

loans, and the broker said, ‘‘Fine. We will just send our loans down 

the street to a competitor,’’ and so that lender had to eventually reverse their policy and start paying these big yield premiums to 

compete with the other lenders who were paying them. 

So if you do not set some floor of reasonable consumer protections, education is critical, but as several people have said, it is 

necessary but it is not sufficient. It is not enough. This is a very 

complex area. There need to be some substantive ground rules 

there that protect both borrowers and the responsible lenders. 

Mr. SERRANO. I am going to wrap up in a couple of minutes. 


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SUBPRIME MORTGAGES

Mr. Jost, what specifically does your group do to deal with the 

subprime issue? 

Mr. LOBO JOST. On the mortgage side? 

Mr. SERRANO. Yes. 

Mr. LOBO JOST. Specifically, we do a lot of outreach and referrals 

and intake in terms of homeowners that are current homeowners 

who have already fallen behind. We try to connect them with counselors, although like I said, by now there are too few counselors to 

connect them with, and also legal services. 

And we are also working on a number of ways to bring down 

other costs of owning a home because the mortgage side is just one 

part of it. There are all of the other costs associated with owning 

a home or have gone up. So we are working on like water and 

sewer issues. We are working on weatherization with the Northwest Bronx Coalition to try to get more people to bring down their 

energy costs as well. 

But specifically with the subprime in our neighborhood, we are 

doing outreach and speaking with folks and organizing events to 

bring people together to talk, and we will bring in lenders. We are 

organizing a homeowner affair coming up next month, and we are 

bringing in one of the banks that is offering SONYMA products, 

which is the New York State Mortgage Association, and they are 

products that help keep people in their homes. 

And then through NEDAP and such and some other groups, we 

do more organizing work, I would say, and advocacy. 

Mr. SERRANO. All right. I thank you all. This has been painfully 

fascinating. Painful because we are not discussing something nice, 

but it is fascinating. You have given us a lot of good information, 

and we will all try to work together as Congress moves along to 

try to deal with this issue, and let’s just hope that the picture is 

not as bleak as we all believe it is and that it can get better as 

we go along. 

So I want to thank you. You have been a great panel. It sounds 

like a TV show, a great panel, and we thank you for your service. 

And for anybody who is here, that adjourns the meeting. 


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(i) 

W I T N E S S E S 

Page 

Baish, M. A ............................................................................................................... 422 

Calhoun, M. D .......................................................................................................... 239 

Carnahan, Robin ...................................................................................................... 418 

Chatfield, W. A ........................................................................................................ 413 

Cherecwich, Paul, Jr ................................................................................................ 401 

Davidson, D. D ......................................................................................................... 1 

Eaves, Joseph ........................................................................................................... 441 

Gambrell, Donna ...................................................................................................... 239 

Gideon, John ............................................................................................................ 545 

Greenberg, Sally ...................................................................................................... 530 

Guinane, Kay ........................................................................................................... 476 

Hacker, G. A ............................................................................................................. 515 

Hager, M. H ............................................................................................................. 506 

Hillman, Gracia ....................................................................................................... 1 

Hunter, Caroline ...................................................................................................... 1 

Hurley, C. A ............................................................................................................. 510 

Irons, J. J ................................................................................................................. 437 

Kelley, C. M .............................................................................................................. 444 

Koop, C. E ................................................................................................................ 504 

Ledbetter, Felecia .................................................................................................... 425 

Lewis, Matt .............................................................................................................. 455 

Lobo Jost, Greg ........................................................................................................ 239 

Matthews, Jeff ......................................................................................................... 1 

Maves, M. D ............................................................................................................. 541 

Moore, B. J ............................................................................................................... 487 

Murguia, Janet ........................................................................................................ 239 

Parnes, Lydia ........................................................................................................... 239 

Rodriguez, Rosemary ............................................................................................... 1 

Rymer, J. T ............................................................................................................... 396 

Stinebert, Chris ........................................................................................................ 239 

Urahn, S. K .............................................................................................................. 1 

Vargas, Arturo ......................................................................................................... 1 

Waldrop, Chris ......................................................................................................... 512 

Weiser, Wendy ......................................................................................................... 1 

White, Lee ................................................................................................................ 430 


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(iii) 

I N D E X 

Election Administration—February 27, 2008 

Page 

Chairman Serrano’s Opening Statement ............................................................... 1 

Mr. Regula’s Opening Statement ........................................................................... 2 

Panel 1: 

Rosemary Rodriguez’s Testimony .................................................................... 4 

Caroline Hunter’s Testimony ........................................................................... 5 

Gracia Hillman’s Testimony ............................................................................ 6 

Donetta Davidson’s Testimony ........................................................................ 8 

Improving Election Operations ........................................................................ 25 

Ballot Concerns ................................................................................................. 26 

Transparency of EAC Research ....................................................................... 27 

2006 Election Review ....................................................................................... 28 

Poll Workers ...................................................................................................... 28 

Absentee Ballots ............................................................................................... 29 

State and Local Election Preparation ............................................................. 30 

Developing New Voting Systems ..................................................................... 32 

Paperwork Reduction Act ................................................................................ 33 

Military and Overseas Voters .......................................................................... 33 

Voter Fraud and Intimidation Report ............................................................ 35 

State Funding under HAVA and State Spending .......................................... 43 

IG Investigation into Voter Fraud and Intimidation Report ........................ 44 

Voter Verification ............................................................................................. 46 

Reliability of Electronic Voting Systems ........................................................ 48 

Panel 2: 

Wendy Weiser’s Testimony .............................................................................. 53 

Susan Urahn’s Testimony ................................................................................ 69 

Arturo Vargas’ Testimony ................................................................................ 77 

Jeff Matthews’ Testimony ................................................................................ 128 

Discrimination Against Minority Voters ........................................................ 134 

Poll Worker Training ....................................................................................... 135 

Voter Fraud ....................................................................................................... 136 

Voter Intimidation ............................................................................................ 186 

Voter Registration ............................................................................................ 187 

Poll Worker Recruitment and Training .......................................................... 188 

Mobile Voter Population .................................................................................. 189 

Online Election Activities ................................................................................ 190 

HAVA Funding ................................................................................................. 191 

Portable Voter System ..................................................................................... 192 

Questions for the Record: 

Chairman Jose

 ́

E. Serrano ............................................................................... 196 

Ranking Member Regula ................................................................................. 223 

Mr. Hinchey ...................................................................................................... 230 

Mr. Bonner ........................................................................................................ 237 


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iv 

Questions for the Record—Continued 

Housing Affordability ....................................................................................... 365 

Mortgage Servicing ........................................................................................... 366 

Multiple Family Homes ................................................................................... 367 

Refund Anticipation Loans .............................................................................. 367 

Tax Preparation Services ................................................................................. 369 

Subprime Mortgages ........................................................................................ 371 

Questions for the Record for the Federal Trade Commission: 

Chairman Jose

 ́

E. Serrano ............................................................................... 373 

Ranking Member Regula ................................................................................. 379 

Questions for the Record for the Treasury Department: 

Ranking Memer Regula ................................................................................... 383 

Consumer Protection in Financial Services: Subprime Lending and Other 

Financial Activities—February 28, 2008 

Chairman Serrano’s Opening Statement ............................................................... 239 

Mr. Regula’s Opening Statement ........................................................................... 241 

Panel 1: 

Director Gambrell’s Testimony ........................................................................ 242 

Director Parnes’ Testimony ............................................................................. 248 

Treasury’s Office of Financial Education ....................................................... 283 

Predicting the Housing Crisis ......................................................................... 284 

Definition of Subprime Mortgages .................................................................. 285 

Impact of Subprime Mortgages on Credit Markets ....................................... 286 

Consumer Education ........................................................................................ 287 

The CDFI Fund and Subprime Mortgages ..................................................... 288 

Reasons for Foreclosures .................................................................................. 289 

Educating At-Risk Homeowners ..................................................................... 290 

Scope of the Problem ........................................................................................ 291 

Bankruptcy Legislation .................................................................................... 292 

Counseling and Outreach ................................................................................ 294 

Law Enforcement .............................................................................................. 295 

Mortgage Disclosure Reform ............................................................................ 296 

Scope of the Problem ........................................................................................ 296 

Home Owner’s Loan Corporation .................................................................... 297 

Servicemember Loans ...................................................................................... 298 

Limitations of HOPE NOW Initiative ............................................................ 299 

FTC v. Mortgages Para Hispanos ................................................................... 300 

Speculators ........................................................................................................ 301 

Panel 2: 

Michael Calhoun’s Testimony .......................................................................... 303 

Janet Murguia’s Testimony ............................................................................. 319 

Chris Stinebert’s Testimony ............................................................................ 331 

Greg Lobo Jost’s Testimony ............................................................................. 344 

Wall Street ........................................................................................................ 357 

Rating Agencies ................................................................................................ 358 

Steering Practices ............................................................................................. 358 

HOPE NOW Program ...................................................................................... 359 

Steering Practices ............................................................................................. 360 

Financial Literacy ............................................................................................ 361 

Judicial Modifications to Mortgage Loans ...................................................... 361 

Tax Credits for Homebuyers ............................................................................ 364 

Stabilizing the Housing Market ...................................................................... 365 


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v 

Public Testimony 

Court Services and Offender Supervision Agency ................................................ 388 

Federal Deposit Insurance Corporation, Office of Inspector General ................. 396 

IRS Oversight Board ............................................................................................... 401 

Selective Service System ......................................................................................... 413 

Missouri Secretary of State ..................................................................................... 418 

American Association of Law Libraries ................................................................. 422 

Coalition To Save Our Schools ............................................................................... 425 

Investment Company Institute ............................................................................... 426 

National Coalition for History ................................................................................ 430 

National Humanities Alliance ................................................................................ 437 

National Telecommunications Cooperative Association ....................................... 441 

National Treasury Employees Union ..................................................................... 444 

OMB Watch .............................................................................................................. 455 

Shape Up America! .................................................................................................. 487 

Voters Unite! ............................................................................................................ 545 

fi 


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